Shenzhen Cuilv Gold Refinery Co., Ltd.

2023

Supply Chain Due Diligence Management Compliance Report

January 5, 2024

Company Name: Shenzhen Cuilu Gold Refinery Co., Ltd

Location: No.2 Factory Building, HuangShengfa Industrial Zone, Baida Street, Xikeng Village, Henggang Street, Longgang District, Shenzhen

Year-End Report: 2023 LPPM Supply Chain Due Diligence Compliance Report

Report Date: January 5, 2024

Report Leader: Li Wenju

Reporter Position: Director of Compliance and Risk Control

Email: [email protected]

Part I: Purpose

In order to meet the requirements of the LPPM Responsible Platinum/Palladium Guidance, avoid any systematic or extensive human rights violations, avoid conflicts, money laundering and combat terrorist financing, our company has established a strong management system. We employ a supply chain due diligence approach to identify and assess risks associated with all suppliers. This ensures that our platinum/palladium supply chain fully aligns with the requirements of the LPPM Responsible Platinum/Palladium Guidance.

Part II: Company Overview

Shenzhen Cuilu Gold Refinery Co., Ltd., established in July 2007, is located in the Huangshengfa Industrial Zone, Baida Street, Xikeng Village, Henggang Street, Longgang District, Shenzhen. The company is a precious metal resource integration enterprise specializing in the recycling of gold, silver, platinum, Palladium, precious metal refining and testing. It operates multiple advanced precious metal refining production lines with an annual capacity to refine 300 tons of gold, 200 tons of silver, 3 tons of platinum, and 3 tons of palladium. The company mainly produces "Cuilu" branded standard gold ingots, silver ingots, platinum ingots, palladium ingots, and high-purity gold (AU99.999% and above) ingots.

"Cuilu" has been recognized as a "Chinese Famous Brand" and a "China Well-known Trademark." The company is listed among the top 100 industrial enterprises in Shenzhen and became a comprehensive member of the Shanghai Gold Exchange in September 2009. It is qualified to provide standard gold ingots and silver ingots. In 2020, the company became a member of the LBMA. The refinery covers an area of over 3,000 square meters, making it a leading enterprise in the precious metal purification industry. The company adheres to the core business philosophy of prioritizing quality and sincere service, obtaining ISO9001 quality system certification and ISO14001 environmental management system certification in 2009.

All platinum and palladium raw materials used in our production come from old platinum and palladium jewelry, ornaments, and related high-quality gold and gold alloy materials produced and processed by Chinese platinum/palladium jewelry companies. Additionally, materials are sourced from enterprises specializing in the recycling of industrial waste materials for platinum and palladium. In the fiscal year 2023, the total purification of platinum and palladium amounted to 580 kilograms and 700 kilograms, respectively.

Part III: Compliance Activities Summary

Step 1: Establish a Strong Company Management System

Compliance Statement:

We have fully complied with Step 1: Establish a Strong Company Management System.

Company Policies:

Compliance Declaration:

In April 2023, the company issued the "Platinum/Palladium Supply Chain Due Diligence Management System" and "Platinum/Palladium Supply Chain Risk Mitigation Measures." Our platinum/palladium supply chain policy strictly prohibits the following behaviors by platinum/palladium suppliers:

1.Violations of human rights, including the use of child labor, torture, inhumane or degrading treatment, widespread use of violence, or other serious human rights abuses such as forced labor, war crimes, crimes against humanity, or genocide.

2.Providing direct or indirect support to illegal armed groups or public or private security forces controlling mining areas, traders, intermediaries, or transportation routes through the supply chain, or engaging in illegal taxation or extortion of money or minerals throughout the supply chain ("Illegal armed groups, public or private security forces").

3.Concealing the origin of platinum/palladium through bribery or fraud.

4.Failure to comply with government requirements regarding extraction, trade, and export taxes on minerals from conflict and high-risk areas.

5.Money laundering or financing of terrorism.

6.Funding conflicts.

7.Engaging in high-risk business activities, such as weapons, gambling, antiques and art, sects, and their leaders.

8.Beneficiaries being politically sensitive individuals or wanted persons.

9.Not compliance with environmental, health, safety, and labor laws and/or company policies in the operating country/region.

The "Platinum/Palladium Supply Chain Due Diligence Management System" outlines the internal organizational structure and responsibilities, due diligence provisions for the platinum/palladium supply chain, risk identification methods, and evaluation criteria, transaction monitoring, document retention, training, and reporting mechanisms. In the fiscal year 2023, we conducted due diligence on all platinum/palladium suppliers as required by the system, identified and assessed risks effectively, and controlled the risks associated with the platinum/palladium supply chain.

The company has signed "Responsible Procurement Commitment" agreements with all platinum/palladium suppliers, covering the content of the policy. Additionally, the policy has been published on the official website: http://hunterzhu.cn.

Internal Management Structure

Compliance Statement:

The company has established an internal management system in accordance with the "LPPM Responsible Platinum/Palladium Supply Chain Due Diligence Management System Procedures." This system outlines the management positions and their corresponding responsibilities. The company has appointed a Compliance Director and five Compliance Specialists. The Compliance Director, who is also the Deputy General Manager of the company, oversees the Compliance Officers, including the Deputy General Manager of the Business Department, Production Plant Manager, Finance Department Manager, and Director of the Testing Center. Each Compliance Specialist is responsible for specific affairs related to the platinum/palladium supply chain.

The Compliance Director, as a senior management member, is responsible for approving contracts with suppliers, including deciding whether to collaborate with high-risk suppliers and supervising the review of suppliers after contract signing.

The Compliance Specialist assist senior management in comprehensively overseeing platinum/palladium supply chain due diligence affairs. They take responsibility for all matters on the platinum/palladium supply chain, ensuring compliance with risk management regulations and the effective identification and avoidance of risks. They are also responsible for providing training on platinum/palladium supply chain due diligence and risk control, drafting and updating platinum/palladium supply chain policies, and providing accurate information to senior management.

The Business Department is responsible for raw material procurement, ensuring the long-term, stable, and secure supply of raw materials while rejecting collaboration with enterprises, organizations, or countries from high-risk areas.

The Compliance Specialist in the Finance Department is responsible for maintaining complete records of all customer transactions. The Compliance Specialist in the Production Department organizes the production records of platinum/palladium inputs, ensuring a closed process during production for safety and traceability. They also guide the warehouse in categorizing and recording platinum/palladium inputs and outputs according to customer requirements.

In 2023, Shenzhen Cuilu Gold Refinery Co., Ltd strictly implemented the "Platinum/Palladium Supply Chain Due Diligence Management System," conducting risk due diligence on suppliers and monitoring all transactions to avoid establishing relationships with high-risk suppliers. Additionally, the Compliance Officers reviewed all due diligence findings and results, and all platinum/palladium material procurement contracts were approved by the Compliance Director.

Traceability System and Identification of Other Supply Chain Participants

Compliance Statement:

The company has established a traceability system in accordance with management system requirements, collecting and maintaining supply chain information for each batch. This includes assigning a unique reference number for each input and output batch: Upward Traceability of Platinum/Palladium Products (Platinum/Palladium -> Raw Materials); Type of Platinum/Palladium material (mined platinum, palladium, or recycled platinum/palladium); -Inbound weight and analysis report; -Raw material inbound date and finished product inbound date; -Downward Traceability of Platinum/Palladium Products (Platinum/Palladium -> Customers); -Customer information; -Transaction weight and analysis report; -Outbound date.

With all records retained, it is possible to trace from finished products to raw materials and vice versa. The system enables tracing each supplier's purchase contract for each batch of products, including information such as precious metal type, purchase weight, analysis reports, and relevant due diligence documents.

Interaction with Trading Partners and Assisting in Due Diligence Capability

Compliance Statement:

When signing contracts with suppliers, business personnel in the Business Department, following management system requirements, sign a "Responsible Procurement Commitment" with all platinum/palladium suppliers. They conduct "Supply Chain Due Diligence" and present relevant terms from the "LPPM Responsible Platinum/Palladium Guidance" to ensure suppliers understand the company's LPPM management requirements, supply chain policies, and the required commitments.

In this commitment, the platinum/palladium supplier agrees in writing and acknowledges that they do not engage in serious human rights violations related to mineral extraction, transportation, or trade. They also commit to not providing direct or indirect support to non-state armed groups, public or private security forces, bribery, false reporting of mineral sources, money laundering, and have not paid taxes and royalties related to mineral extraction, trade, and export from conflict-affected and high-risk areas.

All suppliers contracted in the fiscal year 2023 have signed the relevant commitment agreements.

Transaction Monitoring

Compliance Statement:

All transactions related to platinum/palladium involve payments and receipts through the company's bank accounts, with no cash transactions. These payments and receipts are supervised by banks and national tax authorities, undergoing annual financial audits. Following management system requirements, transaction monitoring is conducted for risks in the platinum/palladium supply chain. The refinery examines shipping documents, weight documents, inspection reports, invoices, transfer records, and other texts for each batch of products received. Compliance officers are responsible for transaction monitoring, examining transactions that do not conform or appear suspicious in any form, providing a written confirmation of investigation results, and reporting to the compliance director. All transactions in the fiscal year 2023 were conducted through bank transfers.

Communication and Complaint Mechanism

Compliance Statement:

The company has established a complaint mechanism and contact information for compliance officers is published on the official website: http://hunterzhu.cn.The complaint mechanism has been communicated to suppliers throughout the procurement process involving platinum/palladium materials. Both internal and external stakeholders can anonymously report any violations related to platinum/palladium trading processes. An opinion box has been set up at the factory as an internal reporting channel for employees, and relevant personnel regularly check and summarize the contents of reports. No reported incidents occurred in the fiscal year 2023. Additionally, the company has implemented a whistleblower protection system to prevent retaliation against whistleblowers, ensuring effective protection of their rights.

Training

Compliance Statement:

The company regularly organizes training for all departments related to platinum/palladium. In the fiscal year 2023, one training session was conducted on April 18, focusing on the investigation procedures for suppliers, risk registration evaluation, and response measures as required by the LPPM Responsible Procurement System. An evaluation of the training's effectiveness was conducted, and training records were retained. From March to May 2023, three training sessions were conducted for the company's platinum/palladium suppliers, covering topics such as the company's LPPM Responsible Silver Supply Chain Due Diligence Management System, platinum/palladium supply chain management policies, the company's supply chain monitoring and reporting system, and the company's anti-money laundering regulations.

Record Retention

Compliance Statement:

In accordance with company requirements, all supplier-related documents, including due diligence files, risk assessment forms, compliance documents, contract texts, inspection records, and inbound/outbound records, are retained for a minimum of five years.

Step 2: Identify and Evaluate Supply Chain Risks

Compliance Statement: We fully comply with Step 2: Identify and Evaluate Supply Chain Risks.

Supply Chain Risk Identification:

Compliance Statement: The "LPPM Responsible Platinum

/Palladium Supply Chain Due Diligence Management System Procedure" outlines the supplier risk identification methods, covering all risks associated with platinum/palladium materials from the origin to the refinery. The "Supplier Due Diligence Form" is used to identify the following risks: supplier basic information, beneficiaries, origin information, responsible precious metals supply chain policy, transportation process, anti-money laundering, anti-terrorism financing, bribery and fraud, human rights violations, transaction monitoring, support for non-governmental armed organizations, etc. The identification methods include establishing supplier profiles, including: company name, legal representative, address, contact information, operating methods, production methods, transaction contracts, etc. Existing supply chain customers need regular checks. In case of new or changed customers, their file information should be promptly checked to keep the file information database up-to-date. Identify every customer, company, and beneficiary, ensuring they are not on any government money laundering, fraud, or terrorism wanted lists, and check if they are on the Chinese public information website for execution information to ensure they are not on the list of untrustworthy individuals. Regularly obtain detailed business and financial information, purpose of platinum/palladium transactions, and business operations from supply chain customers.

Supply Chain Risk Assessment:

Compliance Statement: Before establishing business relationships with suppliers, the business department needs to fill out the "Platinum/Palladium Supply Chain Due Diligence Form" and conduct a risk assessment for all platinum/palladium materials based on the "LPPM Responsible Platinum/Palladium Supply Chain Due Diligence Management System Procedure." For all platinum/palladium materials, including mined platinum/palladium, suppliers need to provide information such as the origin of platinum/palladium materials, mining license permits, import and export licenses, mining information, due diligence documents, etc. In addition, business department personnel will go to the site to investigate the authenticity of the information provided by some suppliers to ensure accurate and reliable assessments. High-risk supply chain assessment criteria are as follows:

1. Platinum/palladium or recycled platinum/palladium comes from, transits through, or is transported from conflict-affected or human rights-violating high-risk areas.

2. Platinum/palladium claimed to come from a country with known limited reserves, limited resources, or expected limited platinum /palladium production.

3. Recycled platinum/palladium comes from known conflict-affected and human rights-violating high-risk areas, or there is reason to suspect that it has been transited through this area.

4. Companies or other known upstream companies in the platinum /palladium supply chain are located in a country with high risks of money laundering, crime, and corruption.

5. The beneficiary of companies or other known upstream companies in the platinum/palladium supply chain is a politically sensitive personnel.

6. Companies or other known upstream companies in the platinum /palladium supply chain actively engage in high-risk business activities, such as weapons, gambling, money laundering, antiques and art, diamonds, religion, and religious leaders.

7. Unable to prove whether the raw material source is recycled or mined. 8) Violation of known environmental protection laws and regulations in the area and sustainable development requirements and reports.

The company uses resources to define conflict-affected and high-risk areas, including: the Fragile States Index, the Global Conflict Storm Table, the United Nations Human Development Index, the United Nations Comprehensive Sanctions List, the United Nations Human Rights Report, the Financial Action Task Force (FATF) report, whether the company is listed in the 10 countries listed by DFA1502 (a total of 10 countries: Democratic Republic of the Congo, Republic of the Congo, Central African Republic, South Sudan, Uganda, Rwanda, Burundi, Tanzania, Zambia, Angola), the EU list of conflict-affected and high-risk areas (EU CAHRA List), and reliable market intelligence on high-risk gold centers/transit centers and high-risk money laundering countries/regions.

Evaluation method: Based on the content of the due diligence form, combined with the actual information received from suppliers and customers, evaluate and score each project based on the evaluation criteria, and finally determine the risk level.

In 2023, assessments were conducted for all 20 platinum and palladium material suppliers（10 out of 20 suppliers provides platinum contained recycled materials, 12 out of 20 suppliers provides palladium contained recycled materials ）. The main sources of platinum and palladium provided by these suppliers were from China, mainly consisting of defective products, remnants, old jewelry, and other materials from jewelry manufacturers in Shenzhen. Investigate their supplier's raw material sources, mainly unsold products, remnants, etc., from showrooms and sales terminals in Guangdong, Shenzhen, Shanghai, Beijing, and other places.

In the assessments of the year 2023 for all 20 platinum and palladium material suppliers, risk assessments were conducted according to the company's identification of conflict-affected and high-risk areas and the supplier's due diligence questionnaires. It was determined that China does not belong to conflict-affected and high-risk areas, and all suppliers and their supply chains were classified as low risk.

Risk Assessment Reporting

Compliance Statement: The Compliance Officer provides a quarterly commentary report on behalf of the senior management team to the Compliance Director and the top management. The senior management retains ultimate control and responsibility for the platinum/palladium supply chain. In the case of high-risk suppliers, approval from the top management is mandatory, and cooperation must be ceased immediately. The risk assessment results for the year 2023 have been accurately reported to the Compliance Director and the top management.

Transaction Monitoring

In accordance with the management system requirements, it is ensured that the risks in the platinum/palladium supply chain are subject to transaction monitoring. The refining plant conducts checks on received batches of products, including examining shipping documents, weight records, inspection reports, and invoices. The Compliance Officer is responsible for transaction monitoring, inspecting transactions with backgrounds that do not conform or appear suspicious in any form, and providing a written confirmation of the investigation results, reporting to the Compliance Director. For materials containing platinum/palladium that do not meet the requirements, they are isolated until the risk is reduced to a low level. No instances of non-compliance with transaction monitoring control procedures were observed in the year 2023. During the audit process, some minor non-compliance issues with suppliers were addressed, and non-compliance projects were closed.

Step 3: Implementation of Risk Management Strategies for Identified Risks

Compliance Statement: We fully comply with Step 3: Design and implement a management strategy to address identified risks.

Implementation of Risk Management Strategy for Identified Risks

(i) Mitigating Risks While Continuing Transactions:

When the assessment of a supplier is classified as low risk, we continue to obtain platinum/palladium raw materials from that supplier. During the collaboration, we progressively enhance the investigation data and assist the supplier in establishing their due diligence system, helping them address deficiencies in risk management gradually.

(ii) Mitigating Risks While Suspending Transactions:

If the assessment result indicates a medium risk, transactions are temporarily suspended, and the suspicious risk is investigated until it is confirmed that the supplier is a low-risk supplier. Simultaneously, the received materials are isolated. The company's platinum/palladium warehouse has a high-risk material isolation area to respond to unforeseen circumstances. Within a 6-month period, if the supplier rectifies the identified risk and resolves it, transactions resume. If the rectification does not meet the requirements or the risk cannot be resolved, cooperation with the supplier is terminated.

(iii) Ceasing Transactions to Avoid Risks:

In cases where the assessment of a supplier is deemed high risk, or high-risk issues are identified during collaboration, transactions are stopped. The assessment report and high-risk issues are reported to the top management, and the supplier is blacklisted, prohibiting transactions with the company for a period of three years.

Quantitative Measures, Performance Monitoring, Reassessment, and Regular Reporting

Compliance Statement: In accordance with the "Risk Mitigation Management Measures," if the due diligence results indicate low risk, we will continue to procure platinum/palladium raw materials from the supplier. If the due diligence results for the platinum/palladium supply chain indicate medium or high risk, suggesting potential money laundering, financing of terrorism, exacerbation of conflicts, or human rights violations, we will immediately cease procuring platinum/palladium raw materials until provided information or data indicates a low-risk level.

Based on the 2023 due diligence results, no supplier requires risk mitigation management strategies. Regular reassessment and continuous monitoring:

1.Annually, the compliance officer in the business department organizes personnel to collect all changes in supplier information, continuously monitors transaction outcomes, and conducts annual supply chain due diligence reassessments to decide whether to continue collaboration.

2.Compliance officers monitor every batch of procured platinum

/palladium raw materials during transportation, inbound/outbound processes, production, and payment.

Regular Reporting: Each quarter, the compliance officer submits reports to the compliance director and top management based on the actual situation managed by LPPM. The report summarizes the operation of the LPPM management system for the quarter, highlights deficiencies, and proposes improvement measures. In 2023, our company implemented quantitative scoring management for suppliers, conducting annual supplementary risk assessments for all suppliers except new ones. The compliance director reviewed the assessment results and submitted reports to top management each quarter.

Step 4: Arrange Independent Third-Party Audit

Compliance Statement: We fully comply with Step 4 by arranging an independent third-party audit.

Compliance Declaration: In January 2024, an independent audit was conducted for the platinum and palladium supply chain. Our company timely prepared the compliance report as of December 31, 2023, and commissioned RCS Global for compliance verification.

Step 5: Supply Chain Due Diligence Report

Compliance Statement: We fully comply with Step 5 by providing the Supply Chain Due Diligence Report.

Compliance Declaration: We conducted investigations on all suppliers following the company's "Platinum/Palladium Supply Chain Due Diligence Management System," meeting the requirements set by LPPM for responsible platinum/palladium sourcing. The "2023 Annual Compliance Report" resulting from these investigations will be publicly disclosed on the company's website http://hunterzhu.cn.

Limited Assurance Statement Regarding Forced Labor

Compliance Statement: We fully comply with the requirements

prohibiting the use of forced labor. Neither our company nor any of our suppliers engage in forced labor.

Compliance Declaration:

We have established the "Anti-Forced Labor Management System" and communicated the prohibition of forced labor requirements to suppliers in different regions through email, chat software, or commitment letters. We conducted a risk assessment on forced labor for all platinum/palladium suppliers using various methods, such as telephone interviews, chat software communication, on-site visits to suppliers (customers), or inquiries with individuals closely connected to the suppliers. This process resulted in the creation of the "Forced Labor Risk Assessment Report."

The investigation covers aspects outlined in the "Anti-Forced Labor Management System," such as: The company prohibits any actions that restrict labor freedom, including withholding identification documents, collecting deposits or collateral, withholding workers' wages, forced searches, restricting workers' entry and exit from the factory, and mandatory overtime.

The company neither uses nor supports the use of any form of forced labor, including prison labor, contractual labor, debt bondage labor, slave labor, forced, or involuntary labor through punishment or intimidation.

All levels of management, including security personnel, are prohibited from conducting forced searches, mandatory overtime, restricting employees' freedom of movement, or intimidating and verbally abusing employees.

Security personnel are solely responsible for maintaining normal work and living order within the company, protecting the company's and employees' property, safety, and personal security. Security personnel or management staff are not allowed to force or intimidate employees. The role of security personnel is to ensure the overall security of the company's personnel and property, not to restrict employees' movements or force them to work.

Through a due diligence investigation into the forced labor risk of our suppliers, we have determined that the supplier distribution areas in Beijing, Guangdong, Shanghai, Shenzhen, and other regions of China are all considered low-risk areas. In the fiscal year 2023, we had a total of 20 suppliers, including 18 legal entities and 2 individual suppliers. The supplied materials include old platinum/palladium jewelry, unsold platinum/palladium jewelry from showrooms and stores, crafts, and decorative items.

The company conducted searches on public websites such as the National Enterprise Credit Information Publicity System and the Qichacha App. All legal entities were found to have no violations of the "Labor Law of the People's Republic of China" or any information related to forced labor.

All employees of the suppliers are voluntarily employed, and no risks of forced labor were identified. The company established the "Anti-Forced Labor Management System" and conducted a comprehensive briefing for all employees in April 2023. The system is prominently displayed within the company, and channels for complaints, such as suggestion boxes and contact information for local labor supervisory authorities, have been established. This ensures that employees have the opportunity to express their opinions and experiences regarding their work.

The company strictly adheres to the "Labor Law of the People's Republic of China" and various regulations issued by the Shenzhen General Labor Union. There is no evidence of any instances of forced labor within the company.

Part IV: Conclusion

In the annual report for the fiscal year ending December 31, 2023,

our company has implemented effective management systems, procedures, processes, and practices, aligning with the Responsible Platinum/Palladium Guidelines set forth by LPPM. We are committed to continuous improvement and will regularly monitor all corrective measures identified internally. We remain dedicated to consistently meeting the requirements of the Responsible Platinum/Palladium Guidelines as outlined by LPPM.

Additional Information

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