Modern Dairy Anti-Bribery and Anti-Corruption Policy

1. Introduction

Modern Dairy (hereinafter referred to as “the Company”) is committed to conducting its business in an honest, ethical and professional manner, and complying with all applicable laws and regulations. The Company has zero tolerance for any form of bribery or corruption, as these practices undermine fair competition, damage our reputation, and expose us to legal risks.

This Anti-Bribery and Anti-Corruption Policy (hereinafter referred to as “the Policy”) sets out the principles and standards that all employees (including part-time and security personnel), contract security provider (note: As of the end of 2023, Modern Dairy’s security personnel are all employees of Modern Dairy and do not use contract security providers), contractors, directors, senior management and third parties acting on behalf of the Company (hereinafter referred to as “Relevant Persons”) must follow to prevent, detect and report any bribery or corruption issues. The Policy is a supplement to the Company’s Code of Ethics and other relevant policies and procedures. The Policy, approved by the Board of Directors, will be regularly reviewed and revised to ensure its continuous compliance with regulatory requirements and to meet the needs of the Company’s sustainable development.

2. Scope of Application

The Policy applies to all businesses, operation locations, and all subsidiaries.

The Policy applies to all employees (including part-time and security personnel), contract security provider, contractors, directors, senior management and third parties acting on behalf of the Company, regardless of their location, function, or level. Third parties include agents, consultants, suppliers, distributors, joint venture partners and any other individuals or entities that provide services or act on behalf of the Company.

The Company requires Relevant Persons to read, understand and comply with the Policy. Any violation of the Policy may result in disciplinary action, including termination of employment or contract. In addition, any violation of the Policy may also constitute a criminal offense under applicable laws and regulations, which may lead to fines or imprisonment.

3. Definition of Bribery and Corruption

Bribery is the act of offering, promising, giving, accepting, or soliciting anything of value (such as money, gifts, benefits, hospitality, travel) to or from anyone (such as government officials, customers, contractors, suppliers) to induce or reward the improper performance of any function or activity related to our business.

Corruption is the abuse of entrusted power for private gain. Corruption includes bribery as well as other forms of misconduct, such as fraud, extortion, embezzlement, nepotism, conflict of interest, etc.

4. Prohibition of Bribery and Corruption

The Company prohibits any form of bribery or corruption in any business transaction involving the Company or its affiliates. The prohibition applies to both public sector (government) bribery and private sector (commercial) bribery.

No Relevant Persons shall directly or indirectly offer, promise, give, demand, accept or receive anything of value to or from anyone to obtain or retain business or advantage for the Company or themselves.

The Company also prohibits facilitation payments (small payments made to low-level government officials to expedite or secure routine administrative actions) and kickbacks (payments made in return for business favors or benefits) that are intended to be or are perceived as bribes.

5. Gifts, Hospitality, and Travel Guidelines

The Company understands that appropriate gifts, hospitality, and travel arrangements can help build and maintain healthy business relationships in commercial dealings. However, these activities must strictly comply with The Policy to ensure they do not constitute bribery or corruption.

5.1 Accepting Gifts, Hospitality, and Travel

Principle: Relevant Persons must not accept any gifts, hospitality, or travel that could influence their objective judgment, lead to a conflict of interest, or be perceived as a bribe.
Value Limit: No department or individual shall accept gifts (including food, tobacco, and alcohol) from business partners (including affiliated companies) with a value exceeding RMB 100.
Unable to Refuse or Return: If, for various reasons, a gift or benefit has already been accepted and cannot be returned, it must be reported promptly to the equivalent or superior department in charge and submitted to the Farm Office or Group Office within 24 hours for unified handling. The Company will record and process the submitted gifts and benefits in accordance with relevant laws and regulations and internal company policies.
Hospitality: Accepted hospitality (e.g., business meals) should be reasonable and consistent with local business customs, and should not be overly frequent or lavish, to avoid creating an improper impression. All hospitality should have a clear business purpose.
Travel: Unless approved in writing by the Company’s senior management, Relevant Persons shall not accept travel expenses paid by third parties. Any approved travel arrangements should be limited to actual transportation and accommodation costs and should not include any entertainment or personal expenses.

6. Political Donations

The Company shall not, under any circumstances, directly or indirectly make political donations to any political party, political organization, candidate, or public official, including money, in-kind contributions, services, or anything of value.

Prohibition on Personal Donations: Employees are prohibited from making political donations in their personal capacity but using company funds or resources.
Exceptional Circumstances: Unless there are clear legal provisions or special circumstances, and strict review and written approval have been obtained from the Board of Directors and the Legal and Compliance Department, the Company will not make political donations. Any such exceptions must be fully transparent and comply with all applicable laws and regulations.

7. Charitable Donations or Sponsorships

The Company encourages participation in charitable activities and community sponsorships, but all charitable donations and sponsorship activities must be conducted in a transparent and lawful manner, ensuring they are not used as a disguise for bribery or corruption.

Legality and Compliance: All charitable donations and sponsorships must comply with all applicable laws and regulations, including anti-bribery and anti-corruption laws.
Due Diligence: Before making large charitable donations or sponsorships, appropriate due diligence should be conducted on the recipient to ensure their legitimacy, reputation, and transparency in the use of funds.
Clear Purpose: Donations or sponsorships should have a clear charitable or public welfare purpose and should not be conditional on any expectation of obtaining business benefits or undue influence.
Approval Process: All charitable donations and sponsorships must follow the Company’s internal approval process and be approved by the relevant department heads and the Disciplinary Inspection Office. Large donations or sponsorships require senior management approval.
Records: Detailed information on all charitable donations and sponsorships (including amount, recipient, purpose, and approval records) must be accurately recorded in the Company’s books.

8. Conflict of Interest

A conflict of interest is a situation where an individual’s personal interests interfere or may interfere with the interests of the Company. A conflict of interest may create opportunities for bribery or corruption.

The Company requires Relevant Persons to avoid any actual or potential conflict of interest in any business transaction involving the Company or its affiliates. The Company has established the following rules for managing conflict of interest:

All Relevant Persons must disclose any personal, financial or family interests that may affect their judgment, objectivity or loyalty to the Company.
All Relevant Persons must obtain written approval from senior management before engaging in any activity that may cause a conflict of interest.
All Relevant Persons must avoid using their position or influence to seek personal benefits or advantages.
All Relevant Persons must report any actual or suspected conflict of interest to senior management or the Ethics and Compliance Department.

9. Training and Communication

The Company regularly provides training and communication on the Policy and relevant anti-bribery and anti-corruption laws and regulations to all Relevant Persons. The training and communication aim to raise awareness, enhance understanding, and strengthen compliance.

The Company requires all Relevant Persons to complete the training and sign the statement of compliance with the Policy every year.

The Company has established the following rules regarding the training plan and objectives:

The Company updates the training content and methods every year according to the latest developments and trends of anti-bribery and anti-corruption.
The Company updates the training targets and frequency every year according to the position, responsibility, and risk level of the Relevant Persons. The training targets include all Relevant Persons, but high-risk departments or individuals may need more or deeper training. The training frequency includes regular training at least once a year, and temporary training when any significant changes or events occur.
The Company updates the training objectives and evaluation every year according to the effectiveness and feedback of the training. The training objectives include improving the awareness and compliance level of Relevant Persons with the Policy and relevant laws and regulations and reducing the occurrence and impact of bribery or corruption. The training evaluation includes tests, questionnaires, interviews, etc., to measure the effectiveness and improvement of the training.

To ensure the effectiveness and diversity of training, the Company will adopt various forms:

Annual Meeting: At least one meeting on Party conduct and integrity building and anti-corruption work will be held annually.
Specialized Training: Various integrity-themed training sessions will be organized irregularly.
Warning Education: Employees will be organized to visit warning education bases to enhance their integrity awareness through case studies.
Group Discussions: Group integrity discussions will be conducted to strengthen communication and guidance.

10. Procedures for Handling Violations

Upon discovery or suspicion of a violation of the Policy, the Company will immediately initiate an investigation procedure.

10.1 Receipt: The Discipline Inspection Commission Office is responsible for receiving all reports and ensuring the confidentiality and protection of the whistleblower’s information and the detailed content of the received reports.

Discipline Inspection Commission Office：

Email: jijianjubao@modernfarming.cn
Phone: 18655597719

10.2 Verification: For real-name reports, the identity of the whistleblower must be verified in person. Two staff members must be present during communication, and a record of the communication must be made. For sensitive and significant matters, a confidentiality commitment must be signed. For reports signed by multiple individuals, a representative can be elected for communication. Anonymous reporting is permitted, but it may affect the depth of the investigation.

10.3 Handling of Problem Clues: The Discipline Inspection Commission Office comprehensively analyzes problem clues. Within one month of receiving a clue, it will be handled in one of four ways: interview and inquiry, preliminary verification, temporary retention for investigation, or conclusion, and a plan will be formulated. Interview and inquiry are applicable to general, unsubstantiated, or difficult-to-verify clues. Preliminary verification targets verifiable clues of disciplinary violations or illegal activities, collecting evidence. Temporary retention for investigation is used for clues where conditions are not yet ripe, to be investigated when conditions mature. Conclusion applies to unsubstantiated, unverifiable, or minor clues. Handling must not be delayed or accumulated.

10.4 Investigation Report: After the investigation, the Discipline Inspection Commission Office will submit a detailed investigation report to the Company’s senior management/Board of Directors, including facts, evidence, conclusions, and recommended corrective/disciplinary measures. If a crime is constituted, the case will be transferred to judicial authorities in accordance with the law.

10.5 Notification: The Discipline Inspection Commission Office shall notify the whistleblower of the outcome of a real-name report within 15 working days from the date of completion.

10.6 Appeal: If the appellant is still dissatisfied with the handling result of our Discipline Inspection Commission Office, they can appeal to the superior disciplinary inspection department, and we will implement the results of the superior disciplinary inspection department’s review and investigation.

11. Corrective or Disciplinary Actions

For any violation of the Policy, the Company will take appropriate corrective measures and disciplinary actions based on the nature, severity and impact of the violation, as well as the cooperation level of the Relevant Persons.

Disciplinary actions may include, but are not limited to:

Verbal Warning: For minor violations.
Written Warning: For more serious or repeated minor violations.
Performance Appraisal Downgrade: Affecting the employee’s performance evaluation and career development.
Withholding of Bonuses or Salary: Deducting part or all of bonuses or performance-based pay based on the losses or impact caused by the violation.
Relocation or Demotion: Relocating employees from sensitive positions or demoting them.
Termination of Employment Contract/Cooperation Agreement: For serious violations, such as those involving significant financial losses, damage to the Company’s reputation, or violations of laws and regulations, the Company will immediately terminate the employment contract with the relevant employee or the cooperation agreement with the third party.
Pursuit of Legal Liability: For acts constituting a crime, the Company will transfer the case to judicial authorities for handling and pursue criminal liability in accordance with the law.
Recovery of Losses: For economic losses caused to the Company due to violations, the Company will pursue compensation liability from the relevant responsible persons in accordance with the law.

Corrective measures may include, but are not limited to:

Internal Control Improvement: Strengthening internal controls and processes in response to identified loopholes.
Additional Training: Providing targeted compliance training to relevant departments or individuals.
Process Optimization: Adjusting and optimizing business processes to reduce future risks.
Public Statement: Issuing statements to the public or regulatory bodies when necessary to protect the Company’s reputation.

12. Audit and Update

The Company audits and updates the Policy regularly to ensure its effectiveness, relevance, and consistency with best practices.

The Company conducts audits of ethical standards on all its operations and all its subsidiaries at least once every three years. The audit covers aspects such as anti-corruption, ethics, integrity or anti-bribery behavior to assess the implementation of the Policy and identify any existing issues. The Company has established the following rules regarding the ethical standard audit:

The Company updates the audit plan and scope every three years according to the Policy and relevant laws and regulations. The audit plan includes the purpose, objectives, methods, timetable, responsibility allocation, etc. of the audit. The scope covers all businesses, all operation locations such as farms, factories, and all subsidiaries.
The Company executes and completes the audit process and results every three years according to the audit plan and scope. The audit process includes collecting and analyzing data, interviewing, and investigating relevant personnel, evaluating, and testing risk control measures, finding and recording problems and non-conformities, etc. The audit results include audit reports, audit opinions, audit recommendations, etc.
The Company develops and implements improvement measures and effectiveness every three years according to the audit results. The improvement measures include rectification plans, rectification responsible persons, rectification deadlines, rectification resources, etc. The improvement effectiveness includes rectification acceptance, rectification evaluation, rectification feedback, etc.

13. 2024 Audit Summary

In 2024, the Discipline Inspection Commission Office has conducted audits of ethical standards on all its operations and all its subsidiaries. The audit covers aspects such as anti-corruption, ethics, integrity or anti-bribery behavior to ensure adherence to company policy and identify any potential risks or violations. The following details the audit work undertaken and results achieved by the Discipline Inspection Commission Office in 2024:

Biological Asset Sales Supervision: Participated in quarterly centralized bidding supervision for biological asset sales, achieving 100% completion in supplier audits and on-site monitoring for business ethics violations. Supervised the execution of 45 contracts. By transitioning from offline bidding to online quotation systems, the bidding process was standardized, and market competitiveness was enhanced.
Silage Supplier Qualification Review: Conducted qualification reviews for 698 silage suppliers with a 100% completion rate. Performed on-site assessments for 131 silage suppliers.
Business Ethics Supervision in Acquisition Projects: Oversaw business ethics throughout the acquisition process, ensuring adherence to principles of fair competition, integrity, and legal compliance. Participated in the supervisory review of 207 major projects and centralized procurement activities and conducted on-site due diligence visits to 269 suppliers.
Employee Misconduct Investigation: Zero corruption litigation cases involving employees were reported. All cases involving business ethics violations were investigated with a 100% completion rate.