(Considered and approved at the 22nd meeting of the 8th session of the Board on 16 January 2023)

Chapter 1 General Provisions

Article 1 In order to strengthen the internal management control of the Group and effectively prevent and control the fraud risk of the Group; and improve the Group’s anti-fraud control and supervision mechanism to ensure the healthy and sustainable development of the Group, this system is formulated in accordance with national laws and regulations and relevant requirements of the Group.

Article 2 This system is applicable to the management, those charged with governance and employees of the Group’s headquarters and all its wholly-owned subsidiaries, majority-controlled companies and branches (collectively the “Group”).

Chapter 2 Duties

Article 3 Personnel at all levels of the Group shall be responsible for the prevention, control and supervision of fraud.

Article 4 The main leaders at all levels of the Group are the first responsible persons for anti-fraud, and shall strictly perform their duties and establish an effective anti-fraud responsibility system.

Article 5 An honest corporate culture environment shall be created, and various rules and regulations of the Group for employees shall be applied and implemented to improve the consciousness of the Group’s employees to comply with professional ethics, thus effectively preventing occurrence of fraud.

Chapter 3 Codes

Article 6 Definition: Fraud refers to the acts of the management, those charged with governance, and employees of the Group or any third party to obtain improper or illegal benefits by means of deception or fraud.

Article 7 Frauds mainly occur in the following forms:

(I) False financial reporting, a deliberate act that causes the financial report to be untrue, which includes the following:

1. Deliberately changing the accounting principles, revising data to overstate or understate revenue; intentionally overstating or understating costs, and overstating or understating inventories, construction in progress, and fixed assets;

2. Falsifying, concealing or deleting transactions or matters, compiling false business contracts and issuing fictitious invoices;

3. Intentionally using inappropriate accounting policies and accounting estimates to adjust profits through related party transactions;

4. Forging or fabricating accounting vouchers and books, concealing or deliberately destroying accounting vouchers, accounting books and financial reports that should be kept in accordance with the law;

5. Deliberately evading taxes in violation of the national tax law and relevant laws and regulations;

6. Other accounting frauds that violate the national unified accounting system and the relevant regulations of the Group and seriously affect the fair expression of the Group’s accounting statements.

(II) Receiving bribes and kickbacks, and misappropriating and embezzling assets, including:

1.Receipt of bribes, kickbacks, and corruption, and misappropriation, embezzlement and theft of the Group’s funds and assets;

2. Conducting false transaction to obtain funds;

3. Setting up hidden reserves and off-balance-sheet assets;

4. Running enterprises in tertiary sector and encroaching upon the interests of the Group.

(III) Violation of regulations or failure to perform duties properly, causing significant economic losses to the Group, and deliberately concealing the fact of losses, including:

1. Unauthorized external investment, resulting in loss or waste of funds;

2. Unplanned construction or investment beyond budgetary estimate, resulting in long-term idleness or waste of construction projects;

3. Unauthorized external guarantees or loans to financial institutions and external borrowing of funds;

4. Sale of the Company’s assets through unfair contracts, or irregular commercial transactions or at low price;

5. Deliberately failing to perform or improperly performing duties, causing damage or loss of assets; or deliberately lending or illegally donating the Group’s assets without compensation;

6. Leakage of the Group’s trade secrets and other intentional acts that cause losses to the Company’s funds and assets.

Article 8 Information communication channels for anti-fraud:

(I) The Group shall publicize anti-fraud policies and reporting procedures in a timely manner through various means such as the employee handbook, various rules and regulations of the Group, and the Group’s internal network; conduct regular trainings and communications on professional ethics and other aspects to ensure that employees of the Group understand all relevant contents of the Group’s anti-fraud policy, and organize employees holding key positions to visit the criminal correction center and prison so that they get knowledge of the consequences of fraud and the Group’s serious attitude towards fraud prevention, thus becoming aware of their roles and responsibilities in complying with the Company’s anti-fraud policy;

(II) The Group’s business dealings with users, suppliers and other relevant entities shall be based on honesty and fairness, and shall pass on the Group’s relevant information and requirements on ethical standards and code of conduct to them;

(III) The Group has sufficient ability to collect information on identified fraud risks, anti-fraud control activities, existing fraud behaviours and remedial measures, and is able to share relevant information;

(IV) The Group shall analyze the prevalence of major fraud events in a timely manner and propose preventive and control measures in a timely manner; the results of handling major fraud incidents shall be communicated to all employees of the Group to make them aware of the harm of non-compliance incidents, which can take a warning role;

(V) The Supervision Department of the Group serves as the Group’s anti-fraud reporting and complaint acceptance center, therefore it is responsible for accepting reporting and complaints on fraud and recording, reporting, investigating and following up on reported violations of regulations and disciplines. The department shall formulate management measures for the acceptance, investigation and handling of reporting and complaints, establish channels for reporting and complaints, and clarify the reporting hotline, e-mail address or acceptance of reporting letter;

(VI) The supervision department of the Group shall establish a confidentiality system for reporting information and records to ensure the independence of reporting information and management personnel; strengthen the safety management measures for reporting mailbox, hotline and email. The person who divulges the information of the whistle-blower or retaliates against the whistle-blower in violation of the rules will be dismissed and his/her labor contract will be terminated. If such person violates the law, he or she will be transferred to the judicial authority for handling in accordance with the law;

(VII) The Supervision Department of the Group shall regularly report to the Group’s audit committee in writing to classify, analyze and handle the reporting cases accepted in the current period, and report the reported incidents of serious nature or significant impact and their investigation and handling in a timely manner.

Article 9 Anti-fraud supervision mechanism:

(I) The Supervision Department of the Group supervises the Company’s fraud risk assessment and anti-fraud measures:

1. To hold regular or irregular meetings to discuss the effectiveness of fraud risk assessment and anti-fraud measures;

2. To supervise whether the accounting standards, accounting policies and accounting assessment applied by the Group and its subsidiaries are in compliance with the national accounting regulations;

3. To supervise the material non-routine transactions of the Group Company, the Group Company’s assessment of fraud risks, the possibility of the management to act beyond the control system, and the behaviours that impose inappropriate influence on the financial reporting process;

4. To supervise the implementation of the Group’s rules and regulations on professional ethics and whistle-blowing mechanism;

5. To supervise the internal audit department’s review of the Company’s internal control and the implementation of audit plans for fraud risks;

6. To meet regularly with independent accountants to discuss the possibility of fraud risk of the Group.

(II) The management of the Group Company is responsible for establishing and maintaining an effective internal control system to prevent fraud;

1. The management of the Group Company shall estimate the impact of possible fraud in daily operation, and communicate with relevant departments of the Group to formulate their respective response plans, procedures and measures;

2. In the event of a fraud event, the management of the Group Company shall address the problem in an objective and fair manner, analyze the impact of fraud in a timely manner, and take necessary remedial measures to prevent or respond to the occurrence of similar fraud events;

3. If the fraud event involves the key management of the Group Company or requires a large number of additional investigation procedures, an independent legal advisor may be engaged to conduct an investigation under the guidance of the audit committee.

(III) The internal audit department of the Group shall regularly organize fraud risk assessment:

1. The internal audit department shall fully consider fraud risks and incorporate fraud investigation into the audit plan when formulating the audit work plan;

2. Internal auditors shall maintain professional prudence in regular audits, and pay attention to the assessment and analysis of fraud risks so as to promptly discover fraud.

(IV) The Group Company shall initiate necessary investigation procedures for the fraud that has occurred and make timely rectification measures.

1. Inspectors shall perform necessary inspection procedures to determine whether the fraud behavior indicated by the fraud has occurred;

2. After completing the necessary investigation procedures for fraud events, the appropriate investigation report shall be issued, considering the severity of the fraud in terms of both the nature and the amount;

3. The Group Company shall conduct careful analysis and research on internal control defects. In this regard, the Group Company may conduct hierarchical management according to the importance and degree of influence, define the responsible department, and adopt effective rectification measures to avoid or reduce losses, and track the effect of rectification;

4. If the existing control measures cannot control the identified fraud risks, corresponding internal control remedial measures shall be taken in a timely manner.

Article 10 Accountability

(I) The Group Company shall hold the relevant responsible persons for the occurrence of fraud.

(II) Accountability for fraud includes leadership responsibility and direct responsibility;

1. Leadership responsibility: the responsibility assumed by the management personnel with relevant leadership functions and powers in the event of fraud due to dereliction of duty or oversight within his/her scope of work, resulting in distortion of accounting information and concealment of losses;

2. Direct responsibility: responsibility of the management personnel and relevant personnel of the Group Company to directly operate or participate in relevant decision-making, or incite, instigate, coerce, connive, shield others and other fraudulent acts, as well as failure to perform or correctly perform their duties and other negligent acts, resulting in distortion of accounting information and concealment of losses.

(3) The Group Company will, in accordance with the relevant China’s laws and regulations as well as the relevant rules and regulations of the Group Company, deal with the relevant responsible persons and investigate their responsibilities, including but not limited to administrative sanctions, removal, dismissal, termination of labor contracts and other disciplinary actions. The cases in which he/she violates the law shall be transferred to the judicial authority.

Chapter 4 Supplementary Provisions

Article 11 This system shall come into effect and be implemented from the date of approval by the Board of the Company.

Article 12 Matters not covered herein shall be subject to the provisions of relevant laws, administrative regulations, regulatory documents and the Articles of Association.

Article 13 This system shall be interpreted by the Board of the Company.

Joincare Pharmaceutical Industry Group Co., Ltd.

16 January 2023