Harbin Sanlian: 2025 Internal Control Evaluation Report

Harbin Sanlian Pharmaceutical Co., Ltd.

2025 Internal Control Evaluation Report

In accordance with the provisions of the "Basic Standards for Enterprise Internal Control" and its supporting guidelines and other internal control supervision requirements (hereinafter referred to as the "Enterprise Internal Control Standards System"), combined with the internal control system and evaluation methods of Harbin Sanlian Pharmaceutical Co., Ltd. (hereinafter referred to as the "Company"), and on the basis of daily supervision and special supervision of internal control, the effectiveness of the company's internal control as of December 31, 2025 was evaluated.

1. Important statement

In accordance with the provisions of the enterprise's internal control normative system, it is the responsibility of the company's board of directors to establish, improve and effectively implement internal control, evaluate its effectiveness, and truthfully disclose the internal control evaluation report. The Audit Committee oversees the establishment and implementation of internal controls by the Board of Directors. Managers are responsible for organizing and leading the daily operation of the enterprise's internal controls. The company's board of directors, audit committee, directors and senior management personnel guarantee that there are no false records, misleading statements or major omissions in this report, and bear individual and joint legal responsibility for the authenticity, accuracy and completeness of the report content.

The goal of the company's internal control is to reasonably ensure legal compliance of operation and management, asset safety, authenticity and completeness of financial reports and related information, improve operating efficiency and effectiveness, and promote the realization of development strategies. Due to the inherent limitations of internal control, it can only provide reasonable assurance for achieving the above objectives. In addition, since changes in circumstances may cause internal controls to become inappropriate, or the degree of compliance with control policies and procedures to be reduced, there is a certain risk in inferring the effectiveness of future internal controls based on the results of internal control evaluations.

2. Conclusion of internal control evaluation

According to the identification of major deficiencies in the company's internal control over financial reporting, there were no major deficiencies in the company's internal control over financial reporting on the base date of the internal control evaluation report. The board of directors believes that the company has maintained effective internal control over financial reporting in all major aspects in accordance with the requirements of the corporate internal control standard system and relevant regulations.

According to the identification of major deficiencies in the company's internal control over non-financial reporting, the company found no major deficiencies in internal control over non-financial reporting on the base date of the internal control evaluation report.

There are no factors that affect the conclusion of the internal control effectiveness evaluation between the base date of the internal control evaluation report and the issuance date of the internal control evaluation report.

3. Internal control evaluation work

(1) Scope of internal control evaluation

The company determines the main units, businesses and matters as well as high-risk areas included in the evaluation scope in accordance with the risk-oriented principle.

1. Main units included in the evaluation scope: the company and its subsidiaries included in the scope of consolidated financial statements.

2. Proportion of units included in the evaluation scope: the total assets account for 100% of the total assets of the company's consolidated financial statements, and the total operating income accounts for 100% of the total operating income of the company's consolidated financial statements.

3. Main businesses and matters included in the evaluation scope: organizational structure, development strategy, human resources, social responsibility, corporate culture, financial activities, procurement business, asset management, sales business, research and development, engineering projects, guarantee business, related transactions, financial reports, comprehensive budget, contract seal management, subsidiary management, internal information transmission, information system management, financial assistance, etc.

4. High-risk areas of focus and key control links

This year's internal control evaluation work, on the basis of comprehensive coverage of major businesses and matters, focused on high operational risk areas such as financial activities, procurement business, sales business, asset management, and related transactions, and extended to key control links that have a systemic impact on corporate governance, compliance operations, and strategy implementation, and carried out focused and in-depth evaluations. Specific key areas and links for evaluation include:

(1) Organizational structure

The company has established a standardized corporate governance structure in accordance with the "Company Law of the People's Republic of China", the "Securities Law of the People's Republic of China" and other relevant laws and regulations, and has formulated relevant management systems such as the "Articles of Association", "Rules of Procedure for Shareholders' Meetings", "Rules of Procedure for Board of Directors", "Working System of Independent Directors", etc., which has clarified the responsibilities and authority, rules of procedure and working procedures in decision-making, execution and supervision, etc., forming a scientific and effective division of responsibilities and checks and balances.

Based on actual operating needs, combined with business characteristics and internal controls, the company rationally sets up internal institutions and clarifies the responsibilities and authorities of organizations at all levels to ensure the smooth and efficient development of business activities.

(2) Development strategy

The Strategy Committee under the Board of Directors studies and makes recommendations on the company's major investment and financing plans, major capital operations, asset management projects and other major matters affecting the company's development in accordance with the "Implementation Rules of the Board of Directors Strategy Committee" and the Company's Articles of Association, and inspects the implementation to enhance the scientific nature of decision-making. The company's strategic plan is implemented into annual operations through annual work plans, comprehensive budget management, etc., ensuring the implementation of the strategic plan.

(3) Human resources

The company closely follows the overall development strategy and formulates a series of human resource management systems including recruitment, training, assessment, salary, job promotion, etc., and evaluates and adjusts them every year to effectively support the implementation of the company's development strategy.

In order to stabilize the company's key management and supervision teams and ensure the continuity and reliability of core operations and management functions, the company implements special management for key management personnel. Its core measures include: establishing an incentive mechanism linked to long-term performance, and supporting the implementation of systematic reserve talent development and succession plans. The company will continue to evaluate and dynamically implement reserve cadre training to cope with the challenges brought about by business development and environmental changes.

(4) Social responsibility

The company places the fulfillment of social responsibilities at a strategic level, has established a clear governance structure and management mechanism, and incorporates relevant goals into the strategic planning and supervision system, and the management is responsible for translating them into specific operating actions and institutional specifications. The company systematically embeds core social responsibility issues such as integrity management, quality assurance, green development and protection of the rights and interests of all parties into the full-chain business processes and internal control systems such as R&D, production, operation and partner management, achieving deep integration of social responsibility fulfillment and daily operation and management, responding to social expectations with practical actions, and making positive contributions to social development.

The company establishes and continuously improves the quality management system in accordance with the requirements of relevant laws and regulations to achieve full coverage of quality monitoring. Strictly abide by laws and regulations related to environmental protection and establish a complete environmental protection and energy management system. Adhering to the law-abiding and honest business philosophy, abiding by contracts and keeping promises, with the purpose of "Harbin Sanlian, at your service", we provide high-quality medicines and health services to protect the rights and interests of customers and consumers.

Continue to protect and safeguard the legitimate rights and interests of employees, build harmonious labor relations, and achieve harmonious development between employees and the company. Through the labor union and the Heilongjiang Kazakh Sanlian Charity Foundation, we continue to carry out public welfare activities through multiple channels and forms, and actively fulfill our social responsibilities.

(5) Corporate culture

After long-term development, the company has gradually built a corporate culture with Harbin Sanlian characteristics, clarifying the core values, purpose, positioning, vision and business philosophy of the company; taking "respect for human nature and continuous improvement" as the basic idea of corporate lean management, fully considering the growth value of employees, giving full play to employees' enthusiasm, initiative and creativity, and consolidating employees' dominant position in corporate development. Carry out selection activities such as "Corporate Culture Star", "Role Model Person of the Year", and "Advanced Group of the Year" to establish benchmarks and models, stimulate the enthusiasm of all employees to learn from each other and catch up, and transform the power of role models into action guides for all employees through deeds publicity and experience sharing. We have implemented special welfare policies such as "Children's College Entrance Examination Scholarship" and "Family Elderly Fund" to solve employees' worries and enhance their sense of belonging. Organize various activities such as basketball and volleyball leagues, sports games, and theme competitions to promote cross-department collaboration and employee exchanges. Drive sustainable development of enterprises through cultural leadership and build soft power with core competitiveness.

(6) Funding activities

In order to build a systematic fund security and efficiency management and control system, the company has formulated a series of fund management systems including the "Monetary Fund Authorization and Approval System" and the "Raised Fund Management System" to clarify the responsibilities, authorities and processes of each link. Regarding the management of raised funds, the procedures for the storage, use, management, and supervision of raised funds in special accounts must be strictly implemented. The company's internal audit department should inspect the storage, management, and use of raised funds at least once a quarter, and report the inspection results to the audit committee in a timely manner. The company fulfills its information disclosure obligations and effectively protects the interests of investors.

In the field of investment and financing management, the company has established investment and financing management systems such as the "Foreign Investment Management Measures", "Securities Investment Management System" and "Financing Management System" to clarify the authorization, approval, verification and other relevant regulations for investment and financing business, carry out scientific planning and demonstration of investment and financing plans, and strictly manage investment and financing business in accordance with prescribed authority and procedures to control operating risks and improve capital operation efficiency.

(7) Procurement business

Based on the actual situation, the company has formulated systems such as "Procurement Management Measures" and "Tendering Management Measures" to clarify the responsibilities and approval authority of each link for the entire process from material purchase, approval, supplier selection, bidding inquiry, to contract signing, acceptance into the warehouse, payment and return processing. Effectively prevent supply risks and ensure continuous and stable supply of materials.

In order to further improve management efficiency, the company relies on the procurement management system to achieve integrated data management, build an online transparent quotation channel, and promote full-process digital operations, which has laid a solid foundation for business standards, optimized the supply and demand cooperation ecosystem, and significantly improved procurement efficiency and convenience.

(8) Asset management

The company is deeply engaged in the refinement of asset management, comprehensively standardizing the management and control processes of various assets, ensuring the safety and integrity of assets, and promoting their efficient operation.

In terms of fixed asset management, the company has formulated the "Fixed Asset Management System", which stipulates fixed asset management responsibilities, procurement plans, procurement execution, registration, insurance, operation and maintenance, allocation, renewal and transformation, inventory, guarantee, leasing, disposal, etc., aiming to strengthen the internal control of fixed assets, protect the safety and integrity of fixed assets, and improve the efficiency of the use of fixed assets. And pay attention to signs of impairment of fixed assets to ensure that the financial information of fixed assets is true and reliable.

In terms of inventory management, the company has formulated the "Material Management Measures", which covers inventory entry, storage, exit and inventory, and clarifies the responsibilities, authorities and business procedures of relevant departments and personnel in inventory business activities, so as to achieve mutual separation, restriction and supervision of incompatible positions. Pay attention to signs of inventory impairment and ensure that inventory financial information is true and reliable.

In terms of intangible assets management, the company has formulated management regulations such as the "Intangible Assets Management System" and clarified the responsibilities, authorities and business processes for the acquisition, acceptance, use, protection, disposal and other business aspects of intangible assets in accordance with the principle of centralized management.

(9) Sales management

The company has established and improved the "Sales Customer Management System", "Sales Customer Credit Management System", A series of sales business management systems such as "Commercial Bribery Prevention Management System", "Sales Price and Contract Management System", "Sales Receipt Management System", "Sales Delivery and Transportation Management System" cover customer qualifications and credit, price management, contract signing approval, shipment collection and other aspects of the sales business responsibilities and authorities. While ensuring the separation of incompatible positions, through aging analysis and correspondence confirmation and other control methods, the risk of recovery of accounts receivable is effectively controlled to ensure the company's asset security and the accuracy and completeness of financial information. The company will regularly inspect and analyze weak links in the sales process and take effective control measures to ensure that sales targets are achieved.

(10) Guarantee business

The company formulated the "External Guarantee Management Measures" in accordance with the "Articles of Association" and relevant laws and regulations, clarifying the principle that external guarantees are uniformly managed by the company, dividing the approval authority of the shareholders' meeting and the board of directors on external guarantee matters, and clearly stipulating the guarantee principles, procedures and risks, and the approval of guarantees. Accuracy, information disclosure, guarantee liability and other related contents. Through the management, review and approval mechanism for the establishment of external guarantee contracts, we can timely understand and grasp the operation and financial status of the guaranteed party, ensure that the guarantee business is compliant and legal, protect the legitimate rights and interests of investors and ensure the safety of the company's property. In addition, the company's internal audit department conducts timely follow-up audits of important guarantee matters and strengthens process supervision.

(11) Related transactions

The company has formulated the "Decision-making System for Related Party Transactions", which stipulates the company's related party transaction behavior from various aspects such as transaction principles, related parties and related relationships, types of related party transactions, decision-making procedures for related party transactions, and disclosure of related party transactions. The company establishes and updates the list of related parties, and the internal audit department regularly audits the progress of related transactions and issues audit reports.

(12) Financial reports

In order to strengthen the management of the entire process of financial report preparation, external provision and analysis and utilization, the company has formulated the "Financial Report Preparation Management System" to clarify the relevant work processes, requirements and responsibilities of financial reports. The preparation methods, procedures, content and procedures for external provision of financial reports strictly comply with the requirements of relevant national laws and regulations and the enterprise's "Business Accounting Standards". Financial reports are prepared based on fully registered and verified accounting records and other relevant information to ensure that the financial reports are true and complete and can effectively support internal and external decision-making.

In strict accordance with relevant laws and regulations and based on actual conditions, the company has formulated the "Information Disclosure Management System" and "Insider Information Insider Management System" to standardize the scope, content, procedures and work responsibilities of information disclosure. The company strictly complies with its disclosure obligations under information disclosure regulations and discloses relevant information truthfully, accurately, completely and timely, without any false records, misleading statements or major omissions.

(13) Comprehensive budget

In order to ensure the implementation of the company's strategies and action plans, the company's strategic intentions, decision-making goals and resource allocation are quantified in the form of budgets. Through reasonable allocation of resources, the company's overall planning, coordination and communication are strengthened, and strategy-oriented comprehensive budget management is implemented. The company has formulated the "Comprehensive Budget Management System" to standardize It has clarified the preparation, approval, execution and analysis of budgets, clarified the responsibilities and authority of budget management agencies at all levels, and implemented a budget management system of "unified planning and level-by-level management" to ensure that budget objectives are reasonable, methods are scientific, and execution is effective, and budget management is integrated into all aspects of the company's business management activities to promote the realization of the company's strategic goals. At the same time, the company implements centralized financial management, and clarifies the centralized management department corresponding to each expense based on business attributes and management responsibilities, and is responsible for the approval, execution control and analysis of relevant budgets, achieving refined and standardized expense management and control.

(14) Subsidiary management

The company has formulated the "Subsidiary Management System" and the "Internal Audit System" and clarified that the operation and development plans of subsidiaries must be subject to and serve the development strategy and overall plan of the parent company. Within the framework of the parent company's development plan, it refines and improves its own plans to contribute to the achievement of overall business goals. At the same time, the company continues to strengthen the integrated management and control of subsidiaries' strategies and operations, aiming to optimize resource allocation, improve decision-making and execution efficiency, and promote the in-depth integration and collaboration of parent and subsidiary companies in business, resources and management to achieve overall strategic goals. In addition, the company has formulated an "Internal Reporting System for Major Matters" to standardize the management of the company's internal reporting of major matters, facilitate the rapid transmission and collection of major internal information, and ensure that the company discloses information in a true, accurate, complete and timely manner.

(15) Financial assistance

The company formulated the "External Financial Aid System" in accordance with relevant laws and regulations and the "Articles of Association", which clarified the definition, scope, transaction principles, restrictions on funding objects, hierarchical approval authority and procedures, the responsibilities of each relevant department, agreement signing requirements, fund recovery mechanisms, information disclosure and accountability and other core contents to ensure that the company's external financial aid behavior is compliant and orderly, and decision-making is scientific and prudent, effectively preventing financial risks, and protecting the legitimate rights and interests of shareholders and the security of the company's funds.

The above-mentioned main units, businesses, matters and high-risk areas included in the evaluation scope cover the main aspects of the company's operation management and internal control, and no major omissions were found.

(2) Internal control evaluation work basis and internal control defect identification standards

The company organizes and carries out internal control evaluation work in accordance with the company's internal control standard system and its supporting guidelines and other relevant regulations, and in conjunction with the company's relevant systems, processes, guidelines and other documents. The company's board of directors distinguished between financial reporting internal control and non-financial reporting internal control based on the identification requirements of major defects, important defects and general defects in the corporate internal control standard system, combined with factors such as company size, industry characteristics, risk preference and risk tolerance, and optimized and adjusted the original internal control defect identification standards. The adjusted standards are more in line with the company's current operation and management needs. The specific adjustments and current standards are as follows:

1. Reason for adjustment: In order to reflect the company's internal control level more scientifically and objectively and ensure that the defect identification standards match the company's business development stage, assets and income scale, the company has optimized the internal control defect identification standards based on recent operating conditions and industry good practices.

2. Adjustment content: On the basis of maintaining the rigor and continuity of the internal control evaluation system, this adjustment makes the identification standards more reasonable and operable, enables more accurate identification and assessment of risks, and promotes the continuous improvement of internal control management.

(1) Adjustment of standards for identification of internal control deficiencies in financial reporting

Adjustment of quantitative standards: Based on the original relative proportion basis of total profit, the absolute amount reference value is introduced. This optimization enables the standard to maintain stability and comparability under different business performance cycles, avoids evaluation fluctuations that may be caused by a single ratio, and improves the accuracy and rationality of the identification results.

Qualitative standard adjustment: The description of the specific circumstances of major defects and important defects has been normatively sorted out and the text has been streamlined to make the expression clearer and more consistent with the expression principles of the "Basic Standards for Enterprise Internal Control" and its supporting guidelines. There are no substantive changes in terms.

(2) Adjustment of identification standards for internal control deficiencies in non-financial reporting

Adjustment of quantitative standards: Adjust the original reference to "Total Profit of Consolidated Financial Statements" to the reference to "Total Revenue of Consolidated Financial Statements". The revenue scale can more stably reflect the company's business volume and operational coverage. Using this as a benchmark makes the measurement of the impact of defects closer to the actual operation and management, and enhances the consistency of cross-period and cross-segment evaluations. At the same time, in order to more accurately distinguish defect levels, the proportion unit has been refined from "percent (%)" to "thousandths (‰)", and the absolute amount has also been introduced as an auxiliary judgment to make the standard more distinguishable and operable.

Qualitative standard adjustment: Combining regulatory requirements and internal management needs, some identification situations of major defects and important defects have been integrated and clarified to make the direction of qualitative judgment clearer and consistent with the company's goal of strengthening compliance operations and governance efficiency.

3. The standards for identifying internal control deficiencies determined by the company are as follows:

(1) Standards for identifying deficiencies in internal control over financial reporting

The quantitative standards for the evaluation of internal control deficiencies over financial reporting determined by the company are as follows:

Compare the amount of financial statement misstatement that may be caused by defects with the relevant indicators of the company's annual consolidated financial statements:

Defect Level Quantitative Criteria (Amount of Potential Misstatement)

Major defect: greater than or equal to 5% of the total profit in the consolidated financial statements, and the absolute amount exceeds 10 million yuan

It is greater than or equal to 3% of the total profit in the consolidated statement, but less than 5% of the total profit in the consolidated statement, and the absolute amount is small. Important defects

less than or equal to 10 million yuan, greater than or equal to 5 million yuan

General defects: less than 3% of the total profit in the consolidated statement, and the absolute amount is less than or equal to 5 million yuan

The qualitative standards for the evaluation of internal control deficiencies over financial reporting determined by the company are as follows:

Major deficiencies: There is conclusive evidence that any of the following situations existed at the end of the evaluation period: ① Directors and senior managers committed fraud; ② The company corrected the published financial report; ③ The certified public accountant discovered that there was a major misstatement in the current financial report, but the internal control failed to detect the misstatement during the operation; ④ The company's audit committee and internal audit agency's supervision of internal control was ineffective.

Important deficiencies: There is conclusive evidence that any of the following situations exist at the end of the evaluation period: ① Failure to select and apply accounting policies in accordance with generally accepted accounting principles; ② Failure to establish anti-fraud procedures and control measures; ③ Lack of effective control mechanisms or failure to implement corresponding controls over the accounting processing of non-routine or special transactions; ④ There are one or more deficiencies in the control of the end-of-period financial reporting process, which cannot reasonably guarantee that the prepared financial statements achieve true and complete objectives.

General defects: other control defects other than major defects and important defects.

(2) Standards for identifying deficiencies in internal control over non-financial reporting

The quantitative standards for the evaluation of non-financial reporting internal control deficiencies determined by the company are as follows:

Compare the amount of direct property losses caused or likely to be caused by the defects with the total revenue of the company's annual consolidated financial statements:

Defect level quantitative standard (amount of direct property damage)

Major defect: greater than or equal to 5‰ of the total revenue in the consolidated financial statements, and the absolute amount exceeds 10 million yuan

Greater than or equal to 3‰ of the total revenue in the consolidated statement, but less than 5‰ of the total revenue in the consolidated statement, and the absolute amount is small. Important defects

less than or equal to 10 million yuan, greater than or equal to 5 million yuan

General defects: less than 3‰ of the total revenue in the consolidated statement, and the absolute amount is less than or equal to 5 million yuan

The qualitative standards for the evaluation of non-financial reporting internal control deficiencies determined by the company are as follows:

Major defects: There is conclusive evidence that any of the following situations exist at the end of the evaluation period: ① The company's decision-making procedures are illegal; ② Violation of national laws and regulations, subject to criminal penalties or serious consequences such as suspension of the company's business, revocation of licenses; ③ The identified major defects in internal control have not been rectified within a reasonable period; ④ The company's important business lacks institutional control or the system has systemic failure.

Important defects: There is conclusive evidence that any of the following situations exist at the end of the evaluation period: ① The decision-making process leads to major errors; ② There are important defects in important business systems or systems; ③ The identified important defects in internal control have not been rectified within a reasonable period of time.

General defects: other control defects other than major defects and important defects.

(3) Identification and rectification of internal control deficiencies

1. Identification and rectification of internal control deficiencies in financial reporting

According to the above-mentioned identification standards of internal control deficiencies in financial reporting, the company did not have any major deficiencies or important deficiencies in internal control over financial reporting during the reporting period.

2. Identification and rectification of internal control deficiencies in non-financial reporting

According to the above-mentioned identification standards of internal control deficiencies in non-financial reporting, no major deficiencies or important deficiencies in the company’s internal control over non-financial reporting were found during the reporting period.

4. Description of other major matters related to internal control

The company has no other statements on major matters related to internal control.

Board of Directors of Harbin Sanlian Pharmaceutical Co., Ltd.

April 27, 2026