Kanghui Co., Ltd. 2025 Internal Control Evaluation Report

Company code: 603139 Company abbreviation: Kanghui Co., Ltd.

Shaanxi Kanghui Pharmaceutical Co., Ltd.

2025 Internal Control Evaluation Report

All shareholders of Shaanxi Kanghui Pharmaceutical Co., Ltd.:

In accordance with the provisions of the "Basic Standards for Enterprise Internal Control" and its supporting guidelines and other internal control regulatory requirements (hereinafter referred to as the Enterprise Internal Control Standard System), combined with the company's (hereinafter referred to as the company's) internal control system and evaluation methods, and on the basis of daily supervision and special supervision of internal control, we evaluated the effectiveness of the company's internal control on December 31, 2025 (the base date of the internal control evaluation report).

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 company's establishment and implementation of internal controls. Managers are responsible for organizing and leading the daily operation of the enterprise's internal controls. The company's board of directors, directors and senior managers guarantee that there are no false records, misleading statements or major omissions in this report, and bear individual and joint legal liability 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

1. Whether the company has any major deficiencies in the internal control of financial reporting on the base date of the internal control evaluation report

□Yes √No

2. Conclusion of the evaluation of internal control over financial reporting

√Valid □Invalid

According to the identification of major deficiencies in the company's internal control over financial reporting, there were no major deficiencies in 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.

3. Whether significant deficiencies in internal control over non-financial reporting have been discovered

□Yes √No

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.

4. Factors affecting the conclusion of the internal control effectiveness evaluation from the base date of the internal control evaluation report to the issuance date of the internal control evaluation report □ Applicable √ Not applicable

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.

5. Whether the internal control audit opinion is consistent with the company’s evaluation conclusion on the effectiveness of internal control over financial reporting

√Yes □No

6. Is the disclosure of major deficiencies in non-financial reporting internal control in the internal control audit report consistent with the disclosure in the company’s internal control evaluation report √ Yes □ No

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. The main units included in the evaluation scope include: the company and all subsidiaries included in the scope of consolidation.

2. Proportion of units included in the evaluation scope:

Indicator proportion (%)

Ratio of the total assets of the units included in the evaluation scope to the total assets of the company's consolidated financial statements 100 Ratio of the total operating income of the units included in the evaluation scope to the total operating income of the company's consolidated financial statements 100

3. The main businesses and matters included in the evaluation scope include:

Organizational structure, development strategy, capital activities, procurement business, sales business, cost management, warehouse management, asset management, investment management, engineering projects, human resources, information systems, financial reporting, guarantee business, contract management and other fields cover the main aspects of company operation and management.

4. High-risk areas of focus include:

Company revenue recognition, impairment of long-term assets, bad debts of other receivables, inventory and depreciation provisions, going concern, etc.

5. The above-mentioned units, businesses, matters and high-risk areas included in the evaluation scope cover the main aspects of the company’s operation and management. Are there any major omissions?

□Yes √No

6. Whether statutory exemptions exist

□Yes √No

7. Other instructions

None

(2). Basis for internal control evaluation and identification standards for internal control deficiencies

The company organizes and carries out internal control evaluation work based on the enterprise's internal control normative system and the company's various management systems.

1. Whether the specific identification standards for internal control deficiencies have been adjusted from previous years

□Yes √No

The company's board of directors distinguished between financial reporting internal control and non-financial reporting internal control based on the company's internal control standard system's identification requirements for major defects, important defects and general defects, combined with company size, industry characteristics, risk preference and risk tolerance and other factors, and studied and determined the specific identification standards for internal control defects applicable to the company, which are consistent with previous years.

2. 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:

Indicator name Quantitative standard for major defects Quantitative standard for important defects Quantitative standard for general defects Total misstatement Misstatement index ≥ 5% 2% ≤ Misstatement index less than 5% Misstatement index < 2% Explanation:

Misstatement indicator = total potential misstatement amount/total operating income

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

Nature of defects Qualitative standards

Significant deficiency: One or a combination of control deficiencies that may cause the enterprise to materially deviate from its control objectives. A combination of one or more control deficiencies whose severity and economic consequences are less than those of a major defect, but which may still lead to a major defect

causing the enterprise to deviate from its control objectives.

General defects include defects other than major defects and important defects.

Description:

If one of the following situations occurs, it will be determined as a major defect, and other situations will be determined as important defects or general defects according to the degree of impact:

1. The control environment is invalid;

2. Fraudulent conduct by directors and senior managers;

3. The certified public accountant discovered that there was a material misstatement in the current financial report, but the company failed to discover the misstatement during its operation;

4. Major deficiencies that have been discovered and reported to management are not corrected after a reasonable period of time;

5. The audit committee and audit department of the company’s board of directors are ineffective in supervising internal control;

6. Other defects that may affect the correct judgment of report users.

7. 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:

Indicator name Quantitative standard for major defects Quantitative standard for important defects Quantitative standard for general defects Direct property loss I≥1% 0.5%≤I＜1% I＜0.5% Description:

I=direct property loss/total net assets

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

Nature of defects Qualitative standards

It has a significant impact on the company's strategy formulation and implementation as well as the company's operations; it is unable to achieve important operational goals or major shortcomings in key performance indicators; it has a significant negative impact on the company's reputation; it has been formally disclosed to the outside world and has been formally disclosed by national government departments and has a negative impact on the disclosure of the company's regular reports.

There are important defects in the company's important business systems; violations of the company's internal rules and regulations; violations of decision-making procedures leading to general important defects

sexual errors; serious loss of business personnel in key positions of the company; important defects in internal control evaluation cannot be rectified. General defects include defects other than major defects and important defects.

Description:

None

(3). Identification and rectification of internal control deficiencies

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

1.1. Major defects

Did the company have any major deficiencies in internal control over financial reporting during the reporting period Yes √ No

1.2. Important defects

Does the company have any important deficiencies in internal control over financial reporting during the reporting period? Yes √ No

1.3. General defects

None

1.4. After the above rectifications, as of the base date of the internal control evaluation report, does the company have any significant internal control issues over financial reporting that have not been rectified?

Defects

□Yes √No

1.5. After the above rectifications, as of the base date of the internal control evaluation report, does the company have any important internal control issues over financial reporting that have not been rectified?

Defects

□Yes √No

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

2.1. Major defects

Did the company discover any major deficiencies in non-financial reporting internal control during the reporting period Yes √ No

2.2. Important flaws

Did the company discover any important deficiencies in non-financial reporting internal control during the reporting period Yes √ No

2.3. General defects

During the reporting period, the company's audit department's self-assessment found that the company's internal control process had general deficiencies in daily operations. In response to the discovered internal control deficiencies, the company formulated rectification measures and modified and improved the process. Rectification was organized during the reporting period. The deficiencies did not affect the realization of the company's internal control objectives for financial reporting.

2.4. After the above rectifications, on the base date of the internal control evaluation report, has the company discovered any major deficiencies in the internal control of non-financial reporting that have not yet been rectified?

□Yes √No

2.5. After the above rectifications, on the base date of the internal control evaluation report, has the company discovered any important deficiencies in the internal control of non-financial reporting that have not yet been rectified?

□Yes √No

4. Description of other major matters related to internal control

1. Rectification of internal control deficiencies in the previous year

□Applicable √Not applicable

2. Internal control operation status this year and improvement directions for the next year

√Applicable □Not applicable

In 2025, the company's internal control system will operate well. By identifying general defects in internal control and implementing rectifications, the company will continue to promote the optimization of the internal control system, thereby reasonably ensuring the legal compliance of the company's operation and management, asset security, and the integrity of financial reports and related information, improving operating efficiency and effectiveness, and promoting the company's development strategy.

In 2026, the company will continue to improve various internal control systems and approval processes based on its business objectives, strengthen the implementation of internal control systems, increase internal control supervision and inspection, and effectively prevent various major risks to promote the healthy and sustainable development of the company.

3. Description of other significant matters

□Applicable √Not applicable

Chairman (authorized by the board of directors): Li Hongming Shaanxi Kanghui Pharmaceutical Co., Ltd.

April 22, 2026