Enhua Pharmaceutical: 2025 Internal Control Self-Evaluation Report

Jiangsu Enhua Pharmaceutical Co., Ltd.

2025 Internal Control Evaluation Report

All shareholders of Jiangsu Enhua 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 internal control system and evaluation methods of Jiangsu Enhua Pharmaceutical Co., Ltd. (hereinafter referred to as the "Company"), and based on 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 relevant 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 Supervisory Board supervises 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, board of supervisors, directors, supervisors 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 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 material 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. The main units included in the evaluation scope include the Company and all 13 subsidiaries it holds. The total assets of the units included in the evaluation scope 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. The specific units are as follows:

1. Xuzhou Enhua Uni-President Pharmaceutical Chain Sales Co., Ltd. is a holding subsidiary of the company. Its main business is: daily beauty services; traditional Chinese medicine slice decoction services; third-class medical device operations; drug retail; foot bath services; maternal and infant health technical services; medical services; sales of disinfection equipment; roads Cargo transportation (excluding dangerous goods); Internet live broadcast technical services; e-cigarette retail; publication retail; Internet information services; third-category medical device leasing (projects that require approval according to law can only be carried out after approval by relevant departments, and specific business projects are subject to the approval results) General items: Internet sales of food (only sales of prepackaged food); advertising release; sales of food additives; retail of cosmetics; sales of daily necessities; retail of sporting goods and equipment; conference and exhibition services; sales of glasses (excluding contact lenses); general cargo warehousing services (excluding hazardous chemicals and other items requiring license approval); Sales of health food (prepackaged); retail of pet food and supplies; marketing planning; supply chain management services; advertising production; brand management; organizing cultural and artistic exchange activities; clinic services; daily life services for residents; consulting and planning services; sales agency; business training (excluding education training, vocational skills training, etc., which require a license training); electronic product sales; packaging services; investment activities with own funds; asset management services for own capital investment; non-residential real estate leasing; housing leasing; library management services; loading and unloading; retail sales of computer software, hardware and auxiliary equipment; rental of counters and booths; typing and copying; sales of communication equipment; vending machines Sales; sales of Class I medical devices; sales of Class II medical devices; sales of adult sex toys (excluding drugs and medical devices); health consulting services (excluding diagnosis and treatment services); sales of sanitary products and disposable medical supplies; health care services (non-medical); sales of disinfectants (excluding hazardous chemicals); software development; national Domestic trade agency; sales of maternal and infant products; Internet sales (except for sales of goods requiring licenses); leasing of Class II medical devices; leasing of Class I medical devices; leasing services (excluding licensed leasing services); sales of infant formula milk powder and other infant formula foods; food sales (only sales of prepackaged food); special medical purposes Sales of formula food; advertising design and agency; remote health management services; information consulting services (excluding licensing information consulting services); wholesale of edible agricultural products; retail of edible agricultural products; wholesale of pet food and supplies; wholesale of electronic components; retail of electronic components; sales of personal hygiene products; sales of wearable smart devices; daily miscellaneous products Sales of products; sales of watches and timing instruments; wholesale of clothing and apparel; retail of clothing and apparel; sales of labor protection products; sales of paper products; sales of daily necessities; sales of plastic products; wholesale of textiles, clothing and household products; sales of needle textiles; sales of food detergents; sales of sanitary pesticides; sales of intelligent unmanned aerial vehicles; special chemicals Product sales (excluding hazardous chemicals); sales of agricultural and sideline products; wholesale of hardware products; retail of hardware products; sales of daily ceramic products; retail of protective equipment for medical staff; sports and health services; centralized fast charging stations; purchase and sale of real estate Chinese herbal medicines (excluding Chinese herbal pieces); takeaway delivery services; motor vehicle charging sales; total quality 4.5 Road cargo transportation by ordinary freight vehicles of tons and below (except online freight and dangerous goods); operation of electric vehicle charging infrastructure; nursing facility services (excluding medical services).

2. Jiangsu Yuanheng Pharmaceutical Co., Ltd. is a holding subsidiary of the company. Its main business is: manufacturing and sales of eye drops, suppositories (including hormones), ointments, creams (including hormones), cosmetics, Class II 6864 medical and hygienic materials and dressings (operated with a valid license); drug research and development and technology transfer; general cargo transportation. (Projects that are subject to approval according to law can only be carried out after approval by relevant departments) Licensed projects: pharmaceutical production; commissioned production of drugs; production of Class II medical devices (projects that are subject to approval according to law can only be carried out after approval by relevant departments, and specific business projects are subject to the approval results) General projects: production of Class I medical devices; sales of Class I medical devices; sales of Class II medical devices; technical services, technology development, technical consultation, technical exchanges, technology transfer, and technology promotion.

3. Jiangsu Enhua Hexin Pharmaceutical Marketing Co., Ltd. is a wholly-owned subsidiary of the company. Its main business is: wholesale sales of Chinese patent medicines, chemical drugs, and psychotropic drugs (limited to Category II) (except for the above drugs that require refrigerated storage); sales of medical devices; biological product technology development, technical consulting, technical services, and technology transfer; self-operated and agent import and export business of various commodities and technologies (except for commodities and technologies that are restricted by the state or prohibited from import and export). (Items that require approval according to law can only be carried out with the approval of relevant departments) General items: cosmetics retail; Internet sales (except for the sale of goods that require permission); cosmetics wholesale; health food (pre-packaged) sales; food sales (only pre-packaged food is sold); food Internet sales (only pre-packaged food is sold).

4. Jiangsu Enhuaside Pharmaceutical Co., Ltd. is a holding subsidiary of the company. Its main business is: manufacturing and sales of tablets, hard capsules, APIs, and pharmaceutical intermediates, scientific research projects, and technology development and transfer.

5. Xuzhou Enhua Import and Export Trading Co., Ltd. is a wholly-owned subsidiary of the company. Its main business is: self-operated and agent import and export business of various commodities and technologies (except for commodities and technologies that are restricted or prohibited from import and export by the state); sales of chemical products, pharmaceutical intermediates, pesticides, food additives, agricultural and sideline products, medical equipment, instruments, engineering machinery, computer equipment and their accessories; pharmaceutical chemical and bioengineering technology research and development, technology transfer and technical consulting services.

6. Jiangsu Enhualuokang Drug Research and Development Co., Ltd. is a controlled subsidiary of the company. Its main business is pharmaceutical product research and development and technology transfer, pharmaceutical intermediates, pharmaceutical, chemical and bioengineering technology development, technology transfer, technical consulting services, pharmaceutical research and development outsourcing services, self-operated and agency import and export business of various commodities and technologies (except for commodities and technologies that are restricted by the state or prohibited from import and export).

7. Hong Kong Enhua Pharmaceutical Co., Ltd. is a wholly-owned subsidiary of the company. Its main business is: sales of raw materials and preparations, and agency for the import and export of various commodities and technologies.

8. Suzhou Enhua Biomedical Technology Co., Ltd. is a wholly-owned subsidiary of the company. Its main business is: technology development, technical consulting, technical services, and technology transfer of chemical drugs, biomedicine, Chinese herbal medicines, medical devices, and diagnostic testing products.

9. Beijing Yihua Mobile Medical Technology Co., Ltd. is a holding subsidiary of the company. Its main business is: general projects: technical services, technology development, technical consultation, technology exchange, technology transfer, technology promotion; sales of industrial control computers and systems; software development; artificial intelligence basic software development; artificial intelligence application software development; advertising release; medical research and experiments Development; data processing and storage support services; socioeconomic consulting services; health consulting services (excluding diagnosis and treatment services); data processing services; conference and exhibition services; mobile terminal equipment sales; computer software, hardware and auxiliary equipment retail; computer system services; software sales; artificial intelligence theory and algorithm software development; information system integration services; Internet of Things equipment sales. (Except for projects that require approval in accordance with the law, business activities can be carried out independently with a business license in accordance with the law) Licensed projects: basic telecommunications business; Internet information services; online data processing and transaction processing business (operational e-commerce); second type value-added telecommunications business; food sales.

10. Shanghai Enyuan Biotechnology Co., Ltd. is a controlled subsidiary of the company. Its main business is: general projects: technical services, technology development, technical consultation, technology exchange, technology transfer, technology promotion; information consulting services (excluding licensed information consulting services); sales of instruments and meters; sales of chemical products (excluding licensed chemical products); wholesale of computer software, hardware and auxiliary equipment; sales of first-class medical devices; import and export of goods; import and export of technology; sales of second-class medical devices. (Except for projects that require approval according to law, business activities can be carried out independently with a business license in accordance with the law) Licensed projects: road cargo transportation (excluding dangerous goods); production of Class II medical devices; production of Class III medical devices; and operation of Class III medical devices. (Projects that require approval according to law can only be carried out with the approval of relevant departments. Specific business projects shall be subject to the approval documents or licenses of relevant departments)

11. Xuzhou Yihe Pharmaceutical Co., Ltd. is a wholly-owned subsidiary of the company. Its main business is: pharmaceutical product research and development and technology transfer; pharmaceutical intermediates, biotechnology technology research and development, technology transfer, and technical consulting services; sales of chemical products (except hazardous chemicals); pharmaceutical intermediate manufacturing and sales; pharmaceutical and pharmaceutical intermediate research and development outsourcing services.

12. Shanghai Shujing Biotechnology Co., Ltd. is a wholly-owned subsidiary of the company. Its main business is: General projects: engaged in technology development, technical consulting, technology transfer, technical services, drug research and development, sales of laboratory consumables, goods import and export, and technology import and export in the fields of biotechnology, pharmaceutical technology, and medical technology.

13. Xuzhou Enhua Biomedical Technology Co., Ltd. is a wholly-owned subsidiary of the company. Its main business is: Licensed projects: pharmaceutical production; pharmaceutical commissioned production; pharmaceutical import and export; pharmaceutical wholesale; pharmaceutical production (excluding the application of processing technologies such as steaming, frying, roasting, and forging of traditional Chinese medicine pieces and the production of confidential prescription products of traditional Chinese medicine) (projects that require approval according to law can only be carried out with the approval of relevant departments, and specific business projects are subject to the approval results) General projects: technical services, technology development, technical consultation, technology exchange, technology transfer, technology promotion; technology import and export; goods import and export; sales of chemical products (excluding licensed chemical products); technology promotion services; engineering and technology research and experimental development; engineering technology services (except planning management, survey, design, supervision); import and export agents; health consulting services (not included) Including diagnostic and treatment services); Internet sales (except for the sale of goods that require licenses); sales of daily necessities; domestic trade agents; engineering and technology research and experimental development (except for the development and application of human stem cells, genetic diagnosis and treatment technology, China’s rare and unique precious and fine varieties); sales of daily necessities (except for projects that require approval according to law, independently carry out business activities with a business license in accordance with the law)

(2) The main businesses and matters included in the evaluation scope include

1. Governance structure

In accordance with relevant national laws and regulations and the company's articles of association, the company has established a standardized corporate governance structure and rules of procedure, clarified the responsibilities and authorities in decision-making, execution, and supervision, and established a general meeting of shareholders, a board of directors, and a board of supervisors to exercise decision-making, execution, and supervisory powers respectively. There is a clear division of labor among the three agencies, each performs its duties, fulfills its responsibilities, and checks and balances each other. The general meeting of shareholders enjoys the legal rights stipulated in laws, regulations and the articles of association of the enterprise, and shareholders exercise their voting rights on major matters such as enterprise operating policies, financing, investment, and profit distribution in accordance with the law. The board of directors is the permanent decision-making body of the company. It is elected by the shareholders' meeting. It is responsible to the shareholders' meeting and exercises the company's business decision-making power in accordance with the law. The company's board of directors has established four special committees: Strategy Committee, Audit Committee, Nomination Committee, and Remuneration and Appraisal Committee. The board of supervisors is responsible to the general meeting of shareholders and supervises the company's directors, managers and other senior managers to perform their duties in accordance with the law.

In accordance with relevant national laws and regulations and the company's articles of association, the company has established rules of procedure for the board of directors, board of supervisors, and general manager, clarifying the responsibilities, authorities, and working procedures for decision-making, execution, and supervision. The company insists on being completely separated from its major shareholders and its affiliated companies in terms of business, personnel, assets, institutions and finance, ensuring that the company has independent and complete business and independent operating capabilities. During the reporting period, the company's "three meetings" and special committees operated in a standardized manner, and the convening and convening procedures of the "three meetings" complied with the provisions of the "Company Law", "Shenzhen Stock Exchange Stock Listing Rules", "Articles of Association" and other relevant rules of procedure.

During the reporting period, the company held a total of 3 shareholders' meetings, 10 board of directors meetings and 7 board of supervisors meetings. The convening, holding and voting procedures of each meeting were in compliance with the provisions of the Company Law and other laws and regulations, normative documents and the Articles of Association.

In accordance with the provisions of relevant laws, regulations and normative documents such as the Company Law of the People's Republic of China (hereinafter referred to as the "Company Law"), the "Transitional Arrangements Related to the Implementation of Supporting Institutions and Rules of the New Company Law" and the "Guidelines on the Articles of Association of Listed Companies (Revised in 2025)" and the "Shenzhen Stock Exchange Stock Listing Rules", the company will cancel the board of supervisors and have no supervisors at the end of the reporting period. The audit committee of the board of directors will exercise the powers of the board of supervisors stipulated in the "Company Law" and the regulatory system. This matter has been reviewed and approved by the shareholders' meeting.

2. Organizational structure (organizational setup and distribution of rights and responsibilities)

In accordance with the provisions of national laws and regulations and the requirements of regulatory authorities, the company has established scientific and standardized institutions and positions based on its own business characteristics and internal management control requirements, clarified responsibilities and authorities, and assigned rights and responsibilities to each responsible unit. When the internal and external environment changes, the company promptly improves and adjusts the organizational structure and improves the overall operational level to achieve the company's long-term development needs.

The company's various functional departments and subsidiaries can operate efficiently under the leadership of the management in accordance with the management system established by the company. Each holding subsidiary has established a complete decision-making system, execution system and supervision and feedback system, and set up internal institutions and business departments in accordance with the principle of mutual checks and balances.

3. Development strategy

The Strategy Committee under the Board of Directors is a specialized working organization responsible for development strategic management. It is mainly responsible for studying and making recommendations on the company's long-term development plans, major investment and financing plans, major capital operations, and asset management project decisions. The members of the committee have strong comprehensive qualities and practical experience, are familiar with the characteristics of the company's business industry and operating operations, have strong market sensitivity and comprehensive judgment capabilities, and can fully understand the direction of national macro policies and domestic and foreign economic and industry development trends.

The company's development strategy is positioned in the central nervous system drug market, and it is the only company in the domestic pharmaceutical industry that focuses on the central nervous system drug market segment. After more than 40 years of focusing resources on the research and development, production, marketing and service of central nervous system drugs, the company now has comprehensive competitive advantages in the field of central nervous system drugs and has formed the company's unique core competitiveness.

During the reporting period, by increasing marketing efforts, strengthening brand promotion, accelerating product iteration, and relying on intelligent technology and Internet platforms, we fully leveraged the advantages of focus to create brand benefits and enhance market competitiveness.

4. Human resources

The company has always adhered to the principle of "people-oriented" and the employment philosophy of "having both ability and political integrity, employing talents based on their position, and employing people based on their strengths", fully respecting the personality of each employee, respecting their personal wishes, and respecting their right to choose. The company strives to provide employees with a good working environment, create a harmonious working atmosphere, and advocate simple and sincere interpersonal relationships.

The company has established a human resources development and management system consisting of five major systems: job analysis and evaluation system, salary incentive system, performance evaluation system, training and development system, and quality and ability identification system. It realizes stepped talent training and multi-channel career development space, and effectively promotes the common development of the company and employees.

The company has formulated a series of talent training plans such as the "Young Eagle Plan", "Fine Eagle Plan" and "Eagle Plan" according to different levels of talents, to meet the backup needs of managers at all levels. The company established Enhua Academy, established a training organization system, and created brand training projects of "Ingenuity Team Leader Training" and "New Employee Training".

During the reporting period, the Human Resources Department focused on the optimization of basic functions and team service support based on the company's strategic goals, and consolidated the foundation of the human resources management system. For the heads of relevant departments, a dual assessment mechanism of "output guarantee + R&D support" is designed to strengthen the closed-loop efficiency of the industrial chain and support the company's integrated research, production and marketing strategy. Completed the launch of the attendance system, achieving diversified operation portals (PC, APP, WeChat service account), one-click processing (such as visual attendance calendar), and online management processes (electronic approval instead of paper). Revise the performance management system to form a closed-loop management system; optimize the salary and welfare system to reflect fairness and competitiveness.

5. Social responsibility

As a listed company, the company has always focused on the realization of corporate social value, taking "valuing quality and respecting life" as its guide of action, and taking "providing returns to shareholders, providing a platform for employees, creating value for customers, and creating prosperity for society" as its mission. While pursuing economic benefits and protecting the interests of shareholders, it treats and protects other interests with integrity. Relevant parties, especially the legitimate rights and interests of employees and customers, promote the construction of enterprises in environmental friendliness, resource conservation, circular economy, etc., participate in and donate to social welfare and charity, actively fulfill social responsibilities, and actively support epidemic prevention and control work; use their own development to influence and promote the revitalization of the local economy, and promote the coordination and harmonious development of the company, society, communities, and nature. In its business activities, the company follows the principles of voluntariness, fairness, equal compensation, and good faith, abides by social morality and business ethics, accepts supervision from the government and the public, does not rely on improper methods such as exaggerated publicity and false advertising to make profits, and does not infringe other people's intellectual property rights such as trademarks, patents, and copyrights.

6. Corporate culture

The company attaches great importance to the construction of corporate culture and regards corporate culture as one of the company's core competitiveness and one of the fundamental means to unite the team and support the long-term development of the company. "Loyal to technology, lean manufacturing" and "valuing quality and respecting life" are the action guidelines pursued by the company, and it always adheres to the "people-oriented" management philosophy in the production and operation process. Through the construction and dissemination of corporate culture, we advocate honesty and trustworthiness, dedication to work, pioneering innovation and teamwork, and strengthen employees' awareness of innovation, quality and risk based on the company's goals of healthy and sustainable development.

7. Environment, health and safety

The company has set up a safety committee with an EHS management department under it to implement the guidelines, policies, laws, regulations and rules on production safety, implement the responsibilities of the main body responsible for production safety, and implement the policy of "safety first, prevention first, comprehensive management". The company has formulated a "Production Safety Emergency Plan", established a production safety responsibility system, and formulated a complete and comprehensive accident emergency plan that is targeted and highly operational. Based on the "Identification of Major Hazard Sources", "Evaluation of Current Situation of Occupational Disease Hazards", and "Safety Inspection and Inspection System", the company conducts regular safety inspections and conducts comprehensive inspections and rectifications of various hazard sources and all aspects of drug production, operation, storage, use, transportation and disposal. Firmly establish a sense of safety responsibility and effectively improve employees' safety, occupational health awareness and self-protection capabilities.

The company has formulated an "Environmental Incident Emergency Plan" to respond to environmental emergencies. Organize supervision and testing of environmentally friendly wastewater and gas at production sites, conduct regular environmental risk assessments, and prepare a "Self-Assessment" report. The company regularly arranges professionals to inspect and maintain environmental protection equipment and facilities to achieve emission standards.

The company insists on promoting green production, actively implements the environmental policy of "environmental protection, coordinated development, compliance with laws and regulations, circular economy, pollution prevention, continuous improvement, human health, and green home", and actively promotes a comprehensive pollution prevention strategy of "source prevention, process control and terminal treatment".

During the reporting period, the company was rated as the "Excellent Enterprise in Xuzhou Occupational Health in 2024" and obtained the QES+ energy system certificate and the national green factory certificate.

8. Product safety

The company actively promotes the establishment and implementation of a preventive quality management system and continuously improves product quality. Implement lean manufacturing, control quality costs, and advance towards the goal of "zero defects". Senior leaders are responsible for overall product and service quality, and have established an internal product quality control and rapid response mechanism to external customer demands with the quality management department as the core. The company has formulated the "Drug Quality Risk Management Procedure", which covers the entire life cycle of the product, applies all aspects related to drug quality, and regularly conducts risk management activities. The company promotes a product traceability system, which can effectively trace the production process, equipment and other information of the product, ensure traceability to the root cause, and facilitate quality improvement and defect prevention.

The company continues to strengthen cost reduction and efficiency improvement work, and carries out technical research and process optimization of existing varieties to reduce product unit consumption and improve finished product yields. It also significantly improves labor efficiency and controls labor costs through the introduction of new automated equipment. At the same time, it accelerates the implementation of new technologies such as enzyme catalysis and microchannel reaction, achieves industrialization within the year, and continues to reduce production costs through technological advancement.

9. Information security

The company has formulated the "Computer Software Management System", "Computer Hardware Management System", "Computer Maintenance Management System", "Computer Network Management System" and "Network Environment Management System", etc., and has made detailed provisions on the implementation procedures of the system. Establish information security positions in various departments of the company, sign confidentiality agreements for personnel in key information security positions, and organize information security training regularly; information security knowledge is regularly released through the information system to improve the security awareness of all employees; information resource management clarifies responsible departments and personnel, controls access rights, manages authorization and passwords, eliminates and prevents illegal access, and improves the security of the use of information resources.

In order to ensure the security of the internal network and prevent and block attacks from external networks, the company network is equipped with firewalls and intrusion detection systems, and anti-virus software and Trojan protection software are installed. The company has formulated relevant systems such as the "Information Security Control System" and "Information System Emergency Plan", conducts risk assessments every year, identifies and handles possible information security risks, and analyzes accidents that have occurred to form accident analysis reports. In order to prevent the failure of the company's information system from affecting the security and integrity of the data, multi-active data center technology is used for the core application system, dual-machine hot backup is performed, data is backed up off-site, and a disaster recovery system is applied to ensure that the company can quickly restore data and put into normal operations under any special circumstances.

During the reporting period, the second phase of the digital application management platform was fully launched, and a number of business processes and logic optimizations were carried out for business module integration, significantly improving the company's operational efficiency, management level and market competitiveness.

10. Funding activities

The company has formulated the "Financial and Accounting Management Measures" and "Accounting Internal Control System" and other systems to implement unified dispatch and use management of the company's funds. All income is included in the company's unified financial management and accounting. In terms of monetary fund collection and payment, strict separation of cashier and accounting responsibilities and separate control of money, accounts, and materials are implemented as required. Cashiers are not responsible for auditing, accounting file keeping, and registration of income, expenditures, expenses, claims, and debt accounts.

11. Procurement and payment business

The company has formulated a supply management system, used the ERP system, optimized the procurement process, improved corporate supply chain management and control, and implemented effective management and supervision of the company's material and equipment procurement. Suppliers are audited regularly to ensure the safety of material supply. Bidding is adopted for important procurement projects, and a sound procurement and bidding management process has been established, effectively reducing procurement costs. Actively develop new suppliers based on existing suppliers, expand procurement channels, introduce better suppliers, avoid untimely supply, and ensure competition and control of procurement prices.

12. Asset management

The company's assets are independent and complete, with clear ownership, and have not been occupied or dominated by directors, supervisors, senior managers, controlling shareholders, actual controllers and their related parties. The company's personnel, assets and finances are separated from those of its controlling shareholder, actual controller and its affiliates, and its institutions and businesses are independent. Each company has independent accounting and assumes independent responsibilities and risks.

The company continues to improve its fixed assets management system, and has clearly standardized the relevant control links such as asset procurement, contract conclusion, acceptance, allocation, inventory, scrapping, mortgage, and guarantee, covering all aspects of internal control of fixed assets management. The internal control design of fixed assets is sound, reasonable, and effectively implemented. The company has established a complete inventory management system and standardized internal control in all aspects of procurement, acceptance, warehousing, receipt, and inventory.

13. Sales and collection business

The company adopts corresponding marketing strategies based on changes in the market environment and development requirements, increases information sharing and problem communication among various departments, improves the accuracy of market forecasts, and continues to improve corporate marketing levels and marketing management. Internal sales management procedures have been formulated, and standardized sales contracts have been formulated. Credit managers conduct credit evaluations on customers. The sales department is responsible for signing contracts and processing orders; the warehousing department is responsible for reviewing delivery documents and handling delivery matters; the finance department is responsible for settling sales payments and supervising payment recovery. During the reporting period, the company's sales and collection business were well controlled. It is a trend that large-volume purchases lead to product price declines. It is inevitable that companies will adopt different price strategies at different time periods and constantly adjust them according to time and place. The company chooses a price strategy that is more beneficial to the company. Focus on differentiated competitive strategies in actual operations.

(3) High-risk areas of focus mainly include

1. Management and control of subsidiaries

The company manages its holding subsidiaries in strict accordance with relevant laws, regulations and relevant provisions of listed companies, and has formulated management systems such as the "Subsidiary Management System", "Subsidiary Major Contract Management Measures", and "Company Seal Management System". The company has the personnel power to appoint or dismiss the senior management of subsidiaries, and appoints directors, financial directors, and information department managers to implement supervision and management; it holds at least one subsidiary business analysis meeting every month, and the general manager of the subsidiary reports major business matters to the company in a timely manner. Without the approval of the company, the subsidiary is not allowed to provide external guarantees or loans without authorization. major matters such as loans, external investments, acquisitions, and asset mortgages; through the financial information network system, the financial operations of subsidiaries can be grasped in real time; the company's functional departments provide guidance, services, and supervision on the relevant businesses of subsidiaries; the company's internal audit department is responsible for performing audits of subsidiaries; and conducts performance appraisals of subsidiary managers every year.

2. Internal control of related-party transactions

The company has formulated a "Fair Decision-making System for Related Party Transactions". Related party transactions always follow the principles of good faith, equality, voluntariness and "three fairs", and are regularly disclosed in the company's interim and annual reports in accordance with laws, regulations and other relevant regulations. When the company's board of directors considers related party transactions, related directors must abstain from voting. The company's directors, supervisors and senior managers all pay close attention to whether there is misappropriation of funds by related parties and other issues that infringe on the company's interests. All related-party transactions during the year were carried out in accordance with the market-oriented principles of fairness and justice to fully ensure that the interests of small and medium-sized shareholders would not be harmed. The "Articles of Association" specify specific measures to prevent shareholders or actual controllers from misappropriating the assets of listed companies. The company's board of directors will establish a "freeze upon occupation" mechanism for shares held by major shareholders to prevent major shareholders and their affiliated companies from occupying listed company funds and misappropriating the interests of listed companies.

The company also updates the list of related parties in a timely manner to ensure that the list of related parties is true, accurate and complete. When transactions occur between the company and its subsidiaries, relevant leaders will prudently determine whether they constitute related transactions. If it constitutes a related-party transaction, the approval and reporting obligations will be fulfilled within their respective authority.

3. Internal control of external guarantees

In accordance with the provisions of relevant laws and administrative regulations, the company has formulated the "External Guarantee Management System", which clarifies the approval authority of the shareholders' meeting and the board of directors on external guarantee matters, as well as the accountability mechanism for violations of the approval authority and review procedures, and clarifies specific issues such as the approval, risk assessment, and information disclosure of external guarantee matters.

During the reporting period, the company had no guarantees, ensuring the interests of the listed company and shareholders.

4. Research and development control

The company has always adhered to the concept of risk management in scientific research and development and production processes, and strictly controlled the company's scientific research activities to improve the company's scientific research management level. To this end, the company has formulated relevant management systems for scientific research project management, stipulating the work flow of R&D projects from project establishment to development, clarifying the methods, procedures and related control measures for authorization and approval, and stipulating the authority and responsibilities of the approvers, as well as the scope of responsibilities and work requirements of the managers. The company attaches great importance to the protection of research and development results and the confidentiality of the company's patented technology, and has signed confidentiality agreements with relevant scientific and technological personnel.

In response to changes in national policies, we promptly revised and improved the procedures, requirements, inspections, assessments and other specifications for research and development, established a special inspection team, strengthened self-examination of research and development work within the company, and formulated a self-examination manual.

During the reporting period, we adhered to the development strategy of “continuous focus and innovation-driven” and followed the guiding principles of “rapid growth, steady reform, and safe development”. We will continue to promote the listing of innovative drugs, high policy barriers and high-tech generic drugs, and accelerate project cooperation with international and domestic R&D institutions. Pay attention to small breakthroughs and micro-innovations, and strive to enhance Enhua's core competitiveness.

5. Internal control of major investments

The company has clearly defined investment authority, approval procedures, and relevant information disclosure in its Articles of Association, Rules of Procedure for the General Meeting of Shareholders, Major Matters Disposal System, and Information Disclosure Management System. The company controls investment risks and focuses on investment efficiency. The company's corporate development department is responsible for conducting specialized research and evaluation on the feasibility, investment risks, investment returns and other matters of the company's major projects. The company implements strict procedures such as preliminary inspection, feasibility study, internal evaluation and investment decision-making for new investment projects, and fulfills the approval procedures and information disclosure obligations of the board of directors or shareholders' meeting in accordance with relevant laws and regulations for major investment projects. In order to standardize the management of the company's major investment projects, reduce construction costs, and complete them on time and with high quality, the company has specially set up a project management team and formulated the "Construction Site Management System for Investment and Construction Projects", "Project Construction Contract Management System", "Project Change and Addition Management System", "Investment and Construction Project Fees" Control Procedures, "Investment and Construction Project Target Budget and Final Account Management System" and other related systems, adopt mature project management methods, standardize the company's operating procedures for large-scale investment and construction projects, improve the monitoring and coordination of project operation processes, and enable projects to be implemented in an effective and controllable state with high efficiency and low cost. The project management team also holds regular coordination meetings and promptly reports project progress to the board of directors and senior management. By taking relevant measures such as supervision and management of project bidding activities, strict review of engineering contracts, and audits of construction projects, various risks during the project construction process are effectively prevented.

6. Internal control of information and communication

In order to ensure that the company discloses information in a timely, accurate and complete manner and to avoid important information leakage, illegal disclosure and other incidents, the company has formulated the "Information Disclosure Management System" and "Major Information Internal Reporting System" in accordance with the "Listing Rules", "Guidelines for Fair Information Disclosure by Listed Companies" and other relevant laws and regulations, which clarifies the information collection and management of various departments, branches and relevant personnel within the company (including controlled subsidiaries), as well as the scope of information disclosure responsibilities and confidentiality responsibilities. Among them, the company's directors, supervisors, senior managers, heads of various functional departments, and general managers of each subsidiary are responsible for internal reporting of major information and are responsible for the timeliness, authenticity, accuracy and completeness of the disclosed content. Relevant responsible persons are required to promptly report and report to the company's chairman, management and board secretary when major information events may occur or have occurred, and the scope of responsibility for internal reporting of major information has been formulated to effectively ensure the smooth progress of information disclosure.

The company continues to improve internal control of information and communication, and strictly implements systems such as the "External Information User Management System", "Responsibility System for Major Errors in Annual Report Information Disclosure", and "Insider Information Reporting System". During the reporting period, the company's information disclosure strictly complied with relevant laws and regulations, the Shenzhen Stock Exchange's stock listing rules and the company's "Information Disclosure Management Regulations", and there was no violation of information disclosure. Internally, the company uses various forms such as the Internet, OA systems, internal publications, research reports, meetings, etc. to realize information transfer between various management levels, departments, business units, and employees and management; while externally publishing company information through media such as the Shenzhen Stock Exchange website, Securities Times, and cninfo.com, the company also communicates with investors, research institutions, industry associations, intermediaries, business units, and relevant regulatory authorities through telephone, email, and various media to obtain external information in a timely manner.

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

(4) 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 enterprise's internal control standard system.

The company's board of directors differentiated 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. 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

(1) The quantitative standards for the evaluation of internal control deficiencies in financial reporting determined by the company are as follows:

Quantitative standards use pre-tax profits and total assets as measurement indicators.

If internal control deficiencies may cause or cause losses related to profits, they shall be measured by the pre-tax profit indicator: if the misstatement amount of the financial report that may be caused by the deficiencies alone or together with other deficiencies is less than 5% of the pre-tax profits, it is deemed to be a general deficiency; if it exceeds 5% of the pre-tax profits, less than 10% is deemed to be an important deficiency; if it exceeds 10% of the pre-tax profits, it is deemed to be a major deficiency.

If internal control deficiencies may cause or cause losses related to asset management, they shall be measured by the total assets indicator: if the misstatement amount of the financial report that may be caused by the deficiencies alone or together with other deficiencies is less than 0.5% of the total assets, it will be deemed as a general deficiency; if it exceeds 0.5% of the total assets, less than 1% will be deemed as an important deficiency; if it exceeds 1% of the total assets, it will be deemed as a major deficiency.

(2) The qualitative standards for the evaluation of internal control deficiencies in financial reporting determined by the company are as follows:

Signs of material financial reporting deficiencies include:

Fraudulent behavior by the company's directors, supervisors and senior managers; the company's correction of published financial reports; major misstatements in the current financial report discovered by certified public accountants but not identified by the company's target control; ineffective supervision of the company's external financial reporting and internal control of financial reporting by the audit committee and audit department; failure to disclose the company's major accounting policies, changes in accounting estimates or corrections of accounting errors as required.

Signs of important deficiencies in financial reporting include: failure to select and apply accounting policies in accordance with generally accepted accounting principles; failure to establish anti-fraud procedures and control measures; failure to establish corresponding control mechanisms for accounting processing of non-routine and special transactions or failure to implement and corresponding compensatory controls; one or more deficiencies in the control of the period-end financial reporting process and the inability to reasonably ensure that the prepared financial statements achieve true and complete objectives.

General defects refer to other control defects other than the above-mentioned major defects and important defects.

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

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

Quantitative standards use pre-tax profits and total assets as measurement indicators.

If internal control defects may cause or cause losses related to profits, they shall be measured by the pre-tax profit indicator: if the direct property loss that the defect may cause alone or together with other defects is less than 5% of the pre-tax profit, it is deemed to be a general defect; if it exceeds 5% of the pre-tax profit, less than 10% is deemed to be an important defect; if it exceeds 10% of the pre-tax profit, it is deemed to be a major defect.

Losses that may be caused or caused by internal control deficiencies related to asset management are measured by the total assets index: if the direct property loss that the defect may cause alone or together with other deficiencies is less than 0.5% of the total assets, it is deemed a general defect; if it exceeds 0.5% of the total assets, less than 1% is deemed an important defect; if it exceeds 1% of the total assets, it is deemed a major defect. (2) The qualitative standards for the evaluation of non-financial reporting internal control deficiencies determined by the company are as follows:

The following situations may be considered as major defects:

The company lacks democratic decision-making procedures; the company's decision-making procedures are unscientific, such as causing serious mistakes in decision-making, resulting in unsuccessful mergers and acquisitions; serious violations of national laws, regulations or normative documents, such as environmental pollution accidents and major safety production accidents; a large number of core managers or core technical personnel are lost; frequent negative news in the media, and negative events have attracted the attention of international and national mainstream media; the results of internal control evaluation, especially major or important defects, have not been rectified; important business lacks institutional control or the system has failed systematically, and the company has been punished by the Securities Regulatory Commission or warned by the stock exchange.

The following situations can be considered as important defects:

The decision-making process exists but is not perfect; the decision-making process leads to errors; the company's internal regulations are violated, resulting in losses; some core managers or core technical personnel are lost; negative events attract the attention of provincial mainstream media; the company is punished by national government departments, but it does not have a negative impact on the company's regular report disclosures.

General defects refer to other control defects other than the above-mentioned major defects and important defects.

(5) 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

According to the resolution of the company's 2025 second extraordinary general meeting of shareholders held on December 19, 2025, it was agreed that the company would cancel the board of supervisors and not have supervisors. The audit committee of the board of directors would exercise the powers of the board of supervisors stipulated in the Company Law and the regulatory system. At the same time, the "Rules of Procedure of the Board of Supervisors" would be abolished accordingly.

The company has no other internal control information that may have a significant impact on investors' understanding of the internal control evaluation report, evaluation of internal control conditions or investment decisions.

Chairman of Jiangsu Enhua Pharmaceutical Co., Ltd.: Sun Pengsheng

April 17, 2026