/[Periodic Report] Xiangyu Pharmaceutical: 2025 Annual Report

NEWS

[Periodic Report] Xiangyu Pharmaceutical: 2025 Annual Report

NEEQ

2026/04/30

Xiangyu Pharmaceutical NEEQ: 832276

Xiangyu Pharmaceutical Co., Ltd.

annual report

2025

Important tips

The company’s controlling shareholders, actual controllers, directors, supervisors and senior managers guarantee that the information contained in this report does not contain any false records.

contains, misleading statements or major omissions, and shall bear individual and joint liability for the authenticity, accuracy and completeness of its contents.

Zhu Guoying, the person in charge of the company, Wang Chengjian, the person in charge of accounting work, and Yuan Hebaonian, the person in charge of the accounting department (accounting supervisor)

The financial report in the report is true, accurate and complete.

3. This annual report has been reviewed and approved by the board of directors of the listed company, and there are no directors who did not attend the review.

4. Daxin Accounting Firm (Special General Partnership) issued a qualified audit report on the company.

Explanation of the Board of Directors on Non-standard Audit Opinions

The company's board of directors believes that Daxin Accounting Firm (Special General Partnership) has issued a qualified audit report on the company's 2025 financial statements based on relevant circumstances and in a strict and prudent manner. The board of directors expresses its understanding that the report objectively and rigorously reflects the company's financial status and operating results in 2025. The board of directors will organize the company's directors, supervisors, senior executives and other personnel to actively take effective measures to eliminate the impact of the qualified matters in the audit report on the company.

This annual report involves forward-looking statements such as future plans, which does not constitute the company’s substantive commitment to investors. Investors and related parties should

Be aware of the risks and understand the differences between plans, forecasts and commitments.

This annual report has been included in "9. Analysis of major risks faced by the company" in "Section 2 Accounting Data, Operational Conditions and Management Analysis"

Investors should pay attention to the analysis of the company's major risk factors during the reporting period.

1. Business Overview

(1) Business model and implementation of business plan

Xiangyu Pharmaceutical inherited the work group of the Hebei Reliao Military Region founded in 1944. In 2000, Xiangyu Pharmaceutical took over the baton of history and has now developed into a modern pharmaceutical and health enterprise integrating production and research. The company has two production bases, six major product series, and has a national enterprise technology center, a postdoctoral research workstation and other provincial-level or above technology platforms. In 2025, it won the Shandong Provincial Science and Technology Award and the Shandong One Enterprise, One Technology R&D Center. It is a time-honored enterprise in China.

The company is committed to building "China's first-line brand for maternal and child medication" and "China's first-tier psychiatric medication brand", focusing on the fields of maternal and child and psychiatric neuroscience. Its products cover six major product series: tonics, gynecology, pediatrics, psychiatric, API and general health, with 139 product registration numbers and 324 product specifications. Among them, there are 16 exclusive varieties and 3 strategic items. Produced by the company "Compound Hongyi Buxue Oral Liquid" is a nationally patented variety with the same source of medicine and food. It has successively won the National Torch Program Chinese Medicine Variety, CCTV Recommended Shandong Brand, Top 100 Chinese National Medicine Brands, Shandong Province Famous Brand, Quality Lu Medicine, and the first batch of "Lu Lian Excellent Products"; Puling Penyankang Granules is a Chinese medicine antibiotic, a national protected variety of traditional Chinese medicine, with high quality Lu Yao builds excellent products and is selected into the clinical application guide of Chinese patent medicines; Ginseng Guben Pill nourishes yin and replenishes qi, strengthens the essence and strengthens the vitality, and regenerates ancient prescriptions. It is the first medicine to replenish qi and yin; "Xiangma Hanchuan Pie" is the only internal and external treatment preparation in China that treats children's asthma by sticking to back acupoints. It has been included in the "First Batch of Technical Innovation Projects in Shandong Province" and will be selected in 2025 "Made in Shandong·Qilu quality products".

There were no major changes in the company's business model during the reporting period.

During the reporting period, the company achieved operating income of 519 million yuan, a decrease of 4.07% compared with the same period last year, and a net profit of 55.138 million yuan for the year, an increase of 35.53% compared with the same period last year.

(2) Industry situation

1. Overall operation of the industry

In 2025, my country's pharmaceutical manufacturing industry will generally operate stably. Major sub-sectors such as chemical pharmaceutical preparation manufacturing, Chinese patent medicine production, and biopharmaceutical product manufacturing have maintained a certain growth rate. However, affected by factors such as medical insurance fee control and centralized procurement price reductions, the overall profit level of the industry has experienced structural differentiation. Affected by the intensifying competition in the international market and the expansion of production capacity in countries such as India, the API industry is facing certain pressure on export prices and order volumes. The traditional Chinese medicine industry has maintained steady growth with the support of national policies, and the development of traditional Chinese medicine formula granules and classic prescriptions has become an important growth point for the industry. The market for comprehensive health products continues to expand, and consumer demand for traditional Chinese medicine nourishing and functional health products has increased significantly.

2. Development trend of subdivided fields

Gynecological drugs: the market is growing steadily. Increased awareness of women's health and fertility support policies drive demand for gynecological inflammation, menstrual regulation and menopausal products. Chinese patent medicines occupy an important share due to their safety and conditioning effects.
Pediatric medication: a key national support direction. Pediatric dosage forms are given priority for review, and there is good demand for pediatric Chinese patent medicines and respiratory medicines. The effects of the three-child policy continue to be released, but there is still a gap in specialized drugs and there is large room for development.
Supplements and general health: Consumption is shifting from "treatment" to "prevention", and there is a strong demand for traditional Chinese medicine tonics, functional health products, and medicinal and food products. Aging has promoted the growth of supplementary Chinese patent medicines, and the penetration rate of new e-commerce retail has increased, bringing growth to the industry.
Psychiatry and neurology: a rapidly growing field. Increased social pressure has increased the incidence of depression, anxiety, and sleep disorders, as well as the rate of medical treatment. The country has increased investment in mental health, and the demand for antidepressant, anti-anxiety, sedative-hypnotic and other drugs has grown steadily.
APIs: Facing challenges, international competition is intensifying (capacity expansion in India and other countries), environmental standards are improving, compliance costs are rising, and industry concentration is increasing. Enterprises with technological advantages and distinctive varieties are more competitive.

3. Main industry policies

In 2025, the policy environment of the pharmaceutical industry will generally remain stable. The main policy directions include: normalizing the dynamic adjustment of the medical insurance catalog, expanding the coverage and improving the quality of centralized procurement (the scope of centralized procurement of proprietary Chinese medicines is expanded); the review and approval reform is deepened, and children's drugs and rare disease drugs are prioritized for review; the inheritance and innovation of traditional Chinese medicine is promoted, and national standards for formula granules are successively released; GMP inspections are intensified, and the quality requirements for the entire life cycle are improved.

4. Industry competition landscape

In 2025, the competitive landscape of the pharmaceutical industry will become differentiated. Large pharmaceutical companies maintain their leading position in the market by virtue of their variety advantages, brand advantages and channel advantages. Industry mergers and acquisitions and reorganization activities are relatively active, and industry concentration is steadily increasing. Small and medium-sized enterprises seek development space through differentiated competition strategies in segmented fields, and specialty varieties, branded Chinese patent medicines and comprehensive health products have become important competition directions. Investment in innovative drug research and development continues to increase, and companies with independent research and development capabilities and core technology advantages have more prominent advantages in market competition.

5. Industry development trends

Looking forward to the future, my country's pharmaceutical industry will show the following development trends: innovation-driven becoming the main engine; the modernization and internationalization of traditional Chinese medicine are accelerating, and classic famous prescriptions, formula granules and comprehensive health products are new growth points; psychotropic and neurological drugs are expected to maintain a high growth rate; APIs are transforming into specialty APIs and CDMOs; new business formats such as pharmaceutical e-commerce and smart medical care are deeply integrated with traditional businesses.

6. Changes in industry development factors, industry laws and regulations, and their impact on the company’s operations

In this period, the domestic pharmaceutical manufacturing industry is in an adjustment period with strong policy supervision, normalized centralized procurement, and accelerated innovation and transformation. In terms of industry development, volume-based procurement continues to expand, medical insurance fee control and DRG/DIP payment reforms deepen, downward pressure on market prices increases, industry revenue and profits are under overall pressure, and competition among small and medium-sized pharmaceutical companies intensifies and differentiation becomes apparent. In terms of policies and regulations, the revision of the "Regulations on the Implementation of the Drug Administration Law", the implementation of opinions on improving the quality of traditional Chinese medicines and the implementation of full life cycle supervision rules have increased compliance costs; innovation support policies have been promoted simultaneously, but their short-term impact on revenue and profits is limited. Affected by the above factors, the company's current revenue fell year-on-year, and profits also declined after deducting asset transfer gains. Operating performance was under pressure, and it was necessary to continue to strengthen compliance, optimize product structure and strictly control costs.

(3) Identification status related to innovation attributes

√Applicable □Not applicable

"Specialized, Specialized and New" certification □National level √Provincial (municipal) level

"Single Champion" recognition □National level □Provincial (municipal) level

"High-tech enterprise" recognition √Yes

determined

Details

On June 24, 2025, Xiangyu Pharmaceutical Co., Ltd. successfully passed the Shandong Province Industrial and Information Technology

The department's review of specialized and new small and medium-sized enterprises in 2025 is valid until December 31, 2028.

On April 24, 2023, the subsidiary Renhetang Pharmaceutical Co., Ltd. was recognized as one of Shandong Province’s 2023

Specialized, special, new, small and medium-sized enterprises, valid for three years.

On December 7, 2024, the Shandong Provincial Department of Science and Technology, the Shandong Provincial Department of Finance, and the State Administration of Taxation

The Eastern Provincial Taxation Bureau jointly awarded the "High-tech Enterprise Certificate" to Xiangyu Pharmaceutical Co., Ltd. (Certificate No.:

GR202437006117), valid for three years.

On December 7, 2023, the Shandong Provincial Department of Science and Technology, the Shandong Provincial Department of Finance, and the State Administration of Taxation

The Eastern Provincial Taxation Bureau jointly awarded the "High-tech Enterprise Certificate" to Renhetang Pharmaceutical Co., Ltd. (Certificate No.:

GR202337005338), valid for three years.

2. Main accounting data and financial indicators

Unit: Yuan Profitability Current period Same period last year Increase or decrease ratio % Operating income 519,389,018.02 541,437,076.53 -4.07% Gross profit margin % 39.64% 42.55% -

Net profit attributable to shareholders of the listed company 55,376,169.72 40,937,337.23 35.27% Non-recurring deductions attributable to shareholders of the listed company 28,249,380.34 38,177,461.86

-26.01% net profit after sexual gains and losses

Weighted average return on equity % (based on vesting 7.32% 5.78% -

Calculated based on the net profit of shareholders of the listed company)

Weighted average return on equity % (based on vesting 3.73% 5.39% -

Deduction of non-recurring losses for shareholders of listed companies

Calculation of net profit after earnings)

Basic earnings per share 0.29 0.21 37.54% Debt solvency End of the current period End of the previous year Increase or decrease ratio % Total assets 1,410,166,074.78 1,122,509,981.12 25.63% Total liabilities 626,054,926.95 393,536,800.23 59.08% Net assets attributable to shareholders of the listed company 784,099,493.84 728,723,324.12 7.60% Net assets per share attributable to shareholders of the listed company 4.09 3.80 7.60%Asset-liability ratio% (parent company) 40.10% 40.69% -Asset-liability ratio% (consolidated) 44.40% 35.06% -Current ratio 1.53 1.63 -Interest coverage ratio 4.90 4.39 -

Operating conditions Current period Same period last year Increase/decrease ratio % Net cash flow generated from operating activities -241,599,115.34 81,929,606.14 -394.89% Accounts receivable turnover rate 2.18 2.16 - Inventory turnover rate 2.58 2.36 -

Growth situation for the current period Same period last year Increase/decrease ratio % Total assets growth rate % 25.63% 14.38% - Operating income growth rate % -4.07% -5.84% - Net profit growth rate % 35.53% -11.10% -

3. Financial situation analysis

(1) Analysis of assets and liabilities

Unit: Yuan End of current period End of previous year

Accounting for total capital

Item Proportion of change in total assets % Amount Amount Ratio of assets

Proportion %

Weight%

Monetary funds 164,270,887.97 11.65% 206,969,666.52 18.44% -20.63% Notes receivable 139,836,378.38 9.92% 91,910,503.52 8.19% 52.14% Accounts receivable 108,154,798.44 7.67% 133,156,434.39 11.86% -18.78% Receivables financing 1,659,748.48 0.12% 4,622,052.71 0.41% -64.09% Inventory 120,911,698.48 8.57% 119,912,914.45 10.68% 0.83%Fixed assets 270,057,294.61 19.15% 296,917,917.88 26.45% -9.05%Construction in progress 122,258.85 0.01% 0.00 0.00% 100.00% Right-of-use assets 426,854.85 0.03% 892,514.67 0.08% -52.17% Intangible assets 113,953,886.80 8.08% 109,294,451.53 9.74% 4.26% Short-term borrowings 361,900,000.00 25.66% 292,400,000.00 26.05% 23.77%Prepayment 411,666,694.17 29.19% 68,580,742.11 6.11% 500.27%Other receivables 2,959,878.94 0.21% 2,680,398.22 0.24% 10.43% Deferred income tax assets 32,877,507.69 2.33% 32,639,021.11 2.91% 0.73% Other non-current assets 2,525,118.10 0.18% 2,787,413.10 0.25% -9.41%Notes payable 145,919,399.56 10.35% 1,955,047.78 0.17% 7,363.73%Accounts payable 23,088,002.87 1.64% 17,520,183.29 1.56% 31.78% Contract liabilities 13,980,620.25 0.99% 17,089,196.00 1.52% -18.19% Employee benefits payable 1,722,447.61 0.12% 1,768,138.02 0.16% -2.58% Taxes payable 7,418,231.34 0.53% 9,222,269.48 0.82% -19.56%Other payables 33,892,365.54 2.40% 42,714,054.25 3.81% -20.65%Other current liabilities 1,817,480.64 0.13% 2,221,595.36 0.20% -18.19% Lease liabilities 0.00 0.00% 431,463.09 0.04% -100.00% Deferred income tax liabilities 64,028.23 0.00% 133,877.20 0.01% -52.17% Non-current due within one year

29,480,559.18 2.09% 550,458.72 0.05% 5,255.63% Liabilities

Long-term deferred expenses 234,464.84 0.02% 0 0% 100%

Reasons for major changes in the project

Notes receivable in this period increased by 47,925,874.86 yuan, an increase of 52.14%, mainly due to the increase in commercial acceptance bills received in this period.

To.

Financing receivables in the current period decreased by 2,962,304.23 yuan, a decrease of 64.09%, mainly due to a decrease in bank acceptance bills received in the current period.

Caused by less.

The right-of-use assets in this period decreased by 465,659.82 yuan, a decrease of 52.17%, mainly due to the accrual of depreciation of buildings and buildings in this period.
Prepayments in this period increased by 343,085,952.06 yuan, an increase of 500.27%, mainly due to the controlling shareholder Xiangyu Group supplying goods through the company.

The supplier borrows funds from the company in the form of advance payment.

Notes payable in this period increased by 143,964,351.78 yuan, an increase of 7,363.73%, mainly due to the increase in bank acceptance bills of 130 million yuan in this period due to the occupation of funds by the controlling shareholder. At the same time, the scale of commercial acceptance bills also increased by 13.9644 million yuan. Both of them jointly promoted bills payable.

The balance has increased significantly.

Accounts payable in this period increased by 5,567,819.58 yuan, an increase of 31.78%, mainly due to the expansion of the procurement scale in this period and the unsettled goods at the end of the period.

Due to the corresponding increase in payment.

Lease liabilities in this period decreased by 431,463.09 yuan, a decrease of 100%, mainly due to the repayment of due rent in this period.
Deferred income tax liabilities for the current period decreased by 69,848.97 yuan, a decrease of 52.17%. The main reason was that the right-of-use assets related to the deductible temporary

Due to amortization of differences.

Non-current liabilities due within one year increased by 28,930,100.46 yuan in the current period, an increase of 5,255.63%, mainly due to the increase in Wei

Due to the long-term loan of RMB 29 million from Fang Bank.

The long-term deferred expenses in this period increased by 234,464.84 yuan, an increase of 100%, mainly due to the new long-term deferred capitalized investment such as the decoration of the R&D building in this period. There was no related amount in the previous period, resulting in a large year-on-year increase.
The construction in progress in this period increased by RMB 122,258.85, an increase of 100%. The main reason is that the isosorbide mononitrate production line in this period has undergone automated transformation and various materials that can be purchased have been collected.

(2) Business situation analysis

Profit composition

Unit: yuan for the current period and the same period last year

Items for the current period and the same period last year accounted for operating income accounted for operating income

Amount Amount Change in amount %

Proportion % Proportion %

Operating income 519,389,018.02 - 541,437,076.53 - -4.07% Operating cost 313,498,834.27 60.36% 311,066,130.17 57.45% 0.78% Gross profit margin % 39.64% - 42.55% - -

Selling expenses 81,426,560.48 15.68% 86,924,817.93 16.05% -6.33% Administrative expenses 31,306,625.27 6.03% 38,465,481.82 7.10% -18.61% Research and development expenses 33,650,462.27 6.48% 35,282,357.67 6.52% -4.63%Financial expenses 15,507,898.26 2.99% 13,890,017.37 2.57% 11.65%Credit impairment loss -1,857,137.36 -0.36% -2,998,814.61 -0.55% -38.07% Asset impairment losses -234,135.77 -0.05% 2,668,772.06 0.49% 108.77% Asset disposal income 27,200,377.42 5.24% 37,406.80 0.01% 72,615.06% Other income 4,030,682.49 0.78% 6,477,044.21 1.20% -37.77%Investment income -1,595,815.22 -0.31% -1,039,701.10 -0.19% -53.49%Operating profit 63,520,167.22 12.23% 53,129,128.84 9.81% 19.56%Non-operating income 2,486,408.25 0.48% 455,878.35 0.08% 445.41%Non-operating expenses 12,400.42 0.00% 1,720,901.61 0.32% -99.28% income tax expense 10,856,208.11 2.09% 11,181,100.84 2.07% -2.91% Net profit 55,137,966.94 10.62% 40,683,004.74 7.51% 35.53%

Reasons for major changes in the project

Credit impairment losses for the current period decreased by RMB 1,141,677.25, a decrease of 38.07%, mainly due to the provision for impairment losses on notes receivable for the current period.

Due to the decrease in scale compared with the previous period.

The asset impairment loss in this period increased by 2,902,907.83 yuan, an increase of 108.77%. The main reason is that some inventory goods in this period have expired.

During the period, provision for inventory depreciation is made.

Other income for this period decreased by 2,446,361.72 yuan, a decrease of 37.77%, mainly due to the large quality standard improvement award recognized in the previous period.

This did not occur in the current period and was due to the decrease in R&D super deduction income.

The investment income of this period decreased by 556,114.12 yuan, a decrease of 53.49%, mainly due to the increase in the scale of bill discounting business in this period and the discount profit.

Due to the increase in interest expenses.

Non-operating income in this period increased by 2,030,529.90 yuan, an increase of 445.41%, mainly due to the breach of contract received from customers in litigation cases during this period.

due to compensation.

Non-operating expenses for the current period decreased by 1,708,501.19 yuan, a decrease of 99.28%, mainly due to the inventory scrapping losses recognized in the previous period.

Didn't happen.

The income from asset disposal in this period increased by 27,162,970.62 yuan, an increase of 72,615.06%. The main reason was that the subsidiary Renhetang transferred Salt

The holder’s rights and interests of Sour Mianserin Tablets were transferred.

Income composition

Unit: Yuan

Item Amount for the current period Amount for the previous period Change percentage %

Main business income 517,442,723.21 540,172,555.25 -4.21% Other business income 1,946,294.81 1,264,521.28 53.92% Main business cost 312,272,405.13 310,382,708.51 0.61% Other business costs 1,226,429.14 683,421.66 79.45%

Analysis by product category

√Applicable □Not applicable

Unit: yuan gross profit margin operating revenue operating cost

Income is higher than that of the previous year. Same as that of the previous year.

Category/Project Operating Income Operating Cost Gross Profit Margin % Same Period Year-on-Year Increase Period

Decrease percentage Increase or decrease % Increase or decrease %

Than nervous system drugs 246,121,474.94 142,017,013.29 42.30% -6.14% 0.89% -4.02% Maternal and child drugs 105,561,485.53 66,935,475.26 36.59% -0.59% -0.31% -0.18% Drugs for cardiovascular and cerebrovascular systems 62,497,525.62 36,773,709.95 41.16% -9.37% 4.50% -7.81% Drugs for digestive system 32,517,802.67 18,621,118.48 42.74% 19.21% 5.71% 7.32% Respiratory system drugs 21,947,073.11 14,403,887.78 34.37% -21.13% -22.04% 0.76% Urinary system drugs 16,359,043.45 12,261,011.35 25.05% 33.31% 60.13% -12.55% Antipyretic and analgesic drugs 16,103,507.87 11,495,674.57 28.61% -10.76% -15.42% 3.93% Vitamin and mineral drugs 16,095,523.52 9,544,149.95 40.70% -0.42% 9.25% -5.25%Others 1,946,294.81 1,226,429.14 36.99% 191.15% 134.59% 15.20%Antibiotic drugs 239,286.50 220,364.50 7.91% -31.00% -54.45% 47.40% Subtotal 519,389,018.02 313,498,834.27 39.64% -3.85% 1.00% -2.90%

Analysis by region

□Applicable √Not applicable

Reasons for changes in revenue composition

The gross profit margin of urinary system drugs in this period decreased by 12.55% year-on-year. The main reason is that the company regards Ginseng Guben Pills as a core strategic product and increases marketing investment, driving the operating income of this category to increase by 33.31% year-on-year, corresponding to an increase of 4.4836 million yuan in revenue; however, due to the increase in production and sales,

Affected by changes in unit costs and other factors, operating costs increased by 60.13% year-on-year. The increase in cost was significantly higher than that in revenue, which lowered the overall gross profit.

interest rate level.

The gross profit margin of antibiotic drugs in this period increased by 47.4% year-on-year. The main reason is that the company adjusted the sales strategy of metronidazole tablets and other products.

The reduction of low-margin businesses resulted in a 31% year-on-year decrease in operating income; at the same time, by optimizing the procurement and production processes, operating costs dropped significantly year-on-year.

dropped by 54.45%. The cost drop was significantly higher than the revenue drop, which promoted the gross profit margin level.

The gross profit margin of other products in this period increased by 15.20% year-on-year. The main reason is that the company’s new sales of alcoholic products have driven operating income to a year-on-year increase of 15.20%.

A year-on-year increase of 186.35%; at the same time, the sales proportion of high-margin product red biscuits increased, and the cost control effect was obvious, and the cost-end growth rate was significantly low.

On the revenue side, it promotes the improvement of gross profit margin level.

Major customers

Unit: Yuan Serial Number Customer Sales Amount Annual Sales Proportion % Is there any related relationship? 1 Jiuzhoutong Pharmaceutical Group Co., Ltd. 35,552,159.12 6.84% No

2 Shandong Nuoji Yali Pharmaceutical Co., Ltd. 27,417,432.46 5.28% No

3 China Resources Pharmaceutical Group Co., Ltd. 27,334,052.37 5.26% No

4 Xiangyu Industrial Group Co., Ltd. 14,393,196.80 2.77% Yes

5 Sinopharm Holding Lunan Co., Ltd. 13,613,711.16 2.62% No

Total 118,310,551.91 22.77% -

Note: Customers controlled by the same controller are deemed to be the same customer for consolidated presentation.

Major suppliers

Unit: Yuan serial number Supplier Purchase amount Annual purchase proportion % Is there any related relationship? 1 Shandong Guilong Pharmaceutical Co., Ltd. 33,158,800.00 9.16% No

2 Linyi Hongfu Pharmaceutical Co., Ltd. 25,086,500.00 6.93% No

3 Guangxi Huichun Trading Co., Ltd. 18,436,600.00 5.10% No

4 Shandong Amanda Pharmaceutical Co., Ltd. 12,535,000.00 3.46% No

5 Jiangsu Cixing Pharmaceutical Co., Ltd. 11,960,000.00 3.31% No

Total 101,176,900.00 27.96% -

(3) Cash flow analysis

Unit: Yuan

Item Amount for the current period Amount for the previous period Change ratio % Net cash flow generated from operating activities -241,599,115.34 81,929,606.14 -394.89% Net cash flow generated from investing activities 201,894,208.65 -149,970,851.94 234.62% Net cash flow generated from financing activities 78,176,267.86 78,370,432.12 -0.25%

cash flow analysis

The net cash flow generated from operating activities in this period decreased by 394.89% compared with the same period last year. The main reasons are: first, the company increased the scale of procurement;

Cash payments for purchasing goods and receiving services increased significantly year-on-year; secondly, period fees, deposits and current payments paid increased significantly.

This resulted in a significant decrease in net operating cash flow.

The net cash flow generated from investing activities in this period increased by 234.62% compared with the same period last year. The main reason: the fixed deposit certificate was withdrawn in this period and transferred to

The holders' equity of Mianserin Hydrochloride Tablets has resulted in a significant increase in net investment cash flow.

4. Investment status analysis

(1) Major holding subsidiaries and joint-stock companies

√Applicable □Not applicable

Unit: Yuan Gong Gong

Division Division

Main business Registered capital Total assets Net assets Operating income Net profit Name Category

weighing type

Ren Holdings Tablets, Granules,

He Zigong hard capsule, powder

50,000,000 818,014,029.85 312,102,631.86 379,070,831.03 76,822,761.46 Preparations and APIs

Manufacturing and sales

Novo Holdings Pharmaceutical Technology Development

Wei Zigong development, technology transfer,

Er Division Technical consulting and health food research 10,000,000 4,277,034.52 23,307.96 0.00 -476,405.57

develop

Business analysis of major participating companies

□Applicable √Not applicable

Acquisition and disposal of subsidiaries during the reporting period

□Applicable √Not applicable

(2) Investment in financial products

□Applicable √Not applicable

Entrusted financial management by non-financial institutions, high-risk entrusted financial management or entrusted financial management with a single significant amount □ Applicable √ Not applicable

(3) Structural entities controlled by the company

□Applicable √Not applicable

(4) Including private equity fund managers within the scope of consolidation

□Applicable √Not applicable

5. Research and development status

(1) R&D expenditures

Unit: Yuan Item Amount/proportion of the current period Amount/proportion of the previous period

Amount of R&D expenditure 37,739,485.21 42,451,852.90 Proportion of R&D expenditure to operating income 7.27% 7.84%

Capitalized proportion of R&D expenditure 10.83% 16.89%

(2) R&D personnel

Education level Number of students at the beginning of the semester Number of students at the end of the semester

PhD 1 1

Master 25 23

Undergraduate degree or below 102 94

Total R&D personnel 128 118

R&D personnel as a proportion of total employees 14.43% 14.48%

(3) Patent status

Item Quantity in this period Quantity in previous period

Number of patents owned by the company 58 77

Number of invention patents owned by the company 53 59

(4) R&D project status

In order to improve the diversity and structural integrity of the company's products, and at the same time enhance market competitiveness by optimizing existing varieties, the company's R&D projects are currently focusing on generic drug development, consistency evaluation and supplementary applications. Currently, the company's R&D projects are in the pilot and verification stages of product development and process optimization. It plans to continuously enrich and optimize the company's product pipeline through a strategy of combining imitation and improvement.

The goals to be achieved by the R&D project include: completing the prescription process research of at least 2 generic drugs and applying for production, promoting the consistency evaluation of more than 3 key varieties, improving product technical standards and quality controllability, so as to enhance the competitive advantage of the company's existing products in bidding, procurement and clinical use.

From the perspective of the company's future development, the implementation of this project will help build a higher-quality, more cost-effective product matrix, reduce the risk of dependence on a single variety, improve market response speed and brand reputation, and lay a solid foundation for the company to transform from imitation to a combination of imitation and innovation. Based on the analysis of industry technology trends, my country's pharmaceutical industry is currently in a critical stage of transformation from "generics-based" to "a combination of generics and innovations". High-end preparations, differentiated generic drugs and quality and efficacy consistency evaluation have become the focus of the industry. Compared with leading companies in the industry that have deployed complex preparations and improved new drugs, the company currently still focuses on conventional generic drugs and consistency evaluation. This project will help narrow the gap with the industry's advanced level in quality control and process optimization, but in the future it is still necessary to increase investment in high-end preparations, improved new drugs and intelligent manufacturing technology to comprehensively enhance technological competitiveness.

6. Explanation of key audit matters

√Applicable □Not applicable

(1) Revenue recognition

Description of the matter

As shown in Note 3 (21) and Note 5 (31) of the financial statements, your company's operating income in 2025 is 519,389,018.02 yuan. Given that operating income is one of your company's key business indicators, there is an inherent risk that management will manipulate the timing of revenue recognition in order to achieve specific goals or expectations. Therefore, we identify revenue recognition as a key audit matter.

Audit response

Our audit procedures for revenue recognition mainly include:

(1) Understand and evaluate the design and operating effectiveness of key internal controls related to revenue recognition;

(2) Select samples from sales contracts or orders, identify the contract terms and conditions related to the transfer of control rights, and evaluate whether the revenue recognition principles and basis meet the requirements of corporate accounting standards;

(3) Obtain the sales details of the current year, select samples from accounting records of sales revenue, check supporting documents such as contracts, outbound orders, commodity delivery methods (cargo transportation documents), sales invoices, and evaluate whether revenue recognition complies with accounting policies;

(4) Analyze the sales collection situation this year, check the post-period collection situation of large accounts receivable, and perform confirmation procedures for the sales revenue of important customers to evaluate the authenticity of the sales revenue;

(5) Execute analysis procedures for major customers and changing situations, and evaluate the commercial rationality of transactions with customers;

(6) Perform analytical procedures on revenue and costs to evaluate the reasonableness of sales gross profit fluctuations;

(7) For the revenue recognized before and after the balance sheet date, select samples to check supporting documents such as outbound orders, commodity delivery methods (cargo transportation documents), and evaluate whether the revenue is recorded in the appropriate accounting period.

(2) Bad debt provision for accounts receivable

Description of the matter

As shown in Note 3 (10) and Note 5 (3) of the financial statements, as of December 31, 2025, the balance of your company's accounts receivable was 227,841,360.48 yuan, and the bad debt provision was 119,686,562.04 yuan. Based on expected credit losses, management performs impairment accounting on financial assets measured at amortized cost (including accounts receivable) and recognizes loss provisions. If accounts receivable cannot be collected on time or cannot be collected and bad debts occur, it will have a significant impact on the financial statements and require management to use significant accounting estimates and judgments. Therefore, we identify the provision for bad debts of accounts receivable as a key audit matter.

Audit response

The audit procedures we perform on bad debt provisions for accounts receivable mainly include:

(1) Understand and evaluate the design and operating effectiveness of key internal controls related to accounts receivable management, obtain your company’s “determination methods and accounting treatment methods for expected credit losses” and other accounting policies, and check whether they comply with the standards and the company’s actual business conditions;

(2) Obtain the detailed list of accounts receivable and aging details, check the credit period, settlement method, customer selection procedures or standards, and continuous customer credit evaluation of major customers, and evaluate the rationality of the provision for bad debt provisions for accounts receivable based on the basis for determining the accounts receivable portfolio, the judgment of the significant amount, and the judgment of separately making bad debt provisions;

(3) Check the past provision and actual occurrence of bad debt provisions for accounts receivable, and evaluate the adequacy of the provision for bad debt provisions for accounts receivable; (4) Understand the selection of your company's expected credit loss model, the classification and combination of credit risk characteristics, and the selection of important parameters, obtain the calculation process, implement recalculation procedures, and evaluate the accuracy of the provision for bad debt provisions for accounts receivable.

7. Corporate Social Responsibility

□Applicable √Not applicable

8. Future Outlook

Whether to voluntarily disclose

□Yes √No

9. Analysis of major risks faced by the company

Name of major risk matters Brief description of major risk matters

my country's domestic testing standards for traditional Chinese medicine are not yet fully in line with international standards. The country formulates and implements GAP, GLP, GCP, and GMP

and GSP and the "Drug Administration Law", strengthen the management of drugs, reform the testing standards of traditional Chinese medicines and gradually integrate them with the international counterparts, and the risk of changes in traditional Chinese medicine standards

The integrated testing standards for traditional Chinese medicines will put forward new requirements for current traditional Chinese medicine manufacturers. The testing of traditional Chinese medicines will be more stringent.

Drugs that meet the standards will be subject to more severe penalties, and the company faces corresponding management and penalty risks.

Risks of drug price reductions: As a new round of bidding in various provinces is completed one after another, and various localities begin to implement new bidding results. As the country encourages medical consortium procurement and mass procurement, and the main role of the medical insurance department and medical institutions in bidding and procurement is strengthened, drug prices may continue to decline, and the company will face the risk of continued drug price reductions.

The main raw materials required for the company's production are Chinese medicinal materials such as wolfberry, Panax notoginseng, Salvia miltiorrhiza, Angelica sinensis, Motherwort, and chemical raw materials such as mianserin hydrochloride. Price changes

Learn raw materials. The purchase price of main raw materials fluctuates with market prices. Price fluctuations will directly affect the gross profit and water risks of the company's products.

flat, which will have a certain impact on the company's sustainable profitability.

The pharmaceutical industry is characterized by high technology and high added value, and product research and development is characterized by high risks and low success rates. From determining the risk direction of new product research and development to project establishment, research and development, clinical trial approval, and then to production, there are long cycles, many links, and complex situations. There may be risks of drug sales not meeting expectations or drug research and development failure after the drug is launched.

The company's current core technologies such as production processes and key technical control conditions are obtained through independent research and development, cooperative research and development, and outsourcing. The company's technical documents and materials for various drugs are also owned by the company. Although the company has strict confidentiality risks of technical leakage

system and effective confidentiality methods, and no confidentiality incidents have occurred since the establishment of the company. However, we cannot rule out the possibility that technological achievements will be leaked or stolen by others in the future, thus affecting the development of the company.

National policies have mandatory binding force on pharmaceutical companies. With the continuous deepening of medical reform and the advancement of industry supply-side structural reform, clinical self-examination, priority review and approval, consistency evaluation of generic drugs, adjustments to the new version of the medical insurance catalog, public hospital reform, and industry policy risks

Many industry policies and regulations such as hierarchical diagnosis and treatment and the two-invoice system have profoundly affected the future development of domestic pharmaceutical companies, exposing the company to the risk of changes in industry policies.

Leading product life cycle risks: Drugs are special commodities with a long research and development cycle. The life cycle is affected by many factors such as efficacy, toxic and side effects, human drug resistance, and the substitution effect of a new generation of dangerous products. Overall, the life cycle of drugs is shortening.

Changes in the market competition landscape The adjustment of the national medical insurance catalog will bring about changes in the market competition landscape, leading to uncertainty about changes in market competition, and will also bring uncertainty to the company's risk growth.

The company's main products are plant-based blood-tonifying products, with relatively advanced technology and concepts. Currently, there are no generic drugs for the company's products on the market, and the company's products are subject to generic drugs

As the company's product popularity continues to increase and production and sales continue to grow, if similar generic drugs are on the market, there will be a risk of impact on the company.

Market development and performance growth will be adversely affected.

As of the end of the reporting period, the company's accounts receivable balance was 227.8414 million yuan, of which the accounts receivable balances of the company's top five receivable customers accounted for 28.31% of the closing balance of accounts receivable, and the accounts receivable aging accounted for 40.03% within one year. The company has calculated the risk of accounts receivable against accounts receivable

Provision for bad debts has been made, but there may still be a risk that the accounts receivable will become uncollectible. Response measures: The company has organized a special accounts receivable cleanup team and will take effective measures to increase the recovery of accounts receivable.

During the reporting period, the company had non-operating fund occupation by the controlling shareholder and related parties, and internal control was not implemented in place. In response, the company strictly followed regulatory requirements to improve internal control systems such as fund management and related transaction approval, clarify the fund payment approval process, and eliminate risk-violating fund lending; it continued to strengthen the monitoring of capital transactions between the controlling shareholder and related parties, and carried out regular self-examinations to effectively prevent fund occupation behaviors and ensure the safety and standard operation of the company's funds.

Are the major risks in this period Yes?

Major changes have occurred:

Is there a risk of being transferred out of the innovation layer?

□Yes √No

Section 3 Major Events

1. Index of major events

Matter Yes or No Index whether there are any litigation or arbitration matters √Yes □No 3.2.(1) Whether there is provision of guarantee √Yes □No 3.2.(2) Whether external loans are provided □Yes √No

Is there any situation where shareholders and their related parties occupy or transfer the company’s funds, assets and other resources? √Yes □No 3.2.(3) Resources

Whether there are related transactions √Yes □No 3.2.(4) Whether there are acquisitions and sales of assets, external investments and other matters that have been reviewed and approved by the shareholders’ meeting □Yes √No

and business mergers that occurred during the reporting period

Is there an equity incentive plan, employee stock ownership plan or other employee incentive measures? Yes √No

Is there any share repurchase matter □Yes √No

Whether there are any disclosed commitments √Yes □No 3.2.(5) Whether there are assets that have been sealed, detained, frozen or mortgaged or pledged √Yes □No 3.2.(6) Whether there are matters subject to investigation and punishment □Yes √No

Is there any breach of trust? □Yes √No

Are there any other major matters that should be disclosed? Yes √No

(1) Details of major events (if the event exists, please fill in the form below)

(2) Litigation and arbitration matters

Litigation and arbitration matters that occurred during the reporting period

√Applicable □Not applicable

Unit: Yuan Nature Cumulative amount % of net assets at the end of the period As plaintiff/applicant 589,344.78 0.08%

As defendant/respondent - -

As a third person - -

Total 589,344.78 0.08%

Major litigation and arbitration matters disclosed in the form of temporary announcements

The company had no major litigation or arbitration matters during the reporting period

(3) Guarantee matters that occur in the company

Provide guarantees for listed companies and subsidiaries within the scope of consolidated statements

√Yes □No

Unit: yuan quilt

guarantor

Guarantee period

Whether

To hang

Is the actual card public

Whether to perform, control, perform

Already ordered, guaranteed, guaranteed, responsible, shares, shares, necessary

Amount of Guarantee Balance of Guarantee No. Person Responsibility Type Dong, Decision

Supervision of funds actual policy

Start End Measure Amount Control Sequence

people and

its control

Made

enterprise

2025 2026

Already in advance

Year 4 Year 4

1 Renhetang 10,000,000 0 10,000,000 Jointly and severally Yes Timely performance No Month 29 Month 29

day day

2025 2026

Already in advance

Year 5 Year 5

2 Renhetang 30,000,000 0 30,000,000 Jointly and severally Yes Timely performance No Month 22 Month 22

day day

2025 2026

Already in advance

Year 6 Year 6

3 Renhetang 40,000,000 0 40,000,000 Jointly and severally Yes Timely performance No Month 26 Month 26

day day

together -

80,000,000 0 80,000,000 - - - - -Total

Performance of guarantee contracts that may bear or have assumed joint liability for repayment

There is no guarantee contract performance that may bear or has assumed joint liability for repayment.

Summary of guarantees provided by the company

Unit: Yuan

Summary of items Guarantee amount Guarantee balance Guarantees provided by listed companies during the reporting period (including guarantees for on-balance sheet subsidiaries) 80,000,000 80,000,000 The company and its on-balance sheet subsidiaries provide guarantees for shareholders, actual controllers and related parties of the listed company - -

The company directly or indirectly provides guarantees for guaranteed persons whose asset-liability ratio exceeds 70% (excluding the principal amount).

The amount of the company's total guarantee exceeding 50% of the net assets (excluding the original amount) - - The company provides guarantees for companies that go off balance sheet during the reporting period - - Guarantee situations that should be highlighted

□Applicable √Not applicable

Estimated guarantee and execution status

□Applicable √Not applicable

(4) Occupation or transfer of company funds, assets and other resources by shareholders and their related parties

Capital occupation of controlling shareholders, actual controllers and the companies they control

√Applicable □Not applicable

Unit: Yuan Whether it has been occupied. Occupied form. Returned. Highest occupancy in a single day.

Occupied amount Occupied balance Taking subject Nature Time of completion Amount Balance

Regulatory measures Xiangyu set 2025

Group and its borrowings January 2 814,236,057.63 430,880,935.00 381,562,080.66 571,423,015.66 No related party Day

Total - - 814,236,057.63 430,880,935.00 381,562,080.66 571,423,015.66 - In 2025, Xiangyu Pharmaceutical and Renhetang borrowed funds of 590,430,816.00 yuan from Xiangyu Group and repaid the borrowed funds of 589,853,601.78 yuan. This fund lending behavior does not belong to the occupation of funds, so it is not reflected in the above table. As of January 1, 2025, the company still owed Xiangyu Group 1,215,827.75 yuan. To sum up, as of December 31, 2025, the company's fund balance occupied by Xiangyu Group and its related parties was 381,562,080.66 yuan. From January to March 2026, the company and its subsidiary Renhetang paid 340,458,099.00 yuan to Xiangyu Group and its related parties through third-party companies in the name of past payments, prepaid raw material purchase payments, etc., and recovered 237,522,600.00 yuan of funds. As of March 31, 2026, the balance of the company's funds occupied by Xiangyu Group and its related parties was 475,950,120.54 yuan.

In addition, the controlling shareholder promised to pay the company interest on capital occupation based on the actual number of days of occupation with reference to the one-year bank loan market quotation rate (LPR). As of March 31, 2026, the capital occupation interest incurred totaled 11.4289 million yuan.

Causes of occurrence, rectification status and impact on the company

Reasons for the occupation of funds

Due to objective factors such as the failure to recover the cooperation funds between Xiangyu Group and Linyi Chengfa Group in time, and the adjustment of the project cooperation plan, which delayed the opening of the real estate project for nearly a year and missed the golden sales period, Xiangyu Group experienced periodic cash flow shortages. In order to avoid a break in the capital chain, Xiangyu Group temporarily borrowed some funds from the company and its subsidiary Renhetang through a number of companies, thus forming a situation where the controlling shareholder occupied the company's non-operating funds.

Measures for liquidation of capital occupation

In order to completely solve the problem of capital occupation by the controlling shareholder, effectively protect the legitimate rights and interests of all shareholders, especially small and medium-sized shareholders, and eliminate the adverse impact of capital occupation on the company's production and operation, the company has formulated the following fund return and rectification plan after communication and negotiation with Xiangyu Group: (1) Dispose of the bank equity held by Xiangyu Group and return the occupied funds with equity transfer proceeds.

Xiangyu Group holds 189 million shares of Linshang Bank Co., Ltd. and has signed a transfer agreement with the transferee. Xiangyu Group has returned all the net equity transfer amount of 220 million yuan to Xiangyu Pharmaceutical.

(2) Use the real estate of Xiangyu Group to offset the occupied funds

Transfer the R&D and office buildings that are currently being rented by the company and whose property rights belong to Xiangyu Group to the company's name, and use the property transfer proceeds to offset part of the funds occupied. The property covers an area of 50 acres and is used for company offices, research and development, quality inspection, small trials, etc.

(3) Recover the proceeds from the auction of the bankrupt assets of the joint venture company and pay off the proceeds

Linyi Chengfa Xiangyu Cultural Tourism and Health Care Industry Development Co., Ltd. has entered bankruptcy proceedings. The real estate and other related assets under the company's name are being auctioned in accordance with the law. The bankruptcy administrator has reached a purchase intention with the intended acquirer. Xiangyu Group holds 20% of the creditor's rights. It is preliminary estimated that the receivable amount is about 38 million yuan. After communication with the administrator, the amount is expected to be collected before the end of June.

(4) The repayment will be made through the distribution of cash dividends from Xiangyu Pharmaceutical’s equity in 2025

The company plans to distribute cash dividends in 2025. Xiangyu Group, Lin Fanru and Shao Changxiu will use the dividends received to return the funds occupied by the company.

(5) Transfer part of the equity of Xiangyu Pharmaceutical held by Xiangyu Group and return the occupied funds

Xiangyu Group and persons acting in concert hold 74.36% of the equity of Xiangyu Pharmaceutical. They are currently negotiating with interested parties to transfer part of the equity and repay the capital occupancy with the net amount of the equity transfer.

(6) Xiangyu Group repays with self-raised funds

The assets of the above-mentioned plans or the net amount of receivables will be used in full to repay the company's capital occupation. If there is any difference, Xiangyu Group will settle it with self-raised funds. As of the date of this announcement, Xiangyu Group has repaid RMB 30 million with self-raised funds.

As of the date of this announcement, Xiangyu Group has returned 250 million yuan of occupied funds and a balance of 225.9501 million yuan (excluding interest on occupied funds). The company will follow up on the advancement of the above plan throughout the process.

Impact on the company

The above-mentioned occupation of funds has not had a substantial adverse impact on the company's operating activities, and the company's financial status and operating results have not been damaged. However, the company will take this opportunity to further strengthen financial management and internal control, improve the work handover process of financial personnel, and strengthen the accuracy of financial accounting and supervision mechanisms to avoid similar situations from happening again. At the same time, we regularly organize and carry out internal training on laws and regulations, thoroughly study and strictly implement the requirements of relevant laws, regulations and obligation rules such as the Company Law, Securities Law, and Corporate Governance Rules of the National Equities Exchange and Quotations for Small and Medium-sized Enterprises, strengthen the continuous training of the company’s controlling shareholders, actual controllers, directors, supervisors, senior managers and other relevant personnel, and implement relevant learning content into daily work based on the actual situation of the company.

(5) Related transactions of the company during the reporting period

Unit: Yuan

Daily related transactions Estimated amount Amount incurred Purchasing raw materials, fuel, power, and receiving services 3,000,000.00 708,584.36 Selling products and commodities, providing services 41,990,000.00 14,393,196.80 Types of daily related transactions that are applicable to the company as stipulated in the company's articles of association - - Others 804,100,000.00 949,356,133.77

In this period, the company borrowed 590,430,816.00 yuan from Xiangyu Group, which exceeded the amount expected at the beginning of the year. The borrowing of funds was lent to the company by the controlling shareholder for free, and there was no need to perform supplementary review and disclosure procedures.

The necessity and continuity of major related transactions and their impact on the company’s production and operations

The above-mentioned related-party transactions are transactions reached by both parties based on the principles of voluntariness, equality, and mutual benefit. The transaction price is determined in accordance with the market method. It does not violate the principles of openness, fairness, and impartiality, and does not harm the interests of the company, its subsidiaries, and other shareholders. It has a positive impact on the company's normal operations; the company is independent from related parties in terms of business, personnel, finance, assets, institutions, etc. The above-mentioned related-party transactions will not cause the company to become more dependent on related parties, will not affect the independence of the company, and will not lead to horizontal competition between the company and related parties.

Illegal related party transactions

□Applicable √Not applicable

(6) Performance of commitments

Commitment

Commitment Commitment performance Commitment subject Commitment start date End Commitment type Commitment specific content

Source situation

Date

actual control

Commitment not to constitute horizontal competition

People or holdings April 17, 2015 - Listed and the commitment to horizontal competition is being fulfilled

fight

shareholders

Strictly abide by the regulations regarding shares

Directors, Supervisors and Senior Management April 17, 2015 - Listing and sales restriction commitments are being fulfilled

Various regulations on sales restrictions

actual control

Prevent related party funds from occupying

Person or holding February 2, 2018 - Rectification Fund occupation commitment not fulfilled

use

shareholders

Details of overdue and unfulfilled commitments

During this period, there were situations where the controlling shareholder and its related parties occupied the company's funds.

(7) Assets that have been seized, detained, frozen or mortgaged or pledged

Unit: Yuan as a share of total assets

Asset name Asset category Type of restricted rights Book value Reason for occurrence

Proportion%

Monetary funds Monetary funds Security deposit, frozen 100,009,860.28 7.09% Issuance of bank acceptance bills Housing fixed assets Mortgage 127,550,394.32 9.05% Borrowing

Land use rights, special intangible assets mortgage 60,303,448.42 loans

4.28%

profit

Total - - 287,863,703.02 20.42% -

The impact of restricted asset rights on the company

The above mortgage loans are required by the company to achieve business development and normal operations, and supplement the company's capital needs through bank loans.

It is conducive to improving the company's financial status, increasing the company's operating strength, promoting the company's business development, and conducive to the interests of all shareholders.

Section 4 Share Changes, Financing and Profit Distribution

1. Common stock capital situation

(1) Common stock capital structure

Unit: Shares at the beginning of the period and at the end of the period

Nature of shares Changes in the current period

Quantity Proportion % Quantity Proportion % Total shares without sales limit 86,168,162 44.94% 3,225,082 89,393,244 46.63% without sales limit Among them: controlling shareholders, actual controlling shareholders

54,911,998 28.64% 599,500 55,511,498 28.95% conditional shares

Shares Directors, supervisors, senior executives 4,807,500 2.51% -365,000 4,442,500 2.32% Core employees - - - - -Total number of restricted shares 105,557,838 55.06% -3,225,082 102,332,756 53.37% Restricted shares Among them: controlling shareholders, actual controlling shareholders

87,060,002 45.41% 0 87,060,002 45.41% conditional shares

Shares Directors, supervisors, senior executives 15,097,500 7.87% -1,770,000 13,327,500 6.95% Core employees - - - - -Total share capital 191,726,000 - 0 191,726,000 -

Number of common shareholders 407

Changes in share capital structure

□Applicable √Not applicable

(2) Information about the top ten shareholders of ordinary shares

Unit: Shares held at the end of the period Held at the end of the period Held at the end of the period

Ending holdings Division sequence Beginning of period holdings Change of holdings Ending of period holdings Unlimited Qualitative

Name of shareholder Restricted shares Legal number Moving number Share ratio Sale shares Pledged shares

Quantity % of frozen cases Quantity Quantity

Number of closed shares 1 Xiangyu Group 113,372,000 599,500 113,971,500 59.45% 66,693,334 47,278,166 0 0 2 Xu Buxi 17,770,000 0 17,770,000 9.27% 13,327,500 4,442,500 0 0 3 Lin Fanru 15,600,000 0 15,600,000 8.14% 11,700,000 3,900,000 15,600,000 0 4 Shao Changxiu 13,000,000 0 13,000,000 6.78% 8,666,668 4,333,332 13,000,000 0 5 Jinan Shengfa Equity 6,310,000 0 6,310,000 3.29% 0 6,310,000 0 0 Investment Fund Partnership

Enterprise (limited partnership)

Guy)

6 Zhang Jiafu 3,988,813 0 3,988,813 2.08% 0 3,988,813 0 0 7 Nantong Jinjiu Huitong 2,200,000 0 2,200,000 1.15% 0 2,200,000 0 0 Phase I Venture Capital

fund partnership

(limited partnership)

8 Wu Jianwei 2,135,000 -190,082 1,944,918 1.01% 1,944,918 0 0 0 9 Zhang Yubai 1,000,000 0 1,000,000 0.52% 0 1,000,000 0 0 10 Liu Minrong 0 958,222 958,222 0.50% 0 958,222 0 0Total 175,375,813 1,367,640 176,743,453 92.19% 102,332,420 74,411,033 28,600,000 0

Description of the top ten shareholders of common stock

√Applicable □Not applicable

Lin Fanru directly holds 8.14% of the company's shares. Shao Changxiu is Lin Fanru's spouse and directly holds 6.78% of the company's shares; Xu Buxi

He is the spouse of Lin Fanru’s sister and holds 9.27% of the company’s shares.

Xiangyu Industrial Group holds 59.45% of the company's shares. Xiangyu Group is a company jointly controlled by Lin Fanru and Shao Changxiu.

Changxiu holds 99.32% of the shares of Xiangyu Group (of which Lin Fanru holds 88.26% and Shao Changxiu holds 11.06%), Xu Buxi

Holds 0.28% of Xiangyu Group shares.

Except for the related relationship between the above shareholders, there is no related relationship between other shareholders of the company.

2. Controlling shareholders and actual controllers

Whether to merge and disclose

□Yes √No

(1) Controlling shareholders

Xiangyu Group directly holds 59.45% of the company's shares and is the company's controlling shareholder. Its legal representative is Lin Fanru. Xiangyu Group was established on May 17, 1996, with a registered capital of 300 million yuan and a paid-in capital of 300 million yuan. Its address is No. 307 Jinyuan Road, Linyi City. Its business scope: engaging in investment activities with its own funds, corporate management consulting, corporate management, non-residential real estate leasing, housing leasing, Chinese herbal medicine cultivation, real estate Chinese herbal medicine (excluding Chinese herbal medicine pieces) purchase and sale. Unified social credit code: 913713026139944157. During the reporting period, Xiangyu Group has always been the company's controlling shareholder and has control over the company, and the controlling shareholder has not changed.

(2) Actual controller situation

The actual controller of the company is Lin Fanru, Chinese nationality, graduate degree, and no permanent residence abroad. Member of the 13th National Committee of the Chinese People's Political Consultative Conference, member of the Standing Committee of the CPPCC Committee of Shandong Province for many times, vice president of the All-China Federation of Industry and Commerce Pharmaceutical Industry Chamber of Commerce, consultant of the World Chinese Physicians Association, vice president of the Shandong Provincial General Chamber of Commerce, founder and lifelong honorary president of the Shandong Provincial Pharmaceutical Chamber of Commerce. Chairman of Xiangyu Industrial Group Co., Ltd. and Chairman of Xiangyu Pharmaceutical Co., Ltd.

Shao Changxiu is the spouse of Lin Fanru, and Xiangyu Group is a company jointly controlled by Lin Fanru and Shao Changxiu. Lin Fanru and Shao Changxiu hold 99.32% of the shares of Xiangyu Group (of which Lin Fanru holds 88.26% and Shao Changxiu holds 11.06%). In addition, shareholder Lin Fanru directly holds 15,600,000 shares of the company, accounting for 8.14% of the total share capital, and shareholder Shao Changxiu directly holds 13,000,000 shares of the company, accounting for 6.78% of the total share capital. The two collectively control 74.36% of the company's shares.

During the reporting period, the actual controller did not change.

Are there any special investment terms that have not yet been fulfilled?

□Yes √No

3. Issuance of common shares and use of raised funds during the reporting period

(1) Stock issuance during the reporting period

□Applicable √Not applicable

(2) Usage of raised funds that lasted to the reporting period

□Applicable √Not applicable

Relevant information on preference shares that have survived to the current period □Applicable √Not applicable

5. Bond financing that lasts to the current period

□Applicable √Not applicable

6. Convertible bonds surviving to the current period

□Applicable √Not applicable

7. Equity distribution

(1) Profit distribution and transfer of reserve funds to share capital during the reporting period □ Applicable √ Not applicable

Profit distribution and implementation of transfer of reserve funds to share capital

□Applicable √Not applicable

(2) Equity distribution plan

√Applicable □Not applicable

Unit: Yuan or share item Number of cash bonuses per 10 shares (tax included) Number of bonus shares per 10 shares Number of bonus shares per 10 shares

Annual distribution plan 5.00 - -

Section 5 Industry Information

□Environmental management company √Pharmaceutical manufacturing company □Software and information technology service company

□Computer, communication and other electronic equipment manufacturing companies □Professional technical service companies □Internet and related service companies

□Retail company □Agriculture, forestry, animal husbandry and fishery company □Education company □Film and television company □Chemical company □Health industry company

□Advertising company □Lithium battery company □Construction company □Not applicable

1. Macroeconomic policies

(1) Policies and regulations on pharmaceutical supervision, pharmaceutical reform and medical institution reform

At the beginning of 2025, the General Office of the State Council issued the "Opinions on Comprehensively Deepening the Reform of Drug and Medical Device Supervision to Promote the High-Quality Development of the Pharmaceutical Industry", which clearly proposed to establish a regulatory system that is compatible with pharmaceutical innovation and industrial development by 2027, and to basically achieve regulatory modernization by 2035. The National Health Commission and other 14 ministries and commissions jointly issued the "Key Points of Correcting Improper Practices in the Pharmaceutical Purchase and Sales Field and Medical Services in 2025", proposing to strengthen the research, judgment and early warning of new types of corruption and hidden corruption issues, and promote penetrating supervision in the pharmaceutical purchase and sales field. At the same time, the National Medical Insurance Administration issued the "Interim Measures for the Management of Medical Insurance Payment by Disease Type", unifying the national DRG/DIP payment rules, further standardizing medical service behavior and controlling medical costs.

(2) Drug research and development, registration, production, import and export policies and regulations

The "Opinions on Comprehensively Deepening the Supervision Reform of Drugs and Medical Devices to Promote the High-Quality Development of the Pharmaceutical Industry" proposes to improve the review and approval mechanism, tilt review and approval resources to innovative drugs that are urgently needed for clinical use, and implement "early intervention, one enterprise, one policy, full guidance, and research and review linkage." The State Food and Drug Administration issued the "Specifications for Drug Registration Inspection Work Procedures and Technical Requirements (2025 Revised Edition)" to reduce the amount of registration inspection samples and shorten the inspection time limit. The 2025 version of the Pharmacopoeia of the People's Republic of China will be officially implemented on October 1, 2025. All drug marketing authorization holders should implement the relevant requirements of the new version of the Pharmacopoeia.

(3) Drug bidding and procurement policies and regulations

The tenth batch of national centralized drug procurement has been successful, involving 62 kinds of drugs, covering hypertension, diabetes, tumors, cardiovascular and cerebrovascular diseases and other diseases, with an average price drop of more than 60%. The eleventh batch of centralized procurement was launched in September. It follows the principle of "stabilizing clinical practice, ensuring quality, preventing bid rigging, and anti-involution" to optimize price difference control. It no longer simply selects the lowest bid and puts forward higher requirements for the quality control level of bidding companies.

(4) Environmental protection, drug quality and safety and product liability policies and regulations

The General Office of the State Council's "Opinions on Comprehensively Deepening the Reform of Drug and Medical Device Supervision and Promoting High-Quality Development of the Pharmaceutical Industry" emphasizes full life cycle supervision and requires enterprises to strengthen their main responsibilities for quality and safety. The release of the 2025 version of the Chinese Pharmacopoeia marks a comprehensive upgrade of drug quality standards. The State Food and Drug Administration issued supporting specifications such as the Pharmaceutical Excipient Appendix and the Pharmaceutical Packaging Material Appendix of the Good Manufacturing Practice for Drugs, further strengthening the quality control requirements for the entire process from raw materials to finished products.

(5) Medical insurance expense control and payment policies and regulations

In 2025, 114 new drugs will be added to the national medical insurance drug catalog, 50 of which are Category 1 innovative drugs, and the total number of drugs in the catalog will increase to 3,253. The National Medical Insurance Administration released the "Commercial Health Insurance Innovative Drug Catalog" for the first time, which included a total of 19 kinds of drugs, covering cutting-edge therapeutic drugs such as CAR-T cell therapy and rare disease drugs, and established a "basic medical insurance + commercial health insurance" dual catalog payment system. The National Medical Insurance Administration issued the "Interim Measures for the Management of Medical Insurance Payment by Disease Type", establishing a unified nationwide payment management mechanism by disease type, requiring medical institutions to proactively control costs and improve the efficiency of medical insurance fund use.

(6) Other industry policies and regulations that may have a direct or important impact on the company

The General Office of the State Council issued the "Opinions on Improving the Quality of Traditional Chinese Medicine and Promoting the High-Quality Development of the Traditional Chinese Medicine Industry", proposing to promote the digital and intelligent development of the traditional Chinese medicine industry and grant a market exclusivity period to qualified exclusive varieties of traditional Chinese medicine. Seven departments including the Ministry of Industry and Information Technology jointly released the "Implementation Plan for the Digital and Intelligent Transformation of the Pharmaceutical Industry (2025-2030)", which proposed the goal of achieving full coverage of the digital transformation of pharmaceutical industry enterprises above designated size by 2030.

Response measures: In the face of the above policy changes, the company will take the following response measures: First, pay close attention to the regulatory reform trends, optimize the R&D registration process, and actively seize the dividends of the review and approval facilitation policy; second, strengthen the construction of the drug quality system and strictly implement the new version of the Pharmacopoeia and GMP relevant requirements to ensure product quality, safety and compliance; the third is to deepen cost control, adapt to the normalization trend of centralized purchasing, and formulate reasonable bidding strategies; the fourth is to actively track the dynamics of the medical insurance catalog and pay attention to the expansion opportunities of multiple payment channels such as the commercial insurance innovative drug catalog; the fifth is to promote digital and intelligent transformation and upgrading to improve production management efficiency and market competitiveness.

2. Business qualifications

On June 24, 2025, Xiangyu Pharmaceutical Co., Ltd. successfully passed the Shandong Provincial Department of Industry and Information Technology’s review of the 2025 Specialized, Special and New Small and Medium Enterprises, which is valid until December 31, 2028.
On February 21, 2025, Ketotifen Fumarate Tablets passed the quality and efficacy consistency evaluation of generic drugs and received a drug supplement application approval notice from the National Medical Products Administration.
On September 26, 2025, Clozapine Tablets passed the generic drug quality and efficacy consistency evaluation and received a drug supplement application approval notice from the State Food and Drug Administration.

3. Main medicines (products)

(1) Basic information on drugs (products) on sale

√Applicable □Not applicable

Drugs (products) Compound Hongyi Bu Compound Motherbatch Pu Ling Pan Ibuprofen Suspension Diphen Hydrochloride Mian Hydrochloride

Sodium valproate tablets

Name: Xue oral liquid, Nangkang granules, liquid, Nido tablets, Serin tablets

Dosage form Oral liquid Capsule Granule Suspension Tablet Tablet Tablet

Enriches blood, benefits, activates blood circulation and promotes qi, clears away heat and eliminates colds. Used to treat colds in children. Suitable for medicine. Mainly used for single-use medicine.

Qi, invigorating the spleen, dissipating blood stasis and relieving pain, dampness, dispersing blood stasis, fever, dizziness, and nausea caused by drug treatment. Pure or complex non-treatment area/use. Used for iron deficiency, dispersing stagnation, relieving mild to moderate pain in children, including heart attack, vomiting, various depression, neurotic attacks, muscle anemia, and moderate pain. For patients with clonic seizures, treatment of clonic seizures can relieve their

depressive symptoms

2011-6-22 2017-6-6 to 2018-5-15 2014-12-17 to Not applicable 2011-9-28 From 2013-11-27 invention patent

to 2031-6- 2037-6-5 to 2038-5- 2034-12-16 to 2031-9- to 2033-11-

21 14 27 27 Drugs (Products) Traditional Chinese Medicine Traditional Chinese Medicine Traditional Chinese Medicine Chemical Drug Chemical Drug Chemical Drug Chemical Drug Registration Classification

Is it a protected variety? No Yes Yes No No No No No protected drug variety

Is it a prescription drug? No Yes Yes No No Yes Yes

Is it a report? No No No No No No No Will it be launched within the reporting period?

new drugs (produced)

product

1.3219 million 4.5628 million 2.2079 million

Production volume 1.9865 million boxes 676.8 thousand boxes 3.9462 million boxes 2.1117 million boxes boxes boxes

2,244,200 boxes 641,800 boxes 1,250,200 3,921,500 boxes 4,537,400 1,931,600 2,113,500 boxes Sales volume

box box box

(2) Production and sales of pharmaceutical products

√Applicable □Not applicable

Classification analysis of revenue and costs of pharmaceutical (product) products

Therapeutic areas/Main drugs Operating income Operating costs Gross profit margin (product) products/Others (please) Operating income Operating costs Gross profit margin Year-on-year increase Year-on-year increase Year-on-year increase

Listed) Less% Less% Less% Mianserin Hydrochloride Tablets 70,237,165.77 22,304,793.83 68.24% -14.08% 12.68% -7.54% Difenidol Hydrochloride Tablets 55,599,012.86 28,100,015.03 49.46% 4.62% -3.19% 4.08% compound Hongyi blood supplement oral 41,125,226.24 23,726,676.83 42.31% 2.90% 2.47% 0.24% liquid

Puling Penyankang Granules 26,273,450.47 14,696,707.98 44.06% -3.07% -17.60% 9.86% Sodium Valproate Tablets 27,681,731.48 16,687,406.37 39.72% 6.64% 0.87% 3.45% Isosorbide Mononitrate 19,759,292.05 6,282,283.65 68.21% -21.45% 2.84% -7.51% Compound Yimu Capsule 12,647,676.57 4,562,621.66 63.93% -19.09% -27.25% 4.04% (OTC)

Ibuprofen suspension 18,848,863.61 14,788,015.90 21.54% 28.58% 12.13% 11.51%

Total 272,172,419.05 131,148,521.25 - - - -

The gross profit margin of Pulingpen Yankang Granules in this period increased by 9.86% compared with the same period last year. The main reason was that the company implemented cost reduction and efficiency improvement and optimized production processes. The cost control effect of this product was more significant, which led to an increase in gross profit margin.
The gross profit margin of ibuprofen suspension in this period increased by 11.51% compared with the same period last year. The main reason was that the company implemented cost reduction and efficiency improvement and optimized production processes. The sales revenue of this product increased in this period and costs were effectively controlled, which led to an increase in gross profit margin.
Sales model analysis

The company's sales can be divided into five models: commercial sales, investment promotion, OTC direct sales, theaters and strategic sales (API + OEM). Commercial and sales model: The company cooperates with pharmaceutical commercial companies, mainly in the pharmaceutical circulation market.

Investment model: In the company's non-direct market, in order to expand the market and promote the brand, the company adopts the investment agency model, that is, the company sells drugs directly to agents, and the agents resell them to terminals. Under this model, although the company transfers part of its profits to agents, it can quickly enter the market and work with agents to promote the brand. The company's main products, such as Compound Hongyi Buxue Oral Liquid, Compound Yimu Capsules, and Puling Penyankang Granules, all adopt the investment promotion model.

OTC direct sales model: The company's OTC drugs are mainly sold through the direct sales model. The company has equipped professional sales teams in its five major direct sales markets of Shandong, Henan, Shaanxi, Anhui and Jiangsu. The drugs produced by the company are directly delivered to pharmacies and other terminals through large pharmaceutical logistics companies, eliminating the need for intermediate links such as agents.

Theater model: This model mainly targets medical insurance prescription products such as mianserin hydrochloride tablets. With academic promotion as the main method, it mainly includes professional journals, magazines, corporate image and product academic promotion, industry associations and self-organized academic promotion meetings of different sizes, academic articles by doctors, etc. Since Mianserin Hydrochloride Tablets are Renhetang’s exclusive medical insurance prescription products and are sold directly to hospitals, academic promotion is the most suitable method. Although the initial investment is large, it can directly increase sales. The company takes core cities such as Beijing and Shanghai as leaders, improves the construction of expert network, and drives and guides sales in other regions. At the same time, second- and third-tier cities are rapidly increasing market coverage and cultivating intensively.

Strategic sales model: Mainly responsible for the sales of OEM products and APIs.

The company's advertising, academic promotion, drug sales and other activities during the reporting period did not contain any illegal activities.

Winning bids in centralized bidding and procurement of major pharmaceutical (products) products

□Applicable √Not applicable

(3) Situation on major drugs (products) that have been included, newly entered, and withdrawn from the national essential medicine catalog and the national medical insurance catalog

√Applicable □Not applicable

Is it the name of the newly introduced major drug (product) during the reporting period? When was it included in the National Essential Drugs List?

Drugs in the home-level medical insurance catalog Sodium Valproate Tablets 0.2g*100 tablets/bottle November 1, 2018 No

Difenidol Hydrochloride Tablets 25mg*30 tablets/bottle November 1, 2018 No

Difenidol Hydrochloride Tablets 25mg*120 tablets/box November 1, 2018 No

Sulpiride tablets 0.1g*100 tablets/bottle November 1, 2018 No

Mianserin Hydrochloride Tablets 30mg*12 tablets/box November 1, 2018 No

Mianserin Hydrochloride Tablets 30mg*14 tablets/box November 1, 2018 No

Mianserin Hydrochloride Tablets 30mg*18 tablets/box November 1, 2018 No

Compound Hongyi Buxue Oral Liquid November 1, 2018 No

Compound Yimu Capsules November 1, 2018 No

Pu Ling Pen Yan Kang Granules November 1, 2018 No

Ibuprofen suspension 60ml 100ml November 1, 2018 No

There were no new drugs entering or exiting the above catalog during the reporting period.

4. Intellectual Property Rights

(1) Core technologies of major pharmaceutical (products)

As a high-tech enterprise, Xiangyu Pharmaceutical has applied for patents on the core technologies of its products and protected the interests of the company through patent protection. As of the end of 2025, the company has authorized 58 patents, including 53 authorized invention patents.

The company's products are mainly divided into gynecological, pediatric, tonic, nervous system, etc., including:

The main core product in the gynecology category is Compound Hongyi Blood Replenishing Oral Liquid. This product uses medicinal materials of the same origin as medicine and food. It is a pure plant blood replenishing product produced through modern extraction, automated filling and other technologies. It is safe, non-heaty, and suitable for all people. In 2016, it was included in the Interpretation of Clinical Pathways - Obstetrics and Gynecology Volume, and is the first choice for postpartum blood replenishing. Compound Yimu Capsules are a national protected variety of traditional Chinese medicine and were included in the Obstetrics and Gynecology volume of the Interpretation of Clinical Pathways in 2016. They are the first choice for postpartum uterine rejuvenation. "Puling Pen Yankang Granules" are a national protected variety of traditional Chinese medicine and were included in the 2017 edition of the Clinical Application Guidelines for Chinese Patent Medicines - the Obstetrics and Gynecology volume. They are the first choice for pelvic inflammatory disease and enjoy the reputation of traditional Chinese medicine antibiotics.

The main core product in the pediatric category, Xiangma Hanchuan Patch, is the only internal and external treatment preparation for children's asthma by applying it to back acupoints. It is included in the 2017 edition of the Clinical Application Guidelines for Chinese Patent Medicines - Pediatric Volume. It is the first choice drug for children with bronchial asthma; ibuprofen suspension is recommended by the World Health Organization as the first choice drug for reducing fever in children.

The main core supplement products include Cordyceps Qishen Capsules, Qingzhuo Yishen Capsules, Yishen Granules, etc. These products use Cordyceps Sinensis or fermented Cordyceps fungus powder as raw materials, and are made through modern extraction, concentration, alcohol precipitation and other technologies. The technologies of these products are all patented.

The technologies involved in the above products are obtained through independent research and development and commissioned research and development. The final production technologies are exclusively produced by Xiangyu Pharmaceutical and are patent protected and do not involve infringement.

(2) Well-known or famous trademarks

√Applicable □Not applicable

In June 2015, "Xiangyu Kaifuli" was certified as a "China Famous Trademark".

(3) Major intellectual property legal disputes or controversial matters

□Applicable √Not applicable

5. Research and development status

(1) Overall R&D situation

The company mainly adopts R&D models such as independent R&D, cooperative R&D, and outsourced R&D. Projects such as finasteride tablets, finasteride tablets, and carbocysteine oral solution adopt the independent R&D model; projects such as sodium valproate sustained-release tablets and sildenafil citrate orally disintegrating tablets adopt the outsourced R&D model.

The R&D center consists of functional departments such as synthesis, formulation, analysis, registration, and clinical. Currently, there are 1 full-time scientific research staff with a doctorate and 23 with a master's degree. The R&D center has an independent research building with a construction area of more than 6,000 square meters and is equipped with complete scientific research and analysis instruments. The R&D center has signed agreements with top domestic medical talents such as Academician Shi Xuemin of the Chinese Academy of Engineering and Professor Li Guigen of Nanjing University to carry out all-round cooperation in areas such as talent training and innovative drug research and development. It has established innovative platforms such as the National Enterprise Technology Center, Postdoctoral Research Workstation, Academician Workstation, Shandong Provincial Gynecological Drug New Preparation Engineering Technology Research Center, and Shandong Provincial Drug Quality Control Technology Engineering Laboratory. It has formed an innovative R&D system led by high-end innovative talents, which can achieve rapid transformation of scientific and technological achievements and technologies into industrial applications. The institute cooperates with external R&D teams such as Harvest (Hunan) Pharmaceutical Technology Co., Ltd., Hunan Huize Biomedical Technology Co., Ltd., and Changsha Jingyi Pharmaceutical Technology Co., Ltd.

At present, the main research and development areas include consistency evaluation, generic drugs, APIs, skill transformation and standard improvement. The development plan of the R&D center implements the R&D strategy of "imitation, imitation, and creation". It is market-oriented, technological progress is the means, investment is the support, and talents are the root. It accelerates the construction of the technological innovation system, vigorously implements high-tech industrialization, and strives to enhance the core competitiveness of the enterprise.

(2) Major R&D projects

Top five R&D projects with R&D investment

Unit: Yuan serial number R&D project Amount of R&D investment in this period Accumulated R&D investment amount R&D (registration) stage 1 Minoxidil liniment 800,000 2,400,000 Under review

2 Ketotifen Fumarate Tablets 180,000 1,800,000 Approved

3 Ibuprofen API 344,000 1,720,000 Approved

4 Sodium valproate tablets 1,445,000 2,562,500 Under review

5 Dapagliflozin tablets 132,000 132,000 Under study

Total 2,901,000 8,614,500 -

The consistency evaluation project of ketotifen fumarate tablets has been approved, the marketing authorization of ibuprofen raw material has been approved, and the clinical research and pharmaceutical research of minoxidil liniment and sodium valproate tablets are all under review.

R&D projects included in priority review and approval categories

□Applicable √Not applicable

Other R&D projects that have a significant impact on core competitiveness

□Applicable √Not applicable

Major R&D projects stopped or canceled

□Applicable √Not applicable

Information on drugs (products) submitted to regulatory authorities for approval, registration completed or production approval obtained

√Applicable □Not applicable

Application status of R&D projects in 2025: Application for marketing authorization for valproic acid API in January, application for supplementary application and additional specifications for glucose powder in February, application for consistency evaluation of sodium valproate tablets in August, application for additional specifications for finasteride tablets in August, application for marketing authorization for minoxidil liniment in October, and application for change instructions for premenstrual tablets in November; other projects are undergoing small-scale research and pilot process verification research, and have not yet reached the project application progress. Follow-up project research will be conducted in accordance with the project progress.

The basic situation of drugs that have completed registration and obtained approval numbers in 2025: the consistency evaluation of ketotifen fumarate tablets was approved in February, the marketing authorization of ibuprofen API was approved in June, the consistency evaluation of clozapine tablets was approved in September, and the ibuprofen suspension was approved in December.

The approved projects will be produced in accordance with the newly approved processes and quality standards after approval. The registration and approval of the above products have significantly enriched the company's product structure and enhanced its market competitiveness in anti-allergic, antipyretic, analgesic, psychiatric and other treatment fields. The approval of consistency evaluation varieties will help consolidate the advantages of centralized procurement and clinical bidding; the linkage of ibuprofen API and suspension will help form the integrated advantage of "API + preparation" and improve cost control and supply chain stability. It is expected that the above varieties will gradually become the company's new revenue growth points in the next 1-2 years.

Major government R&D subsidies, funding, subsidies and tax incentives

□Applicable √Not applicable

Other research and development information voluntarily disclosed

□Applicable √Not applicable

6. Commissioned production of medicines (products)

□Applicable √Not applicable

7. Quality Management

(1) Basic situation

Raw material procurement

Our company has established a strict raw material procurement system and uses risk management methods to conduct supplier qualification confirmation, evaluation, review, approval and management to ensure that supplier information is maintained in the supplier database or files in a timely and correct manner, all material quality and supply-related issues are properly handled, and all changes are managed in accordance with laws and regulations. Quality standards and inspection operating procedures for various materials have been formulated. A quality audit system for material suppliers has been implemented, and a raw material traceability system has been established to track the source and usage of each batch of raw materials. Once quality problems occur, they can be quickly traced back to the source and corresponding measures taken.

Production management

Our company has formulated management procedures for preparing, reviewing, and issuing batch production instructions. It organizes production according to the instructions, conducts process control on the factors that affect production quality in the production process, and conducts quality monitoring on the main key points of the production process, so that the operation process of production operators and the quality of materials and intermediate products are under control to ensure the production of products with stable and uniform quality. Material balance management procedures have been formulated to conduct timely material balance inspections after each batch of products is completed at each stage of production.

Packaging management

The company has established packaging operating procedures to regulate the selection of packaging materials and the execution of packaging processes. During the packaging process, strictly follow the prescribed procedures to ensure the integrity and sealing of the packaging. Labels, instructions and cartons are kept, stored and picked up in dedicated counters (warehouses). Suppliers of packaging materials are also strictly screened to ensure reliable quality. After packaging is completed, QA conducts appearance inspection and quality inspection on the packaged products to ensure that the packaging meets relevant standards and requirements.

Transportation management

In accordance with the requirements of laws and regulations such as the "Drug Administration Law", the company has established an entrusted storage and transportation management system, signed an entrustment agreement with logistics express companies, clarified the responsibilities of all parties in storage and transportation activities, and strictly performed the obligations stipulated in the agreement to ensure that the storage and transportation process continues to be legal and compliant, and continues to meet drug quality management requirements. Based on the needs of operation and management, the company conducts strict review of the legality and transportation guarantee capabilities of each shipping unit. Product transportation shall be carried out strictly in accordance with product storage conditions to ensure that product quality is not affected during transportation. When transporting products that have special requirements for storage conditions (such as temperature, relative humidity), the vehicle equipment must be reviewed. Vehicles have automatic control devices to meet specific conditions (such as temperature and humidity control), and monitoring devices (such as temperature and humidity meters) should be regularly calibrated and audited.

Warehouse management

Our company has a warehouse for Chinese medicinal materials, a warehouse for prepared pieces, a warehouse for raw and auxiliary materials, a warehouse for packaging materials, a warehouse for finished products, etc. There are independent cool warehouses and cold warehouses for materials that need to be stored in a cool or cold place. Medicinal materials that are prone to odor transfer are stored separately in a warehouse that is prone to odor transfer. Toxic drugs and precursor drugs are managed by two people and double locks. Each warehouse has clearly defined areas and has a separate area for unqualified products. There is an independent finished product warehouse. After the finished product passes the inspection, the quality authorized person will evaluate the quality of each batch of products and issue a finished product release report. Our company's storage and transportation department releases products based on the conclusions of the finished product release report. The company has formulated management procedures for the warehousing, storage, and shipment of finished products, and implements product shipments in accordance with the management procedures.

Through the establishment and effective implementation of the above quality management measures, the company effectively guaranteed the quality of drugs during the reporting period and provided patients with safe and reliable drugs.

(2) Major quality and safety issues

□Applicable √Not applicable

8. Production safety and environmental protection

(1) Basic situation

Safety production situation

The company has established a production safety management system and established a production safety leading group to work around the goal of zero accidents in production safety. It always adheres to the concept of safety development and implements the production safety responsibility system at all levels to nip safety hazards in the bud and ensure the sustainable and stable development of production safety. The company completed the third-level certification of production safety standardization in July 2016, and completed the district-level benchmarking assessment for dual-system construction in September 2018.

Environmental protection measures

The company has established a sewage treatment station to centrally treat the sewage generated during the production process, monitor it online, and discharge it to the municipal sewage pipe network if it meets the standards. Signed a waste medicine slag recovery agreement with the biomass boiler factory to complete the collection, transportation and incineration of medicine slag generated during the production process to meet the management requirements of the environmental protection and drug regulatory authorities. The company has installed exhaust gas treatment devices to treat the exhaust gas generated during the production process and ensure that the emissions meet the standards.

(2) Situations involving hazardous wastes and hazardous chemicals

√Applicable □Not applicable

Hazardous waste from the subsidiary Renhetang Pharmaceutical is divided into nine categories and stored in hazardous waste suspension warehouses. The company entrusts four companies with hazardous waste treatment qualifications to handle them respectively. The disposal company will contact companies with special hazardous waste transportation qualifications for transfer, and they will be disposed of by legal methods such as incineration and landfilling. At present, our company has disposed of hazardous wastes many times in accordance with the law, and the implementation is normal.

The company's production and operation activities do not involve hazardous chemicals.

(3) Situations involving biological products

□Applicable √Not applicable

(4) Major environmental pollution incidents or penalties

□Applicable √Not applicable

9. Segmented business

(1) Processing of traditional Chinese medicine pieces and production of proprietary Chinese medicines

√Applicable □Not applicable

At present, the company's traditional Chinese medicines mainly use salvia miltiorrhiza, Panax notoginseng, angelica root, Ligusticum chuanxiong, motherwort, plantain, wolfberry, etc. These medicinal materials are commonly used medicinal materials, mainly from medicinal material suppliers in Anhui, Ningxia and Jiangxi. Adopt the model of bidding procurement and origin inquiry and price comparison procurement; quality control measures include formulating internal control standards and pharmacopoeia standards, signing quality assurance agreements with suppliers, strictly inspecting and accepting in accordance with the quality assurance agreement standards, and strictly controlling the origin.

(2) Consistency evaluation of generic drugs

√Applicable □Not applicable

At present, the company has a total of 9 varieties that have successfully passed the approval of the National Medical Products Administration and obtained the generic drug consistency evaluation approval, mainly including: Difenidol Hydrochloride Tablets, Captopril Tablets, Acetaminophen Tablets, Finasteride Tablets, Chlorpheniramine Maleate Tablets, Glipizide Tablets, Isosorbide Mononitrate Tablets, Ketotifen Fumarate Tablets, and Clozapine Tablets.

(3) Biosimilar drug production and research and development

□Applicable √Not applicable

Section 6 Corporate Governance

1. Directors, supervisors and senior managers

(1) Basic situation

Unit: Number of shares starting and ending dates at the end of the term

Ordinary

Nature: Normal at the beginning of the period Quantity: Normal at the end of the period

Name Position Date of Birth Shareholding Type Number of Common Shares Variable Number of Common Shares

Start date End date Stock ratio

Example%

May 2025 May 2028

Lin Fanru Chairman Male February 1965 15,600,000 0 15,600,000 8.14% 23rd 16th

May 2025 May 2028

Lin Fanru Director Male February 1965 15,600,000 0 15,600,000 8.14% 16th 16th

May 2025 May 2028

Zhu Guoying Director Female November 1977 0 0 0 0% 16th 16th

May 2025 May 2028

Lin Xiangyu Director Male October 1990 0 0 0 0% 16th 16th

May 2025 May 2028

Wang Chengjian Director Male October 1982 0 0 0 0% 16th 16th

May 2025 May 2028

Xu Jinfang Director Female July 1983 0 0 0 0% 16th 16th

September 2021 May 2025

Lin Fanyou Director Male April 1977 0 0 0 0% 13th 16th

Supervisory Board May 2025 May 2028

Xu Buxi Male October 1966 17,770,000 0 17,770,000 9.27% Chairman 23rd 16th

May 2025 May 2028

Xu Buxi Supervisor Male October 1966 17,770,000 0 17,770,000 9.27% 16th 16th

Employee Representative May 2025 May 2028

Mao Chuanwei Male August 1985 0 0 0 0% Supervisor 16th 16th

September 2021 May 2025

Wu Jianwei Supervisor Male July 1965 2,135,000 190, 1,944,918 1.01% 13th 16th

Employee Representative May 2025 May 2028

Wang Shili Male February 1981 0 0 0 0% Supervisor 16th 16th

May 2025 May 2028

Zhu Guoying General Manager Female November 1977 0 0 0 0% 23rd 16th

Deputy General Manager

May 2025 May 2028

Wang Chengjian Management, Finance Male October 1982 0 0 0 0% 23rd 16th

Chief Financial Officer

Deputy General Manager May 2025 May 2028

Sun Yongxi Male June 1987 0 0 0 0%li 23rd 16th

Deputy General Manager February 2022 May 2025

Lin Xiangyu Male October 1990 0 0 0 0% Management 15th 23rd

Board of Directors May 2025 May 2028

Wang Xiaoxue Female June 1986 0 0 0 0%

Secretary 23rd 16th

Relationship between directors, supervisors, senior managers and shareholders:

Directors Lin Fanru and Lin Xiangyu have a father-son relationship; Chairman of the Supervisory Committee Xu Buxi is the spouse of Lin Fanru’s sister. Other directors, supervisors, and senior managers have no relationship with each other or with shareholders.

(2) Status of the Audit Committee

□Applicable √Not applicable

(3) Changes

√Applicable □Not applicable

Name Position at the beginning of the period Type of change Position at the end of the period Reason for change Lin Fanyou Director Resignation None Change of term

Xu Jinfang None New Directors Change of Term

Wu Jianwei Supervisor Resigned None Re-election

Mao Chuanwei None Newly appointed Employee Representative Supervisor Change of term

Sun Yongxi None New Deputy General Manager Change of appointment

Director, Deputy General Manager

Lin Xiangyu resigned as director and was re-elected

reason

Professional background, main work experience, etc. of new directors, supervisors, and senior managers during the reporting period

√Applicable □Not applicable

Xu Jinfang, female, was born in July 1983 and has no permanent residence abroad. From September 2004 to November 2008, he served as cashier, financing specialist, and accountant in the Finance Department of Xiangyu Group; from December 2008 to July 2010, he served as the financial manager of Linyi Yuelai Automobile Service Co., Ltd.; from August 2010 to July 2012, he served as the chief accountant in the Finance Department of Xiangyu Group; from August 2012 to 2022 In December, he served as the financing manager and deputy director of the Capital Operation Department of Xiangyu Group; from 2023 to present, he served as the director of the Finance Department of Xiangyu Group.

Mao Chuanwei, male, born in August 1985, has a graduate degree and no permanent residence abroad. From July 2012 to January 2013, he worked as an engineer in the Marketing Department of Millennium Genetics; from February 2013 to August 2019, he served as an analyst at the R&D Center of Xiangyu Pharmaceutical; from September 2019 to June 2021, he served as the analysis supervisor of the R&D Center of Xiangyu Pharmaceutical; from July 2021 to December 2021, he served as deputy manager of the quality department and quality authorizer of Xiangyu Pharmaceutical; 2022 January From March to present, he serves as Assistant General Manager, Quality Department Manager, Quality Director and Quality Authorized Person of Xiangyu Pharmaceutical.

Sun Yongxi, male, born in June 1987, Chinese nationality, no permanent residence abroad, bachelor’s degree. From October 2010 to October 2011, he worked in the Equipment Department of Shandong Luoxin Pharmaceutical Group Co., Ltd.; from November 2011 to January 2014, he worked in the Production Department of Shandong Yuecaotang Pharmaceutical Co., Ltd.; from February 2014 to April 2017, he served as a registration specialist in Xiangyu Pharmaceutical; From May 2017 to January 2021, he served as the manager of the R&D Department of Xiangyu Pharmaceutical; from February 2021 to July 2021, he served as the assistant to the general manager of Xiangyu Pharmaceutical, responsible for research and development work; from August 2021 to the present, he served as the assistant to the general manager and the person in charge of production of Xiangyu Pharmaceutical.

(4) Equity incentives for directors and senior managers

□Applicable √Not applicable

2. Employee situation

(1) Current employees (company and holding subsidiaries)

Classification by nature of work Number of people at the beginning of the period New in this period Decreased in this period Number of people at the end of the period Management personnel 36 0 2 34 Production personnel 323 1 12 312 Sales personnel 334 12 63 283 Technical personnel 157 2 5 154 Financial personnel 21 0 2 19 Administrative personnel 16 0 3 13 Total employees 887 15 87 815

Classification by education level Number of people at the beginning of the term Number of people at the end of the term Ph.D. 1 1

Master 28 25

Undergraduate 192 195

Specialist 366 320

Junior college or below 300 274

Total employees 887 815

Employee compensation policies, training plans, and the number of retired employees who need to bear the costs of the company, etc.

Employee remuneration policy: During the reporting period, the company established a scientific and reasonable remuneration system and performance appraisal system as well as a competitive remuneration system and welfare system. The remuneration of the company's employees is paid on a monthly basis in accordance with the relevant regulations formulated by the company.
Employee training: The company attaches great importance to employee training and has carried out various forms of internal and external employee training, including induction training for new employees, professional knowledge and skills training for various functional departments, training for middle and senior leadership cadres, etc., so that the company's employees can master more skills, become familiar with job knowledge faster and better, continuously improve the overall quality of employees, and improve work efficiency.

(2) Situation of core employees (the company and its holding subsidiaries)

□Applicable √Not applicable

3. Corporate governance and internal control

Matter Yes or No Whether the investment institution has appointed directors □Yes √No Whether the internal supervision agency has objections to the supervision matters this year □Yes √No Whether the management has introduced professional managers □Yes √No Whether there are new related parties during the reporting period √Yes □No

(1) Basic situation of corporate governance

During the reporting period, the company's deliberations and voting procedures strictly complied with the Articles of Association, Company Law, Securities Law, Supervision and Management Measures for Unlisted Public Companies and the business rules of the National Equity Transfer System, and continued to improve the corporate governance structure, establish a modern enterprise system, and standardize the company's operations. The company's management has deepened the concept of corporate governance and improved its awareness of standardized operations through special studies. The board of directors has evaluated and confirmed that the corporate governance mechanism effectively protects the equal rights of shareholders.

Regarding the capital occupation by the controlling shareholder that occurred during the reporting period, the company will strictly perform relevant review and disclosure procedures in accordance with regulatory requirements. It is currently urging the controlling shareholder to formulate a practical repayment plan and speed up the return of funds to eliminate the impact on the interests of the company and small and medium-sized shareholders.

In the future, the company will take this incident as an opportunity to further optimize its governance structure, improve the internal control system to prevent the occupation of funds by controlling shareholders and related parties, strengthen the supervision of the entire process of capital circulation, prevent such situations from happening again, continue to improve decision-making efficiency and compliance levels, and effectively safeguard the legitimate rights and interests of the company and all shareholders.

(2) Opinions of internal supervision agencies on supervision matters

During the reporting period, the Board of Supervisors strictly complied with the Company Law, Articles of Association and regulatory requirements and performed its supervisory duties by attending the board of directors and shareholders' meetings, reviewing financial reports, and conducting special inspections. This year, we focused on the supervision and verification of matters such as financial compliance, fairness of related transactions, implementation of internal control systems and information disclosure. Regarding the capital occupation by the controlling shareholder that occurred during the reporting period, the Board of Supervisors has urged the company and relevant parties to implement rectification measures, formulate repayment plans, and supervise the authenticity, accuracy and completeness of information disclosure on related matters. No false records, misleading statements or major omissions have been found in the company.

The Board of Supervisors believes that the company's financial data during the reporting period are true and complete, the pricing of related-party transactions is reasonable and necessary review procedures have been fulfilled; the company has taken special rectification measures in response to the capital occupation by the controlling shareholder, and will continue to improve the internal control system related to capital management in the future. The Board of Supervisors has no objection to the legality and compliance of the company's governance and operating activities in 2025, and will continue to strengthen its supervision functions, focusing on the follow-up rectification progress of fund occupation matters and the continued effectiveness of internal controls, so as to effectively protect the rights and interests of all shareholders and the sustainable development of the company.

(3) Explanation on the company’s ability to maintain independence and independent operation

During the reporting period, the company strictly complied with the requirements of the Company Law and the Governance Rules of National Equities Exchange and Quotations, and maintained independence and self-operation capabilities in terms of business, personnel, assets, institutions and finances. The details are as follows:

Business independence: The company has a complete R&D, production and sales system, and independently conducts pharmaceutical manufacturing business. There is no significant overlap between core customers and suppliers and controlling shareholders and actual controllers, and business decisions do not rely on related parties.

Independent personnel: The company's senior executives and core technical personnel all hold full-time positions and do not hold positions other than directors and supervisors in other companies controlled by the controlling shareholder or actual controller. Personnel recruitment and assessment are independent.

Asset independence: The company has complete production and operation assets, including patents, production equipment, land use rights and other clearly owned assets. They are strictly separated from the assets of the controlling shareholder, and there is no sharing or mixing.

Institutional independence: The company has a board of directors, a board of supervisors and management, and each department operates independently. There is no mixed operation or joint office with the controlling shareholder.

Financial independence: The company has established an independent financial department, opened separate bank accounts and conducted independent accounting.

As of the end of the reporting period, there was no horizontal competition between the company and its controlling shareholders and actual controllers. In the future, we will continue to standardize related party behaviors through the "Related Transaction Management System", regularly verify independence, and ensure operational autonomy.

(4) Evaluation of major internal management systems

During the reporting period, the company conducted a comprehensive assessment and review of major internal management systems such as accounting systems, financial management and risk control. The overall design of the company's existing management system is reasonable, covering core aspects such as capital management and related party transaction control. However, the incident of capital occupation by the controlling shareholder that occurred during the reporting period revealed that the company still has deficiencies in the implementation of internal controls and process supervision to prevent the occupation of funds by related parties.

To this end, the company has carried out special rectifications on this matter, further improved the approval and monitoring process of fund receipts and payments, strengthened the dynamic supervision of capital accounts, and urged the controlling shareholders to formulate practical repayment plans. In the future, the company will continue to optimize the internal control system, strengthen system execution, effectively eliminate internal control risks, prevent such situations from happening again, and ensure that financial reports are true, accurate, and complete.

4. Investor Protection

(1) Implementation of cumulative voting system

√Applicable □Not applicable

On May 16, 2025, the company’s 2024 Annual Shareholders’ Meeting voted on the following proposals through cumulative voting:

"Proposal on the Election of Director Candidates for the Fourth Session of the Board of Directors", received 162,541,500 votes, accounting for the valid votes cast at the meeting

99.9994% of the voting rights were passed;

"Proposal on the Election of Shareholder Supervisors of the Fourth Supervisory Board", received 162,542,500 votes, accounting for the valid voting rights present at the meeting

100%, the vote passed.

(2) Provision of online voting

√Applicable □Not applicable

On May 16, 2025, the company's 2024 annual shareholders' meeting was held through a combination of on-site voting and online voting. There were 1 shareholder participating in this shareholders' meeting through online voting, with a total of 1,000 shares holding voting rights, accounting for 0.0005% of the company's total voting shares.

On September 16, 2025, the company's first extraordinary shareholders' meeting in 2025 was held through a combination of on-site voting and online voting. A total of 1 shareholder participated in this shareholders' meeting through online voting, with a total of 7,000 shares holding voting rights, accounting for 0.0037% of the company's total voting shares.

(3) Arrangements for differences in voting rights

□Applicable √Not applicable

Section 7 Financial Accounting Report

1. Audit report

Whether to audit Yes

Audit opinion Qualified opinion

√None □Emphasis section

□Other matters section

Special paragraphs in the audit report

□Paragraph of significant uncertainty about going concern

□Explanation of uncorrected material misstatements in other information contained in other information paragraphs Audit report number Daxin Shenzi [2026] No. 2-01030

Name of the audit institution: Daxin Certified Public Accountants (Special General Partnership)

Address of the audit institution: 16th Floor, Zhiyin Creative Plaza, No. 31 Zhongbei Road, Wuchang District, Wuhan City, Hubei Province Date of audit report April 28, 2026

Suo Baoguo Jiang Yanhong

The name of the signing certified public accountant and the number of consecutive years of signing

5 years 5 years

Whether the accounting firm has changed? No

Continuous service period of accounting firm: 10 years

Audit remuneration of accounting firm (10,000 yuan) 23

All shareholders of Xiangyu Pharmaceutical Co., Ltd.:

1. Reserved opinions

We have audited the financial statements of Xiangyu Pharmaceutical Co., Ltd. (hereinafter referred to as "your company"), including the consolidated and parent company balance sheets on December 31, 2025, the consolidated and parent company income statements, the consolidated and parent company cash flow statements, the consolidated and parent company changes in shareholders' equity statements for 2025, and the notes to the financial statements.

We believe that, except for the impact of the matters described in the "Basis for Qualified Opinion" section, the attached financial statements have been prepared in accordance with the Accounting Standards for Business Enterprises in all material respects and fairly reflect the consolidated and parent company's financial position as of December 31, 2025, as well as the consolidated and parent company's operating results and cash flows in 2025.

2. Form the basis for reservations

As stated in Note V. (5) of the financial statements and Note IX. (5) of accounts receivable and payable from related parties, the amount of prepayments listed in the consolidated balance sheet of your company on December 31, 2025 was 411,666,694.17 yuan, of which prepayments by related parties were 149,785,122.63 yuan.

During the audit process, we performed procedures such as understanding the fund management system, asking about the reasons for prepayments, checking payment approvals, checking vouchers, correspondence, and reviewing contracts and comparing terms. However, we were unable to implement further audit procedures on prepayments to obtain sufficient and appropriate audit evidence, and therefore were unable to judge the commercial rationality of such prepayment arrangements.

We performed the audit work in accordance with the Chinese Certified Public Accountants Auditing Standards. Our responsibilities under these standards are further described in the "CPA's Responsibilities for the Audit of Financial Statements" section of the auditor's report. In accordance with the Chinese Code of Ethics for Certified Public Accountants and the Chinese Code of Independence for Certified Public Accountants, we are independent of your company and have fulfilled our other responsibilities in professional ethics. In our audit, we complied with the independence requirements applicable to audits of the financial statements of public interest entities.

We believe that the audit evidence we obtained is sufficient and appropriate and provides a basis for issuing an audit opinion.

3. Key audit matters

Key audit matters are matters that we, based on our professional judgment, consider to be most important in the audit of the current period's financial statements. The response to these matters is based on the audit of the financial statements as a whole and the formation of audit opinions. We do not express opinions on these matters individually. In addition to the matters described in the Basis for Qualified Opinion section, we have determined that the following matters are key audit matters that need to be communicated in the auditor's report.

(1) Revenue recognition

Description of the matter

Audit response

Our audit procedures for revenue recognition mainly include:

(1) Understand and evaluate the design and operating effectiveness of key internal controls related to revenue recognition;

(5) Execute analysis procedures for major customers and changing situations, and evaluate the commercial rationality of transactions with customers;

(6) Perform analytical procedures on revenue and costs to evaluate the reasonableness of sales gross profit fluctuations;

(2) Bad debt provision for accounts receivable

Description of the matter

Audit response

The audit procedures we perform on bad debt provisions for accounts receivable mainly include:

4. Other information

Your company's management (hereinafter referred to as management) is responsible for other information. The other information includes the information covered in your company's 2025 annual report, but does not include the financial statements and our auditor's report.

Our audit opinion on the financial statements does not cover other information, nor do we express any form of assurance conclusion on other information.

In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained during the audit or otherwise appears to be materially misstated.

If we determine, based on the work we have performed, that other information is materially misstated, we should report that fact. As described in the “Basis for Qualified Opinion” section above, we are unable to determine whether there are material misstatements in other information related to the above matters.

5. Responsibility of management and those charged with governance for financial statements

The management is responsible for preparing financial statements in accordance with the provisions of the Accounting Standards for Business Enterprises to achieve fair reflection, and to design, implement and maintain necessary internal controls so that the financial statements are free of material misstatements due to fraud or errors.

In preparing financial statements, management is responsible for assessing the company's ability to continue as a going concern, disclosing matters related to going concern (if applicable), and applying the going concern assumption, unless management plans to liquidate the company, cease operations or has no other realistic alternative. Those charged with governance are responsible for overseeing your company’s financial reporting process.

6. Responsibility of certified public accountants for auditing financial statements

Our goal is to obtain reasonable assurance as to whether the financial statements as a whole are free of material misstatements due to fraud or error, and to issue an audit report containing an audit opinion. Reasonable assurance is a high level of assurance, but it does not guarantee that an audit performed in accordance with auditing standards will always detect a material misstatement when it exists. Misstatements may be due to fraud or error and are generally considered material if the misstatements, individually or in aggregate, are reasonably expected to affect the economic decisions made by users of financial statements based on the financial statements.

In the process of performing audit work in accordance with the auditing standards, we use professional judgment and maintain professional skepticism. At the same time, we also perform the following tasks:

(1) Identify and assess the risks of material misstatement of financial statements due to fraud or errors, design and implement audit procedures to respond to these risks, and obtain sufficient and appropriate audit evidence as the basis for issuing audit opinions. Because fraud may involve collusion, forgery, intentional omissions, misrepresentations or the override of internal controls, the risk of failing to detect a material misstatement resulting from fraud is higher than the risk of failing to detect a material misstatement resulting from error.

(2) Understand the internal controls related to auditing in order to design appropriate audit procedures, but the purpose is not to express an opinion on the effectiveness of internal controls.

(3) Evaluate the appropriateness of the accounting policies adopted by the management and the reasonableness of the accounting estimates and related disclosures made.

(4) Draw conclusions on the appropriateness of management’s use of the going concern assumption. At the same time, based on the audit evidence obtained, a conclusion is drawn as to whether there is a significant uncertainty about events or conditions that may cause significant doubts about your company's ability to continue as a going concern. If we conclude that significant uncertainty exists, auditing standards require us to draw the attention of users to the relevant disclosures in the financial statements in our audit report; if the disclosures are insufficient, we should issue a qualified opinion. Our conclusions are based on information available as of the date of the auditor's report. However, future events or conditions may cause your company to cease to continue as a going concern.

(5) Evaluate the overall presentation, structure and content of the financial statements, and evaluate whether the financial statements fairly reflect relevant transactions and events.

(6) Obtain sufficient and appropriate audit evidence regarding the financial information of entities or business activities in your company to express an audit opinion on the financial statements. We are responsible for directing, supervising and performing group audits and take full responsibility for our audit opinions.

We communicate with those charged with governance regarding, among other matters, the planned audit scope, timing and significant audit findings, including communication of significant internal control deficiencies identified during our audit.

We also provide statements to those charged with governance that we have complied with ethical requirements related to independence and communicate with those charged with governance all relationships and other matters that may reasonably be considered to affect our independence, and related safeguards, if applicable.

From the matters communicated with those charged with governance, we determine which matters are most significant to the audit of the current period's financial statements and therefore constitute key audit matters. We describe these matters in our auditor's report unless laws or regulations prohibit public disclosure of the matter or, in rare circumstances, we determine that the matter should not be communicated in our auditor's report if the adverse consequences of communicating the matter in the auditor's report are reasonably expected to outweigh the benefits in the public interest.

2. Financial statements

(1) Consolidated balance sheet

Unit: Yuan

Item Notes December 31, 2025 Current assets as of December 31, 2024:

Monetary funds 5(1) 164,270,887.97 206,969,666.52 Settlement reserves

Loan funds

trading financial assets

Derivative financial assets

Notes receivable Five (two) 139,836,378.38 91,910,503.52 Accounts receivable Five (three) 108,154,798.44 133,156,434.39 Accounts receivable financing Five (four) 1,659,748.48 4,622,052.71 Advance payments Five (five) 411,666,694.17 68,580,742.11 Premiums receivable

Reinsurance accounts receivable

Receivable reinsurance contract reserves

Other receivables 5(6) 2,959,878.94 2,680,398.22 Including: interest receivable

Dividends receivable

Buy financial assets under resale agreements

Inventory 5(7) 120,911,698.48 119,912,914.45 Including: data resources

contract assets

Assets held for sale

Non-current assets due within one year

Other current assets 5(8) 480.00 480.00

Total current assets 949,460,564.86 627,833,191.92 Non-current assets:

Granting loans and advances

debt investment

Other debt investments

long-term receivables

long term equity investment

Other equity instrument investments

Other non-current financial assets

investment real estate

Fixed assets 5 (9) 270,057,294.61 296,917,917.88 Construction in progress 122,258.85 0.00 Productive biological assets

oil and gas assets

Right-of-use assets V (10) 426,854.85 892,514.67 Intangible assets V (11) 113,953,886.80 109,294,451.53 Including: data resources

Development expenses 5 (12) 40,508,124.18 52,145,470.91 Including: data resources

goodwill

Long-term deferred expenses 234,464.84

Deferred income tax assets V (Thirteen) 32,877,507.69 32,639,021.11 Other non-current assets V (Thirteen) 2,525,118.10 2,787,413.10 Total non-current assets 460,705,509.92 494,676,789.20

Total assets 1,410,166,074.78 1,122,509,981.12 Current liabilities:

Short-term borrowings 5 (16) 361,900,000.00 292,400,000.00 Borrowing from the Central Bank

borrowing funds

Trading financial liabilities

Derivative financial liabilities

Notes payable Five (17) 145,919,399.56 1,955,047.78 Accounts payable Five (18) 23,088,002.87 17,520,183.29 Advance receipts

Contract liabilities Five (19) 13,980,620.25 17,089,196.00 Financial assets sold under repurchase agreements

Taking deposits and placing deposits with other banks

Agent for buying and selling securities

Agent underwriting securities funds

Employee benefits payable V (twenty) 1,722,447.61 1,768,138.02 Taxes payable V (Twenty-one) 7,418,231.34 9,222,269.48 Other payables V (Twenty-two) 33,892,365.54 42,714,054.25 Including: interest payable

Dividends payable

Handling fees and commissions payable

Reinsurance accounts payable

Liabilities held for sale

Non-current liabilities due within one year V (Twenty-three) 29,480,559.18 550,458.72 Other current liabilities V (Twenty-four) 1,817,480.64 2,221,595.36

Total current liabilities 619,219,106.99 385,440,942.90 Non-current liabilities:

insurance contract reserves

long term borrowing

bonds payable

Among them: preferred shares

perpetual bond

Lease liabilities five (twenty-five) 0.00 431,463.09 Long-term payables

Long-term employee benefits payable

Estimated liabilities

Deferred income V (Twenty-six) 6,771,791.73 7,530,517.04 Deferred income tax liabilities V (Thirteen) 64,028.23 133,877.20 Other non-current liabilities

Total non-current liabilities 6,835,819.96 8,095,857.33

Total liabilities 626,054,926.95 393,536,800.23 Owners’ equity (or shareholders’ equity):

Share capital Five (twenty-seven) 191,726,000.00 191,726,000.00 Other equity instruments

Among them: preferred shares

perpetual bond

Capital reserve V (Twenty-eight) 193,294,752.02 193,294,752.02 Less: treasury shares

other comprehensive income

special reserve

Surplus reserve V (Twenty-nine) 23,635,408.16 15,776,222.05 General risk reserve

Undistributed profits Five (thirty) 375,443,333.66 327,926,350.05 Total equity attributable to owners of the parent company (or shareholders’ equity) 784,099,493.84 728,723,324.12

Minority shareholders’ equity 11,653.99 249,856.77 Total owners’ equity (or shareholders’ equity) 784,111,147.83 728,973,180.89 Liabilities and owners’ equity (or shareholders’ rights) 1,410,166,074.78 1,122,509,981.12

profit) total

Legal representative: Zhu Guoying Person in charge of accounting work: Wang Chengjian Person in charge of accounting department: Yuan Heye

(2) Balance sheet of the parent company

Unit: Yuan

Item Notes December 31, 2025 Current assets as of December 31, 2024:

Monetary funds 62,181,458.84 204,305,930.68 Trading financial assets

Derivative financial assets

Notes receivable 93,510,761.61 32,971,204.73 Accounts receivable 12 (1) 52,962,295.28 57,633,567.25 Accounts receivable financing 1,045,912.03 2,562,486.44 Prepayments 181,774,766.69 55,538,376.59 Other receivables 12 (2) 104,993,283.41 1,109,400.02 Including: interest receivable

Dividends receivable

Buy financial assets under resale agreements

Inventory 34,172,615.14 34,802,938.86 Including: data resources

contract assets

Assets held for sale

Non-current assets due within one year

Other current assets

Total current assets 530,641,093.00 388,923,904.57 Non-current assets:

debt investment

Other debt investments

long-term receivables

Long-term equity investment 12 (3) 69,232,138.55 69,232,138.55 Other equity instrument investments

Other non-current financial assets

investment real estate

Fixed assets 190,404,835.87 205,253,921.05 Construction in progress

productive biological assets

oil and gas assets

Right-of-use assets 426,854.85 892,514.67 Intangible assets 51,574,439.03 55,566,670.31 Including: data resources

Development expenditure 36,220,993.80 35,237,025.79 Including: data resources

goodwill

Long-term deferred expenses 189,082.57

Deferred income tax assets 29,232,577.43 29,058,017.83 Other non-current assets 2,425,000.00 2,687,295.00 Total non-current assets 379,705,922.10 397,927,583.20

Total assets 910,347,015.10 786,851,487.77 Current liabilities:

Short-term borrowings 142,900,000.00 204,900,000.00 Trading financial liabilities

Derivative financial liabilities

Notes payable 15,865,939.86 236,405.08 Accounts payable 9,128,027.53 6,118,430.04 Advance receipts

Financial assets sold and repurchased

Employee benefits payable 1,721,141.91 1,743,672.70 Taxes payable 1,826,966.26 -2,248,769.98 Other payables 156,006,049.05 101,763,172.48 Including: interest payable

Dividends payable

Contract liabilities 5,781,422.29 4,120,985.23 Liabilities held for sale

Non-current liabilities due within one year 29,480,559.18 550,458.72 Other current liabilities 751,584.90 535,728.09

Total current liabilities 363,461,690.98 317,720,082.36 Non-current liabilities:

long term borrowing

bonds payable

Among them: preferred shares

perpetual bond

Lease liabilities 431,463.09 Long-term payables

Long-term employee benefits payable

Estimated liabilities

Deferred income 1,558,032.56 1,894,662.87 Deferred income tax liabilities 64,028.23 133,877.20 Other non-current liabilities

Total non-current liabilities 1,622,060.79 2,460,003.16

Total liabilities 365,083,751.77 320,180,085.52 Owners’ equity (or shareholders’ equity):

Share capital 191,726,000.00 191,726,000.00 Other equity instruments

Among them: preferred shares

perpetual bond

Capital reserve 197,964,533.03 197,964,533.03 less: treasury shares

other comprehensive income

special reserve

Surplus reserve 23,635,408.16 15,776,222.05 General risk reserve

Undistributed profits 131,937,322.14 61,204,647.17 Total owners’ equity (or shareholders’ equity) 545,263,263.33 466,671,402.25 Liabilities and owners’ equity (or shareholders’ equity)

910,347,015.10 786,851,487.77

profit) total

(3) Consolidated income statement

Unit: Yuan

Project Notes 2025 2024

Total operating income 519,389,018.02 541,437,076.53 Including: operating income 5 (31) 519,389,018.02 541,437,076.53 Interest income

Premiums earned

Fee and commission income

Total operating costs 483,412,822.36 493,452,655.05 Including: operating costs 5 (31) 313,498,834.27 311,066,130.17 Interest expenses

Handling fees and commission expenses

surrender deposit

Net compensation expenses

Net withdrawal of insurance liability reserves

policy dividend payout

Reinsurance cost

Taxes and surcharges V (thirty-two) 8,022,441.81 7,823,850.09 Sales expenses V (Thirty-three) 81,426,560.48 86,924,817.93 Administrative expenses V (Thirty-four) 31,306,625.27 38,465,481.82 Research and development expenses V (Thirty-five) 33,650,462.27 35,282,357.67 Financial expenses 5 (thirty-six) 15,507,898.26 13,890,017.37 Among them: interest expenses 16,926,071.40 15,292,538.38

Interest income 1,965,826.43 1,470,591.88 Plus: other income V (thirty-seven) 4,030,682.49 6,477,044.21 Investment income (losses are listed with "-") V (Thirty-eight) -1,595,815.22 -1,039,701.10

Including: income from investments in associates and joint ventures

Profit (losses are listed with "-")

Termination of financial assets measured at amortized cost

Recognize income (losses are listed with "-")

Exchange gains (losses are listed with "-")

Net exposure hedging income (losses are listed with a “-” sign)

Gains from changes in fair value (losses are listed with a “-” sign)

Credit impairment losses (losses are listed with "-") Five (thirty-nine) -1,857,137.36 -2,998,814.61 Asset impairment losses (losses are listed with "-") Five (forty) -234,135.77 2,668,772.06

Asset disposal income (losses are listed with "-") Five (41) 27,200,377.42 37,406.80

Operating profit (losses are listed with "-") 63,520,167.22 53,129,128.84 Plus: Non-operating income 5 (forty-two) 2,486,408.25 455,878.35 Less: Non-operating expenses 5 (43) 12,400.42 1,720,901.61
Total profits (total losses are listed with "-") 65,994,175.05 51,864,105.58 Less: income tax expenses 5 (forty-four) 10,856,208.11 11,181,100.84
Net profit (net loss is listed with "-") 55,137,966.94 40,683,004.74 Among them: the net profit realized by the merged party before the merger

(1) Classification based on business continuity: - - - 1. Net profit from continuing operations (net loss is listed with "-") 55,137,966.94 40,683,004.74

Net profit from discontinued operations (net loss is listed with "-")

(2) Classification by ownership: - - - 1. Profit and loss of minority shareholders (net loss is listed with "-") -238,202.78 -254,332.49

Net profit attributable to the owners of the parent company (net loss 55,376,169.72 40,937,337.23 is listed with "-")

6. Net amount of other comprehensive income after tax

(1) Other comprehensive income attributable to owners of the parent company

net of tax

Other comprehensive income that cannot be reclassified into profit or loss

(1) Remeasurement of changes in defined benefit plan

(2) Other comprehensive income that cannot be transferred to profit or loss under the equity method

(3) Changes in fair value of other equity instrument investments

(4) Changes in the fair value of the company’s own credit risk

(5) Others

Other comprehensive income that will be reclassified into profit and loss

(1) Other comprehensive income that can be converted to profit or loss under the equity method

(2) Changes in fair value of other debt investments

(3) Financial assets are reclassified and included in other comprehensive income

Amount

(4) Credit impairment provisions for other debt investments

(5) Cash flow hedging reserve

(6) Translation differences of foreign currency financial statements

(7) Others

(2) Taxes on other comprehensive income attributable to minority shareholders

Net amount after

Total comprehensive income 55,137,966.94 40,683,004.74

(1) Total comprehensive income attributable to owners of the parent company 55,376,169.72 40,937,337.23

(2) Total comprehensive income attributable to minority shareholders -238,202.78 -254,332.49

8. Earnings per share:

(1) Basic earnings per share (yuan/share) 0.29 0.21

(2) Diluted earnings per share (yuan/share)

Legal representative: Zhu Guoying Person in charge of accounting work: Wang Chengjian Person in charge of accounting department: Yuan Heye

(4) Income statement of the parent company

Unit: Yuan

Project Notes 2025 2024

Operating income 12 (four) 141,217,527.70 135,711,902.62 Less: operating costs 12 (four) 106,844,291.17 105,433,731.65 Taxes and surcharges 3,907,124.59 3,759,147.91 Sales expenses 22,651,771.25 34,430,530.79 Administrative expenses 15,365,119.46 18,054,966.62 Research and development expenses 8,340,049.23 10,644,463.66

Financial expenses 7,736,590.60 8,984,701.78 Including: interest expenses 9,245,221.43 10,390,841.81

Interest income 1,556,834.98 1,463,406.93 plus: other income 1,737,720.86 2,256,693.24 Investment income (losses are listed with "-") 12 (five) 99,541,652.77 526.05

Including: income from investments in associates and joint ventures

Profit (losses are listed with "-")

Termination of financial assets measured at amortized cost

Recognize income (losses are listed with "-")

Exchange gains (losses are listed with "-")

Net exposure hedging income (losses are listed with a “-” sign)

Gains from changes in fair value (losses are listed with a “-” sign)

Credit impairment losses (losses are listed with "-") -1,665,093.28 -2,982,162.10 Asset impairment losses (losses are listed with "-") 748,636.05

Asset disposal income (losses are listed with "-") 37,406.80

Operating profit (losses are listed with "-") 75,986,861.75 -45,534,539.75 plus: non-operating income 2,361,905.79 395,540.34 minus: non-operating expenses 1,315.03 1,439,133.17
Total profits (total losses are listed with "-") 78,347,452.51 -46,578,132.58 Less: income tax expenses -244,408.57 -1,294,180.81
Net profit (net loss is listed with "-") 78,591,861.08 -45,283,951.77

(1) Net profit from continuing operations (net loss is filled in with "-"

78,591,861.08 -45,283,951.77 columns)

(2) Net profit from discontinued operations (net loss is filled in with "-"

column)

5. Net amount of other comprehensive income after tax

(1) Other comprehensive income that cannot be reclassified into profit or loss

Remeasure the changes in defined benefit plan
Other comprehensive income that cannot be transferred to profit or loss under the equity method
Changes in fair value of other equity instrument investments
Changes in the fair value of the company’s own credit risk

5.Others

(2) Other comprehensive income that will be reclassified into profit and loss

Other comprehensive income that can be converted to profit or loss under the equity method
Changes in fair value of other debt investments
The amount of financial assets reclassified and included in other comprehensive income
Credit impairment provisions for other debt investments
Cash flow hedging reserve
Translation differences of foreign currency financial statements

7.Others

Total comprehensive income 78,591,861.08 -45,283,951.77

7. Earnings per share:

(1) Basic earnings per share (yuan/share) 0.41 -0.24

(2) Diluted earnings per share (yuan/share)

(5) Consolidated cash flow statement

Unit: Yuan

Project Notes 2025 2024

1. Cash flow generated from operating activities:

Cash received from sales of goods and provision of services 571,470,007.97 547,653,074.19 Net increase in customer deposits and interbank deposits

Net increase in borrowing from the central bank

Net increase in borrowing funds from other financial institutions

Cash received from premiums from the original insurance contract

Net cash received from reinsurance business

Net increase in policyholders’ savings and investment funds

Cash collected from interest, fees and commissions

Net increase in borrowing funds

Net increase in repurchase business funds

Net cash received from buying and selling securities on behalf of agents

tax refund received

Received other cash related to operating activities V (45) 12,887,818.21 110,160,262.53

Subtotal of cash inflows from operating activities 584,357,826.18 657,813,336.72 Cash paid for purchasing goods and receiving services 471,916,132.86 339,301,865.98 Net increase in customer loans and advances

Net increase in deposits with central banks and inter-banks

Cash used to pay compensation from the original insurance contract

Net increase in financial assets held for trading purposes

Net increase in lending funds

Cash payments for interest, fees and commissions

Cash payment for policy dividends

Cash paid to and for employees 86,133,534.43 86,543,335.43 Various taxes and fees paid 56,371,446.83 49,575,066.19 Cash paid to other operating activities Five (forty-five) 211,535,827.40 100,463,462.98

Subtotal of cash outflows from operating activities 825,956,941.52 575,883,730.58

Net cash flow from operating activities -241,599,115.34 81,929,606.14

2. Cash flow generated from investing activities:

Recover cash received on investments

Cash received from investment income 526.05 Net cash received from disposal of fixed assets, intangible assets and other long-term assets 32,179,734.45 123,340.00

Net cash received from disposal of subsidiaries and other business units

Received other cash related to investing activities V (forty-five) 181,180,000.00 149,000,100.00

Subtotal of cash inflows from investing activities 213,359,734.45 149,123,966.05 Cash paid for the purchase and construction of fixed assets, intangible assets and other long-term assets 11,465,525.80 4,914,817.99

Cash paid for investments

Net increase in mortgage loans

Net cash received from subsidiaries and other business units

Payment of other cash related to investing activities Five (forty-five) 294,180,000.00 Subtotal of cash outflows from investing activities 11,465,525.80 299,094,817.99

Net cash flow generated from investing activities 201,894,208.65 -149,970,851.94

3. Cash flow generated from financing activities:

Absorbing cash received from investments

Including: cash received by subsidiaries from investment by minority shareholders

Cash received from borrowing 447,900,000.00 293,400,000.00 Cash received from issuing bonds

Received other cash related to financing activities Five (forty-five) 591,530,000.00 388,050,000.00

Subtotal of cash inflows from financing activities 1,039,430,000.00 681,450,000.00 Cash paid to repay debts 349,400,000.00 193,900,000.00 Cash paid to distribute dividends, profits or pay interest 16,876,975.31 15,219,567.88 including: dividends and profits paid by subsidiaries to minority shareholders

Payment of other cash related to financing activities V (45) 594,976,756.83 393,960,000.00 Subtotal of cash outflows from financing activities 961,253,732.14 603,079,567.88

Net cash flow generated from financing activities 78,176,267.86 78,370,432.12

4. The impact of exchange rate changes on cash and cash equivalents

Net increase in cash and cash equivalents 38,471,361.17 10,329,186.32 Plus: opening balance of cash and cash equivalents 25,789,666.52 15,460,480.20
Balance of cash and cash equivalents at the end of the period 64,261,027.69 25,789,666.52

Legal representative: Zhu Guoying Person in charge of accounting work: Wang Chengjian Person in charge of accounting department: Yuan Heye

(6) Cash flow statement of the parent company

Unit: Yuan

Project Notes 2025 2024

1. Cash flow generated from operating activities:

Cash received from selling goods and providing services 148,967,334.11 152,996,339.36 Tax refunds received

Other cash received related to operating activities 72,028,527.19 85,437,912.35

Subtotal of cash inflows from operating activities 220,995,861.30 238,434,251.71 Cash paid for purchasing goods and receiving services 179,702,887.49 163,978,442.10 Cash paid to and for employees 30,157,405.70 39,845,701.75 Various taxes paid 12,392,621.35 11,132,905.58 Other cash paid related to operating activities 97,841,662.02 52,811,774.23 Subtotal of cash outflows from operating activities 320,094,576.56 267,768,823.66

Net cash flow from operating activities -99,098,715.26 -29,334,571.95

2. Cash flow generated from investing activities:

Recover cash received on investments

Cash received from investment income 526.05 Received from disposal of fixed assets, intangible assets and other long-term assets 120,000.00

26,094.45

Net cash returned

Net cash received from disposal of subsidiaries and other business units

Other cash received related to investing activities 181,180,000.00 149,000,100.00

Subtotal of cash inflows from investing activities 181,206,094.45 149,120,626.05 Expenses for purchase and construction of fixed assets, intangible assets and other long-term assets 544,843.19

2,460,567.69

paid in cash

Cash paid for investments

Net cash paid to acquire subsidiaries and other business units

Other cash payments related to investing activities 294,180,000.00 Subtotal cash outflow from investing activities 2,460,567.69 294,724,843.19

Net cash flow generated from investing activities 178,745,526.76 -145,604,217.14

3. Cash flow generated from financing activities:

Absorbing cash received from investments

Cash received from borrowing 228,900,000.00 205,900,000.00 Cash received from issuing bonds

Other cash received related to financing activities 497,830,000.00 577,294,829.28

Subtotal of cash inflows from financing activities 726,730,000.00 783,194,829.28 Cash paid to repay debts 261,900,000.00 120,900,000.00 Cash paid to distribute dividends, profits or pay interest 9,196,125.34 10,317,871.31 Other cash payments related to financing activities 496,225,158.00 467,720,000.00 Subtotal of cash outflows from financing activities 767,321,283.34 598,937,871.31

Net cash flow generated from financing activities -40,591,283.34 184,256,957.97

4. The impact of exchange rate changes on cash and cash equivalents

Net increase in cash and cash equivalents 39,055,528.16 9,318,168.88 Plus: opening balance of cash and cash equivalents 23,125,930.68 13,807,761.80
Balance of cash and cash equivalents at the end of the period 62,181,458.84 23,125,930.68

(7) Consolidated statement of changes in shareholders’ equity

Unit: Yuan 2025

Owner's equity attributable to parent company

Other equity instruments Other special general items Less: Minority shareholders Owner's equity combined Yong Capital Comprehensive Surplus Venture capital Other inventories Undistributed profits Equity calculation Continued Reserves Reserves Insurance shares

Stock and debt collection provisions

Be prepared

Closing balance of the previous year 191,726,000.00 193,294,752.02 15,776,222.05 327,926,350.05 249,856.77 728,973,180.89 Add: changes in accounting policies

Early error correction

Business combination under common control

Others

Balance at the beginning of the year 191,726,000.00 193,294,752.02 15,776,222.05 327,926,350.05 249,856.77 728,973,180.89
The amount of increases and decreases in the current period (minus 7,859,186.11 47,516,983.61 -238,202.78 55,137,966.94 shall be filled in with "-")

(1) Total comprehensive income 55,376,169.72 -238,202.78 55,137,966.94

(2) Owner’s investment and capital reduction

Ben

Common shares invested by shareholders

2． Investments from other equity instrument holders

capital

The amount of share-based payment included in owners’ equity
Others

(3) Profit distribution 7,859,186.11 -7,859,186.11 1. Withdrawal from surplus reserve 7,859,186.11 -7,859,186.11 2. Withdraw general risk reserve

Distributions to owners (or shareholders)
Others

(4) Internal transfer of owners’ equity 1. Transfer of capital reserves to capital (or share capital)

Convert surplus reserves to capital (or share capital)
Surplus reserve to make up for losses
Changes in defined benefit plans are carried forward to retained earnings
Other comprehensive income carried forward to retained earnings

6.Others

(5) Special reserves

Extract this period

2． Used in this issue

(6) Others

Closing balance of the year 191,726,000.00 193,294,752.02 23,635,408.16 375,443,333.66 11,653.99 784,111,147.83

2024

Owner's equity attributable to parent company

Stock and debt collection provisions

Be prepared

Closing balance of the previous year 191,726,000.00 193,294,752.02 15,776,222.05 286,989,012.82 504,189.26 688,290,176.15 Add: changes in accounting policies

Early error correction

Business combination under common control

Others

Opening balance of the year 191,726,000.00 193,294,752.02 15,776,222.05 286,989,012.82 504,189.26 688,290,176.15

3. Amount of increase or decrease in the current period (minus

40,937,337.23 -254,332.49 40,683,004.74 (please fill in with "-")

(1) Total comprehensive income 40,937,337.23 -254,332.49 40,683,004.74

(2) Owner’s investment and capital reduction

Ben

Common shares invested by shareholders

2． Investments from other equity instrument holders

capital

Share-based payments are included in owners’ equity

amount of

Others

(3) Profit distribution

Withdrawal from surplus reserve

2． Withdraw general risk reserve

Distributions to owners (or shareholders)
Others

(4) Internal transfer of owners’ equity 1. Transfer of capital reserves to capital (or share capital)

Convert surplus reserves to capital (or share capital)
Surplus reserve to make up for losses
Changes in defined benefit plans are carried forward to retained earnings
Other comprehensive income carried forward to retained earnings

6.Others

(5) Special reserves

Extract this period

2． Used in this issue

(6) Others

Closing balance of the current year 191,726,000.00 193,294,752.02 15,776,222.05 327,926,350.05 249,856.77 728,973,180.89 Legal representative: Zhu Guoying Person in charge of accounting work: Wang Chengjian Person in charge of the accounting department: Yuan Heye

(8) Statement of changes in shareholders’ equity of the parent company

Unit: Yuan 2025

Other equity instruments

Less: Other general projects Excellent permanent special projects

Share capital Other capital reserves Inventories Comprehensive surplus reserves Risks Undistributed profits Total owners’ equity Continued Reserves

Other stock earnings preparation

stocks bonds

Closing balance of the previous year 191,726,000.00 197,964,533.03 15,776,222.05 61,204,647.17 466,671,402.25 Add: changes in accounting policies

Early error correction

Others

Balance at the beginning of the year 191,726,000.00 197,964,533.03 15,776,222.05 61,204,647.17 466,671,402.25

3. Amount of increase or decrease in the current period

(Reduce columns filled with “-” signs to 7,859,186.11 70,732,674.97 78,591,861.08)

(1) Total comprehensive income 78,591,861.08 78,591,861.08

(2) Owner’s investment and reduction

capital

Common shares invested by shareholders

2． Other equity instrument holders

Invest capital

Share-based payments are credited to owners

Amount of Equity

Others

(3) Profit distribution 7,859,186.11 -7,859,186.11 1. Withdrawal from surplus reserve 7,859,186.11 -7,859,186.11 2. Extract general risk reserves 3. Distributions to owners (or shareholders)

Others

(4) Internal carryover of owners’ equity

Conversion of capital reserves to capital (or share capital)
Convert surplus reserves to capital (or share capital)
Surplus reserves are used to make up for losses 4. Changes in defined benefit plans are carried forward to retained earnings
Other comprehensive income carried forward to retained earnings

6.Others

(5) Special reserves

Extract this period

2． Used in this issue

(6) Others

Closing balance of the year 191,726,000.00 197,964,533.03 23,635,408.16 131,937,322.14 545,263,263.33

2024

Other equity instruments Less: Other items Special general risks Owners’ equity combined capital Priority Perpetual capital reserves Inventories Comprehensive surplus reserves Undistributed profits Other reserves Risk reserves

Stock Debt Stock Income

Closing balance of the previous year 191,726,000.00 197,964,533.03 15,776,222.05 106,488,598.94 511,955,354.02 Add: changes in accounting policies

Early error correction

Others

Balance at the beginning of the year 191,726,000.00 197,964,533.03 15,776,222.05 106,488,598.94 511,955,354.02
Amount of increase or decrease in the current period (minus -45,283,951.77 -45,283,951.77 shall be filled in with "-")

(1) Total comprehensive income -45,283,951.77 -45,283,951.77

(2) Owner’s investment and capital reduction

Ben

Common shares invested by shareholders

2． Other equity instrument holders invest

invest capital

Share-based payments are included in ownership rights

amount of profit

Others

(3) Profit distribution

Withdrawal from surplus reserve

2． Withdraw general risk reserve

To the owner (or shareholder)

allocate

Others

(4) Internal transfer of owners’ equity 1. Transfer of capital reserves to capital (or share capital)

Convert surplus reserves to capital (or share capital)
Surplus reserve to make up for losses
Changes in defined benefit plans are carried forward to retained earnings
Other comprehensive income carried forward to retained earnings

6.Others

(5) Special reserves

Extract this period

2． Used in this issue

(6) Others

Closing balance of the year 191,726,000.00 197,964,533.03 15,776,222.05 61,204,647.17 466,671,402.25

Xiangyu Pharmaceutical Co., Ltd.

Notes to Financial Statements

(Unless otherwise specified, the amounts in this note are in RMB)

1. Basic situation of the enterprise

(1) Company registration place and headquarters address

Xiangyu Pharmaceutical Co., Ltd. (hereinafter referred to as the "Company" or the "Company"), formerly known as Shandong Xiangyu Health Pharmaceutical Co., Ltd., was established on October 23, 2000, with a registered capital of 10 million yuan at the time of establishment.

On October 20, 2014, according to the resolution of the shareholders' meeting and the articles of association, the company was changed from a limited liability company to a joint stock limited company and renamed "Xiangyu Pharmaceutical Co., Ltd.". Based on the audited net assets of 136,367,908.60 yuan as of August 31, 2014, it was converted into 80,000,000.00 shares, with a par value of 1 per share. Yuan, the registered capital is RMB 80 million, and all net assets exceeding the share capital are included in the capital reserve.

In August 2017, the company applied to increase the registered capital by RMB 15,626,000.00 based on the resolution of the general meeting of shareholders and the stock subscription status, which was subscribed by Zhejiang Jingxing Venture Capital Co., Ltd., Zhuji Shangde Heli Investment Partnership (Limited Partnership), Suzhou Xinjian Medical Health Equity Investment Partnership (Limited Partnership), and Jinan Shengfa Equity Investment Fund Partnership (Limited Partnership). In May 2018, the registration of new shares was completed at China Securities Depository and Clearing Co., Ltd. After completion of registration, the company's total share capital was 191.726 million shares.

Unified social credit code: 91371300725408089B

Company headquarters address: No. 30, Xiangyu Road, Linyi Economic and Technological Development Zone

Registered capital: 191.726 million yuan

Legal representative of the company: Zhu Guoying

(2) The main business activities actually engaged in by the enterprise.

The company's main business is the research and development and production of traditional Chinese medicine and chemical medicines.

(3) Approval of the financial report and date of approval of the financial report

The company's financial report was approved by the board of directors on April 28, 2026.

2. Basis for preparation of financial statements

(1) Basis for preparation

The Company's financial statements are based on going concern, based on actual transactions and events, in accordance with the "Accounting Standards for Business Enterprises - Basic Standards" and specific accounting standards promulgated by the Ministry of Finance (hereinafter referred to as the Accounting Standards for Business Enterprises), and are prepared based on the important accounting policies and accounting estimates formulated.

(2) Sustaining operations: The company has the ability to continue operations for 12 months from the end of the reporting period.

3. Important accounting policies and accounting estimates

(1) Statement on compliance with accounting standards for enterprises

The financial statements prepared by the company comply with the requirements of the "Accounting Standards for Business Enterprises" and truly and completely reflect the company's financial status as of December 31, 2025, operating results and cash flow in 2025 and other relevant information.

(2) Accounting period

The company's fiscal year is the Gregorian calendar year, that is, from January 1 to December 31 of each year.

(3) Business cycle

The company uses 12 months a year as its normal operating cycle, and uses the operating cycle as the liquidity classification standard for assets and liabilities.

(4) Accounting standard currency

The Company uses RMB as its functional accounting currency.

(5) Methods and selection basis for determining materiality standards

Importance of financial statement items

The company determines the importance of financial statement items based on the principle of whether it affects the economic decisions of users of financial statements, and considers both nature and amount. The importance of the amount of items in the financial statements is based on the relevant items accounting for 5% of the net profit. The importance of the nature of the items in the financial statements is based on whether it is a daily operating activity, whether it causes changes in profits and losses, whether it affects regulatory indicators, and other factors that have a greater impact on the financial status and operating results.

The importance of detailed items in the notes to financial statement items

The company determines the importance of the detailed items in the notes to the financial statement items. Based on the importance of the financial statement items, the specific items account for a certain proportion of the item, or combined with the amount, while taking into account the nature of the specific items. Certain items are not material to the financial statements but may be material to the notes and still require separate disclosure in the notes. The relevant materiality standards for notes to financial statement items are:

Project Materiality Criteria

Important individual accounts receivable with provision for bad debts RMB 10 million

Important construction projects under construction 5 million yuan

(6) Business merger

Business combination under common control

For a long-term equity investment formed by a business merger under the same control, if the merging party pays cash, transfers non-cash assets or assumes debts as the merger consideration, the share of the book value of the owner's equity of the merged party in the final controlling party's consolidated financial statements on the merger date shall be regarded as the initial investment cost of the long-term equity investment. If the merging party issues equity instruments as the consideration for the merger, the total face value of the shares issued shall be deemed as share capital. The difference between the initial investment cost of a long-term equity investment and the book value of the merger consideration (or the total face value of the shares issued) shall be adjusted to the capital reserve; if the capital reserve is insufficient for offset, the retained earnings shall be adjusted. 2. Business combination not under common control

For business combinations not under common control, the combination cost is the sum of the fair value of the assets paid by the purchaser, liabilities incurred or assumed, and equity securities issued by the purchaser to obtain control of the purchased party on the purchase date. The identifiable assets, liabilities and contingent liabilities of the acquiree that meet the recognition conditions and are acquired in a business combination not under common control are measured at fair value on the acquisition date. The difference between the purchaser's cost of merger and the fair value of the acquiree's identifiable net assets acquired in the merger is reflected in the value of goodwill. If the purchaser's merger cost is less than the fair value share of the acquiree's identifiable net assets obtained in the merger, and after review, the difference between the merger cost and the fair value share of the acquiree's identifiable net assets obtained in the merger shall be included in the non-operating income of the current period.

(7) Judgment standards for control and preparation methods of consolidated financial statements

Judgment criteria for control

The scope of consolidation of consolidated financial statements is determined based on control. An invested unit that possesses the following three elements is deemed to have control over it: having power over the invested unit, enjoying variable returns due to participation in relevant activities of the invested unit, and having the ability to use power over the invested unit to affect the amount of returns.

Preparation method of consolidated financial statements

(1) Unify the accounting policies of the parent company and its subsidiaries, and unify the balance sheet dates and accounting periods of the parent company and subsidiaries

If the accounting policies or accounting periods adopted by a subsidiary and the Company are inconsistent, when preparing consolidated financial statements, necessary adjustments will be made to the financial statements of the subsidiary in accordance with the Company's accounting policies or accounting periods.

(2) Offset matters in consolidated financial statements

The consolidated financial statements are based on the financial statements of the parent company and subsidiaries, and have eliminated internal transactions between the parent company and its subsidiaries, and between subsidiaries. The share of the subsidiary's owner's equity that does not belong to the company, as minority shareholders' equity, is listed as "minority shareholders' equity" under the shareholder's equity item in the consolidated balance sheet. The long-term equity investment held by the subsidiary company in the parent company is regarded as the treasury stock of the parent company. As a reduction of shareholders' equity, it is listed as "less: treasury shares" under the shareholder equity item in the consolidated balance sheet.

(3) Accounting treatment of subsidiaries acquired through merger

For subsidiaries acquired through business combinations under common control, the business combination will be deemed to have occurred when the ultimate controlling party began to exercise control, and its assets, liabilities, operating results and cash flows will be included in the consolidated financial statements from the beginning of the current period of merger; for subsidiaries acquired through business combinations not under common control, when preparing consolidated financial statements, their individual financial statements will be adjusted based on the fair value of the identifiable net assets on the acquisition date.

(4) Accounting treatment for disposal of subsidiaries

If a long-term equity investment in a subsidiary is partially disposed of without losing control, in the consolidated financial statements, the difference between the disposal price and the share of the subsidiary's net assets continuously calculated from the date of purchase or merger will be adjusted to the capital reserve. If the capital reserve is insufficient for offset, the retained earnings will be adjusted. If control over the investee is lost due to disposal of part of the equity investment or other reasons, when preparing consolidated financial statements, the remaining equity shall be remeasured according to its fair value on the date of loss of control. The difference between the sum of the consideration obtained for disposing of the equity and the fair value of the remaining equity, minus the share of the original subsidiary's net assets calculated continuously from the date of purchase or merger based on the original shareholding ratio, shall be included in the investment income for the period when control is lost, and goodwill shall be offset at the same time. Other comprehensive income related to the equity investment in the original subsidiary will be converted into current investment income when control is lost.

(8) Determination standards for cash and cash equivalents

The cash determined by the company when preparing the cash flow statement refers to the company's cash on hand and deposits that can be used for payment at any time. The cash equivalents determined when preparing the cash flow statement refer to investments held with short term, strong liquidity, easy to convert into known amounts of cash, and with little risk of value changes.

(9) Financial instruments

Classification, recognition and measurement of financial instruments

(1) Financial assets

Based on the business model of managing financial assets and the contractual cash flow characteristics of financial assets, the Company divides financial assets into the following three categories:

①Financial assets measured at amortized cost. The business model for managing such financial assets is aimed at collecting contractual cash flows, and the contractual cash flow characteristics of such financial assets are consistent with the basic lending arrangement, that is, the cash flows generated on a specific date are only payments of principal and interest based on the outstanding principal amount. Interest income from such financial assets is subsequently recognized according to the effective interest rate method.

② Financial assets measured at fair value with changes included in other comprehensive income. The business model for managing such financial assets aims at both collecting contractual cash flows and selling the financial assets, and the contractual cash flow characteristics of such financial assets are consistent with the basic lending arrangements. This type of financial assets is subsequently measured at fair value, and its changes are included in other comprehensive income, but interest income, impairment losses or gains and exchange gains and losses calculated according to the effective interest rate method are included in the current profit and loss.

③ Measured at fair value and its changes are included in the current profit and loss. Financial assets held that are not divided into those measured at amortized cost and those measured at fair value and whose changes are included in other comprehensive income are measured at fair value, and the gains or losses (including interest and dividend income) generated are included in the current profit and loss. At initial recognition, a financial asset can be irrevocably designated as a financial asset at fair value through profit or loss if the accounting mismatch can be eliminated or reduced. This designation, once made, cannot be revoked.

(2) Financial liabilities

Financial liabilities are classified as: upon initial recognition:

① Financial liabilities measured at fair value with changes included in current profits and losses. Such financial liabilities are subsequently measured at fair value, and the resulting gains or losses are included in the current profits and losses.

② The transfer of financial assets does not meet the conditions for derecognition or the financial liabilities formed by continuing to be involved in the transferred financial assets.

③Financial liabilities measured at amortized cost. This type of financial liabilities is measured at amortized cost using the effective interest method.

Recognition method of fair value of financial instruments

For financial instruments with an active market, their fair value is determined based on the quoted prices in the active market; if there is no active market, valuation techniques are used to determine their fair value. In limited circumstances, if there is insufficient recent information to determine fair value, or if there is a wide range of possible estimates of fair value, and the cost represents the best estimate of fair value within that range, the cost may represent an appropriate estimate of fair value within that range. The Company uses all information about the investee's performance and operations that becomes available after the initial recognition date to determine whether the cost represents fair value.

Derecognition of financial instruments

If a financial asset meets one of the following conditions, it shall be derecognized: (1) The contractual right to receive cash flows from the financial asset terminates; (2) The financial asset has been transferred and meets the conditions for derecognition.

If the current obligation of a financial liability is discharged in whole or in part, the discharged portion shall be derecognised. If an existing liability is replaced by another financial liability with substantially different terms from the same creditor, or the terms of an existing liability are substantially modified, the existing financial liability will be derecognised and a new financial liability will be recognized at the same time. Buying and selling financial assets in a regular manner is recognized and derecognized based on transaction date accounting.

(10) Determination method and accounting treatment method of expected credit losses

Method for determining expected credit losses

Based on expected credit losses, the Company conducts impairment accounting and recognizes loss provisions for financial assets measured at amortized cost (including receivables), financial assets classified as measured at fair value with changes included in other comprehensive income (including receivables financing), and lease receivables.

How to determine expected credit losses

The Company evaluates on each balance sheet date whether the credit risk of relevant financial instruments has increased significantly since initial recognition, and divides the process of credit impairment of financial instruments into three stages. Different accounting treatment methods are adopted for the impairment of financial instruments at different stages: (1) In the first stage, if the credit risk of a financial instrument has not increased significantly since initial recognition, the Company measures loss provisions based on the expected credit losses of the financial instrument in the next 12 months, and calculates interest income based on its book balance (that is, before deducting impairment provisions) and the actual interest rate. (2) In the second stage, if the credit risk of a financial instrument has increased significantly since initial recognition but no credit impairment has occurred, the company will measure the loss provision based on the expected credit losses throughout the entire duration of the financial instrument, and calculate interest based on its book balance and actual interest rate. Income; (3) In the third stage, if credit impairment occurs after initial recognition, the company measures loss provisions based on the expected credit losses throughout the entire duration of the financial instrument, and calculates interest income based on its amortized cost (book balance minus accrued impairment provisions) and actual interest rate.

A simplified approach to expected credit losses that always measures loss reserves in an amount equivalent to lifetime expected credit losses.

Accounting treatment of expected credit losses

In order to reflect the changes in the credit risk of financial instruments since the initial recognition, the company re-measures expected credit losses on each balance sheet date. The resulting increase or reversal of loss provisions shall be included in current profits and losses as impairment losses or gains, and shall be deducted from the book value of the financial assets listed in the balance sheet or included in estimated liabilities, depending on the type of financial instrument. 4. Methods of measuring bad debt provisions for accounts receivable and lease receivables

(1) Accounts receivable that do not contain significant financing components. For receivables that do not contain significant financing components and are formed by transactions regulated by "Accounting Standards for Business Enterprises No. 14 - Revenue", the Company adopts a simplified method, that is, it always measures loss provisions based on expected credit losses throughout the duration.

①Categories and basis for determination of bad debt provisions based on combinations of credit risk characteristics

The company divides notes receivable and accounts receivable into several combinations based on credit risk characteristics for accounts receivable other than those identified individually, and calculates expected credit losses on the basis of the combinations. The basis for determining the combinations is as follows:

Notes receivable are combined according to credit risk characteristics:

Combination Category Determination Basis

Portfolio 1: Bank Acceptance Bill Determined based on the credit risk level of the acceptor

Combination 2: Commercial acceptance bill Determined based on the type of bill acceptance institution

Accounts receivable are combined according to credit risk characteristics:

Combination Category Determination Basis

Accounts receivable portfolio 1: Related parties within the group’s scope of consolidation Determined based on the company’s scope of consolidation

Accounts Receivable Portfolio 2: Traditional Chinese Medicine Garden Business Determined based on the aging of accounts receivable

Accounts Receivable Portfolio 3: Chemical Pharmaceutical Park Business Determined based on the aging of accounts receivable

For notes receivable divided into portfolios, expected credit losses are calculated by referring to historical credit loss experience, combined with current conditions and predictions of future economic conditions, and through default risk exposure and expected credit loss rate throughout the duration.

For accounts receivable divided into portfolios, refer to historical credit loss experience, combined with current conditions and predictions of future economic conditions, prepare a comparison table between accounts receivable and the expected credit loss rate for the entire duration, and calculate expected credit losses.

②Account aging calculation method based on aging confirmation of credit risk characteristics combination

For the aging calculation method based on the combination of aging confirmation credit risk characteristics, the date of occurrence of customer receivables is used as the starting point for calculating aging. For customers with multiple businesses, the calculation of aging is based on the corresponding occurrence date of each business as the age occurrence date to calculate the final recovery time of the aged accounts.

③According to the judgment standards for single provision of bad debt provisions

The Company makes individual identifications of receivables and makes provision for bad debts. It makes individual identifications of receivables that are expected to be irrecoverable, the customer has gone bankrupt, or has experienced major financial difficulties, and makes full provision for bad debts.

(2) Receivables and lease receivables containing significant financing components.

For receivables and lease receivables that contain significant financing components, loss provisions are measured according to the general method, that is, the "three-stage" model. The aging calculation method and individual accrual judgment standards for credit risk characteristic combinations, credit risk characteristic combinations based on aging confirmation are consistent with the identification standards excluding financing components.

Methods of measuring loss provisions for other financial assets

For financial assets other than the above, such as: debt investments, other debt investments, other receivables, long-term receivables other than lease receivables, etc., the company measures loss provisions in accordance with the general method, that is, the "three-stage" model.

(1) Combination categories and determination basis for bad debt provisions based on combinations of credit risk characteristics

Combination Category Determination Basis

Other receivables portfolio 1: Related parties within the group’s scope of consolidation Determined based on the company’s scope of consolidation

Determined based on the nature of the payment, it is mainly the reserve fund paid by the company and other receivables for market development. Combination 2: Reserve fund (market development fee)

fee

Other receivables portfolio 3: Fund lending Determined based on the nature of the payment, mainly loans lent by the Company

Other receivables portfolio 4: margins, deposits, etc. Determined based on the nature of the payments, mainly margins and deposits paid by the company (2) Aging calculation method based on aging confirmation credit risk characteristics combination

(3) Judgment criteria for making provision for bad debts individually

(11) Inventory

Classification of inventory

Inventories refer to the finished products or commodities held by the company for sale in daily activities, products in progress during the production process, materials and supplies consumed in the production process or the provision of labor services, etc. It mainly includes raw materials, products in progress, inventory goods, turnover materials, packaging materials, etc.

Pricing method for issued inventory

When the inventory is shipped, the weighted average method is used to determine the actual cost of the shipment.

Inventory inventory system

The inventory inventory system is a perpetual inventory system.

Amortization method for low-value consumables and packaging materials

Low-value consumables and packaging are amortized using the one-time write-off method.

Recognition standards and accrual methods for inventory depreciation provisions

On the balance sheet date, inventories are measured at the lower of cost and net realizable value. When the net realizable value of the current period is lower than cost, inventory depreciation reserves are withdrawn and inventory depreciation reserves are accrued on a single inventory item. However, for inventory with a large quantity and low unit price, inventory depreciation reserves are accrued according to the inventory category. Inventories that are related to product series produced and sold in the same region, have the same or similar end use or purpose, and are difficult to measure separately from other items, inventory depreciation reserves can be collectively accrued. If the factors that previously caused the inventory value to be written down have disappeared, the inventory devaluation provision shall be reversed within the amount originally accrued.

When determining the net realizable value of inventories, it is based on the conclusive evidence obtained and the purpose of holding the inventories and the impact of events after the balance sheet date are also considered.

(12) Contract assets and contract liabilities

1.Contract assets

The Company presents the right to receive consideration for goods or services that have been transferred to the customer (and that right is dependent on factors other than the passage of time) as a contract asset. The provision for impairment of contract assets refers to the method for determining expected credit losses in the note.

2.Contract liabilities

The Company lists the obligation to transfer goods or provide services to customers for consideration received or receivable from customers as contract liabilities, and contract assets and contract liabilities under the same contract are presented as a net amount.

(13) Long-term equity investment

Judgment criteria for joint control and significant influence

Joint control means that activities that have a significant impact on the returns of an arrangement must be decided with the unanimous consent of the parties sharing control rights, including the sale and purchase of goods or services, the management of financial assets, the purchase and disposal of assets, research and development activities, and financing activities, etc. Significant influence refers to having a significant influence when holding more than 20% to 50% of the voting capital of the invested unit, or having a significant influence even though it is less than 20% but meeting one of the following conditions: having representatives on the board of directors or similar authority of the invested unit; participating in the policy-making process of the invested unit; sending management personnel to the invested unit; the invested unit relies on the technology or technical information of the investing company; and important transactions occur with the invested unit. 2. Determination of initial investment cost

For long-term equity investments obtained through business mergers, if it is a business merger under the same control, the share of the book value of the owner's equity of the merged party in the consolidated financial statements of the ultimate controlling party shall be used as the initial investment cost of the long-term equity investment on the merger date; for business mergers not under the same control, the merger cost determined on the purchase date shall be used as the initial investment cost of the long-term equity investment; long-term equity investments obtained by paying cash , the initial investment cost is the actual purchase price paid; for long-term equity investments obtained through the issuance of equity securities, the initial investment cost is the fair value of the equity securities issued; for long-term equity investments obtained through debt restructuring, the initial investment cost is determined in accordance with the relevant provisions of the Debt Reorganization Guidelines; for long-term equity investments obtained through the exchange of non-monetary assets, the initial investment cost is determined in accordance with the relevant provisions of the Non-monetary Asset Exchange Guidelines.

Subsequent measurement and profit and loss recognition methods

The Company adopts the cost method to account for long-term equity investments that the Company can control over the invested entities, and adopts the equity method to account for long-term equity investments in associates and joint ventures. Equity investments in associates, part of which are held indirectly through venture capital institutions, mutual funds, trust companies or similar entities including investment-linked insurance funds, regardless of whether the above entities have a significant impact on this part of the investment, shall be handled in accordance with the relevant provisions of "Accounting Standards for Business Enterprises No. 22 - Recognition and Measurement of Financial Instruments", and the remaining part shall be accounted for using the equity method.

(14) Fixed assets

1.Conditions for confirmation of fixed assets

Fixed assets refer to tangible assets held for the production of goods, provision of labor services, leasing or operation and management and with a useful life of more than one accounting year. It shall be recognized when the following conditions are met at the same time: the economic benefits related to the fixed asset are likely to flow into the enterprise; the cost of the fixed asset can be measured reliably.

Fixed asset classification and depreciation methods

The company's fixed assets are mainly divided into: houses and buildings, machinery and equipment, electronic equipment, transportation equipment, etc.; the depreciation method adopts the straight-line method. According to the nature and usage of various types of fixed assets, the service life and estimated net residual value of fixed assets are determined. At the end of the year, the service life, estimated net residual value and depreciation method of fixed assets will be reviewed. If there are differences from the original estimates, corresponding adjustments will be made. Except for fixed assets that have been fully depreciated and are still in use and land that is separately valued and accounted for, all fixed assets are depreciated.

Asset category Estimated service life (years) Estimated net residual value rate (%) Annual depreciation rate (%) Houses and buildings 10-20 5 4.75-9.50

Machinery and equipment 10 5 9.50-23.75

Transportation equipment 4-10 5 9.50-23.75

Other equipment 3-5 5 19.00-31.67

(15) Projects under construction

The Company's projects under construction are mainly self-operated and outsourced. The standard and time point for the transfer of projects under construction into fixed assets shall be based on the fact that the projects under construction have reached the intended usable state. The criteria for judging the intended usable state should meet one of the following conditions: the physical construction (including installation) of the fixed assets has been completed or substantially completed; trial production or trial operation has been carried out, and the results show that the asset can operate normally or can stably produce qualified products, or the trial operation results show that it can operate normally or do business; the amount of expenditure on the fixed assets constructed is very small or almost no longer occurs; the fixed assets purchased and constructed have met the design or contract requirements, or are basically consistent with the design or contract requirements.

(16) Borrowing costs

Recognition principles for capitalization of borrowing costs

If the borrowing costs incurred by the company can be directly attributed to the acquisition, construction or production of assets that meet the capitalization conditions, they will be capitalized and included in the cost of the relevant assets; other borrowing costs will be recognized as expenses based on the amount incurred when they are incurred and included in the current profits and losses. Assets that meet the conditions for capitalization refer to fixed assets, investment real estate, inventories and other assets that require a considerable period of acquisition, construction or production activities to reach the intended usable or salable state.

Calculation method of capitalization amount

The capitalization period refers to the period from the time when borrowing costs start to be capitalized to the time when capitalization stops. Periods during which the capitalization of borrowing costs is suspended are not included. If an abnormal interruption occurs during the construction or production process and the interruption lasts for more than 3 months, the capitalization of borrowing costs shall be suspended.

Borrowing of special borrowings shall be determined based on the actual interest expense incurred on the special borrowings in the current period, minus the interest income obtained from depositing unused borrowed funds in the bank or the investment income obtained from temporary investments; the amount of general borrowings shall be determined based on the excess of accumulated asset expenditures over the special borrowings. The weighted average of asset expenditures is calculated and determined by multiplying the capitalization rate of the general borrowings occupied, and the capitalization rate is the weighted average interest rate of the general borrowings; if there is a discount or premium on the borrowing, the amount of discount or premium that should be amortized in each accounting period is determined according to the actual interest rate method, and the interest amount of each period is adjusted.

The effective interest rate method is a method of calculating the amortized discount or premium or interest expense based on the actual interest rate of the borrowed money. The actual interest rate is the future cash flow of the loan during the expected duration, and is the interest rate used to discount the current book value of the loan.

(17) Intangible assets

Valuation method of intangible assets

The Company's intangible assets are initially measured at cost. The actual cost of purchased intangible assets is based on the actual price paid and related expenditures. The actual cost of intangible assets invested by investors shall be determined based on the value stipulated in the investment contract or agreement. However, if the value stipulated in the contract or agreement is unfair, the actual cost shall be determined based on the fair value. For self-developed intangible assets, the cost is the total expenditure incurred before reaching the intended use.

Useful life and its basis for determination, estimation, amortization method or review procedure

Intangible assets with limited service life are amortized as shown in the table below. At the end of the year, the service life and amortization method of the intangible assets are reviewed. If there are differences with the original estimates, corresponding adjustments are made. Intangible assets with indefinite service life are not amortized, but at the end of the year, the service life is reviewed. When there is conclusive evidence that its service life is limited, its service life is estimated.

The useful life of an intangible asset with a limited useful life and its determination basis and amortization method:

Asset class Useful life (years) Amortization method

Land use rights 40-50 straight line method

Trademark Rights 10 Straight Line Method

Patent 10 Straight line method

Software 10 Straight Line Method

The company will determine the intangible assets that cannot foresee the period during which the assets will bring economic benefits to the company, or whose useful life is uncertain, as intangible assets with indefinite useful lives. The basis for judging the uncertain service life is: it comes from contractual rights or other legal rights, but there is no clear service life in the contract or legal provisions; based on the situation in the same industry or the argumentation of relevant experts, it is still impossible to judge the period during which the intangible assets can bring economic benefits to the company.

At the end of each year, the service life of intangible assets with indefinite service life is reviewed, mainly in a bottom-up manner, with the relevant departments for the use of intangible assets conducting a basic review to evaluate whether there are changes in the basis for determining the indefinite service life, etc. 3. Scope of aggregation of R&D expenditures and related accounting treatment methods

The scope of the company's R&D expenditures is mainly determined based on the company's research and development projects, and mainly includes: employee compensation of R&D personnel, direct investment expenses, depreciation expenses and long-term prepaid expenses, amortization expenses of intangible assets, entrusted external research and development expenses, other expenses, etc.

Expenditures in the research phase of internal research and development projects are included in the current profit and loss when incurred; expenditures in the development phase that meet the conditions for recognition as intangible assets are transferred to intangible assets accounting.

Specific criteria for dividing the research phase and development phase of internal research and development projects: The planned investigation phase to obtain new technologies and knowledge should be determined as the research phase, which has the characteristics of planning and exploratory nature; before commercial production or use, the application of research results or other knowledge to a plan or design to produce new or substantially improved materials, devices, products, etc., should be determined as the development phase. This phase has the characteristics of being targeted and having a greater possibility of achieving results.

(18) Impairment of long-term assets

If there are signs of impairment on the balance sheet date for long-term equity investments, investment real estate, fixed assets, projects under construction, right-of-use assets measured using the cost model, productive biological assets measured using the cost model, oil and gas assets, intangible assets and other long-term assets on the balance sheet date, an impairment test is conducted. If the impairment test results show that the recoverable amount of the asset is lower than its book value, impairment provisions will be made based on the difference and included in the impairment loss.

The recoverable amount is the higher of the asset's fair value less disposal costs and the present value of the asset's expected future cash flows. Asset impairment provisions are calculated and recognized on the basis of individual assets. If it is difficult to estimate the recoverable amount of an individual asset, the recoverable amount of the asset group to which the asset belongs is determined. An asset group is the smallest combination of assets that can independently generate cash inflows.

Goodwill that is presented separately in the financial statements shall be tested for impairment at least annually, regardless of whether there is any indication of impairment. During impairment testing, the book value of goodwill is allocated to asset groups or combinations of asset groups that are expected to benefit from the synergies of a business combination. If the test results indicate that the recoverable amount of an asset group or combination of asset groups containing amortized goodwill is lower than its book value, the corresponding impairment loss will be recognized. The amount of impairment loss first deducts the book value of the goodwill allocated to the asset group or asset group combination, and then deducts the book value of other assets in proportion to the proportion of the book value of other assets in the asset group or asset group combination except goodwill.

Once the above-mentioned asset impairment losses are recognized, the portion whose value has been restored will not be reversed in subsequent periods.

(19) Long-term deferred expenses

The company's long-term deferred expenses refer to various expenses that have been incurred but have a benefit period of more than one year (excluding one year). Long-term deferred expenses are amortized in installments according to the benefit period of the expense item. If a long-term deferred expense item cannot benefit future accounting periods, all the amortized value of the item that has not been amortized will be transferred to the current profit and loss.

(20) Employee compensation

Employee compensation refers to various forms of remuneration or compensation given by the company to obtain services provided by employees or to terminate labor relations. Employee compensation mainly includes short-term compensation, post-employment benefits, termination benefits and other long-term employee benefits.

Accounting treatment of short-term compensation

During the accounting period when employees provide services to the company, actual short-term remuneration is recognized as a liability and included in the current profit and loss, except where the accounting standards for enterprises require or allow it to be included in the cost of assets. The employee welfare expenses incurred by the company are included in the current profit and loss or related asset costs according to the actual amount when they are actually incurred. If employee benefits are non-monetary benefits, they are measured at fair value. The company pays social insurance premiums such as medical insurance premiums, work-related injury insurance premiums, maternity insurance premiums, and housing provident funds for its employees, as well as labor union funds and employee education funds withdrawn in accordance with regulations. During the accounting period when employees provide services, the corresponding amount of employee compensation is calculated and determined based on the prescribed accrual basis and accrual ratio, and the corresponding liabilities are recognized and included in the current profit and loss or related asset costs.

Accounting treatment of post-employment benefits

During the accounting period when employees provide services, the company recognizes the deposit amount payable based on the defined contribution plan as a liability and includes it in the current profit and loss or related asset costs. The welfare obligations generated by the defined benefit plan are attributed to the period in which employees provide services based on the formula determined by the expected cumulative welfare unit method, and are included in the current profit and loss or related asset costs.

Accounting treatment of dismissal benefits

When the company provides dismissal benefits to employees, the employee compensation liabilities arising from the dismissal benefits are recognized at the earliest of the following two times and included in the current profit and loss: when the company cannot unilaterally withdraw the dismissal benefits provided due to the termination of labor relations plan or layoff proposal; when the company recognizes the costs or expenses related to the restructuring involving the payment of dismissal benefits.

Accounting treatment methods for other long-term employee benefits

Other long-term employee benefits provided by the company to employees that meet the conditions of the defined contribution plan shall be handled in accordance with the relevant provisions of the defined contribution plan; in addition, other long-term employee benefits net liabilities or net assets shall be recognized and measured in accordance with the relevant provisions of the defined benefit plan.

(21) Income

Principles of revenue recognition

When the company fulfills its performance obligations in the contract, that is, when the customer obtains control of the relevant goods or services, revenue is recognized based on the transaction price allocated to the performance obligation. Obtaining control over relevant goods means being able to direct the use of the goods and obtain almost all economic benefits from them. Performance obligations refer to the company's commitment in the contract to transfer clearly distinguishable goods to the customer. The transaction price refers to the amount of consideration that the Company expects to be entitled to receive for transferring goods to customers, excluding amounts collected on behalf of third parties and amounts that the Company expects to return to customers.

Whether the performance obligation is performed within a certain period of time or at a certain point in time depends on the terms of the contract and relevant legal provisions. If the performance obligation is performed within a certain period of time, the company recognizes revenue based on the performance progress. Otherwise, the Company recognizes revenue at a point when the customer obtains control of the relevant assets.

Revenue recognition method

Contracts for the sale of goods between the Company and its customers generally contain only the performance obligation to transfer the goods. The company usually determines the timing of revenue recognition based on comprehensive consideration of the following factors: acquisition of the current right to receive payment for the goods, transfer of the major risks and rewards of ownership of the goods, transfer of legal ownership of the goods, transfer of physical assets of the goods, and customer acceptance of the goods.

If the contract or agreement price is collected in a deferred manner and is essentially financing in nature, the amount of revenue from the sale of goods shall be determined based on the fair value of the contract or agreement price receivable.

Based on the company's sales model, the specific method for recognizing revenue from the company's sales of goods is as follows: sales revenue is recognized after the products are shipped and delivered to customers in accordance with the contract.

(22) Contract costs

Contract costs include incremental costs incurred to obtain the contract and contract performance costs. The incremental costs incurred to obtain a contract ("contract acquisition costs") are costs that would not have been incurred had the contract not been obtained. If the cost is expected to be recovered, the company will recognize it as the contract acquisition cost and as an asset.

Costs incurred to fulfill the contract, which do not fall within the scope of inventory and other accounting standards for enterprises and meet the following conditions, are recognized as contract performance costs as an asset: the cost is directly related to a current or expected contract, including direct labor, direct materials, manufacturing expenses (or similar expenses), costs clearly borne by the user, and other costs incurred solely because of the contract; the cost increases the resources used to perform performance obligations in the future; the cost is expected to be recovered.

The company will recognize the contract performance costs as assets. If the amortization period does not exceed one year or one normal operating cycle at the time of initial recognition, it will be included in the "inventory" item in the balance sheet; if the amortization period is more than one year or one normal operating cycle at the time of initial recognition, it will be included in the "other non-current assets" item in the balance sheet.

The company will recognize the contract acquisition costs as assets. If the amortization period does not exceed one year or one normal operating cycle at the time of initial recognition, it will be included in the "other current assets" item in the balance sheet; if the amortization period is more than one year or one normal operating cycle at the time of initial recognition, it will be included in the "other non-current assets" item in the balance sheet.

The Company amortizes the assets recognized as contract acquisition costs and contract performance costs on the same basis as the recognition of commodity revenue related to the assets, and includes them in the current profit and loss.

When the book value of assets related to contract costs is higher than the difference between the following two items, the company will make provision for impairment and recognize the excess as asset impairment losses: the remaining consideration expected to be obtained from the transfer of the goods related to the asset; the estimated cost to be incurred for the transfer of the related goods.

If the factors of impairment in the previous period subsequently change, causing the difference between the two aforementioned items to be higher than the book value of the asset, the asset impairment provision that has been originally accrued should be reversed and included in the current profit and loss, but the book value of the asset after reversal shall not exceed the book value of the asset on the date of reversal if no impairment provision is made.

(23) Government subsidies

Types and accounting treatment of government subsidies

Government subsidies refer to the monetary assets or non-monetary assets that the company obtains from the government for free (but does not include the capital invested by the government as the owner). If government subsidies are monetary assets, they shall be measured according to the amount received or receivable. If the government subsidy is a non-monetary asset, it shall be measured at fair value; if the fair value cannot be obtained reliably, it shall be measured at the nominal amount.

Government subsidies related to daily activities shall be included in other income according to the economic business essence. Government subsidies unrelated to daily activities are included in non-operating income and expenses.

Government documents that clearly stipulate that government subsidies are used to purchase, construct or otherwise form long-term assets are recognized as asset-related government subsidies. If the government documents do not clearly stipulate the subsidy objects, and if they can form long-term assets, the part of the government subsidy corresponding to the asset value shall be regarded as the government subsidy related to the assets, and the remaining part shall be regarded as the government subsidy related to the income; if it is difficult to distinguish, the entire government subsidy shall be regarded as the government subsidy related to the income. Government subsidies related to assets are recognized as deferred income. The amount recognized as deferred income will be included in the current profit and loss in stages according to a reasonable and systematic method within the useful life of the relevant assets.

Government subsidies other than those related to assets are recognized as government subsidies related to income. If the income-related government subsidies are used to compensate the enterprise for relevant expenses or losses in the future period, they are recognized as deferred income, and are included in the current profit and loss during the period when the relevant expenses are recognized; if they are used to compensate the enterprise for the relevant expenses or losses that have already occurred, they are directly included in the current profits and losses.

The company obtains policy-based preferential loan interest discounts, and the finance department allocates interest-rate discount funds to the lending bank. If the lending bank provides loans to the company at policy-based preferential interest rates, the actual loan amount received is used as the entry value of the loan, and the relevant borrowing costs are calculated based on the loan principal and the policy-based preferential interest rate; if the finance department directly allocates interest discount funds to the company, the company will offset the corresponding interest rate discounts against related borrowing costs.

Government subsidy confirmation time

Government subsidies are recognized when the conditions attached to the government subsidies are met and can be received. Government subsidies measured according to the amount receivable shall be recognized at the end of the period when there is conclusive evidence that the relevant conditions stipulated in the financial support policy can be met and the financial support funds are expected to be received. Government subsidies other than those measured according to the amount receivable shall be recognized when the subsidy is actually received.

(24) Deferred income tax assets and deferred income tax liabilities

Based on the difference between the book value of assets and liabilities and their tax basis (if the tax basis of items not recognized as assets and liabilities can be determined in accordance with tax laws, the tax basis is determined as the difference), the deferred income tax assets or deferred income tax liabilities are calculated and recognized according to the applicable tax rate during the period when the asset is expected to be recovered or the liability is settled.
The recognition of deferred income tax assets is limited to the amount of taxable income that is likely to be used to offset the deductible temporary differences. On the balance sheet date, if there is conclusive evidence that sufficient taxable income is likely to be obtained in the future period to offset the deductible temporary differences, deferred income tax assets that have not been recognized in previous accounting periods will be recognized. If it is likely that sufficient taxable income will not be available in the future to offset the deferred income tax assets, the book value of the deferred income tax assets will be reduced.

Deferred income tax liabilities are recognized for taxable temporary differences related to investments in subsidiaries and associates, unless the company is able to control the timing of the reversal of the temporary difference and it is probable that the temporary difference will not be reversed in the foreseeable future. For deductible temporary differences related to investments in subsidiaries and associates, deferred income tax assets are recognized when the temporary differences are likely to be reversed in the foreseeable future and it is likely to be taxable income that can be used to offset the deductible temporary differences in the future.

Basis for offsetting net deferred income tax

When the following conditions are met at the same time, the company will present the deferred income tax assets and deferred income tax liabilities as the net amount after offsetting: it has the legal right to settle the current income tax assets and current income tax liabilities on a net basis; the deferred income tax assets and deferred income tax liabilities are for the same taxpayer with the same tax collection department. It is related to the income tax levied by the entity or to different taxable entities, but in the future during each period when important deferred income tax assets and deferred income tax liabilities are reversed, the taxable entity involved intends to settle the current income tax assets and current income tax liabilities with a net amount or to obtain assets and pay off debts at the same time.

(25) Leasing

The Company will evaluate whether the contract is a lease or contains a lease on the contract commencement date. A contract is a lease or contains a lease if a party transfers the right to control the use of one or more identified assets for a certain period in exchange for a consideration. 1. Accounting treatment of lessee

On the start date of the lease period, the Company recognizes right-of-use assets and lease liabilities for leases other than short-term leases and low-value asset leases, and recognizes depreciation expenses and interest expenses respectively during the lease period.

(1) Right-of-use assets

On the commencement date of the lease term, the right-of-use asset is initially measured at cost. This cost includes the initial measurement amount of the lease liability, the amount of lease payments net of lease incentives paid on or before the lease commencement date, initial direct costs, etc.

If it is reasonably certain that the ownership of the leased asset will be obtained at the expiration of the lease term, depreciation will be accrued over the estimated remaining useful life of the leased asset; if it cannot be reasonably determined, depreciation will be accrued during the shorter of the lease term and the remaining useful life of the leased asset. When the recoverable amount is lower than the book value of the right-of-use asset, its book value is written down to the recoverable amount.

Lease liabilities are initially measured based on the present value of the unpaid lease payments at the beginning of the lease term. Lease payments include fixed payments and amounts payable when it is reasonably certain that the option to purchase or the option to terminate the lease will be exercised. Variable lease payments that are not included in the measurement of lease liabilities are included in the current profit and loss when actually incurred.

The company uses the interest rate implicit in the lease as the discount rate; if the interest rate implicit in the lease cannot be reasonably determined, the company's incremental borrowing rate is used as the discount rate. The interest expense of the lease liability in each period during the lease term is calculated based on a fixed periodic interest rate, that is, the discount rate adopted by the Company or the revised discount rate, and is included in financial expenses.

Lease classification standards and accounting treatment methods as a lessor

On the lease commencement date, the Company recognizes leases that substantially transfer almost all risks and rewards related to the ownership of the leased assets as finance leases, and other leases as operating leases.

(1) Accounting treatment of operating leases

Rental income from operating leases is recognized on a straight-line basis over the lease term. The initial direct costs are capitalized and included in the current income in installments during the lease term on the same recognition basis as rental income. Variable rent that is not included in the lease receipts is included in rental income when it is actually incurred.

(2) Accounting treatment of financial leases

On the start date of the lease, the difference between the sum of the finance lease receivable, the unguaranteed residual value and its present value is recognized as unrealized financing income, and is recognized as lease income in each period when rent is received in the future, and the financial lease assets are derecognized. Initial direct costs are included in the initial recording value of finance lease receivables.

(26) Explanation of changes in major accounting policies and changes in accounting estimates

Changes in important accounting policies

The Company has no significant changes in accounting policies during this period.

Changes in important accounting estimates

The Company has no significant changes in accounting estimates during this period.

4. Taxes

(1) Main tax types and tax rates

Tax type Tax calculation basis Tax rate Value-added tax Paid according to the difference between output tax and input tax allowed to be deducted in the current period 13% urban maintenance and construction tax Calculated and paid according to the turnover tax payable and the approved value-added tax exemption 7% and 5% Education fee surcharge Calculated and paid according to the turnover tax payable and the approved value-added tax exemption 3% corporate income tax Calculated and paid according to the taxable income and the corresponding tax rate The specific tax entities subject to different corporate income tax rates of 15% and 25% are as follows:

Name of tax payer Income tax rate

Xiangyu Pharmaceutical Co., Ltd. 15%

Renhetang Pharmaceutical Co., Ltd. 15%

Shandong Novels Pharmaceutical Technology Co., Ltd. 25%

(2) Important tax incentives and approvals

On December 7, 2024, the Shandong Provincial Department of Science and Technology, the Shandong Provincial Department of Finance, and the Shandong Provincial Taxation Bureau of the State Administration of Taxation jointly awarded the "High-tech Enterprise Certificate" (Certificate No.: GR202437006117) to Xiangyu Pharmaceutical Co., Ltd., which is valid for three years and pays income tax at a preferential income tax rate of 15%.
On December 7, 2023, the Shandong Provincial Department of Science and Technology, the Shandong Provincial Department of Finance, and the Shandong Provincial Taxation Bureau of the State Administration of Taxation jointly awarded the subsidiary Renhetang Pharmaceutical Co., Ltd. a "High-tech Enterprise Certificate" (Certificate No.: GR202337005338), which is valid for three years and pays income tax at a preferential income tax rate of 15%.

5. Notes on important items in the consolidated financial statements

(1) Monetary funds

Item Ending balance Beginning balance

Cash on hand 10,670.03 5,764.47 Bank deposits 74,260,217.94 206,963,902.05 Other monetary funds 90,000,000.00

Total 164,270,887.97 206,969,666.52

(2) Notes receivable

Category Ending balance Beginning balance

Bank acceptance bill 1,785,477.52 1,988,148.52 Commercial acceptance bill 142,068,656.23 96,580,000.00 Less: bad debt provision 4,017,755.37 6,657,645.00 Total 139,836,378.38 91,910,503.52

(3) Accounts receivable

Disclosure by age

Aging Closing balance Opening balance

Within 1 year 91,197,993.97 120,501,455.40 1 to 2 years 25,108,229.91 18,601,724.50 2 to 3 years 9,810,808.64 19,046,690.65 3 to 4 years 13,026,826.05 7,961,686.95 4 to 5 years 7,113,857.75 23,062,846.40 More than 5 years 81,583,644.16 58,982,470.41 Less: bad debt provision 119,686,562.04 115,000,439.92Total 108,154,798.44 133,156,434.39

Classified disclosure according to bad debt accrual method

Category Ending Balance

Book balance Bad debt provision

Provision ratio

Book value amount Ratio (%) Amount

Example(%)

Accounts receivable with provision for bad debts based on individual assessments

9,810,563.30 4.31 9,810,563.30 100.00

money

Accounts receivable with provision for bad debts by portfolio 218,030,797.18 95.69 109,875,998.74 50.39 108,154,798.44 Among them: Portfolio 1: Traditional Chinese Medicine Garden business 150,724,835.65 66.15 97,762,828.37 64.86 52,962,007.28 Portfolio 2: Chemical Pharmaceutical Park Business 67,305,961.53 29.54 12,113,170.37 18.00 55,192,791.16 Total 227,841,360.48 100.00 119,686,562.04 52.53 108,154,798.44

Opening balance

1. Original book value

Opening balance 355,664,571.07 196,225,272.22 1,463,287.29 28,947,565.08 582,300,695.66 2. Increase in the current period 176,504.85 818,598.24 327,190.79 238,908.85 1,561,202.73 (1) Purchase 176,504.85 818,598.24 327,190.79 238,908.85 1,561,202.73 3. Decrease amount in the current period 4,400.00 372,549.55 69,453.22 446,402.77 (1) Disposal or scrapping 4,400.00 372,549.55 69,453.22 446,402.77 4. Closing balance 355,841,075.92 197,039,470.46 1,417,928.53 29,117,020.71 583,415,495.62

2. Accumulated depreciation

Opening balance 115,259,394.06 142,214,255.35 1,342,485.40 26,206,053.98 285,022,188.79 2. Increase in the current period 19,095,103.51 8,458,723.34 40,015.75 760,190.17 28,354,032.77 (1) Provision 19,095,103.51 8,458,723.34 40,015.75 760,190.17 28,354,032.77 3. Decrease amount in the current period 4,180.00 353,922.07 20,507.47 378,609.54 (1) Disposal or scrapping 4,180.00 353,922.07 20,507.47 378,609.54 4. Closing balance 134,354,497.57 150,668,798.69 1,028,579.08 26,945,736.68 312,997,612.02

3. Impairment provision

Opening balance 344,836.56 135.49 15,616.94 360,588.99 2. Increase in the current period
Reduction amount in this period
Closing balance 344,836.56 135.49 15,616.94 360,588.99

4. Book value

Book value at the end of the period 221,486,578.35 46,025,835.21 389,213.96 2,155,667.09 270,057,294.61 2. Book value at the beginning of the period 240,405,177.01 53,666,180.31 120,666.40 2,725,894.16 296,917,917.88

(10) Right-of-use assets

Project Houses and Buildings Total

1. Original book value

Opening balance 2,755,153.95 2,755,153.95 2. Increase in the current period
Reduction amount in this period
Ending balance 2,755,153.95 2,755,153.95

2. Accumulated depreciation

Opening balance 1,862,639.28 1,862,639.28 2. Increase in the current period 465,659.82 465,659.82 (1) Provision 465,659.82 465,659.82 3. Decrease in the current period
Closing balance 2,328,299.10 2,328,299.10

3. Impairment provision

4. Book value

Book value at the end of the period 426,854.85 426,854.85 2. Book value at the beginning of the period 892,514.67 892,514.67

(11) Intangible assets

Intangible assets

Items Land use rights Trademark rights Proprietary technology Software and others Total

1. Original book value

Opening balance 10,400.00 160,942,327.84 7,173,820.25 250,870,651.24

82,744,103.15

Increase in the current period 14,927,011.24 163,716.81 15,090,728.05 (1) Purchase 2,283,283.02 163,716.81 2,446,999.83 (2) Consistency evaluation 12,643,728.22 12,643,728.22 3. Reduction amount in this period
Closing balance 10,400.00 175,869,339.08 7,337,537.06 265,961,379.29

82,744,103.15

2. Accumulated amortization

Opening balance 10,400.00 119,437,104.99 1,621,744.83 141,576,199.71

20,506,949.89

Increase in the current period 1,933,704.84 7,772,969.51 724,618.43 10,431,292.78 (1) Provision 1,933,704.84 7,772,969.51 724,618.43 10,431,292.78 3. Reduction amount in this period
Closing balance 22,440,654.73 10,400.00 127,210,074.50 2,346,363.26 152,007,492.49

3. Impairment provision

4. Book value

Book value at the end of the period 60,303,448.42 48,659,264.58 4,991,173.80 113,953,886.80 2. Book value at the beginning of the period 62,237,153.26 41,505,222.85 5,552,075.42 109,294,451.53

(12) Development expenditure

Increase in this period Decrease in this period

Item Beginning balance Closing balance

Internal development expenditure Outsourcing Included in current profit and loss Recognized as intangible assets Others

Tonic drugs 1,808,787.53 107,825.00 1,916,612.53 Rheumatism and immune system drugs 2,787,954.18 2,787,954.18 Respiratory system drugs 6,870,756.00 6,400,732.00 470,024.00 Antibacterial and anti-inflammatory drugs 16,290,022.64 1,225,090.93 1,379,245.28 16,135,868.29 Nervous system drugs 21,016,292.07 2,028,239.84 4,863,750.94 3,082,641.45 15,098,139.52 Drugs for digestive system 740,000.00 740,000.00 Drugs for cardiovascular and cerebrovascular systems 1,603,358.49 1,603,358.49 Drugs for external use on skin 1,028,300.00 727,867.17 1,756,167.17 Total 52,145,470.91 4,089,022.94 12,643,728.22 3,082,641.45 40,508,124.18

Note: For new drug research and development, the capitalization start point is when the national clinical approval is obtained, and for generic drug research and development (consistency evaluation), the capitalization start point is when the first payment is paid.

(13) Deferred income tax assets and deferred income tax liabilities

Deferred income tax assets and deferred income tax liabilities are not presented at the net amount after offsetting

Ending balance Beginning balance

Project

Deferred income tax is deductible temporarily Deferred income tax is deductible temporarily

Asset Difference Asset Difference Deferred tax assets:

Asset impairment provision 20,188,256.49 134,588,376.61 19,874,565.52 132,497,103.48 Deductible losses 12,617,167.32 84,114,448.80 12,617,167.32 84,114,448.80 Lease liabilities 72,083.88 480,559.18 147,288.27 981,921.81

Subtotal 32,877,507.69 219,183,384.59 32,639,021.11 217,593,474.09 Deferred income tax liabilities:

Right-of-use assets 64,028.23 426,854.85 133,877.20 892,514.67 Subtotal 64,028.23 426,854.85 133,877.20 892,514.67

Details of deferred income tax assets not recognized

Item Ending balance Beginning balance

Deductible losses 118,111,554.53 128,652,332.68 Total 118,111,554.53 128,652,332.68

Deductible losses that have not been recognized as deferred income tax assets will expire in the following years

Year Ending Balance Beginning Balance Remarks

2027 36,767,362.57

2028 37,962,830.64 37,962,830.64

2029 53,922,139.47 53,922,139.47

2030 25,750,178.85

Total 117,635,148.96 128,652,332.68

(14) Other non-current assets

Ending balance Beginning balance

Project

Book balance Impairment provision Book value Book balance Impairment provision Book value Advance payment for proprietary technology

2,425,000.00 2,425,000.00 2,425,000.00 2,425,000.00 (Consistency evaluation, etc.)

Prepayment for equipment and projects 100,118.10 100,118.10 362,413.10 362,413.10 Total 2,525,118.10 2,525,118.10 2,787,413.10 2,787,413.10

(15) Assets with restricted ownership or use rights

Situation at the end of the period Situation at the beginning of the period

Project

Book balance Book value Restricted Restricted Book balance Book value Restricted Restricted

Type Situation Type Situation only

Guarantee Gu Yin

currency borrow

100,009,860.28 100,009,860.28 Cash, frozen bank commitment 181,180,000.00 181,180,000.00 Pledged funds settlement and exchange

ticket

fixed borrow

218,097,887.84 127,550,394.32 Mortgage loans 218,097,887.84 132,073,486.80 Mortgage assets Intangible loans

82,744,103.15 60,303,448.42 Mortgage loans 82,744,103.15 62,725,436.34 Total mortgage assets 400,851,851.27 287,863,703.02 482,021,990.99 375,978,923.14

(16) Short-term borrowings

Classification of short-term loans

Borrowing conditions Closing balance Opening balance

Mortgage loan 222,000,000.00 227,500,000.00 Pledge loan 94,900,000.00 34,900,000.00 Credit loan 35,000,000.00

Guaranteed loan 10,000,000.00 30,000,000.00

Total 361,900,000.00 292,400,000.00 Note 1: The company used its own real estate and land use rights as collateral, and Lin Fanru and Zhu Guoying provided guarantees to obtain a loan of RMB 86 million from Jinqueshan Branch of Linshang Bank Co., Ltd.;

Note 2: The company pledged its own property and that of Linyi Pharmaceutical Group Co., Ltd. and obtained a loan of RMB 47 million from the Linyi Branch of the Agricultural Development Bank of China; Note 3: The company pledged its invention patent, and Xiangyu Industrial Group Co., Ltd., Lin Fanru, Linyi Pharmaceutical Group Co., Ltd., and Ma Longde provided guarantees, and obtained a loan of RMB 9.9 million from Shandong Linyi Luozhuang Rural Commercial Bank Co., Ltd.;

Note 4: The subsidiary Renhetang Pharmaceutical Co., Ltd. pledged 73.76495 million shares of Linshang Bank Co., Ltd. held by Xiangyu Industrial Group Co., Ltd., and Lin Fanru provided guarantee to obtain a loan of RMB 60 million from the Linyi Lanshan Branch of Agricultural Bank of China Co., Ltd.

Note 5: The subsidiary Renhetang Pharmaceutical Co., Ltd. used the real estate of Linyi Pharmaceutical Group Co., Ltd. as collateral, and Xiangyu Pharmaceutical Co., Ltd., Linyi Pharmaceutical Group Co., Ltd. and Lin Fanru provided guarantees to obtain a loan of RMB 30 million from the Linyi Branch of Weihai Bank Co., Ltd.;

Note 6: The subsidiary Renhetang Pharmaceutical Co., Ltd. pledged its invention patent, and Xiangyu Industrial Group Co., Ltd., Nie Changsheng and Lin Fanru provided guarantees and obtained a loan of RMB 25 million from Shandong Linyi Hedong Rural Commercial Bank Co., Ltd.;

Note 7: The subsidiary Renhetang Pharmaceutical Co., Ltd. used its real estate as collateral and Xiangyu Industrial Group Co., Ltd., Lin Fanru, Shao Changxiu and the company provided guarantees to obtain a loan of RMB 40 million from Linyi Branch of Shanghai Pudong Development Bank Co., Ltd.;

Note 8: The subsidiary Renhetang Pharmaceutical Co., Ltd. used its real estate as collateral and Nie Changsheng and Wang Shuxia provided guarantees to obtain a loan of RMB 10 million from the Junan Branch of Industrial and Commercial Bank of China Co., Ltd.;

Note 9: The subsidiary Renhetang Pharmaceutical Co., Ltd. used Lin Fanru, Shao Changxiu, and Junan Xinsheng Financing Guarantee Co., Ltd. to provide guarantees, and obtained a loan of 9 million yuan from Qishang Bank Co., Ltd. Linyi Junan Branch.

Note 10: The subsidiary Renhetang Pharmaceutical Co., Ltd. obtained a loan of RMB 10 million from the Jinan Free Trade Zone Branch of Bank of Beijing Co., Ltd. with the guarantee provided by Xiangyu Pharmaceutical Co., Ltd. and Lin Fanru.

(17) Notes payable

Item Ending balance Beginning balance

Bank acceptance draft 130,000,000.00

Commercial acceptance bill 15,919,399.56

1,955,047.78 Total 145,919,399.56

1,955,047.78

(18) Accounts payable

Classification by age

Item Ending balance Beginning balance

Within 1 year (including 1 year) 17,348,150.09 12,510,954.35 More than 1 year 5,739,852.78

5,009,228.94 Total 23,088,002.87 17,520,183.29

(19) Contract liabilities

Item Ending balance Beginning balance

Sales received in advance 13,980,620.25 17,089,196.00 Total 13,980,620.25 17,089,196.00

(20) Employee benefits payable

Classified presentation of employee benefits payable

Item Opening balance Increase in the current period Decrease in the current period Ending balance

Short-term salary 1,768,138.02 74,095,187.78 74,141,611.25 1,721,714.55
Post-employment benefits - defined contribution plan 12,037,432.90 12,036,699.84 733.06 Total 1,768,138.02 86,132,620.68 86,178,311.09 1,722,447.61
Short-term employee compensation situation

Item Opening balance Increase in the current period Decrease in the current period Ending balance

Salaries, bonuses, allowances and subsidies 1,768,138.02 62,771,515.39 62,823,511.50 1,716,141.91
Employee welfare fees 1,829,270.76 1,829,270.76
Social insurance premiums 5,301,164.01 5,300,987.37 176.64 Among them: medical insurance premiums 4,958,295.16 4,958,118.52 176.64

Work injury insurance premium 342,868.85 342,868.85

Housing provident fund 4,098,786.00 4,098,390.00 396.00
Trade union funds and employee education funds 94,451.62 89,451.62 5,000.00

Total 1,768,138.02 74,095,187.78 74,141,611.25 1,721,714.55

Set up the withdrawal plan

Item Opening balance Increase in the current period Decrease in the current period Ending balance

Basic pension insurance 11,561,446.61 11,560,740.05 706.56
Unemployment insurance premium 475,986.29 475,959.79 26.50Total 12,037,432.90 12,036,699.84 733.06

(21) Taxes payable

Type of tax Closing balance Opening balance

Value-added tax 2,916,013.60 1,807,917.17 Corporate income tax 2,939,507.25 5,722,119.42 Real estate tax 594,439.27 585,007.35 Land use tax 473,654.91 473,654.91 Personal income tax total 7,418,231.34

9,222,269.48

(22) Other payables

Item Ending balance Beginning balance

interest payable

Dividends payable

Other payables 33,892,365.54 42,714,054.25 Total 33,892,365.54 42,714,054.25

Other payables

(1) Classification by nature of payment

Item Ending balance Beginning balance

Deposits, margins, etc. 28,252,399.64 31,954,271.27 Fund lending 4,955,348.24

2,028,607.07 Prepaid market fee 684,617.66

8,731,175.91Total 33,892,365.54

42,714,054.25

(23) Non-current liabilities due within one year

Item Ending balance Beginning balance

Lease liabilities due within one year 480,559.18 550,458.72 Long-term borrowings due within one year 29,000,000.00

Total 29,480,559.18 550,458.72

Note: The company used the real estate of Linyi Qianren Trading Co., Ltd. as collateral, and Lin Fanru and Linyi Pharmaceutical Group Co., Ltd. provided guarantees to obtain a loan of RMB 29 million from the Linyi Xicheng Branch of Weifang Bank Co., Ltd.

(24) Other current liabilities

Item Ending balance Beginning balance

Output tax to be reversed

1,817,480.64 2,221,595.36 total

1,817,480.64 2,221,595.36

(25) Lease liabilities

Item Ending balance Beginning balance

Lease payments 504,587.14 1,055,045.86 Less: Unrecognized financing costs 24,027.96 73,124.05 Less: Lease liabilities due within one year 480,559.18 550,458.72 Total 431,463.09

(26) Deferred income

Deferred income is presented by category

Item Beginning balance Increase in the current period Decrease in the current period Ending balance Reasons for formation Government subsidies 7,530,517.04 758,725.31 6,771,791.73 Total related to assets 7,530,517.04 758,725.31 6,771,791.73

Government subsidy projects

This period and assets are included in this period

Newly added to business related/related items Opening balance Other income Other changes Closing balance

Subsidy External Income Relevant Amount

Amount Amount Related technology projects and assets in the park

5,635,854.17 422,095.00 5,213,759.17

Construction funds related to Hongyi Intelligent and

and asset online detection system 1,894,662.87 336,630.31 1,558,032.56

Related construction

Total 7,530,517.04 758,725.31 6,771,791.73

(27) Share capital

This change increases or decreases (+, -)

Item Opening balance

provident fund

Ending balance of new shares issued, bonus shares, others, subtotal

Share transfer

Total number of shares 191,726,000.00 191,726,000.00

(28) Capital reserve

Category Opening balance Increase in the current period Decrease in the current period Ending balance

Capital premium (equity premium) 193,294,752.02 193,294,752.02 Total 193,294,752.02 193,294,752.02

(29) Surplus reserve

Category Balance at the beginning of the period Increase for the period Decrease for the period Ending balance Statutory surplus reserve 15,776,222.05 7,859,186.11 23,635,408.16 Total 15,776,222.05 7,859,186.11 23,635,408.16

(30) Undistributed profits

Item Amount for the current period Amount for the previous period

Undistributed profits at the end of the previous period before adjustment 327,926,350.05 286,989,012.82 Total undistributed profits at the beginning of the period before adjustment (adjustment +, decrease

Undistributed profit at the beginning of the adjusted period 327,926,350.05 286,989,012.82 Plus: Net profit attributable to owners of the parent company for the period 55,376,169.72 40,937,337.23 Less: Appropriation of statutory surplus reserve 7,859,186.11

Undistributed profit at the end of the period 375,443,333.66 327,926,350.05

(31) Operating income and operating costs

Operating income and operating costs are classified by project

Amount for the current period Amount for the previous period

Project

revenue cost revenue cost

Subtotal of main business 517,442,723.21 312,272,405.13 540,172,555.25 310,382,708.51 Drug sales 517,442,723.21 312,272,405.13 540,172,555.25 310,382,708.51
Subtotal of other businesses 1,946,294.81 1,226,429.14 1,264,521.28 683,421.66 Total 519,389,018.02 313,498,834.27 541,437,076.53 311,066,130.17
Operating income for the current period is classified according to the time of revenue recognition.

Revenue recognition time Drug sales Other business income

Confirmed at a certain point in time 517,442,723.21 1,946,294.81

(32) Taxes and surcharges

Item Amount for the current period Amount for the previous period

Property tax 2,327,357.05 2,260,278.39 Land use tax 1,894,619.58 1,894,619.58 Urban maintenance and construction tax 1,855,650.29 1,749,414.69 Education surcharge 1,002,100.10 963,510.60 Local education surcharge 677,346.49 642,340.41 Vehicle and vessel use tax 7,578.00 8,357.04 Stamp tax 257,790.30 305,329.38 Total 8,022,441.81 7,823,850.09

(33) Sales expenses

Item Amount for the current period Amount for the previous period

Business development expenses 42,957,215.75 45,447,008.10 Employee compensation 26,578,062.70 30,410,670.40 Travel expenses 7,709,353.01 8,151,465.46 Sample fee 695,568.60 328,767.31 Vehicle expenses 182,926.26 80,283.29 Office expenses 767,906.68 594,643.30 Conference expenses 2,113,084.39 1,561,993.96 Business entertainment expenses 249,395.70 230,249.39 Depreciation expenses 46,044.66 63,299.99 Others 127,002.73 56,436.73 Total 81,426,560.48 86,924,817.93

(34) Management expenses

Item Amount for the current period Amount for the previous period

Amortization of intangible assets 5,547,859.90 11,083,060.86 Employee compensation 16,127,216.23 17,628,524.52 Depreciation expense 3,976,302.83 4,066,108.02 Intermediary service fee 814,201.56 737,198.30 Office expenses 1,046,914.52 504,584.29 Vehicle expenses 384,811.27 576,213.54 Amortization of right-of-use assets 465,659.82 465,659.82 Transportation expenses 530.50 153,988.00 Entertainment expenses 243,126.46 346,827.99 Water and electricity expenses 288,943.46 579,193.32 Travel expenses 214,343.97 153,988.00 Others 2,196,714.75 2,170,135.16 Total 31,306,625.27 38,465,481.82

(35) Research and development expenses

Item Amount for the current period Amount for the previous period

Process improvement 25,310,413.04 27,451,188.72 Product improvement 6,477,117.43 2,245,711.68 Generic drugs 1,862,931.80 4,988,531.29 New drugs 596,925.98 Total 33,650,462.27 35,282,357.67

(36) Financial expenses

Item Amount for the current period Amount for the previous period

Interest expense 16,926,071.40 15,292,538.38 Less: Interest income 1,965,826.43 1,470,591.88 Handling fees, etc. 547,653.29 68,070.87 Total 15,507,898.26 13,890,017.37

(37) Other income

Item Amount incurred in the current period Amount incurred in the previous period Related to assets/related to income plus deduction 1,788,148.41 3,772,988.63 Related to income

Park technology project construction funds 422,095.00 323,095.00 Related to assets

Hongyi intelligent and online detection system construction 336,630.31 336,630.31 Related to assets

Reward and subsidy funds for improving quality standards 1,350,000.00 Related to income

High-quality development of the pharmaceutical industry and consistency evaluation of generic drugs

540,000.00 related to assets

Price project award and subsidy funds

Technological Innovation Guidance Plan Enterprise Research and Development Financial Subsidy

330,000.00 related to income

help

Job stabilization subsidy 301,272.63 322,755.99 Related to income

Intellectual property patent award 76,000.00 184,000.00 Related to income

Others 236,536.14 187,574.28 Related to income

Total 4,030,682.49 6,477,044.21

(38) Investment income

Item Amount for the current period Amount for the previous period

Bill discount interest -1,595,815.22 -1,040,227.15 Others 526.05

Total -1,595,815.22 -1,039,701.10

(39) Credit impairment losses

Item Amount for the current period Amount for the previous period

Credit impairment losses on notes receivable 2,639,889.63 -6,657,645.00 Credit impairment losses on accounts receivable -4,686,122.12 1,911,389.52 Credit impairment losses on other receivables 189,095.13 1,747,440.87 Total -1,857,137.36 -2,998,814.61

(40) Asset impairment losses

Item Amount for the current period Amount for the previous period

Inventory depreciation loss

234,135.77 2,668,772.06 -

total

234,135.77 2,668,772.06

(41) Income from asset disposal

Item Amount for the current period Amount for the previous period

Disposal of non-current assets not classified as held for sale

27,200,377.42 37,406.80 Gains or losses on disposal of assets

Total 27,200,377.42 37,406.80

(42) Non-operating income

Itemized presentation of non-operating income

Included in non-recurring items for the current period Amount incurred in the current period Amount incurred in the previous period

Amount of profits and losses Others 72,177.58 455,878.35 72,177.58 Business fines 2,414,230.67 2,414,230.67 Total 2,486,408.25 455,878.35 2,486,408.25

(43) Non-operating expenses

Included in non-recurring items for the current period Amount incurred in the current period Amount incurred in the previous period

Amount of profit and loss Loss from damage and scrapping of non-current assets 2,344.89 129,092.31 2,344.89 Loss from inventory scrapping 1,152,143.38

Fines and late fees 168,722.88

Donation expenditure 100,000.00

Others 10,055.53 170,943.04 10,055.53

Total 12,400.42 1,720,901.61 12,400.42

(44) Income tax expenses

Details of income tax expenses

Item Amount for the current period Amount for the previous period

Current income tax expense calculated in accordance with tax laws and relevant regulations 11,164,543.66 10,995,084.82 Deferred income tax expense -308,335.55 186,016.02 Total 10,856,208.11 11,181,100.84

Adjustment process of accounting profits and income tax expenses

Item Amount

Total profit 65,994,175.05 Income tax expense calculated according to statutory/applicable tax rates 9,899,126.26 Impact of different tax rates applicable to subsidiaries -47,640.56 Impact of non-deductible costs, expenses and losses 104,755.71 Deductible temporary differences of deferred income tax assets not recognized in the current period

3,981,628.22 or the impact of deductible losses

Super deduction for R&D expenses -3,075,516.13 Impact of super deduction from wages for placement of disabled persons -6,145.39 Income tax expense 10,856,208.11

(45) Cash flow statement

Cash related to operating activities

(1) Other cash received related to operating activities

Item Amount for the current period Amount for the previous period

Interest income 1,470,591.88

1,965,826.43

Government subsidies 2,044,330.27

2,830,059.96

Received deposits and current funds, etc. 8,091,931.82 106,645,340.38 Total 12,887,818.21 110,160,262.53

(2) Other cash paid related to operating activities

Item Amount for the current period Amount for the previous period

Period expenses 61,615,041.29 40,711,789.57 Payment of deposit and current accounts, etc. 149,920,786.11 59,751,673.41 Total 211,535,827.40 100,463,462.98

Cash related to investing activities

(1) Other cash received related to investment activities

Item Amount for the current period Amount for the previous period

Time deposit certificates and financial management 181,180,000.00 149,000,100.00 Total 181,180,000.00 149,000,100.00

(2) Other cash paid related to investment activities

Item Amount for the current period Amount for the previous period

Time deposit certificates and financial management 294,180,000.00 Total 294,180,000.00

Cash related to financing activities

(1) Other cash received related to financing activities

Item Amount for the current period Amount for the previous period

Transactions with related parties 591,530,000.00 266,160,000.00 Transactions with non-related parties 121,890,000.00 Total 591,530,000.00 388,050,000.00

(2) Other cash paid related to financing activities

Item Amount for the current period Amount for the previous period

Related party transactions 592,825,158.00 266,970,000.00 Non-related party transactions 1,551,598.83 126,390,000.00 Lease payments 600,000.00 600,000.00 Total 594,976,756.83 393,960,000.00

(3) Changes in various liabilities arising from financing activities

Increase in this period Decrease in this period

Item Opening balance

non-cash change non-cash change

Closing balance cash change Cash change

Move, move

Short-term borrowings 292,400,000.00 418,900,000.00 349,400,000.00 361,900,000.00 Due within one year

29,000,000.00 29,000,000.00 Long-term borrowings

Total 292,400,000.00 447,900,000.00 349,400,000.00 390,900,000.00

(46) Supplementary information for cash flow statement

Supplementary information to the cash flow statement

Item Amount incurred in the current period Amount incurred in the previous period 1. Adjust net profit to cash flow from operating activities

Net profit 55,137,966.94 40,683,004.74 plus: asset impairment provision 234,135.77 -2,668,772.06 Credit impairment loss 1,857,137.36 2,998,814.61 Depreciation of fixed assets, depreciation of oil and gas assets, depreciation of productive biological assets, investment

28,354,032.77 29,409,887.27 Depreciation of capital real estate

Depreciation of right-of-use assets 465,659.82

465,659.82 Amortization of intangible assets 10,431,292.78

14,366,963.92 Amortization of long-term deferred expenses 5,993.88

Losses on disposal of fixed assets, intangible assets and other long-term assets (gains calculated in

-27,200,377.42 -37,406.80 (Fill in “-”)

Losses from scrapping of fixed assets (income is listed with “-”) 2,344.89 129,092.31 Net exposure hedging losses (income is listed with “-”)

Loss from changes in fair value (income is listed with a “-” sign)

Financial expenses (income is listed with "-") 16,926,071.40 15,292,538.38 Investment losses (income is listed with "-") 1,595,815.22 -526.05 Decrease in deferred income tax assets (increase is listed with "-") -238,486.58

255,864.99 Increase in deferred income tax liabilities (decreases are indicated with "-") -69,848.97

-69,848.97 Decrease in inventory (increases are listed with "-") -1,232,919.80

22,083,164.18 Decrease in operating receivables (increases are indicated with "-") -380,466,097.49

-19,113,846.34 Increase in operating payables (decreases are listed with "-") 52,598,164.09

-21,864,983.86Others

Net cash flow generated from operating activities -241,599,115.34 81,929,606.14 2. Major investments and financing activities that do not involve cash receipts and payments

debt to capital

Convertible corporate bonds due within one year

Lease fixed assets

Net changes in cash and cash equivalents

Closing balance of cash 64,261,027.69 25,789,666.52 Less: Opening balance of cash 25,789,666.52 15,460,480.20 Add: Closing balance of cash equivalents

Less: Opening balance of cash equivalents

Net increase in cash and cash equivalents 38,471,361.17 10,329,186.32

Cash and cash equivalents

Item Ending balance Beginning balance

Cash 64,261,027.69 25,789,666.52 Of which: Cash on hand 10,670.03 5,764.47 Bank deposits that can be used for payment at any time 64,250,357.66 25,783,902.05

2. Cash equivalents

Balance of cash and cash equivalents at the end of the period 64,261,027.69 25,789,666.52

6. R&D expenditures

(1) Listed by nature of expenses

Item Amount for the current period Amount for the previous period

Employee compensation 11,004,665.39 11,228,499.11 Depreciation and amortization expenses 8,024,194.14 6,778,085.39 Direct investment 13,147,021.38 17,500,270.85 Entrusted external research and development expenses 4,110,990.53 6,408,627.28 Others 1,452,613.77 536,370.27

Total 37,739,485.21 42,451,852.90 Including: Expenditure R&D expenditure 33,650,462.27 35,282,357.67 Capitalized R&D expenditure 4,089,022.94 7,169,495.23

(2) Development expenditures on R&D projects that meet capitalization conditions

Increase in this period Decrease in this period

Item Opening balance

Internal development is recognized as intangible when included

Closing balance other

Expenses Other Period Profit and Loss Assets

Tonic drugs 1,808,787.53 107,825.00 1,916,612.53 Rheumatism and immune system

2,787,954.18 2,787,954.18 Medication

For respiratory system

6,870,756.00 6,400,732.00 470,024.00 medicine

Antibacterial and anti-inflammatory

16,290,022.64 1,225,090.93 1,379,245.28 16,135,868.29 Medication

For nervous system

21,016,292.07 2,028,239.84 4,863,750.94 3,082,641.45 15,098,139.52 Medicine

For digestive system

740,000.00 740,000.00 Medicine

cardiovascular and cerebrovascular systems

1,603,358.49 1,603,358.49 Medication

Dermal external use 1,028,300.00 727,867.17 1,756,167.17 Total 52,145,470.91 4,089,022.94 12,643,728.22 3,082,641.45 40,508,124.18

7. Interests in other entities

(1) Interests in subsidiaries

Structure of enterprise groups

Mainly

Shareholding ratio (%)

Name of subsidiary company Registration place Nature of business Acquisition method Camp

direct indirect

Renhetang Pharmaceutical Co., Ltd. Tablets, granules, hard capsules, under the same control

Linyi City Linyi City 100.00

Division: Powder, API and other pharmaceutical manufacturing and sales merged

for sale

Medical technology development, technology transfer,

Shandong Novell Medical Hospital

Linyi City Linyi City Technical consulting and health food research 50.00 Establishment of Pharmaceutical Technology Co., Ltd.

develop

Note: Linyi Pharmaceutical Group Co., Ltd. and the Company (both under the control of Xiangyu Industrial Group Co., Ltd.) signed a power of attorney on December 24, 2013, and its 20.00% voting rights in Shandong Novels Medical Technology Co., Ltd. were exercised by the company on behalf of the company. The total proportion of the voting rights of the Company was 70.00%, and Shandong Novels Pharmaceutical Technology Co., Ltd. was included in the scope of consolidation.

8. Government subsidies

(1) Liability items involving government subsidies

Current period

Financial report Newly added to business in this period Transferred in this period Others and assets/receipts in this period

Beginning balance Closing balance

Table item Subsidy amount External income Other income Changes Interest-related

Amount

Deferred collection

7,530,517.04 758,725.31 6,771,791.73 Interests related to assets

Total 7,530,517.04 758,725.31 6,771,791.73 ——

(2) Government subsidies included in current profits and losses

Type Amount of current period

Other income 2,242,534.08 Total 2,242,534.08

9. Related party relationships and transactions

(1) The parent company of the company

Registered capital (10,000) Parent company to this company Parent company to this company Name of parent company Registration place Nature of business

Yuan) shareholding ratio (%) Voting rights ratio (%)

Pharmaceutical industry, automobile

Xiangyu Industrial Group

Shandong Linyi Car and real estate investment 30,000.00 59.445 59.445 Co., Ltd.

capital

Note: The actual controllers of the company are Lin Fanru and Shao Changxiu.

(2) Situation of the Company’s subsidiaries

For details, see Note "7. Interests in Other Entities".

(3) Information about other related parties of the enterprise

Names of other related parties Relationship between other related parties and the Company

Linyi Pharmaceutical Group Co., Ltd. is controlled by the same company

Linyi Renhetang Pharmaceutical (Chain) Co., Ltd. is controlled by the same company Linyi Zhongrui Medicine Co., Ltd. is controlled by the same company Linyi Binjiang Real Estate Co., Ltd. is controlled by the same company Wuhai Renhetang Pharmaceutical Chain Co., Ltd. is controlled by the same company Inner Mongolia Renhetang Pharmaceutical Chain Co., Ltd. is controlled by the same company Shandong Xiangyu Asset Management Co., Ltd. is controlled by the same company Shandong Xiangyu Pharmaceutical E-Commerce Co., Ltd. is controlled by the same company Xiangyu (Linyi) Medical Equipment Co., Ltd. Under the control of the same company Baotou Renhetang Pharmaceutical Chain Co., Ltd. Under the control of the same company Linyi Xiangyu Advertising Media Co., Ltd. Under the control of the same company Shandong Xiangyu Development Investment Holdings Co., Ltd. Under the control of the same company Shandong Xiangyu Medical Consulting Co., Ltd. Under the control of the same company Shandong Antier Mother and Baby Care Co., Ltd. Under the control of the same company Linyi Xiangyu Small Loan Co., Ltd. Under the control of the same company Renhetang Pharmaceutical Group Guoyitang Chain (Heze) Co., Ltd. Controlled by the same company Heze Renhetang Pharmaceutical Chain Co., Ltd. Controlled by the same company Jining Renhetang Pharmaceutical Chain Co., Ltd. Controlled by the same company Renhetang Pharmaceutical Group Co., Ltd. Controlled by the same company Shandong Renren Health Technology Co., Ltd. Controlled by the same company Linyi Chengfa Xiangyu Cultural Tourism and Health Care Industry Development Co., Ltd. Parent company's shareholding company Linyi Kangying Equity Investment Fund Management Center (Limited Partnership) Controlled by the same company Linyi Rulin Equity Investment (Fund) Management Co., Ltd. Controlled by the same company Linyi Ruiying Equity Investment Center (Limited Partnership) Controlled by the same company Linyi Lanshan District Renhetang Hospital Co., Ltd. Controlled by the same company Inner Mongolia Renhetang Baozhong Medicine Co., Ltd. Controlled by the same company Renhetang (Inner Mongolia) Pharmaceutical Co., Ltd. Controlled by the same company Xiangyu (Shandong) Internet Hospital Co., Ltd. Controlled by the same company Renhetang (Shandong) Pharmaceutical Co., Ltd. Controlled by the same company Linyi Feixian Renhetang Traditional Chinese Medicine Clinic Co., Ltd. Under the control of the same company Yuncheng Kangqiang Integrated Traditional Chinese and Western Medicine Clinic Co., Ltd. Under the control of the same company Linyi Heying Medical Information Consulting Co., Ltd. Under the control of the same company Linyi Zhonghui Import and Export Co., Ltd. Under the control of the same company Shandong Qingtai Materials Co., Ltd. Under the control of the same company Lin Xiangyu, Xu Jinfang, Wang Chengjian Directors

Zhu Guoying General Manager Nie Changsheng General Manager of the subsidiary Xu Buxi Supervisor, company shareholders (shareholding ratio of more than 5%) Wang Shili and Mao Chuanwei Supervisors

Wang Xiaoxue Secretary of the Board of Directors

(4) Related transactions

Related transactions related to the purchase and sale of goods, provision and receipt of services

Related transactions Amount incurred in the current period Amount incurred in the previous period

Related Easy Pricing

Related transactions Accounting for similar transactions Accounting for similar transactions Name of related party

easy type

Internal transaction

Capacity

Square

decide

formula

policy

and

process amount

Yijin proportion proportional

Amount

The order of Yijin proportions and examples

(%) (%) Linyi Renhetang Pharmaceutical Market Set

Sales of medicines 605,707.79 0.12 1,103,664.79 0.20 (Chain) Co., Ltd. Price

Linyi Pharmaceutical Group Co., Ltd. Market Settings

Sales of medicines 65,649.56 0.01 45,450.62 0.01 Company price

Xiangyu Industrial Group Co., Ltd. Market Determination

Sales of medicines 319,675.58 0.06 233,812.95 0.04 Company price

Linyi Binjiang Real Estate Co., Ltd. Market Settings

Sales of medicines 132,800.88 0.03 90,645.70 0.02 Company price

Wuhai Renhetang Pharmaceutical Market Order

Sales of medicines 14,452.57 0.00 398,396.12 0.07 Chain Co., Ltd. Price

Linyi Xiangyu small loan market

Sales of pharmaceuticals 3,638.05 0.00 8,800.00 0.00 Co., Ltd. Price

Inner Mongolia Renhetang Pharmaceutical Market Settings

Sales of medicines 4,734.51 0.00 2,309,677.20 0.43 Chain Co., Ltd. Price

Shandong Xiangyu Asset Management Market Determination

Sales Pharmaceuticals 506.19 0.00 106.19 0.00 Co., Ltd. Price

Shandong Xiangyu Medical Electronics Market

Sales of medicines 12,682.30 0.00 4,130.27 0.00 Commercial Co., Ltd. Price

Shandong Antier maternal and infant care market set

Sales of medicines 16,067.96 0.00 9,316.81 0.00 Management Co., Ltd. Price

Baotou City Renhetang Pharmaceutical Market Order

Sales of medicines 16,136.46 0.00 1,131,472.02 0.21 Chain Co., Ltd. Price

Renhetang Pharmaceutical Group

market determined

Medical Hall Chain (Heze) Sales of medicines 1,134.68 0.00 381,694.71 0.07

price

Ltd.

Heze City Renhetang Pharmaceutical Market Order

Sales of medicines 25,250.36 0.00 Chain Co., Ltd. price

Jining Renhetang Pharmaceutical Market

Sales of medicines 264,596.99 0.05 Chain Co., Ltd. Price

Renhetang Pharmaceutical Group has market determination

Sales of medicines 106,387.08 0.02 80,467.26 0.01 Co., Ltd. price

Shandong Renren Health Technology Market Determination

Sales of medicines 8,099.12 0.00 2,029.73 0.00 Co., Ltd. price

Renhe Market, Lanshan District, Linyi City

Sales of medicines 9,087.43 0.00 3,796.09 0.00 Tang Hospital Co., Ltd. Price

Renhetang (Shandong) Medical Market Customization

Sales of medicines 12,936,387.08 2.49 10,593,753.32 1.96 Pharmaceutical Co., Ltd. Price

Renhetang (Inner Mongolia) Market Customization

Sales of medicines 140,049.56 0.03

Pharmaceutical Co., Ltd. price

Subtotal —— —— —— 14,393,196.80 16,687,061.13

Related transactions Amount incurred in the current period Amount incurred in the previous period Easy to price

Related crosses Related crosses Account for similar crosses

Related party name

Easy type Easy content

Fang decision-making strategy and

process amount

easy amount

Amount

Proportion of transactions in the same amount category

preface

(%)

(%) Linyi Renhetang Pharmaceutical Market Set

Purchase of medicines 1,601.10 0.00 69.75 0.00 (Chain) Co., Ltd. Price

Renhetang (Shandong) Medical Market Set

Procurement of raw materials 706,983.26 0.18

Pharmaceutical Co., Ltd. price

Total 708,584.36 0.18 69.75

Related leasing situation

Lease recognized in the current period Name of the lessor recognized in the previous period Name of the lessee Information on leased assets

Lease expenses Lease expenses Xiangyu Industrial Group Co., Ltd. Xiangyu Pharmaceutical Co., Ltd. Real estate 465,659.82 465,659.82

Related guarantees

Whether the guarantee starts and the guarantee expires

Guaranteed party Guaranteed party Guarantee amount Date of performance Day

Completed Lin Fanru, Linyi Medical Collection

Xiangyu Pharmaceutical Co., Ltd. 29,000,000.00 2025-1-10 2026-12-21 Futuan Co., Ltd.

Xiangyu Industrial Group Co., Ltd.

Si, Lin Fanru, Linyi Medical

Xiangyu Pharmaceutical Co., Ltd. 9,900,000.00 2025-7-16 2026-7-15 Fuyao Group Co., Ltd., Ma

Longde

Lin Fanru, Zhu Guoying Xiangyu Pharmaceutical Co., Ltd. 30,000,000.00 2025-12-1 2026-11-30 No Lin Fanru, Zhu Guoying Xiangyu Pharmaceutical Co., Ltd. 56,000,000.00 2025-8-5 2026-1-21 No Linyi Pharmaceutical Group Co., Ltd.

Xiangyu Pharmaceutical Co., Ltd. 47,000,000.00 2025-12-18 2026-12-16 No Company

Xiangyu Industrial Group Co., Ltd.

Renhetang Pharmaceutical Co., Ltd. 25,000,000.00 2025-6-18 2026-6-16 Fu Si, Lin Fanru, Nie Changsheng

Xiangyu Industrial Group Co., Ltd.

Renhetang Pharmaceutical Co., Ltd. 40,000,000.00 2025-6-26 2026-6-26 Fu Si, Lin Fanru, Shao Changxiu

Nie Changsheng, Wang Shuxia Renhetang Pharmaceutical Co., Ltd. 10,000,000.00 2025-3-7 2026-3-6 No Lin Fanru, Shao Changxiu Renhetang Pharmaceutical Co., Ltd. 9,000,000.00 2025-3-11 2026-3-9 No Lin Fanru Renhetang Pharmaceutical Co., Ltd. 10,000,000.00 2025-4-29 2026-4-29 No Linyi Pharmaceutical Group Co., Ltd.

Renhetang Pharmaceutical Co., Ltd. 30,000,000.00 2025-5-22 2026-5-22 Fu Si, Lin Fanru

Xiangyu Industrial Group Co., Ltd.

Renhetang Pharmaceutical Co., Ltd. 60,000,000.00 2025-9-20 2026-9-19 Fu Si, Lin Fanru

Total 355,900,000.00

Fund lending situation of related parties

Related party placements/lendings Amount Description

Deposit 590,430,816.00

Xiangyu Industrial Group Co., Ltd.

Removed 589,853,601.78

5． Key management personnel compensation

Remuneration of key management personnel Amount incurred in the current period Amount incurred in the previous period

Total 2,559,657.95 2,266,948.12

(5) Accounts receivable and payable from related parties

Items receivable

Ending balance Beginning balance

Project name Related parties

Book balance Provision for bad debts Book balance Provision for bad debts

Linyi Renhetang Medicine (Lianyi

Notes receivable 2,600,000.00 171,176.36 5,230,000.00 699,490.00 Lock) Co., Ltd.

Renhetang (Shandong) Pharmaceutical Co., Ltd.

Notes receivable 64,215,588.33 6,924,391.19 25,400,000.00 1,884,300.00 Company

Yanhetang Pharmaceutical Group Chinese Medical Hall

Notes receivable 246,929.90 1,901.36

Lock (Heze) Co., Ltd.

Jining Renhetang Pharmaceutical Chain Co., Ltd.

Notes receivable 36,138.00 278.26

Ltd.

Linyi Renhetang Medicine (Lianyi

Accounts receivable 5,627,835.23 4,320,680.73 7,160,094.93 3,963,674.81

lock) co., ltd.

Accounts receivable Linyi Pharmaceutical Group Co., Ltd. 23,150.00 2,915.20 22,574.00 3,541.86

Accounts receivable Xiangyu Industrial Group Co., Ltd. 830,644.40 344,720.28

Accounts receivable Linyi Binjiang Real Estate Co., Ltd. 2,215,973.80 1,791,189.31 2,065,908.80 1,317,378.45

Wuhai Renhetang Pharmaceutical Chain Co., Ltd.

Accounts receivable 480,615.62 174,195.76 487,743.22 85,986.15 Co., Ltd.

Inner Mongolia Renhetang Pharmaceutical Chain Co., Ltd.

Accounts receivable 3,408,607.38 1,225,599.90 1,940,737.34 279,504.61 Co., Ltd.

Shandong Xiangyu Pharmaceutical E-Commerce Co., Ltd.

Accounts receivable 4,989.00 628.25 2,280.00 357.73 Co., Ltd.

Baotou City Renhetang Pharmaceutical Chain Co., Ltd.

Accounts receivable 1,145,517.58 388,354.80 1,145,816.38 161,440.71 Co., Ltd.

Yanhetang Pharmaceutical Group Chinese Medical Hall

Accounts receivable 647,801.08 308,070.13 893,437.90 229,167.27 Lock (Heze) Co., Ltd.

Heze City Renhetang Pharmaceutical Chain Co., Ltd.

Accounts receivable 30,854.80 12,219.22 31,211.20 5,641.71 Co., Ltd.

Jining Renhetang Pharmaceutical Chain Co., Ltd.

Accounts receivable 264,448.48 101,962.76 305,058.60 46,710.02

Ltd.

Accounts receivable Renhetang Pharmaceutical Group Co., Ltd. 594,380.00 329,746.26 593,213.00 290,404.43

Linyi Xiangyu Small Loan Co., Ltd.

Accounts receivable 23,730.00 11,646.07 24,090.00 9,877.60 Co., Ltd.

Shandong Xiangyu Asset Management Co., Ltd.

Accounts receivable 120.00 18.83 Co., Ltd.

Renhetang Hospital, Lanshan District, Linyi City

Accounts receivable 3,293.60 516.77 Co., Ltd.

Shandong Renren Health Technology Co., Ltd.

Accounts receivable 1,980.00 310.66 Division

Renhetang (Shandong) Pharmaceutical Co., Ltd.

Accounts receivable 23,049,238.77 4,334,094.01 22,434,653.14 2,958,322.11Company

Renhetang (Inner Mongolia) Pharmaceutical Co., Ltd.

Accounts receivable 158,256.00 19,928.67

Ltd.

Linyi Heying Medical Information Consulting Co., Ltd.

Prepayment 149,785,122.63

Ltd.

Total - 254,559,176.60 20,118,978.24 68,572,856.51 12,281,364.00

Payable items

Project name Related party Closing balance Opening balance

Other payables Xiangyu Industrial Group Co., Ltd. 412,130.57 1,215,827.75 Other payables Linyi Renhetang Pharmaceutical (Chain) Co., Ltd. 173,066.71 Other payables Nie Changsheng 4,500,000.00

Accounts payable Linyi Renhetang Pharmaceutical (Chain) Co., Ltd. 11,709.39

Total —— 4,923,839.96 1,388,894.46

10. Commitments and contingencies

(1) Commitments

As of the balance sheet date, the company does not need to disclose important commitments.

(2) Contingencies

As of the balance sheet date, the company does not need to disclose important contingencies.

11. Post-balance sheet events

As of the reporting date, the Company has no post-balance sheet events that need to be disclosed.

12. Notes on main items of the parent company’s financial statements

(1) Accounts receivable

Disclosure by age

Aging Closing balance Opening balance

Within 1 year 42,476,740.42 52,351,396.13 1 to 2 years 19,480,276.08 12,447,689.35 2 to 3 years 7,623,140.63 16,451,641.82 3 to 4 years 12,693,443.24 7,348,238.83 4 to 5 years 6,567,751.52 21,943,284.30 More than 5 years 68,108,406.60 46,557,538.91 Less: bad debt provision 103,987,463.21 99,466,222.09

Total 52,962,295.28 57,633,567.25

Classified disclosure according to bad debt accrual method

Ending balance

13. Supplementary information

(1) Detailed statement of non-recurring gains and losses for the current period

Item Amount Remarks

Gains and losses on disposal of non-current assets, including write-offs for which asset impairment provisions have been made

27,198,032.53 points

2． Government subsidies included in current profits and losses (closely related to corporate business, according to national

2,239,484.61 enterprises enjoy unified standard quotas or quantitative government subsidies (excluding government subsidies)

Other non-operating income and expenses other than the above items 2,476,352.72 Less: Impact on income tax 4,787,080.48 Impact on minority shareholders’ equity

Total 27,126,789.38

(2) Return on net assets and earnings per share

Weighted average return on equity Basic earnings per share Profit for the reporting period

(%)

This year Previous year This year Net profit attributable to the company's ordinary shareholders in the previous year 7.32 5.78 0.29 0.21 Net profit attributable to the company's ordinary shareholders after deducting non-recurring gains and losses

3.73 5.39 0.15 0.20Profit

Xiangyu Pharmaceutical Co., Ltd.

April 30, 2026

Attachment: Adjustments and Differences in Accounting Information

1. Changes in accounting policies, changes in accounting estimates or correction of major errors, etc.

(1) Retrospective adjustments or restatements of accounting data

□Changes in accounting policies □Correction of accounting errors □Other reasons √Not applicable

(2) Reasons and effects of changes in accounting policies, accounting estimates or correction of major accounting errors

□Applicable √Not applicable

2. Non-recurring profit and loss items and amounts

Unit: Yuan

Item Amount

Gains and losses from disposal of non-current assets, including the write-off of asset impairment provisions 27,198,032.53 2. Government subsidies included in current profits and losses (closely related to corporate business, in accordance with national unified

2,239,484.61 standard fixed or quantitative government subsidies are excluded)

Other non-operating income and expenses other than the above items 2,476,352.72

Total non-recurring gains and losses 31,913,869.86 Less: Income tax impact 4,787,080.48 Impact on minority shareholders’ equity (after tax)

Net non-recurring gains and losses 27,126,789.38

3. Differences in accounting data under domestic and overseas accounting standards

□Applicable √Not applicable