Hengdian Group DMEGC Co., Ltd. 2025 Annual Internal Control Evaluation Report
In accordance with the "Basic Norms for Enterprise Internal Control" and its supporting guidelines, as well as other internal control regulatory requirements (hereinafter referred to as the "Enterprise Internal Control Norms System"), and based on the internal control system and evaluation methods of Hengdian Group DMEGC Co., Ltd. (hereinafter referred to as the "Company"), and on the basis of daily supervision and special supervision of internal control, we have evaluated the effectiveness of the Company's internal control as of December 31, 2025 (the "Internal Control Evaluation Report Base Date").
I. Important Statement
In accordance with the requirements of the Enterprise Internal Control Norms System, the establishment, improvement, and effective implementation of internal control, the evaluation of its effectiveness, and the truthful disclosure of the internal control evaluation report are the responsibilities of the Company's Board of Directors. The Audit Committee supervises the establishment and implementation of internal control by the Board of Directors. The management is responsible for organizing and leading the daily operation of the Company's internal control. The Company's Board of Directors, Audit Committee, directors, and senior management guarantee that the content of this report contains no false records, misleading statements, or major omissions, and shall bear individual and joint legal responsibility for the authenticity, accuracy, and completeness of the report's content.
The objective of the Company's internal control is to reasonably ensure that business operations are legal and compliant, assets are secure, financial reports and related information are true and complete, operational efficiency and effectiveness are improved, and development strategies are achieved. Due to the inherent limitations of internal control, it can only provide reasonable assurance for the achievement of these objectives. In addition, due to changes in circumstances that may render internal control inappropriate, or a decrease in the degree of adherence to control policies and procedures, there is a certain risk in inferring the effectiveness of future internal control based on the results of the internal control evaluation.
II. Internal Control Evaluation Conclusion
Based on the identification of material weaknesses in the Company's financial reporting internal control, as of the Internal Control Evaluation Report Base Date, there are no material weaknesses in financial reporting internal control. The Board of Directors believes that the Company has maintained effective financial reporting internal control in all material aspects in accordance with the Enterprise Internal Control Norms System and relevant regulatory requirements.
Based on the identification of material weaknesses in the Company's non-financial reporting internal control, as of the Internal Control Evaluation Report Base Date, the Company has not found any material weaknesses in non-financial reporting internal control.
No factors have occurred between the Internal Control Evaluation Report Base Date and the date of issuance of the Internal Control Evaluation Report that affect the conclusion of the internal control effectiveness evaluation.
III. Internal Control Evaluation Work
(I) Scope of Internal Control Evaluation
The Company determines the main entities, businesses, and matters to be included in the evaluation scope and high-risk areas based on the principle of risk orientation. The main entities included in the evaluation scope are: the Company and all its wholly-owned subsidiaries.
The scope of the internal control evaluation covers various businesses and matters of the Company and all its wholly-owned subsidiaries, focusing on the following high-risk areas: human resource management risks, capital operation risks, procurement management risks, asset management risks, sales and collection management risks, research and development management risks, engineering project management risks, external guarantee management risks, comprehensive budget management risks, contract management risks, and information system security management risks.
The main businesses and matters included in the evaluation scope are: