002072SZSE

Explanation on the Elimination of Major Impacts Related to the Negative Opinion in the 2019 Internal Control Audit Report by the Board of Directors

Kairuide Co., Ltd.·April 28, 2022

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The board of directors of Kaierde Holdings Co., Ltd. has addressed the significant impacts related to the negative opinion in the 2019 internal control audit report. Key issues included unresolved internal control deficiencies and ineffective execution of internal controls. The company has implemented corrective measures, including improved management processes and legal compliance, resulting in the elimination of these major impacts.

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Explanation on the Elimination of Major Impacts Related to the Negative Opinion in the 2019 Internal Control Audit Report

The Asia-Pacific (Group) Accounting Firm (Special General Partnership) issued a negative internal control audit report for Kaierde Holdings Co., Ltd. (hereinafter referred to as "the Company" or "Kaierde") for the year 2019 (Audit No. A Special Review (2020) 0127). The board of directors now provides an explanation regarding the elimination of significant impacts related to the negative opinion in the 2019 internal control audit report as follows:

I. Overview of Significant Issues Related to the Negative Opinion in the 2019 Internal Control Audit Report

According to the internal control audit report (Audit No. A Special Review (2020) 0127), the Company’s internal control over financial reporting for 2019 had the following significant deficiencies:

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