Xinling Electric Power Co., Ltd. To All Shareholders:
In accordance with the requirements of the "Basic Norms for Enterprise Internal Control" and its supporting guidelines, and other internal control regulatory requirements (hereinafter referred to as the "Internal Control System"), combined with Xinling Electric Power Co., Ltd.'s (hereinafter referred to as the "Company") internal control system and evaluation methods, and based on daily internal control supervision and special supervision, an evaluation was conducted on the effectiveness of the Company's internal control as of December 31, 2025 (the evaluation report base date).
I. Important Statement
In accordance with the requirements of the Internal Control System, establishing and improving internal control, evaluating its effectiveness, and truthfully disclosing 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 is free from any false records, misleading statements, or material omissions, and shall bear individual and joint legal liability 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 management is legal and compliant, assets are safe, financial reports and related information are true and complete, operating 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 achieving these objectives. Furthermore, changes in circumstances may render internal control inappropriate, or reduce the degree of compliance with control policies and procedures, and there is a certain risk in inferring the future effectiveness of internal control based on the results of the internal control evaluation.
II. Conclusion of Internal Control Evaluation
Based on the identification of material weaknesses in the Company's financial reporting internal control, as of the evaluation report base date, the Company has no material weaknesses in financial reporting internal control. The Company's Board of Directors believes that the Company has maintained effective financial reporting internal control in all material aspects in accordance with the requirements of the Internal Control System and relevant regulations.
Based on the identification of material weaknesses in the Company's non-financial reporting internal control, as of the evaluation report base date, the Company has found no material weaknesses in non-financial reporting internal control.
No factors have occurred between the evaluation report base date and the issuance date 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 included in the evaluation scope, as well as high-risk areas, based on a risk-oriented approach. The main entities included in the evaluation scope are the Company and its subsidiaries within the consolidated financial statements. The total assets of the entities included in the evaluation scope account for 100% of the total assets of the Company's consolidated financial statements, and the total operating revenue accounts for 100% of the total operating revenue of the Company's consolidated financial statements.
The main businesses and matters included in the evaluation scope include: internal control environment, risk assessment, internal control activities, information and communication, and internal supervision. High-risk areas of focus include: control of monetary funds, procurement business, asset management, and sales business. The details are as follows:
- Internal Control Environment