ADAMA Ltd.
Assessment Report on Internal Control for 2025
All Shareholders of ADAMA Ltd.:
We evaluated the effectiveness of the internal control for the Company as of December
Standards for Enterprise Internal Control", its supporting guidelines and other internal control
regulatory requirements (hereinafter referred as the internal control system of enterprises), while
taking into consideration the internal control mechanism and assessment methods of our
Company (hereinafter referred to as “ADAMA” or the “Company") and also on the basis of daily
and special supervision.
I. Important Statement
In accordance with the internal control system of enterprises, the board of directors of a
company holds the responsibility to establish and improve the internal control, evaluate its
effectiveness and truthfully disclose the corresponding assessment report. The board of
supervisors of a company supervises the establishment and implementation of the internal
control by the board of directors. The management team is responsible for initiating and
organizing daily activities of the enterprise internal control. The board of directors, board of
supervisors and all members thereof, including directors and supervisors, as well as the senior
management of the company, confirm that the report is true, accurate and complete, does not
contain any misleading statements or material omissions and assume joint and several legal
liability arising therefrom.
The goal of the internal control is to ensure that the business management of a company is
legitimate and compliant, the company’s assets are secured and that its financial reporting and
related reported information are true and complete. It is also aimed at improving operational
efficiency and effectiveness, and promoting the realization of development strategies. Due to the
inherent limitations of an internal control, it can only provide reasonable assurance to achieve
those objectives mentioned above. Moreover, changes in circumstances may cause the internal
control to be inappropriate, or reduce compliance with policies and procedures. Therefore, there
is a risk in speculating the effectiveness of future internal controls based on these assessment
results.
II. Conclusion of the Internal Control Assessment
reporting on the base date of the internal control assessment report?
□ Yes √ No
√ Valid □ Invalid
According to the internal control's criteria for identification of material deficiencies in the
internal control over financial reporting, there is no such deficiency as of the base date of
the internal control assessment report. The board of directors of the Company believes
that the Company has managed an effective internal control of its financial report in all
major aspects in accordance with the requirements of the internal control system and
related regulations.
reporting
□ Yes √ No
According to the internal control's criteria for identification of material deficiencies in the
internal control related to non-financial reporting of the Company, no such deficiency
was found on the base date of the assessment report.
the issuance date of the assessment report of the internal control
□ Applicable √ Not Applicable
There are no factors affecting the effectiveness of the assessment conclusion as of the
base date until the issuance date of the assessment report of the internal control.
assessment conclusion on the internal control over financial reporting
√ Yes □ No
is consistent with that of the assessment report of the company’s internal control
√ Yes □ No
III. Assessment of Internal Control
(I) Scope of Internal Control Assessment
The Company confirms the main units, businesses, items and highly risky areas to be
included in the assessment scope according to the risk-oriented principle.
Major subsidiaries for the manufacturing, formulation, R&D and marketing.
Index Proportion (%)
Total Assets of Units within the Assessment Scope Compared to Total Assets
in the Consolidated Statements of the Company
Total Operating Income of Units within the Assessment Scope Compared to
Total Operating Income in the Consolidated Statements of the Company
Financial Reporting, ITGC, Sales, Assets, Payroll, Purchase, Inventory, Treasury, Entity-
level controls, Comprehensive Budget, Research and Development, Related Parties,
Contract management.
Sales, Assets, Purchase, Treasury (including derivatives)
cover the main aspects of the company's operation and management. Is there any material
omission?
□ Yes √ No
□ Yes √ No
None
(II) Work Basis of the internal control assessment and the identification standards of deficiencies
The Company conducted the internal control evaluation based on the requirements of the
internal control system and relevant external supervision regulations.
deficiency compared to previous years
□ Yes √ No
The quantitative criteria for deficiency assessment in the internal control of the financial reports as
was determined by the Company are as follows:
Index Quantitative Criteria for Quantitative Criteria for a Quantitative Criteria
a Material Deficiency Significant Deficiency for a General
Deficiency
Misstatement The misstatement in The misstatement in financial Resulting in other
in Financial financial report relates report relates to an amount that misstatement related
Report to an amount that is is greater than or equal to amounts.
greater than or equal to RMB 50 million, but less than
RMB 100 million. RMB 100 million.
The qualitative criteria for deficiency assessment in the internal control of the financial reports as was
determined by the Company are as follows:
Classification Qualitative Criteria
by Features
Material Resulting in an adverse opinion or disclaimer of opinion, by the external
Deficiency auditor, on the Company’s financial statements; or resulting in a material
correction of the Company’s publicly announced financial statements.
Significant Resulting in a qualified opinion, by the external auditor, on the Company’s
Deficiency financial statements; or resulting in an adverse opinion or disclaimer of
opinion, by the external auditor, on the Company’s material subsidiaries’ (i.e.
Solutions) financial statements; or resulting in a significant correction of the
Company’s material subsidiaries’ (i.e. Solutions) publicly announced
financial statements. In addition, where no internal control or no relevant
compensation control is established or implemented for the accounting
treatment for unusual or special transactions.
General Resulting in an unqualified opinion, with an explanatory paragraph, by the
Deficiency external auditor, on the Company’s financial statements; or resulting in a
qualified opinion, or unqualified opinion with an explanatory paragraph, by
the external auditor, on the Company’s subsidiaries’ financial statements.
The quantitative criteria for a deficiency assessment in the internal control over non-financial
reporting as was determined by the Company are as follows:
Index Quantitative Criteria of Quantitative Criteria of Quantitative Criteria of
Material Deficiency Significant Deficiency General Deficiency
Asset Loss Asset Loss ≥ RMB 150 RMB 80 million ≤ Asset Asset Loss < 80 million
million Loss < 150 million RMB RMB
The qualitative criteria for a deficiency assessment in the internal control over non-financial
reporting as was determined by the Company are as follows:
Classification Qualitative Criteria
by Features
Material 1) Fraud committed in the Company by any of its directors, supervisors and
Deficiency senior management personnel;
in a material effect on the Company's business;
system;
causing a material negative impact on the Company's business (generally
related to matters that need to be approved by the shareholders meeting or
the board of directors).
Significant 1) Significant fraud committed by any department head of the Company;
Deficiency 2) Significant fraud committed by a head of any of the Company’s material
subsidiaries;
significant fines as well as a significant effect on the Company's business ;
management system; Material design deficiencies are found in the relevant
management systems of subsidiaries;
significant effect on the Company's business (generally referred to matters
subject to senior management's decision);
significant negative impact on the Company's business (generally referred
to matters that need to be decided by the shareholders’ meeting or the
board of directors).
General 1) Fraud committed by any other personnel in the Company;
Deficiency 2) Fraud committed by any other personnel in material subsidiaries;
materially violates material laws and regulations, resulting in negative
feedback from regulatory authorities;
found in material subsidiaries.
of the Company; other design deficiencies exist in the relevant
management system of the material subsidiaries;
impact on the Company's business;
negative impact on the Company's business.
(III) Identification and rectification of internal control deficiencies
financial reporting
Whether the company has a material deficiency in the internal control of the financial reporting during the
reporting period
□ Yes √ No
Whether the company has a significant deficiency in the internal control of the financial reporting during the
reporting period
□ Yes √ No
The general internal control deficiencies identified by the Company do not affect the realization of the control
objectives; the Company acknowledges with great importance the general deficiencies found during the
reporting period and has proposed remediation opinions and actively formulated corresponding plans for their
implementation.
company has a material deficiency in the internal control over financial reporting that has not been
rectified
□ Yes √ No
company has a significant deficiency in the internal control over financial reporting that has not been
rectified
□ Yes √ No
Whether the company identified any material deficiency in the internal control over non-financial reporting
during the reporting period
□ Yes √ No
Whether the company identified any significant deficiency in the internal control over non-financial reporting
during the reporting period
□ Yes √ No
The general deficiency identified by the company does not affect the realization of the control objectives; the
Company acknowledges with great importance the general deficiency found during the reporting period and
has proposed rectification opinions and actively formulated corresponding plans for implementation.
the company has a material deficiency in the internal control not related to financial reporting that has
not been rectified
□ Yes √ No
company has a significant deficiency in the internal control not related to financial reporting that has
not been rectified
□ Yes √ No
IV. Other important matters related to internal control
□ Applicable √ Not Applicable
□ Applicable √ Not Applicable
□ Applicable √ Not Applicable
Board of Directors
ADAMA Ltd.
March 26, 2026
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