Kanghong Pharmaceutical: Raised Funds Management System (December 2025)
Chengdu Kanghong Pharmaceutical Group Co., Ltd.
Raised funds management system
Chapter 1 General Principles
Article 1 In order to standardize the management of raised funds of Chengdu Kanghong Pharmaceutical Group Co., Ltd. (hereinafter referred to as the "Company"), improve the efficiency of the use of raised funds, and protect the interests of investors to the greatest extent, in accordance with the "Company Law of the People's Republic of China", "Securities Law of the People's Republic of China" and "Measures for the Administration of Securities Issuance Registration of Listed Companies" This system is formulated in accordance with the requirements of the "Shenzhen Stock Exchange Stock Listing Rules", "Supervisory Rules for Fund Raising by Listed Companies" and other relevant laws and regulations and the "Articles of Association of Chengdu Kanghong Pharmaceutical Group Co., Ltd." (hereinafter referred to as the "Articles of Association"), taking into account the actual situation of the company.
Article 2 The term “raised funds” as mentioned in this system refers to the funds raised by a company from investors through the issuance of stocks or other equity securities and used for specific purposes, excluding funds raised by the company for the implementation of equity incentive plans.
Article 3 The funds raised by the company shall be earmarked for specific purposes. The company's use of raised funds should comply with national industrial policies and relevant laws and regulations, practice the concept of sustainable development, and fulfill social responsibilities. In principle, it should be used for its main business, which is conducive to enhancing the company's competitiveness and innovation capabilities. If the China Securities Regulatory Commission has other regulations on the use of companies issuing shares or convertible corporate bonds to purchase assets and raise supporting funds, such regulations shall prevail.
The company's board of directors shall be responsible for establishing and improving the company's fund-raising management system and ensuring the effective implementation of the system.
Article 4 If the investment project with raised funds is implemented through the company's subsidiaries or other enterprises controlled by the company, this system shall apply to the subsidiaries or other controlled enterprises.
Article 5 The company’s directors and senior managers shall be diligent and responsible, urge the company to standardize the use of raised funds, ensure the safety of the company’s raised funds, and shall not control the company to change the use of raised funds without authorization or in disguised form.
Article 6 The controlling shareholder, actual controller and other related parties of the company shall not occupy the funds raised by the company, nor may they use the funds raised by the company to invest in projects to obtain improper benefits.
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If the company discovers that the controlling shareholders, actual controllers and other related parties have appropriated the raised funds, it shall promptly request the return and disclose the reasons for the occupation, the impact on the company, the repayment and rectification plan and the progress of rectification.
Chapter 2 Special Account Storage of Raised Funds
Article 7 The company shall carefully select a commercial bank and open a special account for raised funds (hereinafter referred to as the "special account"). The raised funds shall be deposited in the special account decided by the board of directors for centralized management and use. The special account shall not store non-raised funds or use them for other purposes.
If a company has raised funds twice or more, it shall set up an independent special account for raised funds.
The portion of the actual net amount of raised funds that exceeds the planned amount of raised funds (hereinafter referred to as "excess funds") shall also be deposited in a special raised funds account for management.
Article 8 The company shall sign a three-party supervision agreement (hereinafter referred to as the "Agreement") with the sponsor or independent financial consultant and the commercial bank where the raised funds are deposited (hereinafter referred to as the "commercial bank") at the latest one month after the raised funds are received. After the agreement is signed, the company can use the raised funds.
The agreement should at least include the following:
(1) The company shall centrally deposit the raised funds in a special account;
(2) The account number of the special account for raised funds, the items of raised funds involved in the special account, and the deposit amount;
(3) If the company’s cumulative withdrawals from the special account at one time or within 12 months exceed RMB 10 million or 5% of the net raised funds, the company and the commercial bank shall promptly notify the sponsor or independent financial advisor;
(4) The commercial bank shall issue bank statements to the company every month and send a copy to the sponsor or independent financial consultant;
(5) The sponsor or independent financial consultant can go to the commercial bank to inquire about the special account information at any time;
(6) The supervisory responsibilities of the sponsor or independent financial advisor, the notification and cooperation responsibilities of the commercial bank, and the supervision methods of the sponsor or independent financial advisor and the commercial bank on the use of funds raised by the company;
(7) The commercial bank fails to issue bank statements or bank statements to the sponsor or independent financial consultant in a timely manner three times.
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If the company notifies the special account of large withdrawals and fails to cooperate with the sponsor or independent financial consultant in inquiring and investigating the information of the special account, the company may terminate the agreement and cancel the special account for raised funds;
(8) Rights, obligations and liability for breach of contract of the company, commercial bank, sponsor or independent financial advisor. The company shall promptly announce the main contents of the agreement after the signing of the above agreement.
If a company implements an investment project with raised funds through its holding subsidiary, a tripartite agreement shall be signed by the company, the holding subsidiary that implements the investment project with raised funds, a commercial bank, and the sponsor or independent financial advisor. The company and its holding subsidiary shall be regarded as a common party.
If the above agreement is terminated early before the expiration of the validity period, the company shall sign a new agreement with the relevant parties within one month from the date of termination of the agreement and make a timely announcement.
If the raised funds are invested in overseas projects, the company and the sponsor or independent financial consultant shall take effective measures to ensure the safety and standardized use of the raised funds invested in overseas projects, and disclose relevant specific measures and actual results in a special report on the storage, management and actual use of the raised funds.
Chapter 3 Use of Raised Funds
Article 9 The company shall use the raised funds prudently, ensure that the use of raised funds is consistent with the commitments in the issuance application documents, and shall not arbitrarily change the investment direction of the raised funds. When any situation occurs that seriously affects the normal progress of the investment plan of raised funds, the company shall make a timely announcement.
Article 10 The company’s application, approval, execution authority and procedures for the use of raised funds are as follows:
(1) The project implementation department that specifically uses the raised funds shall fill in the project payment form, prepare a payment approval summary form after being reviewed by the company's relevant cost personnel and financial personnel, and submit it to the company's business leader and financial director for review and approval before payment is made.
(2) Within one week after the end of each quarter, the financial department should report the payment status of the raised funds in that quarter to the secretary of the company's board of directors. The secretary of the board of directors should verify whether the use of raised funds complies with the use plan disclosed in the raised funds documents. If there is any discrepancy, it should be promptly submitted to the company's board of directors to perform necessary procedures in accordance with laws, regulations, the Articles of Association and this system.
Article 11 In principle, the raised funds shall be used for the company’s main business, and the raised funds shall not be used for securities
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Investments, derivatives transactions and other high-risk investments or providing financial assistance to others are not allowed to invest directly or indirectly in companies whose main business is the purchase and sale of securities.
The company shall not use the raised funds for pledge, entrusted loans or other investments that change the purpose of the raised funds in a disguised manner.
Article 12 The company shall ensure the authenticity and fairness of the use of raised funds, prevent the raised funds from being occupied or misappropriated by related parties, and take effective measures to prevent related parties from using the raised funds to invest in projects to obtain improper benefits.
Article 13 If the following circumstances occur in an investment project with raised funds, the company shall promptly re-evaluate the feasibility, expected income, etc. of the project and decide whether to continue to implement the project:
(1) There are major changes in the market environment involved in the investment project with raised funds;
(2) After the raised funds are received, the investment project with raised funds is put on hold for more than one year;
(3) The completion period of the latest investment plan of raised funds has exceeded and the investment amount of raised funds has not reached 50% of the relevant plan amount;
(4) Other abnormal situations occur in investment projects with raised funds.
If the company has the above-mentioned circumstances, it shall disclose it in a timely manner. The company shall disclose the progress of the project, the reasons for abnormalities, and the specific circumstances of re-evaluation during the reporting period in the latest periodic report. If it is necessary to adjust the investment plan of raised funds, it shall also disclose the adjusted investment plan of raised funds; if it involves changing the investment project of raised funds, the relevant review procedures for changing the use of raised funds shall apply.
Article 14 If an investment project with raised funds is not expected to be completed within the original time limit and the company intends to postpone its implementation, it shall be reviewed and approved by the board of directors in a timely manner, and the sponsor or independent financial advisor shall issue a clear opinion. The company should promptly disclose the specific reasons for failure to complete the project on schedule, explain the current deposit and account status of the raised funds, whether there are any circumstances that affect the normal progress of the plan to use the raised funds, the expected completion time and phased investment plan, measures to ensure on-schedule completion after extension, etc.
Article 15 When a company uses raised funds for the following matters, it shall be reviewed and approved by the board of directors, and shall be disclosed in a timely manner after the sponsor or independent financial adviser issues clear opinions:
(1) Use raised funds to replace self-owned funds that have been invested in investment projects with raised funds in advance;
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(2) Use temporarily idle raised funds for cash management;
(3) Use temporarily idle raised funds to temporarily supplement working capital;
(4) Change the use of raised funds;
(5) Change the implementation location of investment projects with raised funds;
(6) Use surplus funds to raise funds;
(7) The excess raised funds will be used for projects under construction and new projects, to repurchase the company's shares and cancel them in accordance with the law. If a company changes the purpose of raised funds, uses excess raised funds, or uses surplus raised funds to meet the standards for review by the shareholders' meeting, it must also be reviewed and approved by the shareholders' meeting.
If relevant matters involve related transactions, asset purchases, external investments, etc., review procedures and information disclosure obligations must also be performed in accordance with the relevant provisions of the Shenzhen Stock Exchange Stock Listing Rules.
Article 16 After the completion of a single or all investment projects with raised funds, if the remaining funds (including interest income) are less than 10% of the net raised funds of the project, the company shall perform corresponding procedures in accordance with paragraph 1 of Article 15 of this system when using the remaining funds.
If the surplus funds (including interest income) reach or exceed 10% of the net amount of funds raised for the project, the company's use of the surplus funds must also be reviewed and approved by the shareholders' meeting.
If the remaining funds (including interest income) are less than 5 million yuan or less than 1% of the net raised funds of the project, they may be exempted from the aforementioned procedures, and their use shall be disclosed in the annual report.
Article 17 If a company uses raised funds to replace self-raised funds that have been invested in investment projects with raised funds in advance, the company shall, in principle, implement the replacement within six months after the raised funds are transferred into the special account.
During the implementation of investment projects with raised funds, in principle, payment should be made directly with raised funds. If it is really difficult to pay directly with raised funds in matters such as paying personnel salaries, purchasing overseas products and equipment, etc., replacement can be implemented within six months after payment with self-raised funds.
If the company has disclosed in the issuance application documents that it intends to use raised funds to replace pre-invested self-raised funds and the pre-invested amount is determined, it shall make an announcement before the replacement is implemented.
Article 18 The company may conduct cash management of temporarily idle raised funds, and cash management shall be through
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It is implemented through a special account for raised funds or a publicly disclosed special settlement account for products. If cash management is implemented through a product-specific settlement account, the account shall not store non-raised funds or be used for other purposes. The implementation of cash management shall not affect the normal progress of the investment plan of raised funds. When opening or canceling a product-specific settlement account, the company shall make a timely announcement.
Cash management products should meet the following conditions:
(1) Products with high security such as structured deposits and certificates of deposit must not be non-principal guaranteed;
(2) The liquidity is good, and the product term shall not exceed twelve months;
(3) Cash management products are not allowed to be pledged.
Article 19 If a company uses idle raised funds for cash management, it shall promptly announce the following content after the board of directors meeting:
(1) Basic information on the funds raised this time, including the time when the funds are received, the amount of funds raised, the net amount of funds raised and the investment plan, etc.;
(2) The use of raised funds and the reasons why raised funds are idle;
(3) The amount and period of cash management, whether there is any disguised change in the use of raised funds, and measures to ensure that the normal progress of investment projects with raised funds will not be affected;
(4) The income distribution method, investment scope and safety of cash management products, the safety analysis provided by the product issuer, the risk control measures taken by the company to ensure the safety of funds, etc.;
(5) Opinions issued by the sponsor or independent financial advisor.
When a company encounters major adverse factors such as the deterioration of the financial status of the issuer of cash management products or the loss of invested products, it should promptly disclose risk warning announcements and explain the risk control measures taken by the company to ensure the safety of funds.
Article 20 If a company uses idle raised funds to supplement working capital, it shall do so through a special account for raised funds, which shall be limited to production and operation activities related to the main business, and shall meet the following conditions:
(1) Shall not change the use of raised funds in any disguised manner or affect the normal progress of the investment plan of raised funds;
(2) The last raised funds used to temporarily supplement working capital have been returned;
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(3) The time for a single temporary replenishment of working capital shall not exceed 12 months;
(4) Do not use idle raised funds to directly or indirectly conduct high-risk investments such as securities investments and derivatives transactions.
Article 21 If a company uses idle raised funds to temporarily replenish working capital, it shall promptly announce the following content after deliberation and approval by the company's board of directors:
(1) Basic information on the funds raised this time, including the time when the funds are received, the amount of funds raised, the net amount of funds raised and the investment plan, etc.;
(2) Usage of raised funds;
(3) The amount and period of idle raised funds to replenish working capital;
(4) The amount of financial cost savings expected by using idle raised funds to replenish working capital, the reasons for insufficient working capital, whether there is a disguised change in the investment direction of raised funds, and measures to ensure that the normal progress of investment projects with raised funds will not be affected;
(5) Opinions issued by the sponsor or independent financial consultant;
(6) Other contents required by Shenzhen Stock Exchange.
Before the expiration date of supplementary working capital, the company shall return part of the funds to the special account for raised funds and make a timely announcement after all funds have been returned. If the company expects to be unable to return this part of the funds to the special account for raised funds on time, it shall perform the review procedures in accordance with the requirements of the preceding paragraph before the expiration date and make a timely announcement. The content of the announcement shall include the whereabouts of the funds, the reasons why they cannot be returned, the reasons and deadlines for continued use to supplement working capital, etc.
Article 22 The company shall, based on the actual production and operation needs of the enterprise, submit it to the board of directors or shareholders’ meeting for review and approval, and use the excess raised funds in a planned manner in the following order:
(1) Supplement the funding gap of investment projects with raised funds;
(2) Temporarily replenish working capital;
(3) Carry out cash management.
The company should properly arrange the use plan of excess raised funds based on the company's development plan and actual production and operation needs. The excess raised funds should be used for projects under construction and new projects, repurchasing the company's shares and canceling them in accordance with the law.
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The company shall clarify the specific use plan of the excess raised funds at the latest when the entire raised investment project of the same batch is completed, and put it into use according to the plan.
When a company uses super-raised funds to invest in projects under construction and new projects, it should fully disclose information such as the construction plan, investment necessity and rationality, investment cycle and rate of return of the relevant projects. If the project involves related transactions, asset purchases, external investments, etc., it should also perform review procedures and information disclosure obligations in accordance with Chapter 6 of the Stock Listing Rules of the Shenzhen Stock Exchange and other provisions.
If it is indeed necessary to use temporarily idle over-raised funds for cash management or temporary supplement of working capital, the necessity and rationality should be explained. If a company uses temporarily idle over-raised funds for cash management or temporary supplement of working capital, the amount, time limit and other matters shall be reviewed and approved by the board of directors, the sponsor shall issue a clear opinion, and the company shall disclose relevant information in a timely manner.
The company shall explain the use of excess raised funds and the use plan for the next year in a special report on the storage, management and use of the company's raised funds.
Chapter 4 Changes in Investment Direction of Raised Funds
Article 23 The funds raised by the company shall be used according to the purposes listed in the prospectus or other public offering documents, and shall not change the purpose without authorization.
If the company has the following circumstances, it is a change of purpose of raised funds, and the board of directors should make a resolution in accordance with the law. The sponsor or independent financial adviser should issue clear opinions and submit them to the shareholders' meeting for review. The company should disclose relevant information in a timely manner:
(1) Cancel or terminate the original fund-raising project, implement new projects or permanently replenish working capital;
(2) Change the entity implementing the investment project with raised funds;
(3) Change the implementation method of investment projects with raised funds;
(4) Other circumstances determined by the Shenzhen Stock Exchange as changes in the use of raised funds.
If the company is under the circumstances specified in Item (1) of the preceding paragraph, the sponsor shall explain in detail the main reasons for changes in the investment projects with raised funds and the rationality of the previous recommendation opinions based on the documents related to the raised funds disclosed in the previous period.
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If the implementation entity of the investment project with raised funds changes between the company and its wholly-owned subsidiary, or if it only involves a change in the implementation location of the raised investment project, it will not be regarded as a change in the purpose of the raised funds. Relevant changes should be resolved by the board of directors without going through the shareholders' meeting review procedures. The sponsor should issue clear opinions and the company should disclose relevant information in a timely manner.
If a company uses raised funds for cash management, temporary replenishment of working capital, or use of super-raised funds, exceeding the limit, period or purpose determined by the board of directors or shareholders meeting review process, if the circumstances are serious, it will be deemed to have changed the use of raised funds without authorization.
Article 24 The company shall select new investment projects scientifically and prudently, conduct feasibility analysis of the new investment projects, and be convinced that the investment projects have good market prospects and profitability, can effectively prevent investment risks, and improve the efficiency of the use of raised funds. If a company intends to change the use of raised funds, it shall report to the Shenzhen Stock Exchange within 2 trading days after submitting it to the board of directors for review and announce the following:
(1) Basic situation of the original project and specific reasons for the change;
(2) Basic situation, feasibility analysis, economic benefit analysis and risk warning of the new project;
(3) Investment plan for new projects;
(4) An explanation that the new project has been obtained or is yet to be approved by relevant departments (if applicable);
(5) Opinions of the sponsor or independent financial advisor on changing the investment direction of the raised funds;
(6) An explanation that changes in investment projects with raised funds still need to be submitted to the shareholders’ meeting for review;
(7) Other contents required by Shenzhen Stock Exchange.
Article 25 If a company plans to change the investment project with raised funds into a joint venture, it shall carefully consider the necessity of the joint venture on the basis of fully understanding the basic situation of the joint venture parties, and the company shall hold the controlling shareholding to ensure effective control of the investment project with raised funds.
Article 26 If a company changes the purpose of raised funds to acquire the assets (including equity) of the controlling shareholder or actual controller, it shall ensure that it can effectively avoid horizontal competition and reduce related transactions after the acquisition.
Article 27 If a company changes the implementation location of an investment project with raised funds, it shall make a timely announcement after deliberation and approval by the board of directors, explaining the change, reasons, impact on the implementation of the investment project with raised funds, and the opinions issued by the sponsor or independent financial consultant.
Article 28 Before the completion of all projects with raised funds, if a company has surplus funds due to project termination and uses part of the raised funds to permanently replenish working capital, it shall meet the following requirements:
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(1) The funds raised have been received for more than one year;
(2) It will not affect the implementation of other fund-raising projects;
(3) Fulfill the approval procedures and information disclosure obligations in accordance with the requirements for changes in the use of raised funds.
Chapter 5 Management and Supervision of Raised Funds
Article 29 The company's accounting department shall set up a ledger for the use of raised funds and record in detail the expenditure of raised funds and the investment in raised funds projects. The company's internal audit department should inspect the storage, management and use of raised funds at least once every quarter, and report the inspection results to the audit committee in a timely manner.
If the audit committee believes that there are irregularities or major risks in the company's management of raised funds or that the internal audit department fails to submit an inspection result report in accordance with the provisions of the preceding paragraph, it shall report to the board of directors in a timely manner. The board of directors shall promptly report to the Shenzhen Stock Exchange and make an announcement after receiving the report.
Article 30 The company's board of directors shall continue to pay attention to the actual storage, management and use of raised funds, comprehensively verify the progress of investment projects with raised funds every half year, issue special reports on the storage, management and use of raised funds for half-year and annual periods, and hire an accounting firm to issue an assurance report on the storage, management and use of annual raised funds. Relevant special reports should include the basic situation of the raised funds and the storage, management and use of funds stipulated by the Shenzhen Stock Exchange. The company shall disclose the assurance report and periodic report issued by the accounting firm in qualified media at the same time.
If there is a discrepancy between the actual investment progress of an investment project using raised funds and the investment plan, the company shall explain the specific reasons. If the actual annual use of raised funds for an investment project differs by more than 30% from the estimated use amount of the most recently disclosed raised funds investment plan, the company shall adjust the raised funds investment plan and disclose the latest annual raised funds investment plan, the current actual investment progress, the adjusted annual investment plan and the reasons for changes in the investment plan in special reports and periodic reports on the storage, management and use of raised funds. The company shall cooperate with the continuous supervision work of the sponsor or independent financial consultant and the audit work of the accounting firm, and promptly provide or apply to the bank for the necessary information related to the storage, management and use of raised funds.
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The accounting firm shall provide reasonable assurance and provide assurance conclusions on whether the special report of the board of directors has been prepared in accordance with the relevant regulations of the Shenzhen Stock Exchange and whether it truthfully reflects the actual storage, management, and use of the annual raised funds.
If the assurance conclusion is a "reserved conclusion", "negative conclusion" or "unable to reach a conclusion", the company's board of directors shall analyze the reasons for the conclusion raised by the accountant in the assurance report, propose corrective measures and disclose them in the annual report.
Article 31 Independent directors should pay attention to whether there are major differences between the actual use of raised funds and the company's information disclosure. With the consent of more than half of the independent directors, the independent directors may hire an accounting firm to conduct a special audit on the use of raised funds. The company shall fully cooperate with the special audit work and bear the necessary audit fees.
Chapter 6 Supplementary Provisions
Article 32 The company’s board of directors is responsible for formulating, proposing amendments and explanations to this system.
Article 33 Matters not covered by this system shall be implemented in accordance with relevant laws, administrative regulations, normative documents and the Articles of Association. If this system is inconsistent with the then-effective laws, regulations, normative documents, and the "Articles of Association," etc., the provisions of the then-effective laws, regulations, normative documents, and the "Articles of Association," etc. shall prevail, and this system shall be revised in a timely manner and submitted to the shareholders' meeting for review and approval by the board of directors.
Article 34 This system shall be implemented from the date of review and approval by the company’s shareholders’ meeting.
Chengdu Kanghong Pharmaceutical Group Co., Ltd. December 3, 2025
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