Kanghui Shares' "Shareholder Return Plan for the Next Three Years (2026-2028)"
Shaanxi Kanghui Pharmaceutical Co., Ltd.
Shareholder return planning for the next three years (2026-2028)
In accordance with the relevant laws, regulations and normative documents such as the "Company Law of the People's Republic of China", the Securities Law of the People's Republic of China and the "Guidelines for Supervision of Listed Companies No. 3 - Cash Dividends of Listed Companies" and the "Articles of Association of Shaanxi Kanghui Pharmaceutical Co., Ltd." (hereinafter referred to as the "Articles of Association"), In order to clarify the company's reasonable investment return plan for shareholders, improve the cash dividend policy, increase the transparency and operability of profit distribution decisions, and facilitate shareholders to supervise the company's operations and profit distribution, the company has formulated the "Shareholder Return Plan for the Next Three Years (2026-2028)", with the specific contents as follows:
1. Factors to consider when formulating shareholder return planning
The company implements a sustained and stable profit distribution policy. The company's profit distribution should pay attention to reasonable investment returns for investors and take into account the company's sustainable development. The company has comprehensively considered the actual situation and development goals of the enterprise, established a sustainable, stable and scientific return plan and mechanism for investors, and thus made institutional arrangements for profit distribution to ensure the continuity and stability of the profit distribution policy.
2. Principles for formulating the company’s shareholder return planning
The company's profit distribution can take the form of cash, stocks, a combination of cash and stocks, or other methods permitted by laws and regulations. When the company chooses a profit distribution method, it gives priority to cash dividends over stock dividends and other distribution methods. When determining the specific amount of profits to be distributed in cash, the company should fully consider the impact of future operating activities and investment activities, and pay full attention to social capital costs, bank credit and debt financing environment to ensure that the distribution plan is in line with the overall interests of all shareholders. On the premise of ensuring that the company's share capital size and equity structure are reasonable, based on the consideration of rewarding investors and sharing corporate value, and starting from real and reasonable factors such as the company's growth, dilution of net assets per share, and the matching of the company's stock price and the company's share capital size, when the company's stock valuation is within a reasonable range, the company can distribute stock dividends while implementing cash dividends.
3. The company’s shareholder return plan for the next three years (2026-2028)
The company can distribute dividends in the form of cash, stocks, or a combination of cash and stocks, with cash dividends being preferred. The company's board of directors may propose the company's mid-term profit distribution based on the company's current profit scale, cash flow status, development stage and capital needs.
The company's cash dividend must meet the following conditions at the same time: (1) The company's distributable profits for the year (i.e., the after-tax profits remaining after the company makes up for losses and withdraws the provident fund) are positive and have sufficient cash flow, and the implementation of cash dividends will not affect the company's subsequent continued operations; (2) The audit institution issues a standard unqualified audit report on the company's financial report for that year; (3) The company's accumulated distributable profits are positive.
If the company has the conditions for cash dividends, the profits distributed in cash every year should not be less than 20% of the distributable profits realized in that year. While implementing the above-mentioned cash dividend distribution, the company may distribute bonus shares at the same time. When a company distributes cash dividends, the proportion of cash dividends should also comply with the following requirements:
(1) If the company is in a mature development stage and has no major capital expenditure arrangements, when distributing profits, the proportion of cash dividends in this profit distribution should be at least 80%;
(2) If the company is in a mature stage of development and has major capital expenditure arrangements, when distributing profits, the proportion of cash dividends in this profit distribution should be at least 40%;
(3) If the company is in the growth stage and has major capital expenditure arrangements, when distributing profits, the proportion of cash dividends in the profit distribution should be at least 20%.
If the company's development stage is difficult to distinguish but there are major capital expenditure arrangements, it can be handled in accordance with the provisions of the preceding paragraph.
The company's board of directors will comprehensively consider factors such as the characteristics of the company's industry, development stage, its own business model, profitability level, and whether there are major asset expenditure arrangements, and propose a differentiated cash dividend policy in accordance with the procedures stipulated in the company's articles of association.
- Within six months after the end of each fiscal year, the company shall perform the corresponding review procedures for profit distribution in accordance with the provisions of the Articles of Association. The company accepts the suggestions and supervision of the company's dividends from all shareholders.
4. The company’s shareholder return planning formulation cycle and adjustments
The company re-examines the shareholder dividend return plan at least every three years, makes appropriate and necessary modifications to the company's dividend distribution policy, and determines the shareholder return plan for that period. The company's board of directors will combine specific operating data and fully consider the company's current profit scale, cash flow status, development stage, and current capital needs to formulate a specific annual or mid-term dividend plan.
If the company really needs to adjust the profit distribution policy determined in the shareholder dividend return plan due to actual production and operation conditions, investment planning and long-term development needs, the company's board of directors should propose a profit distribution policy adjustment proposal based on the actual situation. The adjusted profit distribution policy should be based on the protection of shareholders' rights and interests, and must not violate the relevant regulations of the China Securities Regulatory Commission and the Shanghai Stock Exchange. Proposals related to adjusting the profit distribution policy must be submitted to the company's shareholders' meeting for review and decision after review by the board of directors. When the shareholders' meeting considers adjustments to the profit distribution policy, it must be approved by more than two-thirds of the voting rights held by shareholders present at the meeting.
5. Decision-making procedures and mechanisms for profit distribution plan and three-year dividend return planning
The company's annual profit distribution plan is proposed and formulated by the board of directors based on the provisions of the "Articles of Association", profitability, capital supply and demand. When the board of directors considers the specific plan for cash dividends, it should carefully study and demonstrate the timing, conditions and minimum proportion of the company's cash dividends, conditions for adjustment and decision-making process requirements, etc. When the board of directors considers and formulates policies related to profit distribution, it must be approved by more than half of all directors before it can be submitted to the shareholders' meeting for review.
Independent directors can solicit opinions from minority shareholders, propose dividend proposals, and submit them directly to the board of directors for review. If independent directors believe that the specific cash dividend plan may damage the rights and interests of the company or small and medium-sized shareholders, they have the right to express independent opinions. If the board of directors fails to adopt the opinions of independent directors or does not fully adopt them, it shall disclose the opinions of independent directors and the specific reasons for not adopting them in the announcement of the board of directors' resolution.
Before the shareholders’ meeting reviews the specific cash dividend plan, the company should proactively communicate with shareholders, especially small and medium-sized shareholders, through multiple channels, including but not limited to telephone, fax and email communication or inviting small and medium-sized shareholders to attend meetings, fully listen to the opinions and demands of small and medium-sized shareholders, and promptly respond to issues of concern to small and medium-sized shareholders.
When the company convenes the annual shareholders' meeting to review the annual profit distribution plan, it may review and approve the conditions, proportion limit, amount limit, etc. for the next year's interim cash dividend. The upper limit of interim dividends for the next year reviewed by the annual shareholders' meeting shall not exceed the net profit attributable to the company's shareholders during the corresponding period. The board of directors formulates a specific interim dividend plan based on the resolution of the shareholders' meeting and subject to the conditions for profit distribution.
If there are matters not covered in this plan or this plan conflicts with relevant laws, regulations, normative documents and the Articles of Association, the relevant laws, regulations, normative documents and the Articles of Association shall prevail. This plan shall take effect from the date of review and approval by the company's shareholders' meeting, and the same shall apply when it is revised.
Shaanxi Kanghui Pharmaceutical Co., Ltd.
April 22, 2026