Shanghai Rongzheng Enterprise Consulting Services (Group) Co., Ltd.’s Independent Financial Advisor’s Report on Matters Related to the Reserved Grant of the 2025 Restricted Stock Incentive Plan of Shanghai Xiaofang Pharmaceutical Co., Ltd.
Securities code: 603207 Securities abbreviation: Xiaofang Pharmaceutical
About Shanghai Rongzheng Enterprise Consulting Services (Group) Co., Ltd.
Matters related to the reserved grant of the 2025 restricted stock incentive plan of Shanghai Xiaofang Pharmaceutical Co., Ltd.
of
independent financial advisor report
December 2025
Directory
1. Interpretation ................................................................................................................................. 2
2. Statement...................................................................................................................................... 3
3. Basic assumptions ............................................................................................................ 4
4. Approval and authorization of this incentive plan .................................................................. 5
5. Opinions of independent financial advisor ............................................................................................. 7
6. Documents for reference and consultation methods ............................................................................. 10
1. Interpretation
In this independent financial advisor's report, unless otherwise stated, the following abbreviations have the following meanings:
Xiaofang Pharmaceutical, the Company, and the Company refer to Shanghai Xiaofang Pharmaceutical Co., Ltd. (including branches and holding subsidiaries) this incentive plan and this equity incentive
Refers to the 2025 Restricted Stock Incentive Plan of Shanghai Xiaofang Pharmaceutical Co., Ltd.
According to the conditions and prices stipulated in this incentive plan, the company will grant a certain number of restricted stocks to the incentive objects, which refers to the company's stocks. These stocks are set for a certain period of sales restriction and can be released from circulation only after meeting the conditions for lifting the sales restrictions stipulated in this incentive plan.
Incentive objects refer to the employees of the company who receive restricted stocks in accordance with the provisions of this incentive plan.
Grant date refers to the date when the company grants restricted stocks to incentive objects. The grant date must be the trading day. Grant price refers to the price of each restricted stock granted by the company to incentive objects.
The restricted stocks granted to the incentive targets under this incentive plan are prohibited from being transferred and used to guarantee the sales restriction period.
period of guarantee and debt repayment
After the conditions for unlocking sales stipulated in this incentive plan are met, the restricted sales unlocking period held by the incentive objects refers to
The period during which stocks can be lifted from sales restrictions and listed for circulation
According to this incentive plan, the restricted stocks obtained by the incentive objects must meet the conditions for unlocking the restrictions.
conditions
"Company Law" means "Company Law of the People's Republic of China"
“Securities Law” refers to the “Securities Law of the People’s Republic of China”
"Administrative Measures" refers to the "Administrative Measures for Equity Incentives of Listed Companies"
"Articles of Association" refers to "Articles of Association of Shanghai Xiaofang Pharmaceutical Co., Ltd."
China Securities Regulatory Commission refers to China Securities Regulatory Commission
Stock Exchange refers to Shanghai Stock Exchange
Securities registration and clearing institution refers to China Securities Depository and Clearing Co., Ltd. Shanghai Branch
Yuan, RMB 10,000 refers to RMB yuan, RMB 10,000
Note: 1. The financial data and financial indicators quoted in this independent financial consultant's report refer to the financial data in the consolidated statement and the financial indicators calculated based on such financial data unless otherwise specified.
- Any difference in the mantissa between some totals and the direct sum of each detail in this independent financial consultant's report is due to rounding.
2. Statement
This independent financial advisor makes the following statement regarding this report:
(1) The documents and materials on which this independent financial advisory report is based are provided by Xiaofang Pharmaceutical. All parties involved in this plan have guaranteed to the independent financial advisor that all the documents and materials provided on which this independent financial advisory report is based are legal, authentic, accurate, complete and timely, and do not contain false records, misleading statements or major omissions, and are responsible for their legality, authenticity, accuracy, completeness and timeliness. This independent financial advisor does not bear any responsibility for any risks arising therefrom.
(2) The independent financial advisor only expresses its opinion on whether the matters related to the reserved grant of this incentive plan are fair and reasonable to Xiaofang Pharmaceutical shareholders, and the impact on the rights and interests of shareholders and the continued operation of the listed company. It does not constitute any investment advice for Xiaofang Pharmaceutical. The independent financial advisor is not responsible for any risks that may arise from any investment decisions made by investors based on this report.
(3) The independent financial advisor has not entrusted or authorized any other institution or individual to provide information not listed in this independent financial advisor's report or to make any explanations or explanations for this report.
(4) The independent financial consultant reminds all shareholders of the listed company to carefully read the relevant information about this incentive plan publicly disclosed by the listed company.
(5) In an attitude of diligence, prudence, and due diligence to all shareholders of the listed company, and based on the principle of objectivity and impartiality, the independent financial consultant conducted an in-depth investigation into the matters involved in the reserved grant of the incentive plan and carefully reviewed the relevant information. The scope of the investigation included the articles of association of the listed company, relevant board of directors, resolutions of the shareholders' meeting, the company's financial report during the relevant period, etc., and conducted effective communication with relevant personnel of the listed company. On this basis, the independent financial consultant issued this independent financial consultant report, and is responsible for the authenticity, accuracy and completeness of the report.
This independent financial advisory report is prepared in accordance with the requirements of the Company Law, Securities Law, Management Measures and other laws, regulations and normative documents, and based on relevant information provided by the listed company.
3. Basic assumptions
The independent financial advisory report issued by this financial advisor is based on the following assumptions:
(1) There are no major changes in the country’s current relevant laws, regulations and policies;
(2) The information on which this independent financial advisor relies is authentic, accurate, complete and timely;
(3) The relevant documents issued by the listed company for this equity incentive plan are true and reliable;
(4) There are no other obstacles to this equity incentive plan, and all agreements involved can be effectively approved and ultimately completed as scheduled;
(5) All parties involved in this equity incentive plan can fully perform all obligations in accordance with the terms of the incentive plan and relevant agreements in an honest and trustworthy manner;
(6) There are no major adverse effects caused by other unpredictable and force majeure factors.
4. Approval and authorization of this incentive plan
On January 3, 2025, the company held the second meeting of the second board of directors and the second meeting of the second board of supervisors, and reviewed and approved the "Proposal on <Shanghai Xiaofang Pharmaceutical Co., Ltd. 2025 Restricted Stock Incentive Plan (Draft)> and its Summary" and "Proposal on <Shanghai Xiaofang Pharmaceutical Co., Ltd. Co., Ltd. 2025 Restricted Stock Incentive Plan Implementation Assessment and Management Measures>" and other proposals. The company's board of supervisors verified the relevant matters of this incentive plan and issued relevant verification opinions.
On January 25, 2025, the company disclosed the "Shanghai Xiaofang Pharmaceutical Co., Ltd.'s Announcement on the Public Solicitation of Voting Rights for Independent Directors" (Announcement Number: 2025-006) on the website of the Shanghai Stock Exchange (www.sse.com.cn). According to the entrustment of other independent directors of the company, independent director Yu Wei served as a solicitor to solicit voting rights from all shareholders of the company on the company's incentive plan-related proposals to be considered at the company's first extraordinary general meeting of shareholders in 2025.
The company has publicized the list of incentive targets internally, and the publicity period is from January 6, 2025 to January 15, 2025. During the publicity period, the company's Board of Supervisors did not receive any objections from employees regarding the first grant of incentive objects to the incentive plan, and on February 8, 2025, it disclosed the "Verification Opinions and Publicity Statement of the Board of Supervisors of Shanghai Xiaofang Pharmaceutical Co., Ltd. on the List of Incentive Objects of the Company's 2025 Restricted Stock Incentive Plan".
On February 13, 2025, the company held the first extraordinary general meeting of shareholders in 2025, which reviewed and approved the "Proposal on the <Shanghai Xiaofang Pharmaceutical Co., Ltd. 2025 Restricted Stock Incentive Plan (Draft)> and its Summary", the "Proposal on the <Shanghai Xiaofang Pharmaceutical Co., Ltd. Co., Ltd. 2025 Restricted Stock Incentive Plan Implementation Assessment and Management Measures>" and the "Proposal on Requesting the General Meeting of Shareholders to Authorize the Board of Directors to Handle Matters Related to the 2025 Restricted Stock Incentive Plan".
On February 14, 2025, the company disclosed the "Xiaofang Pharmaceutical's Self-examination Report on the Purchase and Sale of the Company's Stocks by Insiders of the Company's 2025 Restricted Stock Incentive Plan" on the Shanghai Stock Exchange website (www.sse.com.cn) (Announcement Number: 2025-009).
On February 13, 2025, the third meeting of the company’s second board of directors and the third meeting of the second board of supervisors both reviewed and approved the “Proposal on the First Grant of Restricted Stocks to the Incentive Objects of the Company’s 2025 Restricted Stock Incentive Plan”. The company's supervisory board issued an agreed verification opinion.
On December 19, 2025, the company held the seventh meeting of the second board of directors, and reviewed and approved the "Proposal on Adjusting Matters Related to the Company's 2025 Restricted Stock Incentive Plan" and "The Proposal on Granting Reserved Partial Restricted Stocks to the Incentive Objects of the Company's 2025 Restricted Stock Incentive Plan". The Remuneration and Appraisal Committee of the company's board of directors issued an agreed verification opinion.
After verification, this financial consultant believes that: as of the date of this report, Xiaofang Pharmaceutical has obtained the necessary approvals and authorizations for the grant of restricted stocks to incentive targets, and is in compliance with the relevant provisions of the "Administrative Measures" and the company's "2025 Restricted Stock Incentive Plan (Draft)" (hereinafter referred to as the "Incentive Plan (Draft)").
5. Opinions of independent financial advisor
(1) Description of the achievement of the award conditions of this incentive plan
According to the provisions of the incentive plan, if the following grant conditions are met at the same time, the company shall grant restricted stocks to the incentive objects. On the contrary, if any of the following grant conditions are not met, the company shall not grant restricted stocks to the incentive objects:
- The company has not experienced any of the following situations:
(1) The financial accounting report for the most recent fiscal year was issued a negative opinion or an audit report in which a certified public accountant was unable to express an opinion;
(2) An audit report in which a certified public accountant issued a negative opinion or was unable to express an opinion on the internal control of the financial report in the most recent fiscal year;
(3) In the last 36 months after listing, there has been any failure to distribute profits in accordance with laws, regulations, articles of association, and public commitments;
(4) Equity incentives are not allowed under laws and regulations;
(5) Other circumstances determined by the China Securities Regulatory Commission.
- None of the following situations occur to the incentive objects:
(1) Determined as an unsuitable candidate by the stock exchange within the last 12 months;
(2) Have been deemed as inappropriate candidates by the China Securities Regulatory Commission and its dispatched agencies within the last 12 months;
(3) In the past 12 months, he has been subject to administrative penalties or market ban measures by the China Securities Regulatory Commission and its dispatched agencies due to serious violations of laws and regulations;
(4) Those who are prohibited from serving as company directors or senior managers as stipulated in the Company Law;
(5) Laws and regulations prohibit participation in equity incentives of listed companies;
(6) Other circumstances determined by the China Securities Regulatory Commission.
After verification, Xiaofang Pharmaceutical did not have "an audit report in which a certified public accountant issued a negative opinion or was unable to express an opinion on the financial accounting report of the most recent fiscal year", "an audit report in which a certified public accountant issued a negative opinion or was unable to express an opinion on the internal control of the financial report in the most recent fiscal year". In addition, Xiaofang Pharmaceutical did not have any "situations in which profits were not distributed in accordance with laws, regulations, articles of association, and public commitments in the last 36 months after listing", "equity incentives are not allowed to be implemented under laws and regulations", and "other circumstances identified by the China Securities Regulatory Commission". Up to now, the incentive targets have not met the above-mentioned conditions for awarding, and the awarding conditions of the company's incentive plan have been met.
(2) Status of reserved grants under this incentive plan
Award date: December 19, 2025
Number of shares granted: 320,000 shares
Source of stock: A-share ordinary shares of the company issued to incentive targets by the company.
Number of people awarded: 30 people
Grant price: 12.77 yuan/share
The validity period, sales restriction period and sales restriction lifting arrangements of this incentive plan
(1) The validity period of some restricted stocks reserved under this incentive plan starts from the date when the registration of reserved restricted stocks is completed and ends on the date when all restricted stocks granted to the incentive targets are released from sale restrictions or repurchased, and the longest period shall not exceed 36 months.
(2) The restricted sales period of the restricted stocks reserved for grant under this incentive plan is 12 months and 24 months from the date of completion of registration of restricted stock grant. The restricted stocks granted to incentive targets under this incentive plan may not be transferred, used to guarantee or repay debts before the restrictions are lifted. The restricted stocks granted to the incentive recipients due to the transfer of capital reserve funds to share capital, stock dividends, and stock splits are also subject to sales restrictions and may not be sold or transferred in other ways on the secondary market. The unlocking period for these shares is the same as the unlocking period for restricted stocks. If the company repurchases restricted shares that have not been released from sale, these shares will be repurchased together.
After the lock-up period expires, the company will handle the lifting of sales restrictions for incentive targets who meet the conditions for lifting sales restrictions, and the restricted stocks held by incentive targets who do not meet the conditions for lifting sales restrictions will be repurchased by the company.
The unlocking period for the restricted stocks reserved for grant under this incentive plan and the unlocking schedule for each period are as follows:
Arrangements for lifting sales restrictions. Time for lifting sales restrictions. The sales restriction lifting ratio starts from the first trading day after 12 months from the date of completion of grant registration to the date of grant.
50% off for the first one to unlock the sale period
Ending on the last trading day within 24 months from the date of completion of registration
From the first trading day 24 months after the date of completion of grant registration to
50% during the second lifting period
Ending on the last trading day within 36 months from the date of completion of registration
Restricted stocks that have not applied for lifting of sales restrictions within the above agreed period or corresponding restricted stocks that cannot apply for lifting of sales restrictions because they have not met the conditions for lifting sales restrictions will be repurchased by the company in accordance with the principles stipulated in this incentive plan.
- The distribution of restricted stocks granted under this incentive plan among the incentive objects is as shown in the following table:
Restricted shares granted % Restricted shares granted % Company stock serial number at the time of grant Name Position
Number of votes (10,000 shares) Proportion of the total number of votes Proportion of the total principal amount
1. Middle and senior managers and core personnel
Middle and senior managers and key personnel
32 100.00% 0.20%
(30 people)
Total (30 people) 32 100.00% 0.20%
Note: 1. The shares of the company granted to any of the above incentive targets through all equity incentive plans within the validity period do not exceed 1.00% of the company's total share capital. The total number of underlying stocks involved in all the company's incentive plans within the validity period shall not exceed 10.00% of the company's total share capital at the time of the announcement of this incentive plan.
The incentive targets of this incentive plan do not include independent directors, nor shareholders or actual controllers who individually or collectively hold more than 5% of the company's shares and their spouses, parents, and children.
If the total number of values in the above table does not match the sum of each sub-item value, it is due to rounding.
After this grant, the company’s equity distribution will not cause the company’s equity distribution to fail to meet the listing conditions.
After verification, the independent financial consultant believes that the reserved grant of restricted stocks complies with the "Management Measures" and the relevant provisions of the company's incentive plan.
(3) Explanation of the impact of the grant on the financial status and operating results of the relevant year
In order to truly and accurately reflect the impact of this grant on the company, this financial consultant recommends that Xiaofang Pharmaceutical, in compliance with the relevant provisions of "Accounting Standards for Business Enterprises No. 11 - Share-based Payment" and "Accounting Standards for Business Enterprises No. 22 - Recognition and Measurement of Financial Instruments", and in accordance with the requirements of the relevant regulatory authorities, measure, withdraw and account for the expenses incurred by the restricted stocks granted, and at the same time draw the attention of shareholders to the possible dilutive impact.
(4) Concluding observations
This financial consultant believes that: as of the date of issuance of the report, Shanghai Xiaofang Pharmaceutical Co., Ltd. has obtained the necessary approvals and authorizations for this incentive plan. The determination of the grant date, grant price, grant objects, grant quantity and other matters reserved for this incentive plan are in compliance with the provisions of the Company Law, the Securities Law, the Management Measures and other laws, regulations and normative documents, and there are no circumstances that do not meet the grant conditions stipulated in the company's 2025 restricted stock incentive plan.