Kanghong Pharmaceutical: Beijing Tongshang (Chengdu) Law Firm's legal opinion on the adjustment of the exercise price of the 2023 stock appreciation rights incentive plan of Chengdu Kanghong Pharmaceutical Group Co., Ltd.
Beijing Tongshang (Chengdu) Law Firm
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Legal Opinion on Adjustment of the Exercise Price of the 2023 Stock Appreciation Rights Incentive Plan of Chengdu Kanghong Pharmaceutical Group Co., Ltd.
June 2026
Directory
Approval and authorization of this adjustment matter......................................................6
Specific circumstances of adjustment of exercise price under this incentive plan......................................7
Concluding comments................................................................................................................8
Definition
In this legal opinion, unless otherwise stated in the text, the following words have the following meanings:
Our firm refers to Beijing Tongshang (Chengdu) Law Firm
Kanghong Pharmaceutical, Inc., on
Refers to Chengdu Kanghong Pharmaceutical Group Co., Ltd.
Municipal company
This incentive plan refers to the 2023 Stock Appreciation Rights Incentive Plan of Chengdu Kanghong Pharmaceutical Group Co., Ltd. "Incentive Plan (Draft)" of the 2023 Stock Appreciation Rights Incentive Plan of Chengdu Kanghong Pharmaceutical Group Co., Ltd.
(Draft)》
"Assessment Methods for the 2023 Stock Appreciation Rights Incentive Plan of Chengdu Kanghong Pharmaceutical Group Co., Ltd." refers to
Assessment Implementation Management Measures"
The company grants incentive objects stock appreciation rights by simulating changes in stock market prices under certain conditions.
method, the right to obtain the difference between the redemption price paid by the company and the exercise price is the company's foreign core employees who have obtained stock appreciation rights in accordance with the provisions of this incentive plan (excluding incentive objects, including independent directors, supervisors, shareholders or actual controllers who individually or collectively hold more than 5% of the company's shares and their spouses, parents, and children)
Grant date refers to the date when the company grants stock appreciation rights to the incentive objects. The grant date must be the trading day. The incentive objects exercise their stock appreciation rights according to the stock appreciation rights incentive plan. Exercise refers to the act of exercising the rights in this incentive plan. The exercise is the act of the incentive objects receiving the difference between the redemption price and the exercise price paid by the company in accordance with the conditions set by the incentive plan. The redemption price refers to the closing price of the company's stock on the exercise date.
"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”
"Listing Rules" refers to the "Shenzhen Stock Exchange Stock Listing Rules"
"Articles of Association" refers to "Articles of Association of Chengdu Kanghong Pharmaceutical Group Co., Ltd."
China Securities Regulatory Commission refers to China Securities Regulatory Commission
Shenzhen Stock Exchange refers to Shenzhen Stock Exchange
The People's Republic of China, for the purpose of this legal opinion, does not include the Hong Kong Special Administrative Region China.
District, Macao Special Administrative Region and Taiwan Region
Yuan refers to RMB
In this legal opinion, if there is a discrepancy between the total number and the sum of the sub-items, it is due to rounding.
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Beijing Tongshang (Chengdu) Law Firm
About Chengdu Kanghong Pharmaceutical Group Co., Ltd. 2023 Stock Appreciation Rights Incentive Plan
exercise price adjusted
legal opinion
To: Chengdu Kanghong Pharmaceutical Group Co., Ltd.
The firm accepts the company's entrustment and issues this legal opinion on the company's adjustment to the exercise price (hereinafter referred to as the "this adjustment") in accordance with the relevant provisions of the Company Law, Securities Law, Management Measures and other laws, administrative regulations, departmental rules and normative documents, as well as the Articles of Association.
Our lawyers declare:
In order to issue this legal opinion, our firm and our lawyers have strictly performed their statutory duties in accordance with the Securities Law, the Administrative Measures for Law Firms Engaging in Securities Legal Business, the Rules for the Practice of Securities Legal Business of Law Firms (Trial), and followed the principles of diligence and good faith. The facts that have occurred or existed before the date of issuance of the legal opinion have been fully verified to ensure that the facts identified in this legal opinion are true, accurate, and complete, the concluding opinions expressed are legal and accurate, and there are no false records, misleading statements, or major omissions, and corresponding legal responsibilities shall be assumed;
Our lawyers have reviewed and judged all documents, materials and relevant instructions provided by the company related to the issuance of this legal opinion, and issued a legal opinion accordingly. For facts that are crucial to this legal opinion and cannot be supported by independent evidence, our lawyers rely on supporting documents or oral statements issued by relevant government departments, companies or other relevant units to make judgments;
The company guarantees that it has provided authentic and complete original written materials, copies of materials or oral testimony that our lawyers deem necessary to issue this legal opinion, and guarantees that the documents and information provided are true and accurate, and that the scanned copies or copies are consistent with the originals, and that there are no false statements, major omissions or concealments;
The Exchange agrees that the company will regard this legal opinion as one of the necessary documents for the implementation of this adjustment of the incentive plan, submit it to the Shenzhen Stock Exchange for announcement together with other materials, and assume the corresponding legal liability for the legal opinion issued;
This legal opinion only expresses opinions on legal issues in China related to this adjustment of this incentive plan. It does not express opinions on the rationality of the underlying stock value, assessment standards and other issues involved in this adjustment of the company's incentive plan, as well as non-legal professional matters such as accounting and auditing. When accounting, auditing and other contents are involved, they are quoted strictly in accordance with the reports or company descriptions issued by relevant intermediaries. This does not mean that the firm has verified or made any guarantee as to the authenticity and accuracy of these contents;
This legal opinion is only for the purpose of this adjustment of the incentive plan and shall not be used for any other purpose.
Based on the above, in accordance with the recognized business standards, ethics and diligence of the legal industry, our lawyers now issue the following legal opinions:
Text
1. Approval and authorization of this adjustment
After verification by our lawyers, as of the date of issuance of this legal opinion, the approvals and authorizations that have been fulfilled for this adjustment are as follows:
(1) On December 5, 2023, the company held the fourth meeting of the eighth board of directors, which reviewed and approved the "Proposal on the Company's 2023 Stock Appreciation Rights Incentive Plan (Draft)" and its Summary, the "Proposal on the Company's <2023 Stock Appreciation Rights Incentive Plan Assessment and Implementation Management Measures>" and the "Proposal on Requesting the General Meeting of Shareholders to Authorize the Board of Directors and its Authorized Persons to Fully Handle Matters Related to the 2023 Stock Appreciation Rights Incentive Plan." The company's independent directors issued unanimous independent opinions on the matter.
(2) On December 5, 2023, the company held the fourth meeting of the eighth board of supervisors, and reviewed and approved the "Proposal on the Company's 2023 Stock Appreciation Rights Incentive Plan (Draft)" and its Summary, the "Proposal on the Company's <2023 Stock Appreciation Rights Incentive Plan Assessment and Implementation Management Measures>" and the "Proposal on Verifying the Company's "2023 Stock Appreciation Rights Incentive Plan List of Incentive Objects".
(3) From December 6, 2023 to December 15, 2023, the company publicized the incentive target information on the company’s official website. During the publicity period, the company’s Board of Supervisors and Human Resources Department did not receive any objections or adverse reactions from any organization or individual, and there was no feedback record.
(4) On December 16, 2023, the company disclosed the "Explanation and Review Opinions of the Board of Supervisors on the List of Incentive Objects of the 2023 Stock Appreciation Rights Incentive Plan".
(5) On December 22, 2023, the company's second extraordinary general meeting of shareholders in 2023 reviewed and approved the "Proposal on the Company's 2023 Stock Appreciation Rights Incentive Plan (Draft)" and its Summary, the "Proposal on the Company's <2023 Stock Appreciation Rights Incentive Plan Assessment and Implementation Management Measures>" and the "Proposal on Requesting the General Meeting of Shareholders to Authorize the Board of Directors and its Authorized Persons to Fully Handle Matters Related to the 2023 Stock Appreciation Rights Incentive Plan."
(6) On February 7, 2024, the fifth meeting of the company's eighth board of directors reviewed and approved the "Proposal on Granting Stock Appreciation Rights to Incentive Objects of the Company's 2023 Stock Appreciation Rights Incentive Plan", which determined that the grant date of the company's 2023 Stock Appreciation Rights Incentive Plan is February 8, 2024, and 100,000 stock appreciation rights will be granted to 1 eligible incentive object at an exercise price of 16.90 yuan/share.
(7) On February 7, 2024, the fifth meeting of the company’s eighth board of supervisors reviewed and approved the “Proposal on Granting Stock Appreciation Rights to Incentive Objects of the Company’s 2023 Stock Appreciation Rights Incentive Plan”.
(8) On May 27, 2024, the seventh meeting of the company's eighth board of directors and the seventh meeting of the eighth board of supervisors reviewed and approved the "Proposal on Adjusting the Exercise Price of the Company's 2023 Stock Appreciation Rights Incentive Plan" and agreed to adjust the exercise price of the stock appreciation rights in the 2023 Stock Appreciation Rights Incentive Plan from 16.90 yuan/share to 16.52 yuan/share. The Supervisory Board issued a concurring opinion.
(9) On May 29, 2025, the eleventh meeting of the eighth session of the board of directors and the eleventh meeting of the eighth session of the supervisory board of the company reviewed and approved the "Proposal on Adjusting the Exercise Price of the Company's 2023 Stock Appreciation Rights Incentive Plan" and the "Proposal on Fulfilling the Exercise Conditions for the First Exercise Term of the 2023 Stock Appreciation Rights Incentive Plan", and agreed to adjust the exercise price of the stock appreciation rights in the 2023 Stock Appreciation Rights Incentive Plan from 16.52 yuan per share. 15.92 yuan/share; agrees that the company will handle matters related to the exercise of the first exercise period of stock appreciation rights in 2023 in accordance with relevant regulations. The company's Board of Supervisors issued verification opinions, and the Remuneration and Assessment Committee of the company's Board of Directors has reviewed and approved the aforementioned matters and issued an agreed opinion.
(10) On June 2, 2026, the 19th meeting of the company's eighth board of directors reviewed and approved the "Proposal on Adjusting the Exercise Price of the Company's 2023 Stock Appreciation Rights Incentive Plan" and the "Proposal on Cancellation of Part of the Stock Appreciation Rights in the 2023 Stock Appreciation Rights Incentive Plan", and agreed to adjust the exercise price of the stock appreciation rights in the 2023 Stock Appreciation Rights Incentive Plan from 15.92 yuan/share to 15.22 yuan/share. Yuan/share; because the exercise conditions for the second exercise period set by the company's "2023 Stock Appreciation Rights Incentive Plan (Draft)" have not been met, it is agreed that the company will cancel the 30,000 stock appreciation rights that have been granted but have not yet been exercised and are held by an incentive object granted by the 2023 Stock Appreciation Rights Incentive Plan. The Remuneration and Appraisal Committee of the Company's Board of Directors has reviewed and approved the aforementioned matters and issued an agreed opinion.
In summary, our lawyers believe that as of the date of issuance of this legal opinion, the company has obtained the necessary approvals and authorizations for this adjustment at this stage, which is in compliance with the relevant provisions of the "Management Measures" and the "Incentive Plan (Draft)".
2. The specific circumstances of adjusting the exercise price of this incentive plan
According to the provisions of the company's "Incentive Plan (Draft)", if the company pays dividends, transfers capital reserves to share capital, distributes stock dividends, splits shares, allots shares or reduces shares before the incentive objects exercise their rights, the exercise price of the stock appreciation rights should be adjusted accordingly.
On May 21, 2026, the company's 2025 shareholders' meeting reviewed and approved the "2025 Profit Distribution Plan". The 2025 profit distribution plan is: based on the company's total share capital of 921,320,954.00 shares on April 22, 2026, a cash dividend of 7.00 per 10 shares will be distributed to all shareholders. Yuan (including tax), a total of RMB 644,924,667.80 in cash dividends were distributed, and the remaining undistributed profits were carried forward to the next year. If the total share capital of the company changes between the announcement of the distribution plan and before its implementation due to equity incentive exercise, conversion of convertible bonds, share repurchase, etc., the total amount of cash dividends will be adjusted based on the principle that the cash dividend ratio remains unchanged.
On June 2, 2026, the 19th meeting of the company's eighth board of directors reviewed and approved the "Proposal on Adjusting the Exercise Price of the Company's 2023 Stock Appreciation Rights Incentive Plan" and the "Proposal on Cancellation of Part of the Stock Appreciation Rights in the 2023 Stock Appreciation Rights Incentive Plan", and agreed to adjust the exercise price of the stock appreciation rights in the 2023 Stock Appreciation Rights Incentive Plan from 15.92 yuan/share to 15.22 yuan/share. Yuan/share, this adjustment will take effect from the ex-rights and ex-dividend date of equity distribution (June 9, 2025).
According to the authorization of the company's second extraordinary general meeting of shareholders in 2023, the above-mentioned adjustment matters are within the scope of authorization and do not need to be submitted to the shareholders' meeting for review after being reviewed and approved by the company's board of directors.
In summary, our lawyers believe that the company’s adjustment of the exercise price of stock appreciation rights in this incentive plan complies with the relevant provisions of the “Incentive Plan (Draft)”, “Articles of Association” and “Administrative Measures”.
3. Conclusions
In summary, our lawyers believe that as of the date of issuance of this legal opinion:
- The company has obtained the necessary approvals and authorizations for this adjustment at this stage and is in compliance with the "Management Measures"
and the relevant provisions of the "Incentive Plan (Draft)";
- The company’s adjustment of the exercise price of stock appreciation rights in this incentive plan is in compliance with the Incentive Plan (Draft)
The relevant provisions of the "Articles of Association" and "Management Measures";
- The company still needs to fulfill relevant information disclosure obligations regarding this adjustment.
This legal opinion is made in triplicate and will take effect after being signed by our lawyers and stamped with the official seal.
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Beijing Tongshang (Chengdu) Law Firm (Chapter)
Handling lawyer: ____________________
Yu Dan
Attorney: ___________________ Zhou Yuxin
Person in charge: ____________________Sun Mian
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