Key Highlights of the Profit Distribution Plan

• Continuity and Stability: The Profit Distribution and Return Plan aims to ensure a stable and sustainable mechanism for shareholder returns, reflecting a commitment to long-term growth and value creation.
• Legal and Regulatory Compliance: The plan is formulated pursuant to the Companies Law of the PRC, updated Regulatory Guidelines, and strict adherence to the Company’s articles of association and market value management rules.

Comprehensive Factors Considered

The Company has taken into account a wide range of factors in formulating the plan, including:

• Actual operating conditions
• Shareholder opinions
• Capital costs and financing environment
• Profit scale, cash flow, development stage, and capital needs for project investment
• Bank credit facilities and debt financing conditions

This signals a prudent approach, balancing investor returns with operational sustainability.

Principles Guiding the Plan

• Reasonable returns to investors are prioritized in profit distribution.
• Policies are designed to be continuous and stable, ensuring compliance with regulations.
• Profit distribution will not exceed accumulated distributable profits, thus protecting the Company’s sustainable operation.
• Promotion of cash dividends as the preferred method of distribution.

Detailed Profit Distribution Mechanism (2026-2028)

Forms of Distribution

• Dividends may be distributed in cash, bonus shares, or other legal methods.
• Cash dividends are the preferred choice.

Cash Dividend Conditions

• Cash dividends will be proposed when the year’s net realized profits (after covering losses and reserves) are positive and the financial report receives a standard unqualified audit opinion.
• If cash dividends are not distributed despite meeting conditions, the Board must give specific reasons, explain the use of retained profits, seek independent director opinions, and submit to shareholders for approval.

Distribution Intervals and Proportion

• Profit distribution will occur at least once a year.
• Interim cash dividends may be proposed based on operational results and capital requirements.
• Notably, cumulative cash dividend distribution for 2026-2028 shall be at least 35% of cumulative distributable profits.

Bonus Shares Distribution

• Bonus shares or conversion of reserves into share capital may be considered only after meeting the cash dividend ratio.
• Distribution of bonus shares will consider the scale of share capital and operational performance growth.

Governance and Decision-Making Procedures

• Profit distribution proposals require approval by a majority of the Board and shareholders.
• Bonus shares or conversion plans require at least two-thirds approval by shareholders.
• Changes to the profit distribution policy must protect minority shareholder interests and require thorough approval processes (audit and supervision committee, Board, and shareholders).
• Shareholders and independent directors are tasked to supervise execution and decision-making related to profit distribution.
• Unclaimed dividends may be forfeited after the validity period expires.
• All actions must comply with applicable laws, regulations, and securities rules where shares are listed.
• The Company will disclose execution progress and compliance in periodic reports.

Additional Information

• Any matters not stated in the plan will be governed by relevant laws, regulations, and the articles of association.
• The Profit Distribution and Return Plan will become effective upon approval by the shareholders’ meeting.
• In case of discrepancies between English and Chinese versions, the Chinese version prevails.

Implications for Investors and Shareholders

• Minimum Dividend Commitment: The explicit commitment to a minimum 35% cash dividend payout is significant, providing clarity and assurance on shareholder returns. This is a key metric likely to influence share price and investor sentiment.
• Governance Improvements: Enhanced oversight and transparent procedures for profit distribution, including protection of minority shareholders, strengthen investor confidence.
• Flexibility for Bonus Shares: Potential additional returns in the form of bonus shares, subject to operational performance, could further enhance shareholder value.
• Disclosure and Transparency: Regular reporting on dividend policy execution ensures ongoing transparency, which is price-sensitive and may impact valuation.

Potential Share Price Drivers

• A firm commitment to regular, substantial cash dividends (at least 35%) is likely to positively affect share valuation and attract income-focused investors.
• Improved governance and transparency may reduce risk premiums associated with the stock.
• The possibility of bonus shares, tied to operational performance, adds an element of potential upside for shareholders.
• Any deviation from the plan, or failure to meet payout targets, must be explained and approved, which could be negative for share price if not managed well.

Disclaimer

This article is for informational purposes only and does not constitute investment advice. Investors are advised to conduct their own research and consult professional financial advisors before making any investment decisions. The Profit Distribution and Return Plan is subject to approval at the shareholders’ meeting and may be amended in accordance with relevant regulations.