Shanghai Junshi Biosciences Co., Ltd. - Proxy Solicitation & Information Statement 2020

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

If you are in any doubt as to any aspect of this circular or as to the action to be taken, you should consult your licensed securities dealer, bank manager, solicitor, professional accountant or other professional adviser.

If you have sold or transferred all your shares in Shanghai Junshi Biosciences Co., Ltd.*, you should at once hand this circular, the accompanying form of proxy to the purchaser or transferee or to the bank, a licensed securities dealer or other agent through whom the sale or transfer was effected for transmission to the purchaser or transferee.

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this circular, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this circular.

This circular appears for information purposes only and does not constitute an invitation or offer to acquire, purchase or subscribe for securities of the Company.

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SHANGHAI JUNSHI BIOSCIENCES CO., LTD.[] *上海君實生物醫藥科技股份有限公司**

(a joint stock company incorporated in the People’s Republic of China with limited liability)

(Stock code: 1877)

APPOINTMENT OF INDEPENDENT NON-EXECUTIVE DIRECTOR LICENSE AGREEMENT WITH A RELATED PARTY

UTILIZATION OF PART OF THE SURPLUS PROCEEDS FOR PERMANENT REPLENISHMENT OF LIQUIDITY

GENERAL MANDATE TO ISSUE A SHARES AND/OR H SHARES

AMENDMENTS TO THE ARTICLES OF ASSOCIATION

PROPOSED ADOPTION OF THE 2020 RESTRICTED A SHARE INCENTIVE SCHEME AND ASSESSMENT MANAGEMENT MEASURES

PROPOSED ISSUE AND GRANT OF NEW A SHARES UNDER THE INCENTIVE SCHEME PURSUANT TO SPECIFIC MANDATE WHICH INVOLVES CONNECTED TRANSACTION

Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders

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A letter from the Board is set out on pages 7 to 59 of this circular. Notices convening the EGM and the Class Meeting of H Shareholders to be held at 13th Floor, Building 2, Nos. 36, 58 Haiqu Road, China (Shanghai) Pilot Free Trade Zone, Shanghai, the PRC on Monday, 16 November 2020 are set out on pages 197 to 204 of this circular and have been despatched on 29 September 2020. The corresponding reply slip(s) and the form(s) of proxy for the EGM and Class Meeting of H Shareholders have also been despatched on 29 September 2020 and have been published on the websites of the Stock Exchange (http://www.hkexnews.hk) and of the Company (www.junshipharma.com).

Whether or not you are able to attend the EGM and/or the Class Meetings, you are reminded to complete, sign and return the corresponding reply slip(s) and the form(s) of proxy in accordance with the instructions printed thereon. For holders of H Shares, (i) the reply slip(s) for the EGM and the Class Meeting of H Shareholders shall be lodged at the Company’s H share registrar, Tricor Investor Services Limited, at Level 54, Hopewell Centre, 183 Queen’s Road East, Hong Kong on or before Tuesday, 27 October 2020 and (ii) the form(s) of proxy for the EGM and the Class Meeting of H Shareholders shall be lodged at the Company’s Hong Kong H share registrar, Tricor Investor Services Limited, at Level 54, Hopewell Centre, 183 Queen’s Road East, Hong Kong no later than 24 hours before the time fixed for holding the EGM or any adjournment thereof. Completion and return of the form(s) of proxy will not preclude you from attending the EGM and/or the Class Meetings and any adjournment thereof and voting in person.

Reference to times and dates in this circular are to Hong Kong local times and dates.

* For identification purposes only.

22 October 2020

CONTENTS

			Pages
DEFINITIONS	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		1
LETTER FROM	THE BOARD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		7
LETTER FROM	THE INDEPENDENT BOARD COMMITTEE . . . . . . . . . . . . .		60
LETTER FROM	THE INDEPENDENT FINANCIAL ADVISER . . . . . . . . . . . . .		62
APPENDIX I	–	UTILIZATION OF PART OF THE
		SURPLUS PROCEEDS FOR PERMANENT
		REPLENISHMENT OF LIQUIDITY . . . . . . . . . . . . . .	87
APPENDIX II	–	GENERAL MANDATE TO ISSUE A SHARES
		AND/OR H SHARES . . . . . . . . . . . . . . . . . . . . . . . . . .	93
APPENDIX III	–	PROPOSED AMENDMENTS TO THE
		ARTICLES OF ASSOCIATION . . . . . . . . . . . . . . . . . .	96
APPENDIX IV	–	THE 2020 RESTRICTED A SHARE INCENTIVE
		SCHEME (DRAFT) . . . . . . . . . . . . . . . . . . . . . . . . . . . .	119
APPENDIX V	–	THE MANAGEMENT MEASURES FOR
		ASSESSMENT FOR THE IMPLEMENTATION OF
		THE 2020 RESTRICTED A SHARE INCENTIVE
		SCHEME . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	175
APPENDIX VI	–	GENERAL INFORMATION. . . . . . . . . . . . . . . . . . . . . . .	184
NOTICE OF EGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .			197
NOTICE OF CLASS MEETING OF H SHAREHOLDERS. . . . . . . . . . . . . . . . . .			203

– i –

DEFINITIONS

Unless the context otherwise requires, the following expressions in this circular shall have the following meanings:

“A Share(s)” ordinary share(s) in the share capital of the Company, with a nominal value of RMB1.00 each, which are traded in Renminbi and are listed on the STAR Market “A Shareholder(s)” holder(s) of A Shares “Adjustment” adjustment to the number of the Restricted Shares and/or the Grant Price upon occurrence of certain corporate actions of the Company according to the Incentive Scheme. Further details of the Adjustment are summarized in the paragraph headed “The Proposed 2020 Restricted A Share Incentive Scheme – IX. Method and Procedures for Adjustment” under “(6) Proposed Adoption of the Incentive Scheme (draft) and its summary” in this circular “Anwita” Anwita Biosciences, Inc. “Articles of Association” or the articles of association of the Company as effective at “Articles” the time “Assessment Management the management measures for assessment for the Measures” implementation of the Incentive Scheme (《2020年限制性股票激勵計劃實施考核管理辦法》) of the Company “associate(s)” has the meaning ascribed to it under the Hong Kong Listing Rules “Board of Directors” or “Board” the board of Directors of the Company “Board of Supervisors” the board of Supervisors of the Company “CICC” or “Sponsor Institution” China International Capital Corporation Limited (中國國際金融股份有限公司), the sponsor institution of the Company for the STAR Market Listing “Class Meeting of the 2020 second class meeting of A Shareholders to be A Shareholders” held on Monday, 16 November 2020 immediately after the conclusion of the EGM (or any adjournment thereof)

– 1 –

DEFINITIONS

“Class Meeting of H Shareholders”
the 2020 second class meeting of H Shareholders to be held on Monday, 16 November 2020 immediately after the conclusion of the Class Meeting of A Shareholders (or any adjournment thereof)
“Class Meetings” the Class Meeting of A Shareholders and the Class Meeting of H Shareholders
“Company” Shanghai Junshi Biosciences Co., Ltd.* 上海君實生物醫藥科技股份有限公司, a joint stock limited company incorporated in the PRC with limited liability, the H Shares and A Shares of which are listed and traded on the main board of the Hong Kong Stock Exchange and the STAR Market, respectively
“Connected Participant(s)” a Participant(s) who is a connected person of the Company
“connected person(s)” has the meaning ascribed to it under the Hong Kong Listing Rules
“connected transaction(s)” has the meaning ascribed to it under the Hong Kong Listing Rules
“CSDC”
China Securities Depository and Clearing Co., Ltd.
“CSRC” China Securities Regulatory Commission
“Director(s)” the director(s) of the Company
“EGM”
the 2020 third extraordinary general meeting of the Company to be held on Monday, 16 November 2020 at 2:00 p.m. (or any adjournment thereof)
“First Grant”
the proposed grant of not more than 28,589,500 Restricted Shares, representing approximately 80% of the total number of Restricted Shares under the Incentive Scheme (subject to Adjustment)
“General Mandate”

the general mandate to allot, issue or otherwise deal with A Shares and/or H Shares proposed to be granted at the EGM, further details of which are set out in Appendix II to this circular

– 2 –

DEFINITIONS

“Grant Date”

the date on which the Company grants the Restricted Shares to the Participants

“Grant Price” the price of each Restricted Share to be granted to the Participants (subject to Adjustment)
“Group” the Company and its subsidiaries
“Guidelines on Standard Operation”
the Applicable Guidelines of Self-Regulatory Regulations for Listed Companies on the STAR Market of the Shanghai Stock Exchange No. 1 – Standard Operation (《上海證券交易所科創板上市公司自律監管規則適用指引第1號–規範運作》)
“Guidelines on the Management and Utilization of Raised Funds”
the Guidelines on the Supervision and Administration on Listed Companies No. 2 – Supervision and Administration Requirements for Listed Companies on the Management and Utilization of Raised Funds (《上市公司監管指引第2號–上市公司募集資金管理和使用的監管要求》)
“H Share(s)”
overseas-listed ordinary share(s) in the share capital of the Company, with a nominal value of RMB1.00 each, which are traded in Hong Kong dollars and are listed on the Hong Kong Stock Exchange
“H Shareholder(s)”
holder(s) of H Shares
“HKD”
Hong Kong dollars, the lawful currency of Hong Kong
“Hong Kong” the Hong Kong Special Administrative Region of the PRC
“Hong Kong Listing Rules” or the Rules Governing the Listing of Securities on the “Listing Rules” Hong Kong Stock Exchange
“Hong Kong Stock Exchange” or The Stock Exchange of Hong Kong Limited “Stock Exchange”

“Incentive Scheme” the 2020 restricted A share incentive scheme of the Company

“IND”

Investigational New Drug

– 3 –

DEFINITIONS

“Independent Board Committee”
“Independent Financial Adviser” or “Rainbow Capital”
“Independent Non-executive Director(s)”
“Independent Shareholders”
“Latest Practicable Date”
“License Agreement”
“Management Measures”
“NDA”
“Notice of EGM”
“Notice of the Class Meeting of A Shareholders”
an independent board committee of the Company comprising all Independent Non-executive Directors who are independent from related matters to advise the Independent Shareholders in respect of the issue and grant of the Restricted Shares by the Company to the Connected Participants under the Incentive Scheme
Rainbow Capital (HK) Limited, a corporation licensed to carry out Type 6 (advising on corporate finance) regulated activity under the SFO, and the independent financial adviser of the Company appointed to advise the Independent Board Committee and the Independent Shareholders in respect of the issue and grant of the Restricted Shares by the Company to the Connected Participants under the Incentive Scheme
the independent non-executive Director(s) of the Company
Shareholders who are not required to abstain from voting on the relevant resolutions in relation to the Incentive Scheme and the issue and grant of the Restricted Shares by the Company to the Connected Participants thereunder to be considered and, if thought fit, approved at the EGM and the Class Meetings
20 October 2020, being the latest practicable date prior to the printing of this circular of ascertaining certain information herein
the license agreement proposed to be entered into between the Company and Anwita
the Management Measures for Share Incentives of Listed Companies (《上市公司股權激勵管理辦法》)
New Drug Application
the notice of the EGM dated 29 September 2020, a copy of which is set out on pages 197 to 202 of this circular
the notice of the Class Meeting of A Shareholders dated 29 September 2020

– 4 –

DEFINITIONS

“Notice of the Class Meeting of the notice of the Class Meeting of H Shareholders dated H Shareholders” 29 September 2020, a copy of which is set out on pages 203 to 204 of this circular
“Notices of the Class Meetings” the Notice of the Class Meeting of A Shareholders and the Notice of the Class Meeting of H Shareholders
“Participants” the participants of the Incentive Scheme
“PRC Company Law” the Company Law of the PRC (《中華人民共和國公司法》) (as amended from time to time)
“PRC Securities Law” the Securities Law of the PRC (《中華人民共和國證券法》) (as amended from time to time)
“PRC” or “China”
the People’s Republic of China (for the purpose of this circular, excluding Hong Kong, the Macau Special Administrative Region of the PRC and Taiwan)
“R&D”
research and development
“Remuneration and Appraisal Committee”
“Reserved Grant”
the remuneration and appraisal committee of the Company the reserved grant of not more than 7,147,000 Restricted Shares, representing approximately 20% of the total number of Restricted Shares under the Incentive Scheme (subject to Adjustment)
“Restricted Share(s)”
A Share(s) to be granted to the Participants by the Company on such conditions and at the Grant Price stipulated under the Incentive Scheme, which are subject to the attribution conditions stipulated under the Incentive Scheme and can only be attributed and transferred after satisfaction of the attribution conditions
“RMB”

Renminbi, the lawful currency of the PRC

“SFO”
the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong), as amended, supplemented or otherwise modified from time to time
“Shanghai Stock Exchange”

the Shanghai Stock Exchange

– 5 –

DEFINITIONS

“Share(s)” ordinary share(s) in the share capital of the Company with a nominal value of RMB1.00 each, comprising H Shares and A Shares “Shareholder(s)” holder(s) of Share(s) “sNDA” supplement New Drug Application “Specific Mandate” the specific mandate to be sought from the Shareholders at the EGM and the Class Meetings to issue and allot not more than 35,736,500 A Shares (subject to Adjustment) as Restricted Shares under the Incentive Scheme

“STAR Market” the STAR Market of the Shanghai Stock Exchange “STAR Market Listing” the initial public offering and listing of the Company’s A Shares on the STAR Market on 15 July 2020 “STAR Market Listing Rules” the Rules Governing the Listing of Stocks on the STAR Market of Shanghai Stock Exchange (《上海證券交易所科創板股票上市規則》) “Supervisor(s)” the supervisor(s) of the Company “US$” United States dollars, the lawful currency of the United States “%” per cent

For identification purposes only.

– 6 –

LETTER FROM THE BOARD

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SHANGHAI JUNSHI BIOSCIENCES CO., LTD.[] *上海君實生物醫藥科技股份有限公司**

(a joint stock company incorporated in the People’s Republic of China with limited liability)

(Stock code: 1877)

Executive Directors: Mr. Xiong Jun (Chairman and Legal Representative) Dr. Li Ning (Chief Executive Officer and General Manager) Dr. Feng Hui Mr. Zhang Zhuobing Dr. Yao Sheng

Non-executive Directors: Dr. Wu Hai Mr. Tang Yi Mr. Li Cong Mr. Yi Qingqing Mr. Lin Lijun

Registered address, headquarters and principal place of business in the PRC: Level 13, Building 2 Nos. 36 and 58, Hai Qu Road China (Shanghai) Pilot Free Trade Zone the PRC

Principal place of business in Hong Kong: Level 54, Hopewell Centre 183 Queen’s Road East, Hong Kong

Independent Non-executive Directors: Dr. Chen Lieping Mr. Chen Xinjun Mr. Qian Zhi Mr. Zhang Chun Dr. Roy Steven Herbst

22 October 2020

To the Shareholders

Dear Sir or Madam,

APPOINTMENT OF INDEPENDENT NON-EXECUTIVE DIRECTOR LICENSE AGREEMENT WITH A RELATED PARTY

UTILIZATION OF PART OF THE SURPLUS PROCEEDS FOR PERMANENT REPLENISHMENT OF LIQUIDITY

GENERAL MANDATE TO ISSUE A SHARES AND/OR H SHARES AMENDMENTS TO THE ARTICLES OF ASSOCIATION

PROPOSED ADOPTION OF THE 2020 RESTRICTED A SHARE INCENTIVE SCHEME AND ASSESSMENT MANAGEMENT MEASURES

PROPOSED ISSUE AND GRANT OF NEW A SHARES UNDER THE INCENTIVE SCHEME PURSUANT TO SPECIFIC MANDATE WHICH INVOLVES CONNECTED TRANSACTION

I. INTRODUCTION

The purpose of this circular is to provide you with information regarding resolutions to be proposed at the EGM and the Class Meetings to enable you to make informed decisions on whether to vote for or against the proposed resolutions at the EGM and the Class Meetings.

– 7 –

LETTER FROM THE BOARD

At the EGM, ordinary resolutions will be proposed to consider and, if thought fit, approve:

(1) the appointment of Mr. Jiang Hualiang as an Independent Non-executive Director;
(2) the signing of the License Agreement with a related party; and
(3) the utilization of part of the surplus proceeds from the STAR Market Listing for permanent replenishment of liquidity.

At the EGM, a special resolution will be proposed to consider, and, if thought fit, approve:

(4) the proposed grant of the General Mandate to issue additional A Shares and/or H Shares.

At the EGM and the Class Meetings, special resolutions will be proposed to consider and, if thought fit, approve:

(5) the proposed amendment of the Articles of Association and industrial and commercial registration of the amendments;
(6) the proposed Incentive Scheme (draft) and its summary;
(7) the proposed Assessment Management Measures; and
(8) the authorization granted by the general meeting to the Board of Directors to deal with matters relating to the Incentive Scheme.

II. DETAILS OF THE RESOLUTIONS

(1) Appointment of Independent Non-executive Director

Mr. Jiang Hualiang (“ Mr. Jiang ”) has been nominated as an Independent Non-executive Director to fill the casual vacancy of Mr. Chen Xinjun, who tendered his resignation as an Independent Non-executive Director on 24 July 2020.

The biography of Mr. Jiang is as follows:

Mr. Jiang Hualiang (蔣華良), aged 55, specializes in the fields of drug design, drug chemistry and drug science. Mr. Jiang has been a researcher, project leader and PhD tutor in the medicinal chemistry and drug design fields at the Shanghai Institute of Materia Medica, Chinese Academy of Sciences (the “ SIMMCAS ”) since November 1997. He has also held various other positions at the SIMMCAS: from February 2014 to April 2019, he was the director, researcher and PhD tutor; from December 2004 to February 2014, he was a deputy

– 8 –

LETTER FROM THE BOARD

director, researcher and PhD tutor; and from September 1995 to November 1997, he served as an associate researcher. Mr. Jiang’s other work experience includes: from July 1999 to December 1999, he was a visiting professor in medicinal chemistry at the Weizmann Institute of Science, Israel; and during the periods from February 1997 to July 1997 and from August 2001 to February 2002, he was a visiting scholar at the Hong Kong University of Science and Technology.

Mr. Jiang obtained his bachelor’s degree in organic chemistry from Nanjing University, the PRC in July 1987, a master’s degree in physical chemistry from East China Normal University, the PRC in July 1992 and a doctor’s degree in medicinal chemistry from the SIMMCAS in July 1995. He was elected as an Academician of the Chinese Academy of Sciences in 2017.

As at the Latest Practicable Date, save as disclosed above, Mr. Jiang has confirmed that he: (i) does not hold any position in the Company or any other subsidiaries of the Company, nor did he hold any directorship or positions of supervisor in any other listed companies in Hong Kong or overseas in the last three years; (ii) does not have any relationship with any directors, supervisors, senior management or substantial shareholders (as defined in the Hong Kong Listing Rules) of the Company; and (iii) does not have any interests in the shares or underlying shares of the Company or any of its associated corporations within the meaning of Part XV of the SFO.

If Mr. Jiang is appointed as an Independent Non-executive Director at the EGM, the Company will enter into a service contract with Mr. Jiang in relation to his appointment as an Independent Non-executive Director for a term commencing from the date of approval of his appointment at the EGM and expiring on the conclusion of the Second Session of the Board of Directors, this term of office is determinable by either party serving on the other not less than three months’ written notice, and subject to retirement by rotation and re-appointment in accordance with the Articles of Association and the Hong Kong Listing Rules. Under the terms of the proposed service contract, the director’s fee payable to Mr. Jiang will be RMB500,000 per annum, which was determined with reference to his duties and responsibilities in the Company and prevailing market conditions, and will be subject to review by the Board and the Remuneration and Appraisal Committee from time to time. Mr. Jiang has not entered into nor proposed to enter into any service contracts, which fall within the meanings of Rule 13.68 of the Hong Kong Listing Rules requiring the prior approval of shareholders of the Company at general meetings, with the Company.

Save as disclosed above, there are no other matters concerning Mr. Jiang’s appointment as an Independent Non-executive Director that need to be brought to the attention of the Shareholders of the Company nor any information required to be disclosed pursuant to the requirements of Rule 13.51(2)(h) to (v) of the Hong Kong Listing Rules.

An ordinary resolution will be proposed at the EGM to consider and, if thought fit, approve the appointment of Mr. Jiang as an Independent Non-executive Director. If approved, the appointment of Mr. Jiang shall take effect on the date of the EGM.

– 9 –

LETTER FROM THE BOARD

(2) License Agreement with a Related Party

An ordinary resolution will be proposed at the EGM to consider and, if thought fit, approve the signing of the License Agreement with Anwita, a related party of the Company.

The Company proposes to enter into the License Agreement with Anwita, pursuant to which Anwita will grant the Company an exclusive license of Anti-HSA-IL-2N� series products and related ANWITA technology and intellectual property rights or an exclusive license used in conjunction with the proprietary products of the Company as agreed under the License Agreement in the licensed territory (including mainland China, Hong Kong, Macau Special Administrative Region and Taiwan region) (the “ Licensed Territory ”).

Key terms of the License Agreement are summarized below:

I. License Scope

Anwita will grant the Company an exclusive license of Anti-HSA-IL-2N� series products and related ANWITA technology and intellectual property rights or an exclusive license used in conjunction with the proprietary products of the Company as agreed under the License Agreement in the Licensed Territory. Licensed products include IL-2N� protein, Anti-HSA-IL-2N� fusion protein and derivatives. The Company will conduct R&D and commercialization of the licensed products in the Licensed Territory. In addition, the Company is entitled to sublicense relevant authorization, and has the non-exclusive right to conduct clinical trials outside the Licensed Territory.

II. Financial Terms

(I) Upfront payment

The Company will pay an upfront payment of US$2 million to Anwita.

(II) Milestone payment

The Company will pay Anwita milestone payments of no more than US$86 million in aggregate based on the R&D and commercialization progress. The milestone payments are subject to the fulfilment of the corresponding R&D and commercialization targets, and the ultimate amount of payment is subject to uncertainties.

(III) Royalties

The Company will pay Anwita the royalties of single-digit percentage of the net sales of the licensed products.

– 10 –

LETTER FROM THE BOARD

(IV) Sublicense revenue sharing

When the Company completes a certain stage of clinical trials and obtains the corresponding clinical data, Anwita may request the Company to provide relevant clinical data. When Anwita shares the trial data with a third party at a gain, Anwita will share with the Company all proceeds received from sublicensing such rights to any third party. The commission amount will be agreed separately.

(V) Payment for the development of cell line

When the Company designates a drug or derivative of Anwita as a drug candidate for the Company’s development, Anwita will provide the Company with cell line development services for drug production. For each cell line development work to develop drug candidates, the Company will make payments of up to US$300,000 to Anwita.

Information about the Licensed Products

Anti-HSA-IL-2N� are the IL-2 proprietary products developed by Anwita. They are based on AWT-P1790 which is owned by Anwita, with abolished CD25 binding, optimized CD122 affinity, and fused with an anti-HSA nanobody to extend their in vivo half-life. The improvements made these series of products become the new generation of potent IL-2 products with reduced toxicity.

Information about Anwita

Anwita is a company headquartered in California, the United States. Its main business is to discover and develop cytokine fusion proteins and monoclonal antibodies. Anwita possesses strong technology skills of cytokine drug modification and excellent technical capabilities. Its technology platforms, including sd-HSA, have a wide range of applications for cytokine fusion proteins.

Mr. Zhong Ziyang is the chairman and chief executive officer of Anwita. As at the Latest Practicable Date, the Company holds 2,990,162 series-A preferred shares of Anwita, accounting for approximately 20% of Anwita’s issued shares. Mr. Feng Hui, an executive Director, is a director of Anwita. As at the Latest Practicable Date, except for the above-mentioned relations, there is no other relationship between Anwita and the Company in terms of property rights, businesses, assets, credits and debts or human resources.

To the best of the knowledge, information and belief of the Company having made all reasonable enquires, Anwita is not a connected person of the Company under Chapter 14A of the Hong Kong Listing Rules.

– 11 –

LETTER FROM THE BOARD

Reasons for and benefits of entering into the License Agreement

With its capability in continuous innovation in the field of cytokines, especially several modified cytokine drugs of oncology and auto-immune diseases that have overcome the high toxicity and short half-life of traditional cytokine drugs, Anwita enjoys certain technical advantages, thus creating greater synergy with the Company in the fields of oncology and auto-immune diseases.

The cooperation is conducive to expanding the Company’s R&D pipeline in the field of cancer treatment, improving the Company’s market layout and providing alternative treatment options for the unmet clinical needs in the market, which will have a positive impact on the sustained operations of the Company.

Under the PRC law, Anwita is a related party of the Company and the License Agreement therefore constitutes a related party transaction and is subject to shareholders’ approval by way of an ordinary resolution. The Directors confirm that Anwita is not a connected person of the Company, and the License Agreement and the transactions contemplated thereunder do not constitute connected transaction under Chapter 14A of the Hong Kong Listing Rules.

Mr. Feng Hui abstained from voting on the above board resolution on the signing of the License Agreement with Anwita. The Board (save for Mr. Feng Hui, who abstained from voting) is of the view that the above transaction constituted normal business activities of the Group, the price was determined on a market basis, and the pricing policy was fair and reasonable, and not prejudicial to the interests of the Company and its Shareholders as a whole.

According to the applicable PRC laws, regulations and regulatory requirements, Mr. Feng Hui, who is interested in 13,140,000 A Shares, representing approximately 1.51% of the Company’s total issued share capital as of the Latest Practicable Date, is required to abstain from voting on resolution no. 2 in relation to the above related party transaction at the EGM.

– 12 –

LETTER FROM THE BOARD

(3) Utilization of Part of the Surplus Proceeds from the STAR Market Listing for the Permanent Replenishment of Liquidity

An ordinary resolution will be proposed at the EGM to consider and, if thought fit, approve the utilization of part of the surplus proceeds from the STAR Market Listing for the permanent replenishment of liquidity of the Group.

The proceeds referred to in such resolution relate to the proceeds from the STAR Market Listing only, and do not relate to the proceeds from the listing of the H Shares of the Company on the Hong Kong Stock Exchange.

Further details of the resolution on the utilization of part of the surplus proceeds from the STAR Market Listing for the permanent replenishment of liquidity are set out in Appendix I to this circular.

(4) Proposed Grant of the General Mandate to Issue A Shares and/or H Shares of the Company

In order to seize market opportunities and ensure flexibility to issue new Shares, it is proposed to approve at the EGM the grant of an unconditional general mandate to the Board of Directors, and for the Board of Directors to delegate the chairman and his authorized persons (unless relevant laws and regulations provide otherwise for delegated matters) to be authorized to, subject to market conditions and the needs of the Company, separately or concurrently issue, allot and deal with A Shares and/or H Shares or securities convertible into such shares, options, warrants or similar rights to subscribe for any A Shares and/or H Shares in the Company not exceeding each of 20% of the A Shares or H Shares in issue as at the date of passing the resolution.

Under Hong Kong Listing Rules, the proposed grant of General Mandate to issue A Shares and/or H Shares is subject to the approval of the Shareholders by special resolution in general meeting. A special resolution will be proposed at the EGM to consider and, if thought fit, approve the proposed grant of General Mandate to issue A Shares and/or H Shares.

Further details of the resolution on the proposed grant of General Mandate to issue A Shares and/or H Shares are set out in Appendix II to this circular.

(5) Proposed Amendments to the Articles of Association

The Company proposed to amend the relevant articles in the Articles of Association (1) to reflect the result of and in connection with the Company’s issue of A Shares and listing on the STAR Market; and (2) pursuant to the Reply of the State Council on Adjusting the Provisions to Matters Including the Notice Period for Convention of General Meetings Applicable to Overseas Listed Companies (No. 97 [2019] of the State Council) (《國務院關於調整適用在境外上市公司召開股東大會通知期限等事項規定的批覆》(國函[2019]97 號)) (which provides that overseas listed joint stock limited companies incorporated in the PRC

– 13 –

LETTER FROM THE BOARD

shall follow the relevant provisions of the PRC Company Law in respect of requirements on notice period for convening general meetings, shareholders’ right of raising motions and convening procedures, instead of the provisions of Articles 20 to 22 of the Special Regulations of the State Council on the Overseas Offering and Listing of Shares by Joint Stock Limited Companies (《國務院關於股份有限公司境外募集股份及上市的特別規定》)).

Among others, certain proposed amendments with respect to share purchase of the Company intend to reflect the latest position in the PRC Company Law. As relevant provisions under the PRC Company Law make no distinction between domestic shares/A shares and H shares of a company, the subject amendments accordingly do not distinguish between the different classes of shares of the Company. However, the amendments to Articles 27 and 29 of the Articles of Association which allow the Company to repurchase its shares in certain scenarios subject to Board approval (including for the purpose of using the shares for employee stock ownership plan or as equity incentives, using the shares in the conversion of the convertible corporate bonds issued by the Company or necessary for the Company to protect the Company value and the shareholders’ equity), are intended to apply to repurchase of A Shares, but not H Shares of the Company. As of the Latest Practicable Date, the Company currently does not intend to repurchase any Shares, including its H Shares. Further, notwithstanding the subject amendments, the Company shall still be subject to the relevant requirements and restrictions under the Hong Kong Listing Rules for any share repurchase. The Company will seek shareholders’ approval via special resolution in general meeting and class meetings in accordance with Rules 19A.24 and 19A.25 of the Hong Kong Listing Rules and/or the Code on Share Buy-back as may be applicable if any repurchase of shares is to be conducted.

The full text of the proposed amendments to the Articles of Association is set out in Appendix III to this circular and were prepared in Chinese language. In the event of any discrepancy between the English translation and the Chinese version of the proposed amendments to the Articles of Association, the Chinese version shall prevail.

Except for the proposed amendments as set out in set out in Appendix III to this circular, other provisions of the Articles of Association remain unchanged.

The proposed amendments to the Articles of Association are subject to Shareholders’ approval by way of special resolution at the EGM and the Class Meetings, and the amended Articles of Association will take effect upon the resolution being passed by the Shareholders at the EGM and the Class Meetings.

(6) Proposed Adoption of the Incentive Scheme (draft) and its summary

Reference is made to the Company’s announcement dated 30 September 2020 in relation to the proposed adoption of the Incentive Scheme and the proposed issue and grant of new A Shares under the Incentive Scheme pursuant to the Specific Mandate which involves a connected transaction.

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LETTER FROM THE BOARD

To further perfect the Company’s corporate governance structure, establish and improve the Company’s long-term incentive mechanism, attract and retain the Company’s management personnel, core technical personnel and other personnel, fully mobilize their enthusiasm and creativity, effectively strengthen the cohesion of the core team and the competitiveness of the Company, align the interests of the shareholders, the Company and the core staff members, bring their attention to the long-term development of the Company and ensure that the Company’s development strategy and business goals shall be realized, the Board of Directors passed the resolution on 29 September 2020 on the proposed adoption of the Incentive Scheme.

The full text of the Incentive Scheme (draft) is set out in Appendix IV to this circular. The Incentive Scheme was prepared in Chinese language. In the event of any discrepancy between the English translation and the Chinese version of the Incentive Scheme, the Chinese version shall prevail.

The Proposed 2020 Restricted A Share Incentive Scheme

The principal terms of the proposed Incentive Scheme are summarized as follows:

I. Purpose of the Incentive Scheme

II. Form and Source of the Restricted Shares to be Granted

The form of incentive adopted under the Incentive Scheme is Restricted Shares.

The source of all Restricted Shares under the Incentive Scheme will be new ordinary A Shares to be issued by the Company to the Participants.

III. Number of the Restricted Shares to be Granted

The total number of Restricted Shares to be granted under the Incentive Scheme will be not more than 35,736,500 A Shares, representing approximately 5.19% of the total number of issued A Shares and approximately 4.10% of the total issued share capital of the Company as at the Latest Practicable Date (subject to Adjustment). Amongst the total number of Restricted Shares, 7,147,000 A Shares, representing approximately 20% of the total number of Restricted Shares, will be reserved for the Reserved Grant in a subsequent period of 12 months after the approval and adoption of the Incentive Scheme at the EGM and Class Meetings (subject to Adjustment).

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LETTER FROM THE BOARD

The cumulative total number of underlying Shares involved under all share incentive schemes of the Company which are within their validity period shall not exceed 20% of the total share capital of the Company as at the date the Incentive Scheme is submitted for approval at the EGM and the Class Meetings. The total number of Shares to be granted to any Participant under all share incentive schemes of the Company which are within their validity period shall not exceed 1% of the total share capital of the Company.

IV. Participants of the Incentive Scheme

A. Basis for determining the Participants

Legal basis for determining the Participants

The Participants are determined after taking into account the actual circumstances of the Company and in accordance with the PRC Company Law, the PRC Securities Law, the Management Measures, the Hong Kong Listing Rules, the STAR Market Listing Rules, the Business Guidelines for Information Disclosure of Companies Listed on the STAR Market No. 4 — Information Disclosure on Equity Incentives 《(科創板上市公司信息披露業務指南第4號 — 股權激勵信息披露》) and other relevant laws, administrative regulations and regulatory documents as well as the Articles of Association.

2. Positions held by the Participants in the Company

The Participants include Directors, members of the senior management, core technical staff and other persons (who are all employees of the Group) considered by the Board (excluding the Independent Non-executive Directors and Supervisors) to be required to be incentivized of the Group. The list of Participants will be prepared by the Remuneration and Appraisal Committee and verified by the Board of Supervisors.

B. Scope of the Participants

The First Grant proposes to cover 2,004 Participants, representing approximately 91.55% of the total number of 2,189 employees of the Group as at 21 September 2020.

None of the Participants are Independent Non-executive Directors and Supervisors.

All such Director or member of the senior management being Participants must have been elected at a Shareholders’ general meeting or engaged by the Board. All Participants must have an employment or labour relationship with the Company or its subsidiaries at the time of grant and during the assessment period of the Incentive Scheme.

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LETTER FROM THE BOARD

The Participants for the Reserved Grant shall be determined within 12 months after the Incentive Scheme is considered and approved at the EGM and Class Meetings. The Company will announce relevant information about the Participants on the Company’s website timely after the Board of Directors having made such proposal, independent non-executive Directors and the Board of Supervisors having expressed clear opinions, and the Company’s counsel having provided professional opinions and legal opinions. Overseas regulatory announcement will also be published on the Hong Kong Stock Exhange’s website to remind Shareholders and potential investors of the publication of such information. The Reserved Grant shall lapse if the Participants cannot be determined within the 12-month period. The basis for determining the Participants for the Reserved Grant shall be the same as the basis for determining the Participants for the First Grant.

In the event that any grantee under the Reserved Grant is a connected person of the Company, such will constitute a connected transaction of the Company. The Company will comply with the relevant requirements under the Hong Kong Listing Rules, including reporting, announcement and independent Shareholders’ approval and appointment of the independent financial adviser requirements under Chapter 14A of the Hong Kong Listing Rules as and when appropriate.

C. Persons who are prohibited to participate in the Incentive Scheme
The person has been determined as an inappropriate candidate by the Shanghai Stock Exchange within the most recent 12 months;
The person has been identified as an inappropriate candidate by the CSRC and its delegated institutions within the most recent 12 months;
The person has been subject to administrative punishment or market ban measures by the CSRC and its delegated institutions due to major breach of laws and regulations in the most recent 12 months;
The person has the circumstances stipulated in the PRC Company Law that he/she shall not act as a director or member of the senior management of a company;
Laws and regulations stipulate that the person shall not participate in the equity incentives of listed companies;
Other circumstances as determined by the CSRC.

During the implementation process of the Incentive Scheme, if any of the above circumstances in relation to a Participant arises, the Company shall terminate his/her right to participate in the Incentive Scheme, and any granted Restricted Shares which have not yet been attributed to him/her shall not be attributed and shall lapse.

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LETTER FROM THE BOARD

D. Allocation of Restricted Shares to be granted

A summary of the allocation of the Restricted Shares to be granted under the Incentive Scheme is set out below:

Name of Participant(s) Major position of Participant(s) Xiong Jun1 Executive Director, Chairman and Legal Representative Li Ning1 Executive Director, Chief Executive Officer and General Manager Feng Hui1 Executive Director, core technical staff Zhang Zhuobing1 Executive Director, Deputy General Manager, core technical staff Yao Sheng1 Executive Director, Deputy General Manager, core technical staff Wang Gang Deputy General Manager Duan Xin Deputy General Manager Yin Kan Deputy General Manager Xie Wan Deputy General Manager Ma Jun Deputy General Manager Yuan Lu Financial director Chen Yingge Secretary of the Board of Directors Wang Shixu2 Financial manager of Junshi Biotechnology Other employees of the Company (1,991 Participants in total) First Grant Subtotal (2,004 Participants in total) Reserved Grant Total	Number of Restricted Shares to be granted 820,000 1,560,000 820,000 820,000 2,000,000 270,000 360,000 300,000 300,000 150,000 80,000 80,000 30,000 20,999,500 28,589,500 7,147,000 35,736,500	Percentage to the total number of Restricted Shares 2.29% 4.37% 2.29% 2.29% 5.60% 0.76% 1.01% 0.84% 0.84% 0.42% 0.22% 0.22% 0.08% 58.76% 80.00% 20.00% 100.00%	Percentage to the total issued A Shares as at the Latest Practicable Date 0.12% 0.23% 0.12% 0.12% 0.29% 0.04% 0.05% 0.04% 0.04% 0.02% 0.01% 0.01% 0.00% 3.05% 4.15% 1.04% 5.19%	Percentage to the total share capital of the Company as at the Latest Practicable Date 0.09% 0.18% 0.09% 0.09% 0.23% 0.03% 0.04% 0.03% 0.03% 0.02% 0.01% 0.01% 0.00% 2.41%
				3.28% 0.82%
				4.10%

Notes:

(1) Mr. Xiong Jun, Dr. Li Ning, Dr. Feng Hui, Mr. Zhang Zhuobing and Dr. Yao Sheng are executive Directors and therefore Connected Participants under Chapter 14A of the Hong Kong Listing Rules.
(2) Ms. Wang Shixu is an associate of Dr. Wu Hai, a non-executive Director, and hence a Connected Participant under Chapter 14A of the Hong Kong Listing Rules.
(3) Discrepancies in this table between the total shown and the sum of the amounts listed are due to rounding.

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LETTER FROM THE BOARD

(4) The number of the Restricted Shares is subject to Adjustment.

If a Participant, due to personal reasons, voluntarily waives the Restricted Shares which have been granted to him/her, the Board of Directors shall adjust the number of granted Restricted Shares accordingly, and allocate the portion of the Restricted Shares waived by such Participant to the Reserved Grant or allocate such portion amongst the Participants.

To the best of the Directors’ knowledge, information and belief having made all reasonable enquiry, save for the Connected Participants set out above, the other Participants under the First Grant are independent of the Company and its connected persons.

V. Grant Price and Basis of Determination of the Grant Price

A. Grant Price of the Restricted Shares

The Grant Price of the First Grant shall be RMB55.50 per A Share (subject to Adjustment). A Participant who has satisfied the conditions for grant and attribution may purchase new A Shares issued by the Company at such Grant Price. The Grant Price of the Reserved Grant shall be the same as the Grant Price of the First Grant, i.e. RMB55.50 per A Share (subject to Adjustment).

B. Basis of determination of the Grant Price

Pursuant to the STAR Market Listing Rules and the Management Measures, the Grant Price shall not be lower than the nominal value of each share of the Company and in principle should not be lower than the higher of the following prices:

(i) 50% of the average trading price of the A Shares for the date of the A Share announcement of the draft Incentive Scheme (i.e. 29 September 2020), being RMB85.46 per A Share; and
(ii) 50% of any one of the average trading price of the A Shares for the 20 trading days, being RMB90.25 per A Share, 60 trading days or 120 trading days immediately preceding the A Share announcement of the draft Incentive Scheme. As the A Shares were first listed and commenced trading on the STAR Market on 15 July 2020, the A Shares have not yet been traded for 60 or 120 trading days as at the date of the said announcement. Therefore, only the average trading price of the A Shares for the 20 trading days immediately preceding the A Share announcement of the draft Incentive Scheme is available.

The Grant Price of RMB55.50 per A Share is at a substantial discount of the prevailing trading price of the A Shares. The Grant Price was determined based on the issue price of the A Shares in the Company’s STAR Market Listing on 15 July

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LETTER FROM THE BOARD

2020, being RMB55.50 per A Share. This was also determined with a view to stabilize talents and effectively incentivize employees under different cycles and business environments which may allow the Company to gain advantage in the competitive industry that it operates in. The Board has also taken into consideration the level of difficulty of the performance targets which Participants must achieve for the Restricted Share(s) to be attributed, and considers that this is in balance with the substantial discount in the Grant Price.

The Grant Price of RMB55.50 per A Share represents:

(i) a premium of approximately 30.34% to the closing price of HKD48.35 per H Share as quoted on the Hong Kong Stock Exchange and a discount of approximately 34.19% to the closing price of RMB84.33 per A Share as quoted on the Shanghai Stock Exchange on the trading day immediately preceding 29 September 2020 (being the date on which the Board approved the Incentive Scheme);
(ii) a premium of approximately 25.56% to the average closing price of HKD50.19 per H Share as quoted on the Hong Kong Stock Exchange and a discount of approximately 38.46% to the average closing price of RMB90.19 per A Share as quoted on the Shanghai Stock Exchange on the 5 consecutive trading days immediately preceding 29 September 2020;
(iii) a premium of approximately 28.27% to the average closing price of HKD49.13 per H Share as quoted on the Hong Kong Stock Exchange and a discount of approximately 38.02% to the average closing price of RMB89.55 per A Share as quoted on the Shanghai Stock Exchange on the 20 consecutive trading days immediately preceding 29 September 2020;
(iv) a premium of approximately 26.89% to the closing price of HKD50.65 per H Share as quoted on the Hong Kong Stock Exchange and a discount of approximately 38.21% to the closing price of RMB89.82 per A Share as quoted on the Shanghai Stock Exchange as at the Latest Practicable Date; and
(v) a premium of approximately 1918.18% to the net asset value per share of the Company, being approximately RMB2.75 (calculated based on the consolidated net asset value of the Company as at 30 June 2020 of approximately RMB2,398,875,000 and the number of issued Shares as at the Latest Practicable Date, being 871,276,500 Shares).

In the event of any capitalization issue, bonus issue, dividend distribution, share split or share consolidation or rights issue of the Company during the period from the date of announcement of the Incentive Scheme to the date of completion of attribution registration of the Restricted Shares by the Participants, the Grant

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LETTER FROM THE BOARD

Price and the number of Restricted Shares shall be adjusted in accordance with the terms of the Incentive Scheme as summarized in the paragraph “IX. Method and Procedure for Adjustment” below.

VI. Validity Period, Grant Date, Attribution Arrangements and Black-Out Periods

A. Validity period of the Incentive Scheme

The Incentive Scheme will become effective upon the Grant Date of the First Grant, and shall be valid until the date on which all Restricted Shares have been attributed or lapsed, such period shall not exceed 48 months.

B. Grant Date of the Restricted Shares

The Company will convene a Board meeting to determine whether the conditions of grant under the Incentive Scheme have been met and the Grant Date after the Incentive Scheme having been adopted and approved at the EGM and the Class Meetings. The Company shall make the First Grant to the Participants and complete the relevant procedures including making relevant announcement(s), within 60 days after the Incentive Scheme having been adopted and approved at the EGM and the Class Meetings and the conditions for the grant having been satisfied. If the Company is unable to complete the procedures within the 60-day period, the Company will make a timely announcement to disclose the reason for being unable to complete the procedures and declare the termination of the Incentive Scheme.

The Restricted Shares for the Reserved Grant shall be granted within 12 months after the Incentive Scheme is approved and adopted by the EGM and the Class Meetings. The Reserved Grant shall lapse if the Participants for the Reserved Grant cannot be determined within the said 12-month period.

The Grant Date must be a trading day. If the Grant Date falls on a non-trading day, then it shall be the next trading day immediately after such non-trading day.

C. Attribution arrangements under the Incentive Scheme

Subject to the attribution conditions having been fulfilled, the Restricted Shares may be attributed to the Participants (for the First Grant) in three tranches and (for the Reserved Grant) in two tranches. An attribution date must be a trading day within the validity period of the Incentive Scheme, and shall not fall within any of the following periods:

60 days prior to the publication of the annual report (inclusive of the date of publication of the annual report), or the period between the end of the relevant financial year and the publication of the annual report, whichever is shorter;

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LETTER FROM THE BOARD

30 days prior to the publication of the half-year report or quarterly report (inclusive of the date of publication of such half-year or quarterly report), or the period between the end of the half-year or the quarter and the publication of the relevant report, whichever is shorter;
10 days prior to the disclosure of results preview or preliminary financial results;
during the period from the date of occurrence of a material event which may have considerable impact on the trading price of the shares and their derivatives of the Company, or the date of entering the decision-making process, up to 2 trading days after relevant disclosure has been made in accordance with the laws; or
any other period stipulated by the CSRC and the Shanghai Stock Exchange.

Attribution arrangements of the First Grant under the Incentive Scheme are as follows:

		Attribution
Tranche	Attribution period	percentage
First tranche	From the first trading day after the expiry of 12	40%
	months following the Grant Date of the First Grant
	until the last trading day within the 24 months
	following the Grant Date of the First Grant
Second tranche	From the first trading day after the expiry of 24	30%
	months following the Grant Date of the First Grant
	until the last trading day within the 36 months
	following the Grant Date of the First Grant
Third tranche	From the first trading day after the expiry of 36	30%
	months following the Grant Date of the First Grant
	until the last trading day within the 48 months
	following the Grant Date of the First Grant

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LETTER FROM THE BOARD

Attribution arrangements of the Reserved Grant under the Incentive Scheme are as follows:

		Attribution
Tranche	Attribution period	percentage
First tranche	From the first trading day after the expiry of 12	50%
	months following the Grant Date of the Reserved
	Grant until the last trading day within the 24
	months following the Grant Date of the Reserved
	Grant
Second tranche	From the first trading day after the expiry of 24	50%
	months following the Grant Date of the Reserved
	Grant until the last trading day within the 36
	months following the Grant Date of the Reserved
	Grant

Those Restricted Shares not being attributed to the Participants during the period of their respective tranches as a result of failure to fulfil the attribution conditions are not allowed to be attributed or deferred to be attributed in the next attribution period(s), and they shall lapse according to the provisions under the Incentive Scheme.

Upon attribution, the Restricted Shares will be registered with the CSDC under the Participant’s name.

D. Black-out periods

The requirements of black-out for the Restricted Shares under the Incentive Scheme are implemented in accordance with relevant laws, administrative regulations and regulatory documents including the PRC Company Law and the PRC Securities Law, and the Articles of Association as follows:

Where the Participant is a director or a member of the senior management of the Company, the number of Shares which may be transferred each year during his/her term of office shall not exceed 25% of the total number of Shares held by him/her. No Shares held by him/her may be transferred within six months after his/her termination of office;
For Participants who are directors or members of the senior management of the Company and their spouses, parents or children, if they have sold the Shares held by them within 6 months after purchasing such Shares, or if they have purchased the Shares within 6 months after selling their Shares, the gains obtained therefrom shall be attributed to the Company and the Board shall forfeit the gains; and

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LETTER FROM THE BOARD

During the validity period of the Incentive Scheme, if the relevant requirements under the relevant laws, administrative regulations, regulatory documents such as the PRC Company Law and the PRC Securities Law and the Articles of Association regarding the transfer of shares held by the directors and members of the senior management of the Company are changed, the transfer of the Shares held by the Participants shall comply with the relevant laws, regulations and regulatory documents including the PRC Company Law and the PRC Securities Law and the Articles of Association as amended at the time of transfer.

VII. Conditions for Grant and Attribution of Restricted Shares

A. Conditions for grant of the Restricted Shares

The Company shall grant the Restricted Shares to the Participants upon satisfaction of all of the following granting conditions; or conversely, if any of the following granting conditions has not been satisfied, no Restricted Shares shall be granted to the Participants:

None of the following has occurred on the part of the Company:
(a) An audit report on the financial and accounting report for the most recent financial year in which a certified public accountant issued an adverse opinion or was unable to express an opinion;
(b) An audit report on internal control over financial reporting for the most recent financial year in which a certified public accountant issued an adverse opinion or was unable to express an opinion;
(c) In the most recent 36 months upon listing, there have been cases of failure to distribute profits according to laws and regulations, the Articles of Association and public undertakings;
(d) Laws and regulations stipulate that equity incentives shall not be implemented; or
(e) Other circumstances as determined by the CSRC.
None of the following has occurred on the part of the Participants:
(a) The Participant has been determined as an inappropriate candidate by the Shanghai Stock Exchange within the most recent 12 months;

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LETTER FROM THE BOARD

(b) The Participant has been identified as an inappropriate candidate by the CSRC and its delegated institutions within the most recent 12 months;
(c) The Participant has been subject to administrative punishment or market ban measures by the CSRC and its delegated institutions due to major breach of laws and regulations in the most recent 12 months;
(d) The Participant has the circumstances stipulated in the PRC Company Law that he/she shall not act as a director or member of the senior management of a company;
(e) Laws and regulations stipulate that the Participant shall not participate in the equity incentives of listed companies; or
(f) Other circumstances as determined by the CSRC.
B. Conditions for attribution of the Restricted Shares

For the Restricted Shares to be attributed to the Participant, all of the following conditions need to be satisfied within the attribution period:

None of the following has occurred on the part of the Company:
(a) An audit report on the financial and accounting report for the most recent financial year in which a certified public accountant issued an adverse opinion or was unable to express an opinion;
(b) An audit report on internal control over financial reporting for the most recent financial year in which a certified public accountant issued an adverse opinion or was unable to express an opinion;
(c) In the most recent 36 months upon listing, there have been cases of failure to distribute profits according to laws and regulations, the Articles of Association and public undertakings;
(d) Laws and regulations stipulate that equity incentives shall not be implemented; or
(e) Other circumstances as determined by the CSRC.

In the event that any one of the above circumstances arises, the Restricted Shares that have been granted but have not yet been attributed to the Participant under the Incentive Scheme shall not be attributed and shall lapse.

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LETTER FROM THE BOARD

None of the following has occurred on the part of the Participants:
(a) The Participant has been determined as an inappropriate candidate by the Shanghai Stock Exchange within the most recent 12 months;
(b) The Participant has been identified as an inappropriate candidate by the CSRC and its delegated institutions within the most recent 12 months;
(c) The Participant has been subject to administrative punishment or market ban measures by the CSRC and its delegated institutions due to major breach of laws and regulations in the most recent 12 months;
(d) The Participant has the circumstances stipulated in the PRC Company Law that he/she shall not act as a director or member of the senior management of a company;
(e) Laws and regulations stipulate that the Participant shall not participate in the equity incentives of listed companies; or
(f) Other circumstances as determined by the CSRC.

In the event that any one of the above circumstances arises in relation to a certain Participant, the Company will terminate such Participant’s right to participate in the Incentive Scheme and the Restricted Shares that have been granted but have not yet been attributed to such Participant under the Incentive Scheme shall not be attributed and shall lapse.

Requirements on length of employment of the Participants

Before each tranche of Restricted Shares granted to the Participant is attributed, the length of employment of the Participant must be more than 12 months.

Performance assessment requirements at the Company level

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LETTER FROM THE BOARD

The performance assessment objectives under the Incentive Scheme in relation to the First Grant are set out below:

		Performance Target A	Performance Target B	Performance Target C
		Company attribution	Company attribution	Company attribution
Tranche		factor 100%	factor 80%	factor 60%
First Grant	First tranche	The Company must meet	The Company must meet	The Company must meet
		all of the following	all of the following	all of the following
		conditions:	conditions:	conditions:
		1. Operating income:	1. Operating income:	1. Operating income:
		in the year 2020, the	in the year 2020, the	in the year 2020, the
		Company’s operating	Company’s operating	Company’s operating
		income shall not be	income shall not be	income shall not be
		less than RMB1.45	less than RMB1.35	less than RMB1.20
		billion;	billion;	billion;
		2. Preclinical projects:	2. Preclinical projects:	2. Preclinical projects:
		in the year 2020, there	in the year 2020, there	in the year 2020, there
		shall be no less than	shall be no less than	shall be no less than
		2 IND applications	2 IND applications	1 IND application
		being filed and	being filed and	being filed and
		accepted, and in which	accepted, and in which	accepted, and in which
		the Company owns not	the Company owns not	the Company owns not
		less than 50% interests;	less than 50% interests;	less than 50% interests;
		3. Clinical development:	3. Clinical development:	3. Clinical development:
		in the year 2020, there	in the year 2020, there	in the year 2020, there
		shall be no less than	shall be no less than	shall be no less than
		2 new drugs NDA or	2 new drugs NDA or	2 new drugs NDA or
		extended indications	extended indications	extended indications
		(sNDA) being filed and	(sNDA) being filed and	(sNDA) being filed and
		accepted, and in which	accepted, and in which	accepted, and in which
		the Company owns not	the Company owns not	the Company owns not
		less than 50% interests.	less than 50% interests.	less than 50% interests.

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LETTER FROM THE BOARD

Tranche

	Performance Target A	Performance Target B	Performance Target C
	Company attribution	Company attribution	Company attribution
	factor 100%	factor 80%	factor 60%
Second	The Company must meet	The Company must meet	The Company must meet
tranche	all of the following	all of the following	all of the following
	conditions:	conditions:	conditions:
	1. Operating income:	1. Operating income:	1. Operating income:
	in the years 2020-2021,	in the years 2020-2021,	in the years 2020-2021,
	the Company’s	the Company’s	the Company’s
	accumulated operating	accumulated operating	accumulated operating
	income shall not be	income shall not be	income shall not be
	less than RMB3.6	less than RMB3.3	less than RMB2.8
	billion;	billion;	billion;
	2. Preclinical projects:	2. Preclinical projects:	2. Preclinical projects:
	in the years 2020-2021,	in the years 2020-2021,	in the years 2020-2021,
	there shall be no less	there shall be no less	there shall be no less
	than 9 IND applications	than 7 IND applications	than 6 IND applications
	accumulatively, being	accumulatively, being	accumulatively, being
	filed and accepted, and	filed and accepted, and	filed and accepted, and
	in which the Company	in which the Company	in which the Company
	owns not less than 50%	owns not less than 50%	owns not less than 50%
	interests;	interests;	interests;

Clinical development: 3. Clinical development: 3. Clinical development: in the years 2020-2021, in the years 2020-2021, in the years 2020-2021, there shall be no less there shall be no less there shall be no less than 6 new drugs NDA than 5 new drugs NDA than 4 new drugs NDA or extended indications or extended indications or extended indications (sNDA) accumulatively, (sNDA) accumulatively, (sNDA) accumulatively, being filed and being filed and being filed and accepted, and in which accepted, and in which accepted, and in which the Company owns not the Company owns not the Company owns not less than 50% interests. less than 50% interests. less than 50% interests.

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LETTER FROM THE BOARD

Tranche

	Performance Target A	Performance Target B	Performance Target C
	Company attribution	Company attribution	Company attribution
	factor 100%	factor 80%	factor 60%
Third	The Company must meet	The Company must meet	The Company must meet
tranche	all of the following	all of the following	all of the following
	conditions:	conditions:	conditions:
	1. Operating income:	1. Operating income:	1. Operating income:
	in the years 2020-2022,	in the years 2020-2022,	in the years 2020-2022,
	the Company’s	the Company’s	the Company’s
	accumulated operating	accumulated operating	accumulated operating
	income shall not be	income shall not be	income shall not be
	less than RMB6.6	less than RMB5.7	less than RMB4.8
	billion;	billion;	billion;
	2. Preclinical projects:	2. Preclinical projects:	2. Preclinical projects:
	in the years 2020-2022,	in the years 2020-2022,	in the years 2020-2022,
	there shall be no less	there shall be no less	there shall be no less
	than 16 IND	than 13 IND	than 11 IND
	applications	applications	applications
	accumulatively, being	accumulatively, being	accumulatively, being
	filed and accepted, and	filed and accepted, and	filed and accepted, and
	in which the Company	in which the Company	in which the Company
	owns not less than 50%	owns not less than 50%	owns not less than 50%
	interests;	interests;	interests;
	3. Clinical development:	3. Clinical development:	3. Clinical development:
	in the years 2020-2022,	in the years 2020-2022,	in the years 2020-2022,
	there shall be no less	there shall be no less	there shall be no less
	than 11 new drugs	than 9 new drugs NDA	than 7 new drugs NDA
	NDA or extended	or extended indications	or extended indications
	indications (sNDA)	(sNDA) accumulatively,	(sNDA) accumulatively,
	accumulatively, being	being filed and	being filed and
	filed and accepted, and	accepted, and in which	accepted, and in which
	in which the Company	the Company owns not	the Company owns not
	owns not less than 50%	less than 50% interests.	less than 50% interests.
	interests.

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LETTER FROM THE BOARD

The performance assessment objectives under the Incentive Scheme in relation to the Reserved Grant are set out below:

			Performance Target A	Performance Target B	Performance Target C
			Company attribution	Company attribution	Company attribution
Tranche			factor 100%	factor 80%	factor 60%
Reserved	First	tranche	The Company must meet	The Company must meet	The Company must meet
Grant			all of the following	all of the following	all of the following
			conditions:	conditions:	conditions:
			1. Operating income:	1. Operating income:	1. Operating income: in
			in the years 2020-2021,	in the years 2020-2021,	the years 2020-2021,
			the Company’s	the Company’s	the Company’s
			accumulated operating	accumulated operating	accumulated operating
			income shall not be	income shall not be	income shall not be
			less than RMB3.6	less than RMB3.3	less than RMB2.8
			billion;	billion;	billion;
			2. Preclinical projects:	2. Preclinical projects:	2. Preclinical projects:
			in the years 2020-2021,	in the years 2020-2021,	in the years 2020-2021,
			there shall be no less	there shall be no less	there shall be no less
			than 9 IND applications	than 7 IND applications	than 6 IND applications
			accumulatively, being	accumulatively, being	accumulatively, being
			filed and accepted, and	filed and accepted, and	filed and accepted, and
			in which the Company	in which the Company	in which the Company
			owns not less than 50%	owns not less than 50%	owns not less than 50%
			interests;	interests;	interests;
			3. Clinical development:	3. Clinical development:	3. Clinical development:
			in the years 2020-2021,	in the years 2020-2021,	in the years 2020-2021,
			there shall be no less	there shall be no less	there shall be no less
			than 6 new drugs NDA	than 5 new drugs NDA	than 4 new drugs NDA
			or extended indications	or extended indications	or extended indications
			(sNDA) accumulatively,	(sNDA) accumulatively,	(sNDA) accumulatively,
			being filed and	being filed and	being filed and
			accepted, and in which	accepted, and in which	accepted, and in which
			the Company owns not	the Company owns not	the Company owns not
			less than 50% interests.	less than 50% interests.	less than 50% interests.

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LETTER FROM THE BOARD

		Performance Target A	Performance Target B	Performance Target C
		Company attribution	Company attribution	Company attribution
Tranche		factor 100%	factor 80%	factor 60%
	Second	The Company must meet	The Company must meet	The Company must meet
	tranche	all of the following	all of the following	all of the following
		conditions:	conditions:	conditions:
		1. Operating income:	1. Operating income:	1. Operating income:
		in the years 2020-2022,	in the years 2020-2022,	in the years 2020-2022,
		the Company’s	the Company’s	the Company’s
		accumulated operating	accumulated operating	accumulated operating
		income shall not be	income shall not be	income shall not be
		less than RMB6.6	less than RMB5.7	less than RMB4.8
		billion;	billion;	billion;
		2. Preclinical projects:	2. Preclinical projects:	2. Preclinical projects:
		in the years 2020-2022,	in the years 2020-2022,	in the years 2020-2022,
		there shall be no less	there shall be no less	there shall be no less
		than 16 IND	than 13 IND	than 11 IND
		applications	applications	applications
		accumulatively, being	accumulatively, being	accumulatively, being
		filed and accepted, and	filed and accepted, and	filed and accepted, and
		in which the Company	in which the Company	in which the Company
		owns not less than 50%	owns not less than 50%	owns not less than 50%
		interests;	interests;	interests;
		3. Clinical development:	3. Clinical development:	3. Clinical development:
		in the years 2020-2022,	in the years 2020-2022,	in the years 2020-2022,
		there shall be no less	there shall be no less	there shall be no less
		than 11 new drugs	than 9 new drugs NDA	than 7 new drugs NDA
		NDA or extended	or extended indications	or extended indications
		indications (sNDA)	(sNDA) accumulatively,	(sNDA) accumulatively,
		accumulatively, being	being filed and	being filed and
		filed and accepted, and	accepted, and in which	accepted, and in which
		in which the Company	the Company owns not	the Company owns not
		owns not less than 50%	less than 50% interests.	less than 50% interests.
		interests.

Note: Operating income refers to the audited operating income of the Company.

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LETTER FROM THE BOARD

During the attribution period, the Company will handle the registration of the attributed Restricted Shares for the Participants who have satisfied the attribution conditions. In the event that the above performance assessment requirements at the Company level have not been reached or have been partially reached within the respective attribution tranche, the Restricted Shares (or such relevant portion in cases of partially reached target) that have been granted but are yet to be attributed to the Participants in such tranche shall not be attributed and shall lapse.

5. Performance assessment requirements at the Participant’s individual level

The individual assessment of Participants is carried out according to the internal performance assessment system of the Company. The individual assessment results of Participants are divided into four levels – “excellence”, “good”, “qualified” and “unqualified” with the corresponding attribution percentage as follows:

Assessment level	Excellence	Good	Qualified	Unqualified
Individual attribution
factor	100%	80%	60%	0

Under the premise of the Company achieving above its aforementioned performance target C (inclusive), the number of Restricted Shares to be attributed to the Participant in the current attribution tranche equals to the number of Restricted Shares to be attributed to the Participant under the Incentive Scheme in the current year × the Company attribution factor × the individual attribution factor.

If the Restricted Shares to be attributed to the Participant under the Incentive Scheme in a tranche cannot be attributed or fully attributed due to assessment reasons, such Restricted Shares shall not be deferred to the next tranche for attribution and shall lapse.

The content of the assessment under the Incentive Scheme is implemented in accordance with the Assessment Management Measures.

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LETTER FROM THE BOARD

C. Explanation on reasonableness of the performance appraisal indicators of the Restricted Shares

The Company is an innovation-driven biopharmaceutical company with products that are primarily innovative biological products, most of which are source-innovated and self-developed, and also introduced through collaborative development that have synergies with the Company’s original product line. As at 30 June 2020, the Company has 1 product that has received conditional marketing approval from the National Medical Products Administration. Also, the Company had 21 product candidates (including the extended indications study of the aforementioned marketed product), of which 19 are innovative drugs and 2 are biosimilars. In order to achieve the Company’s strategy and maintain its existing competitiveness, the assessment indicators of the Incentive Scheme at the Company level are quantitative indicators of operating income, preclinical projects and clinical development projects, which can truly reflect the Company’s operation, market situation and research and development progress, and is an effective indicator to predict the business development trend and measure the Company’s growth potential.

The Company’s performance indicators under the Incentive Scheme include the Company’s operating income, the number of INDs filed by the Company and accepted, the number of NDA or extended indications (sNDA) projects that have been filed by the Company and accepted. The performance appraisal indicators under the Incentive Scheme are determined by the Company on the basis of comprehensive consideration of the macroeconomic environment, the Company’s historical performance, industry development, market competition and the Company’s future development plan and other relevant factors. The performance indicators under the Incentive Scheme are challenging, which will help enhance the Company’s competitiveness and motivate employees, ensure the achievement of the Company’s future growth strategy and business objectives, and deliver more efficient and sustainable returns to Shareholders. In addition to the performance indicators at the Company level, the Company has also set up a strict performance appraisal system at the Participant’s individual level, which allows a more accurate, comprehensive evaluation of the work performance of the Participants. The Company will determine whether the Participants meet the attribution conditions based on the annual performance evaluation results of the Participants.

The Company’s appraisal system under the Incentive Scheme is integrated, comprehensive and operable. Meanwhile, the scientific and reasonable performance indicators restrain the Participants and can achieve the appraisal purpose of the Incentive Scheme.

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LETTER FROM THE BOARD

VIII. Implementation, Grant and Attribution Procedures

A. Procedures for the implementation of the Incentive Scheme
The Remuneration and Appraisal Committee is responsible for formulating the Incentive Scheme and the Assessment Management Measures.
The Board shall resolve on the Incentive Scheme and the Assessment Management Measures formulated by the Remuneration and Appraisal Committee. When the Board resolves on the Incentive Scheme, Directors who have an interest in the resolution shall abstain from voting.
The independent Directors and the Board of Supervisors will express opinions on whether the Incentive Scheme is conducive to the sustainable development of the Company, whether there are any circumstances apparently harmful to the interests of the Company and all Shareholders.
The Company will engage an independent financial adviser to give professional opinions on the feasibility of the Incentive Scheme, the reasonableness of the Grant Price, whether the Incentive Scheme is conducive to the sustainable development of the Company, whether there are any circumstances apparently harmful to the interests of the Company and all Shareholders. The Company will engage a legal advisor as to PRC laws to issue a legal opinion on the Incentive Scheme.
Within two trading days after the Board having reviewed and approved the Incentive Scheme, the Company will make an announcement of Board resolutions, the draft and summary of the Incentive Scheme, the opinions of independent Directors, and the opinions of the Board of Supervisors.
The Company shall carry out self-investigation on the trading of Shares by insiders in the 6 months’ period prior to the announcement of the Incentive Scheme to examine whether any insider trading exists.
Before convening the EGM and the Class Meetings, the Company shall announce the name and position of the Participants internally via the Company’s website or other channels for 10 days. The Board of Supervisors shall review the list of the Participants and take sufficient consideration of the public response. The Company shall disclose the information regarding the review by the Board of Supervisors regarding the list of Participants and the publication responses 5 days prior to the consideration of the Incentive Scheme at the EGM and the Class Meetings.

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LETTER FROM THE BOARD

When the EGM and the Class Meetings are convened to consider and, if thought fit, approve the Incentive Scheme, the independent Directors shall solicit proxy voting rights from all Shareholders regarding the resolution(s) related to the Incentive Scheme. The Incentive Scheme and relevant resolution(s) shall be considered and, if thought fit, approved by the Shareholders by way of special resolution at the EGM and the Class Meetings. Shareholders who have an interest in the resolution shall abstain from voting.
The Company will make an announcement of the Shareholders’ resolutions, the Incentive Scheme as approved at the EGM and the Class Meetings, as well as the self-investigation report on insider trading of the Shares and PRC legal opinion on matters including the EGM and the Class Meetings.

Where connected persons or other situations required by the listing rules of the place where the Company’s shares are listed are involved, the Company shall comply with such local laws and regulations and meet the relevant requirements (including, if necessary, obtaining prior approval from the independent Shareholders).

The Board will grant the Restricted Shares to the Participants, and will make announcements and complete other relevant procedures pursuant to the authorization granted by the Shareholders within 60 days after the Incentive Scheme having been adopted and approved at the EGM and the Class Meetings. The Board shall handle specific matters such as the attribution and registration of Restricted Shares in accordance with the authorization granted at the EGM and the Class Meetings.
B. Procedures for the grant of the Restricted Shares
The Board shall convene a meeting to grant the Restricted Shares to the Participants within 60 days after the Incentive Scheme having been adopted and approved at the EGM and the Class Meetings.
Before granting the Restricted Shares to the Participants, the Board shall convene a meeting to consider whether the Participants have satisfied the conditions for grant prescribed in the Incentive Scheme and make an announcement thereafter. The independent Directors and the Board of Supervisors shall also issue their explicit opinions at the same time. The legal advisor as to PRC laws shall issue legal opinions as to whether the Participants have satisfied the conditions of the grant. The Board of Supervisors shall verify the Grant Date and the list of Participants and issue an opinion.

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LETTER FROM THE BOARD

When there is discrepancy between the Company’s grant of the Restricted Shares to the Participants and the arrangement stipulated under the Incentive Scheme, the independent Directors, the Board of Supervisors (when the Participants change), legal advisor as to PRC laws and independent financial consultants shall simultaneously express clear opinions.

The Company shall enter into an “Agreement on the Granting of Restricted Shares” with the Participants setting out their respective rights and obligations.
The Company shall keep a register for management of the Restricted Shares with reference to the “Agreement on the Granting of Restricted Shares” to be signed by the Participants and the subscription situation, and such register shall record the names of the Participants, the number of Restricted Shares granted, the Grant Date and the serial number of the relevant “Agreement on the Granting of Restricted Shares”.
The Company shall grant the Restricted Shares to the Participants and make an announcement within 60 days after the Incentive Scheme is considered and approved at the EGM and the Class Meetings (if there are conditions to the grant, then counting from the fulfilment of the granting conditions). If the Company fails to make an announcement in respect of the grant of the Restricted Shares within the 60-day period, the Incentive Scheme shall be terminated, and the Board shall promptly disclose the reasons for the failure to implement the Incentive Scheme and is prohibited from approving a share incentive scheme again within 3 months thereafter.
The Participants of the Reserved Grant shall be determined within 12 months after the Incentive Scheme is reviewed and approved by the EGM and the Class Meetings. The Reserved Grant shall lapse if such Participants cannot be determined within the said 12-month period.
Where connected persons or other situations required by the listing rules of the place where the Company’s Shares are listed are involved, the Company shall comply with such local laws and regulations and meet the relevant requirements (including, if necessary, any prior approval from the independent Shareholders).
C. Procedures for the attribution of the Restricted Shares
Prior to attribution, the Company shall confirm whether the Participants have satisfied the attribution conditions. The Board shall consider whether the attribution conditions under the Incentive Scheme have been satisfied and the independent Directors and Board of Supervisors shall issue their explicit opinions at the same time. The Company’s legal advisor as to PRC laws shall issue legal opinions as to whether the conditions for attributing the Restricted Shares have been satisfied.

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LETTER FROM THE BOARD

The Participants who have fulfilled the attribution conditions shall pay the Grant Price for the subscription of the Restricted Shares into the account designated by the Company, which will be verified and confirmed by a certified public accountant. Participants who have not paid the Grant Price within the requisite period shall be deemed to have waived his/her right to subscribe for the Restricted Shares. The Company shall in a unified matter apply to the Shanghai Stock Exchange for the attribution of the Restricted Shares to Participants, and after confirmation by the Shanghai Stock Exchange, the CSDC will handle the matters for the attribution of the Restricted Shares. The Restricted Shares of the Participants who have not fulfilled the attribution conditions in the relevant tranche shall not be attributed and shall lapse. The Company shall make timely disclosure in respect of the implementation of the Incentive Scheme.
Participants may transfer their attributed Restricted Shares, however, the transfer of the Restricted Shares held by the Directors and members of the senior management of the Company should comply with the requirements of the relevant laws, administrative regulations and regulatory documents.

In each of the above Board meetings, Directors who have an interest in the relevant resolution shall abstain from voting.

IX. Method and Procedures for Adjustment

A. Adjustment method of the number of the Restricted Shares

In the event of any capitalization issue, bonus issue, share split, rights issue or share consolidation of the Company during the period from the date of announcement of the Incentive Scheme to the completion of attribution registration of Restricted Shares by the Participants, the number of Restricted Shares shall be adjusted accordingly. Adjustment will be made according to the following manners, and in certain event, the aggregate number of Restricted Shares (as adjusted) may exceed 35,736,500 A Shares. The adjustment method is as follows:

Capitalization issue from capital reserve, bonus issue and share split

==> picture [101 x 10] intentionally omitted <==

Where: Q0 represents the number of Restricted Shares before the adjustment; n represents the ratio of increase per share resulting from capitalization issue from capital reserve, bonus issue or share split of shares (i.e. the number of shares increased per share upon capitalization issue from capital reserve, bonus issue or share split); Q represents the number of Restricted Shares after the adjustment.

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LETTER FROM THE BOARD

2. Rights issue

Q = Q0 × P1 × (1 + n)/(P1 + P2 × n)

Where: Q0 represents the number of Restricted Shares before the adjustment; P1 represents the closing price as at the record date; P2 represents the price of the rights issue; n represents the ratio of the rights issue (i.e. the ratio of the number of shares to be issued under the rights issue to the total share capital of the Company before the rights issue); Q represents the number of Restricted Shares after the adjustment.

Share consolidation

==> picture [74 x 10] intentionally omitted <==

Where: Q0 represents the number of Restricted Shares before the adjustment; n represents the ratio of consolidation of shares (i.e. one Share of the Company shall be consolidated into n Shares); Q represents the number of Restricted Shares after the adjustment.

4. New issue of shares

In the event of new issue of Shares by the Company, no adjustment shall be made to the number of Restricted Shares.

B. Adjustment method of the Grant Price of the Restricted Shares

In the event of any dividend distribution, capitalization issue, bonus issue, share split, rights issue or share consolidation of the Company during the period from the date of announcement of the Incentive Scheme to the completion of attribution registration of Restricted Shares by the Participants, the Grant Price shall be adjusted accordingly. The adjustment method is as follows:

Capitalization issue from capital public reserve, bonus issue and share split

==> picture [97 x 10] intentionally omitted <==

Where: P0 represents the Grant Price before the adjustment; n represents the ratio of increase per share resulting from the capitalization issue from capital public reserve, bonus issue or share split to each Share; P represents the Grant Price after the adjustment.

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LETTER FROM THE BOARD

2. Rights issue

==> picture [193 x 11] intentionally omitted <==

Where: P0 represents the Grant Price before the adjustment; P1 represents the closing price as at the record date; P2 represents the price of the rights issue; n represents the ratio of the rights issue (i.e. the ratio of the number of shares to be issued under the rights issue to the total share capital of the Company before the rights issue); P represents the Grant Price after the adjustment.

Share consolidation

==> picture [70 x 10] intentionally omitted <==

Where: P0 represents the Grant Price before the adjustment; n represents the ratio of consolidation of shares per share; P represents the Grant Price after the adjustment.

Dividend distribution

==> picture [73 x 10] intentionally omitted <==

Where: P0 represents the Grant Price before the adjustment; V represents the dividend per share; P represents the Grant Price after the adjustment. P shall be greater than 1 after the dividend distribution.

5. New issue of shares

In the event of new issue of Shares by the Company, no adjustment shall be made to the Grant Price of the Restricted Shares.

C. Adjustment procedures

The Grant Price adjusted according to the terms of the Incentive Scheme should also comply with the STAR Market Listing Rules and the Management Measures. The Board of Directors is required to make such adjustments based on the principles, methods and procedures of the Incentive Scheme. The Company’s counsel as to PRC laws will issue an opinion as to whether the above adjustment is in compliance with the Management Measures, the Articles of Association and the Incentive Scheme and whether the relevant adjustment procedures have been complied with.

The Company’s general meeting authorizes the Board to adjust the number of Restricted Shares and the Grant Price based on the reasons set forth in the Incentive Scheme. After the Board adjusts the number of Restricted Shares and the Grant Price in accordance with the above provisions, it shall promptly announce and notify the

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LETTER FROM THE BOARD

Participants. The Company shall engage legal advisors as to PRC laws to provide professional opinions to the Board as to whether the above adjustments comply with the requirements under the Management Measures, the Articles of Association and the Incentive Scheme.

If the number of the Restricted Shares and the Grant Price need to be adjusted due to matters other than the above circumstances, in addition to the Board’s approval of the relevant proposals, such adjustments must be submitted to the general meeting of the Company for approval.

X. Other Rights and Obligations of the Company and the Participants and Dispute Mechanism

A. Rights and obligations of the Company
The Company has the right to interpret and implement the Incentive Scheme, to conduct performance assessment on the Participants, and to supervise and examine whether the Participants are eligible for attribution. If the Participants fail to meet the attribution conditions as determined under the Incentive Scheme, upon approval by the Board, the Restricted Shares that have been granted to the Participants but have not yet been attributed shall not be attributed and shall lapse.
The Company has the right to require the Participants to work for the Company according to the requirements of the positions at which he/she is employed. If the Participant is not qualified for the positions or fails the assessment, or if the Participant violates the law, violates professional ethics, divulges company secrets, violates the Company’s rules and regulations, neglects his/her duty or malfeasance or has other acts that seriously damage the Company’s interests or reputation, upon approval by the Board, the Restricted Shares that have been granted to the Participants but have not yet been attributed shall not be attributed and shall lapse.
The Company shall withhold and pay the personal income tax and other taxes and fees payable by the Participants according to the relevant provisions of the national tax laws and regulations.
The Company undertakes not to provide loans and any other forms of financial assistance, including providing guarantee for their loans, to the Participants to obtain relevant Restricted Shares according to the Incentive Scheme.

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LETTER FROM THE BOARD

The Company shall timely, truthfully, accurately and completely disclose the information disclosure documents related to the Incentive Scheme in accordance with the relevant laws, regulations and regulatory documents, ensure that there are no false records, misleading statements or material omissions, and timely fulfill the relevant reporting obligations of the Incentive Scheme.
In accordance with the Incentive Scheme and the relevant requirements of the CSRC, the Shanghai Stock Exchange and registration and clearing companies, the Company shall handle the registration of the attribution of Restricted Shares for the Participants that meet the attribution conditions. However, the Company shall not be held liable if the Participants fails to complete the registration matters of the attribution of Restricted Shares and loss is caused to the Participants due to the reasons on the part of the CSRC, the Shanghai Stock Exchange and the registration and clearing companies.
Other relevant rights and obligations stipulated in laws, administrative regulations and regulatory documents.
B. Rights and obligations of the Participants
The Participants shall be diligent and responsible, abide by professional ethics, and make due contributions to the development of the Company in accordance with the requirements of the positions at which he/she is employed by the Company.
The Participants have the right to receive the attributed Restricted Shares granted in accordance with the Incentive Scheme, and should lock-up and deal with his/her Restricted Shares in accordance with the relevant provisions.
The source of funds for the Participants is their own financing.
Prior to the attribution, the Restricted Shares granted to the Participants under the Incentive Scheme shall not be transferred, used to guarantee or repay debts.
Prior to the attribution, the Restricted Shares granted to the Participants under the Incentive Scheme do not carry any voting rights or right to participate in the distribution of bonus shares or share dividends.
The income received by the Participants as a result of the Incentive Scheme shall be subject to personal income tax and other taxes and fees in accordance with national tax regulations.

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LETTER FROM THE BOARD

The Participants undertake that if there are false records, misleading statements or material omissions in the Company’s information disclosure documents, resulting in non-compliance with the arrangement for granting rights and interests, the Participants shall fulfill their undertakings and return all the benefits obtained from the Incentive Scheme to the Company after confirming the existence of false records, misleading statements or major omissions in the relevant information disclosure documents.
If the Participant is no longer eligible to be a Participant under the Incentive Scheme as stipulated in Article 8 of the Management Measures during the implementation of the Incentive Scheme, the Restricted Shares that have been granted but have not yet been attributed to such Participant shall not be attributed, and shall lapse.
Other relevant rights and obligations stipulated in laws, administrative regulations, regulatory documents and the Incentive Scheme.
C. Dispute settlement mechanism between the Company and the Participants

Any dispute between the Company and the Participants shall be resolved in accordance with the provisions of the Incentive Scheme and the “Agreement on the Granting of Restricted Shares”. In event of any dispute that is not clearly covered by such provisions, the Company and the Participants shall negotiate and resolve their disputes in accordance with national laws and the principles of fairness and reasonableness. Where any dispute cannot be settled by negotiation, it shall be resolved through litigation by submitting to the People’s Court with jurisdiction over the Company’s place of business.

XI. Amendment and Termination of the Incentive Scheme

A. Procedures for the amendment and termination of the Incentive Scheme
Procedure for the amendment of the Incentive Scheme
- (a) If the Company intends to make amendments to the Incentive Scheme before it is considered and approved by the Shareholders at the EGM and the Class Meetings, the amendments shall be considered and approved by the Board. If the Company intends to make amendments to the Incentive Scheme that has been adopted by Shareholders at the EGM and the Class Meetings, such amendments shall be submitted to the general meeting and class meetings of A Shareholders and H Shareholders for its approval and shall not include circumstances that would result in the acceleration of attribution or reduction of the Grant Price. Where other situations

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LETTER FROM THE BOARD

required by the listing rules of the place where the Company’s Shares are listed are involved, the Company shall comply with such local laws and regulations.

(b) The Company shall timely disclose the reasons and contents of the amendments. The independent Directors and the Board of Supervisors shall give clear opinions on whether the amended scheme is conducive to the sustainable development of the Company and whether there are any situations that clearly harm the interests of the Company and all Shareholders. The legal advisor as to PRC laws shall express its professional opinions on whether the amended scheme conforms to the provisions of the Management Measures and relevant laws and regulations, and whether there are any circumstances that clearly harm the interests of the Company and all the Shareholders.
Procedures for the termination of the Incentive Scheme
(a) If the Company intends to terminate the Incentive Scheme before it is considered and approved at the EGM and the Class Meetings, the Board shall consider and approve and disclose such intended termination of the Incentive Scheme. If the Company intends to terminate the implementation of the Incentive Scheme after it is considered and approved at the EGM and the Class Meetings, it shall be submitted to the Board and the general meeting and class meetings of A Shareholders and H Shareholders for approval and be disclosed.
(b) The Company shall timely disclose the announcement of resolutions of the general meeting or the Board. The legal advisor as to PRC laws shall express its professional opinions on whether the termination of Incentive Scheme conforms to the provisions of the Management Measures and relevant laws and regulations, and whether there are any circumstances that clearly harm the interests of the Company and all the Shareholders.

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LETTER FROM THE BOARD

B. In the event of any changes occurred at the Company level
In the event that any of the circumstances below occurs, the Incentive Scheme shall be terminated, and the Restricted Shares that have been granted to the Participants under the Incentive Scheme but have not yet been attributed shall not be attributed and shall lapse:
- (a) An audit report on the financial and accounting report for the most recent financial year in which a certified public accountant issued an adverse opinion or was unable to express an opinion;
- (b) An audit report on internal control over financial reporting for the most recent financial year in which a certified public accountant issued an adverse opinion or was unable to express an opinion;
- (c) In the most recent 36 months upon listing, there have been cases of failure to distribute profits according to laws and regulations, the Articles of Association and public undertakings;
- (d) Laws and regulations stipulate that equity incentives shall not be implemented; or
- (e) Other circumstances where the Incentive Scheme should be terminated as determined by the CSRC.
Merger or division of the Company, etc.

In case of merger or division of the Company, the Board shall decide whether to terminate the Incentive Scheme within five trading days from the date of merger or division.

Change of control of the Company

In the event of a change of control of the Company, the Board shall decide whether to terminate the Incentive Scheme within five trading days from the date of the change of the control.

If the Company fails to meet the conditions for granting or attributing the Restricted Shares due to false records, misleading statements or material omissions in the information disclosure documents, the Restricted Shares that have not yet been attributed to the Participants shall not be attributed and shall lapse.

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LETTER FROM THE BOARD

If the Restricted Shares that have been granted to the Participants have already been attributed, all the Participants shall return the granted rights and interests. If a Participant who is not responsible for the above matters suffers from losses due to the return of rights and interests, such Participant can recover such losses from the Company or the responsible targets in accordance with the relevant arrangements under the Incentive Scheme. The Board shall recover the proceeds from the Participants in accordance with the preceding paragraph and the relevant arrangements under the Incentive Scheme.

C. In the event of changes in the personal circumstances of the Participants
Change in position of the Participants
- (a) If the position of the Participant changes but he/she still works in the Company or its subsidiaries, the Restricted Shares granted to him/her shall still be carried out in accordance with the procedures stipulated in the Incentive Scheme.
- (b) If the Participant is a Supervisor or an independent Director or other person who cannot hold the Restricted Shares of the Company, the Restricted Shares that have been attributed to such Participant shall not be handled. The Restricted Shares that have been granted to such Participant but have not yet been attributed shall not be attributed, and shall lapse.
- (c) If the Participant violates the law, violates professional ethics, divulges company secrets, damages the interests or reputation of the Company due to dereliction of duty or malfeasance and resulting in a change of position, or causes the Company to terminate the labor relationship with the Participant due to the above-mentioned reasons, the Participant shall return all gains from the attribution of the Restricted Shares. The Restricted Shares that have been granted to such Participant but have not yet been attributed shall not be attributed, and shall lapse. At the same time, in event of serious circumstances, the Company may also recover the losses suffered by the Company from the Participant in accordance with relevant laws and regulations.
Resignation of the Participants
- (a) If the contract of the Participant expires and he/she no longer renews the contract or resigns voluntarily, the Restricted Shares that have been attributed to such Participant shall not be handled. In such case, the Restricted Shares that have been granted to such Participant but have not yet been attributed shall not be attributed, and shall lapse.

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LETTER FROM THE BOARD

(b) If the Participant leaves the Company passively due to layoffs and other reasons and there are no behaviors such as failure to pass performance evaluation, negligence or violation of laws and disciplines, the Restricted Shares that have been attributed to such Participant shall not be handled. In such case, the Restricted Shares that have been granted to such Participant but have not yet been attributed shall not be attributed and shall lapse.

3. Retirement of the Participants

If the Participants that have retired are re-hired, the Restricted Shares that have been granted to them will be carried out in accordance with the procedures stipulated in the Incentive Scheme which took effect before the retirement. If the Participants reject the Company’s request for continued employment, or if the Participants retire and leave the Company, the Restricted Shares that have been granted but not yet attributed shall not be attributed and shall lapse.

Incapacity of the Participants
(a) If the Participants are incapacitated due to work injury and leave the Company, the Remuneration and Appraisal Committee shall decide that the Restricted Shares granted to the Participants shall be carried out in accordance with the procedures stipulated in the Incentive Scheme which took effect before the occurrence thereof, and the personal performance evaluation results will no longer be included in the attribution conditions, or the Restricted Shares that have been attributed to such Participant shall not be handled and the Company shall cancel his/her Restricted Shares that have been granted but not yet been attributed.
(b) If the Participants leave the Company, which is not due to the incapability arising from work injury, the Restricted Shares that have been attributed to the Participants shall not be handled. The Restricted Shares that have been granted to such Participant but have not yet been attributed shall not be attributed, and shall lapse.

5. Death of the Participants

(a) If the Participants is deceased due to their duty, the Remuneration and Appraisal Committee shall decide that the Restricted Shares granted to them shall be held by the designated property heir or legal heir on their behalf, and shall be carried out in accordance with the procedures stipulated in the Incentive Scheme which took effect before their death, and the results of their personal performance evaluation shall not be included in the attribution conditions; or the

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LETTER FROM THE BOARD

Restricted Shares that have been attributed to such Participant shall not be handled and the Company shall cancel his/her Restricted Shares that have been granted but has not been attributed.

(b) If the Participants is deceased for other reasons, the Restricted Shares that have been attributed to the Participants shall not be handled. The Restricted Shares that have been granted to such Participant but have not yet been attributed shall not be attributed, and shall lapse.
Change of control of the subsidiary where the Participants work

If the Participants work in a subsidiary controlled by the Company, and if the Company loses control over the subsidiary and the Participants still work in such subsidiary, the Restricted Shares that have been attributed to such Participant shall not be handled. The Restricted Shares that have been granted to such Participant but have not yet been attributed shall not be attributed, and shall lapse.

Change in eligibility of the Participants

If the Participant no longer meets the eligibility of the Participant due to any one of the following circumstances, the Restricted Shares that have been attributed to such Participant shall not be handled, and the Restricted Shares that have been granted to such Participant but have not yet been attributed shall not be attributed, and shall lapse:

(a) The Participant has been determined as an inappropriate candidate by the Shanghai Stock Exchange within the most recent 12 months;
(b) The Participant has been identified as an inappropriate candidate by the CSRC and its delegated institutions within the most recent 12 months;
(c) The Participant has been subject to administrative punishment or market ban measures by the CSRC and its delegated institutions due to major breach of laws and regulations in the most recent 12 months;
(d) The Participant has the circumstances stipulated in the PRC Company Law that he/she shall not act as a director or member of the senior management of a company;
(e) Laws and regulations stipulate that the Participant shall not participate in the equity incentives of listed companies;
(f) Other circumstances as determined by the CSRC.

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LETTER FROM THE BOARD

8. Others

The Remuneration and Appraisal Committee shall be responsible for making decisions on other unspecified situations and the methods of handling them.

XII. Accounting Treatment and Impact on the operating Performance

A. Accounting treatment

According to the relevant requirements of the Accounting Standards for Business Enterprises No. 11-Share-based Payments and Accounting Standards for Business Enterprises No. 22-Recognition and Measurement of Financial Instruments published by the Ministry of Finance of the PRC, the unit cost of the Restricted Shares equals to the fair value of the Restricted Shares less the Grant Price, where the fair value of the Restricted Shares is the closing price on the grant date.

B. Estimated impact on the operating performance in each accounting period due to the implementation of the Restricted Shares

The Company will grant 35,736,500 Restricted Shares (subject to Adjustment) to the Participants, among which 28,589,500 Restricted Shares (subject to Adjustment) will be granted under the First Grant. The fair value of the Restricted Shares was estimated based on the closing data in relation to the A Shares on the Shanghai Stock Exchange on the trading day prior to the publication of the draft Incentive Scheme, and the total equity expense of the First Grant was estimated to be RMB847,678,700. The total amount of above expenses as the incentive cost of the Incentive Scheme will be recognized over the course of the Incentive Scheme in attribution proportion in installments and will be charged to operating profit or loss. In accordance with applicable accounting standards, the actual amount shall be based on the fair value of the Shares calculated on the “actual grant date”, assuming the Grant Date to be in November 2020, and the amortization of cost of the Restricted Shares from the years 2020 to 2023 is as follows:

Unit: RMB0’ 000

Amortization cost of the
Restricted Shares	Year 2020	Year 2021	Year 2022	Year 2023
84,767.87	4,591.59	52,273.52	20,132.37	7,770.39
Notes:

The above costs are projected costs, and actual costs are related to the Grant Price, the Grant Date, the closing price of the A Shares on the Grant Date, the number of Restricted Shares granted and the best estimate of the number of attributable equity instrument.

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LETTER FROM THE BOARD

Shareholders’ attention is drawn to the possible dilutive effect of the share-based payment described above.
The final impact of the above projected amortization expenses on the Company’s operating results is subject to the audit report issued by the accountants.

The cost of the Incentive Scheme will be charged to cost expenses. Without considering the positive effect of the Incentive Scheme on the Company’s performance, the Company estimates that, based on current information, the amortization of cost expenses of the Incentive Scheme will have an impact on the net profit each year within the validity period, but the impact is not significant. Considering the positive effect of the Incentive Scheme on the Company’s operation and development, which will stimulate the enthusiasm of the management and business team, improve operating efficiency and reduce operating costs, the Incentive Scheme will have a positive effect on the Company’s long-term performance.

Proposed First Grant of Restricted Shares and Issue of New A Shares under the Incentive Scheme Pursuant to Specific Mandate

Subject to the approval of the Independent Shareholders at the EGM and the Class Meetings, the Board has resolved to grant not more than a total of 35,736,500 Restricted Shares (subject to Adjustment), of which (i) 28,589,500 Restricted Shares will be granted to not more than 2,004 Participants under the First Grant, representing approximately 4.15% of the total number of issued A Shares and approximately 3.28% of the total issued share capital of the Company as at the Latest Practicable Date (subject to Adjustment) and (ii) 7,147,000 Restricted Shares will be granted under the Reserved Grant, representing approximately 1.04% of the total number of issued A Shares and approximately 0.82% of the total issued share capital of the Company as at the Latest Practicable Date (subject to Adjustment), pursuant to the terms of the Incentive Scheme set out above. The Restricted Shares to be granted (including those under the First Grant and the Reserved Grant) will be issued and allotted pursuant to the Specific Mandate which may be granted at the EGM and the Class Meetings.

Among the Restricted Shares to be granted in the First Grant, 6,050,000 Restricted Shares (subject to Adjustment) in aggregate will be granted to 6 Connected Participants in total, and not more than 22,539,500 Restricted Shares (subject to Adjustment) will be granted to not more than 1,998 other Participants who are not connected persons of the Company as set out in the paragraph “D. Allocation of Restricted Shares to be granted” above.

In addition to the principal terms of the proposed Incentive Scheme summarized in the section “The Proposed 2020 Restricted A Share Incentive Scheme” above, further information in relation to the issue and allotment of the Restricted Shares under the Incentive Scheme (including the First Grant and the Reserved Grant) are set out below:

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LETTER FROM THE BOARD

The total funds to be raised and the proposed use of proceeds: Not more than RMB1,983,375,750, being the aggregated Grant Price of RMB55.50 per A Share (subject to Adjustment), will be paid by the Participants to subscribe for not more than 35,736,500 Restricted Shares (subject to Adjustment) under the Incentive Scheme. The Company intends to use the proceeds towards the replenishment of the Group’s liquidity.

Grant Price: The Grant Price under both the First Grant and the Reserved Grant shall be RMB55.50 per A Share (subject to Adjustment). Basis for determination is set out in the paragraph “V. Grant Price and Basis of Determination of the Grant Price” above. A Participant who has satisfied the conditions for grant and attribution may purchase new A Shares issued by the Company at such Grant Price.

Aggregate nominal value: The nominal value of the A Share is RMB1.00 per A Share. The aggregate nominal value of the Restricted Shares to be granted under the Incentive Scheme (including the First Grant and the Reserved Grant) is not more than RMB35,736,500.

Reasons for and Benefits of the Adoption of the Proposed Incentive Scheme

The purpose of the Incentive Scheme is to, among others, establish and improve the Company’s long-term incentive mechanism, attract and retain the Company’s core staff, fully mobilize their enthusiasm and creativity, effectively strengthen the cohesion of the core team and the competitiveness of the Company, align the interests of the shareholders, the Company and the core staff members, bring their attention to the long-term development of the Company and ensure that the Company’s development strategy and business goals shall be realized.

The Company is of the view that the adoption and implementation of the proposed Incentive Scheme is beneficial to the Company and its Shareholders as whole. The Board (including the Independent Non-executive Directors having considered the advice of the Independent Financial Adviser) is also of the view that the terms and conditions of the Incentive Scheme are fair and reasonable and in the interests of the Company and the Shareholders as a whole. Given the nature of the business of the Company and the highly competitive industry in which it operates, it is extremely important for the Company to recruit and retain talents and the Company’s long-term development plan will very much depend on the loyalty and contribution of the Participants. The proposed Incentive Scheme is considered a critical component of the Company’s employee appraisal system and effectively aligns the employee’s achievements at the individual level with the Company’s overall performance.

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LETTER FROM THE BOARD

Other Information

Fund raising activities in the past 12 months

Save as disclosed below, the Company has not conducted any fund raising activities involving the issuance of share capital within 12 months immediately preceding the Latest Practicable Date.

Date of

announcement Fund raising activity Net proceeds Intended use of proceeds 30 April 2019 and Issue of new A Shares of the Approximately For the research and 14 July 2020 Company on the listing on RMB4,497 million development projects of the STAR Market of the innovative drugs, the Junshi Shanghai Stock Exchange Biotechnology Industrialization Lingang Project and repayment of bank loans and replenishment of liquidity

Information of the Company and the Participants

The Company is a joint stock limited liability company established in the PRC, whose H Shares are listed on the Hong Kong Stock Exchange (stock code: 1877) and A Shares listed on the STAR Market of the Shanghai Stock Exchange (stock code: 688180). The Group is an innovation-driven biopharmaceutical company dedicated to the discovery and development of innovative drugs and their clinical research and commercialization on a global scale.

The Connected Participants under Chapter 14A of the Hong Kong Listing Rules under the First Grant are Mr. Xiong Jun, Dr. Li Ning, Dr. Feng Hui, Mr. Zhang Zhuobing and Dr. Yao Sheng, who are all executive Directors and Ms. Wang Shixu, who is an associate of Dr. Wu Hai, a non-executive Director of the Company. Mr. Xiong Jun is also a substantial shareholder of the Company for the purpose of the Hong Kong Listing Rules.

Implications of the Hong Kong Listing Rules

The Incentive Scheme is a discretionary scheme of the Company and does not constitute a share option scheme under Chapter 17 of the Hong Kong Listing Rules.

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LETTER FROM THE BOARD

The Connected Participants include executive Directors (namely, Mr. Xiong Jun, Dr. Li Ning, Dr. Feng Hui, Mr. Zhang Zhuobing and Dr. Yao Sheng) and an associate of a non-executive Director (namely, Dr. Wu Hai). Mr. Xiong Jun is also a substantial shareholder of the Company for the purpose of the Hong Kong Listing Rules. The Connected Participants are therefore connected persons of the Company. Accordingly, the issue and grant of the Restricted Shares to the Connected Participants under the Incentive Scheme constitutes non-exempt connected transactions of the Company, and is subject to reporting, announcement and Independent Shareholders’ approval requirements under Chapter 14A of the Hong Kong Listing Rules.

The Company will seek a Specific Mandate from the Shareholders at the EGM and Class Meetings for the issue and allotment of Restricted Shares under the Incentive Scheme (including the grant to the Connected Participants under the First Grant).

Board Approval

The resolutions in relation to the adoption of the proposed Incentive Scheme and the Assessment Management Measures, the issue and grant of the Restricted Shares to the Participants (including the issue and grant of the Restricted Shares to the Connected Participants) under the Incentive Scheme were considered and approved at the meeting of the Board held on 29 September 2020. Each of Mr. Xiong Jun, Dr. Li Ning, Dr. Feng Hui, Mr. Zhang Zhuobing and Dr. Yao Sheng, who were all executive Directors, and Ms. Wang Shixu, a Participant (who was an associate of Dr. Wu Hai, a non-executive Director) were Connected Participants under Chapter 14A of the Hong Kong Listing Rules. The said Directors abstained from voting on the resolutions in relation to the adoption of the proposed Incentive Scheme and the Assessment Management Measures, the issue and grant of the Restricted Shares to the Participants (including the issue and grant of the Restricted Shares to the Connected Participants) under the Incentive Scheme at the Board meeting as a result of their interests. Save as disclosed, none of the remaining Directors has a material interest in the above resolutions and they approved the above resolutions unanimously.

Independent Board Committee and Independent Financial Adviser

The Independent Board Committee (consisting of all Independent Non-executive Directors, namely, Dr. Chen Lieping, Mr. Chen Xinjun, Mr. Qian Zhi, Mr. Zhang Chun and Dr. Roy Steven Herbst) has been established to advise the Independent Shareholders

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LETTER FROM THE BOARD

of the Company in respect of the issue and grant of Restricted Shares by the Company to the Connected Participants under the Incentive Scheme. Rainbow Capital has been appointed as the Independent Financial Adviser to advise the Independent Board Committee and the Independent Shareholders of the Company in respect of the issue and grant of Restricted Shares by the Company to the Connected Participants under the Incentive Scheme.

A special resolution will be proposed at the EGM and the Class Meetings to consider and, if thought fit, approve the adoption of the Incentive Scheme (which involves the Specific Mandate for issue and allotment of the Restricted Shares under the Incentive Scheme and the issue and grant of the Restricted Shares (including the grant to the Connected Participants under the First Grant) under the Incentive Scheme).

(7) Proposed Adoption of the Assessment Management Measures for the Implementation of the Incentive Scheme

To ensure the smooth implementation of the Incentive Scheme, the Assessment Management Measures have been formulated according to the PRC Company Law, the PRC Securities Law, the Management Measures and other relevant laws, administrative regulations, normative documents, the relevant requirements of the Articles of Association as well as the actual situation of the Company.

The full text of Assessment Management Measures for implementation of the Incentive Scheme is set out in Appendix V to this circular. The Assessment Management Measures were prepared in Chinese language. In the event of any discrepancy between the English translation and the Chinese version of the Assessment Management Measures, the Chinese version shall prevail.

A special resolution will be proposed at the EGM and the Class Meetings to consider and, if thought fit, approve the adoption of the Assessment Management Measures for implementation of the Incentive Scheme.

(8) Grant of Authorization to the Board of Directors by the general meeting to deal with matters relating to the Incentive Scheme

To ensure the smooth implementation of the Incentive Scheme, it is proposed at the EGM and the Class Meetings that the Board of Directors be authorized to handle matters related to the Incentive Scheme, including but not limited to the following:

To propose at the EGM and the Class Meetings that the Board of Directors be authorized to be responsible for the following matters in relation to the implementation of the Incentive Scheme:

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LETTER FROM THE BOARD

(1) To authorize the Board of Directors to determine the participation qualification and conditions of the Participants under the Incentive Scheme, and determine the Grant Date under the Incentive Scheme;
(2) To authorize the Board of Directors to adjust the number of the Restricted Shares and the Grant Price according to the terms of the Incentive Scheme in the event of capitalization of capital reserves, bonus issue, share split or consolidation, rights issue and dividend distribution of the Company;
(3) To authorize the Board of Directors to adjust the portion of the Restricted Shares that the Participant(s) have waived to subscribe to the Reserved Grant, or allocate and adjust such Restricted Shares among the Participants before the grant of the Restricted Shares;
(4) To authorize the Board of Directors to grant the Restricted Shares to a Participant upon his/her fulfillment of the conditions of grant, and to handle all necessary matters in connection with the grant of the Restricted Shares;
(5) To authorize the Board of Directors to review and confirm the attribution qualification of the Participants and the conditions for attributing the Restricted Shares, and to agree to the Board of Directors delegating such rights to the Remuneration and Appraisal Committee;
(6) To authorize the Board of Directors to determine whether the Restricted Shares may be attributed to a Participant;
(7) To authorize the Board of Directors to handle all matters necessary in connection with the attribution of the Restricted Shares to the Participants, including but not limited to the submission of application to a stock exchange in respect of the attribution of the Restricted Shares, applying to securities registration and clearing company for registration and clearing services, amending the Articles of Association; and applying to register the change in registered capital of the Company to the administration for industry and commerce;
(8) To authorize the Board of Directors to make decisions on the amendment and termination of the Incentive Scheme including but not limited to disqualification of the Participants for attribution, cancellation of the Restricted Shares of the Participants that have not yet been attributed, dealing with the compensation and inheritance of Restricted Shares of the deceased Participants that have not yet been attributed and termination of the Incentive Scheme;

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LETTER FROM THE BOARD

(9) To authorize the Board of Directors to determine all matters including the Participants, the number of Restricted Shares to be granted, the Grant Price and the Grant Date of the Restricted Shares for the Reserved Grant under the Incentive Scheme;
(10) To authorize the Board of Directors to sign, execute, amend or terminate any agreement in connection with the Incentive Scheme and other relevant agreements;
(11) To authorize the Board of Directors to manage and adjust the Incentive Scheme, and from time to time formulate or amend the management and implementation rules of the Incentive Scheme, subject to compliance with the terms of the Incentive Scheme. However, if such amendments are subject to approval at the general meeting or/and by relevant regulatory authorities under the requirements of laws, regulations or relevant regulatory authorities, such amendments by the Board of Directors shall be subject to such approvals;
(12) To authorize the Board of Directors to implement all other necessary matters in connection with the Incentive Scheme, except such rights as expressly required under the relevant documents to be exercised by the Shareholders at a general meeting;
To propose at the EGM and the Class Meetings to authorize the Board of Directors to complete procedures with relevant governments and authorities in relation to the Incentive Scheme including review, registration, filing, approval and consent; to sign, execute, amend and complete documents submitted to relevant governments, authorities, organizations, and individuals; to amend the Articles of Association and handle the registration of the change in registered capital of the Company; and to carry out all actions deemed to be necessary, appropriate, or expedient in relation to the Incentive Scheme.
To propose at the EGM and the Class Meetings to authorize the Board of Directors to engage intermediaries, such as receiving bank, accountants, lawyers or securities companies, for the implementation of the Incentive Scheme.
To propose at the EGM and the Class Meetings to approve the period of authorization given to the Board of Directors to be consistent with the validity period of the Incentive Scheme. Save as specifically required by the laws, administrative regulations, rules of the CSRC, regulatory documents, the Incentive Scheme, or the Articles of Association to be approved by the Board of Directors through resolutions, other matters may be directly exercised on behalf of the Board of Directors by the chairman of the Board of Directors or appropriate person(s) authorized thereby.

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LETTER FROM THE BOARD

A special resolution will be proposed at the EGM and the Class Meetings to consider and, if thought fit, approve the authorization to be granted to the Board of Directors to deal with matters relating to the Incentive Scheme.

To the best knowledge of the Directors, according to the applicable PRC laws, regulations and regulatory requirements, (i) Mr. Xiong Jun together with his parties acting in concert, who are interested in an aggregate of 217,231,536 A Shares and 2,600 H Shares, representing approximately 24.93% of the Company’s total issued share capital as of the Latest Practicable Date, (ii) Mr. Feng Hui, who is interested in 13,140,000 A Shares, representing approximately 1.51% of the Company’s total issued share capital as of the Latest Practicable Date, (iii) Mr. Zhang Zhuobing’s spouse, who is interested in 8,608,000 A Shares, representing approximately 0.99% of the Company’s total issued share capital as of the Latest Practicable Date, and (iv) Mr. Yao Sheng’s parent, who is interested in 8,608,000 A Shares, representing approximately 0.99% of the Company’s total issued share capital as of the Latest Practicable Date, are required to abstain from voting on resolutions nos. 6, 7 and 8 at the EGM and nos. 2, 3 and 4 at the Class Meetings.

III. EGM AND CLASS MEETINGS

The EGM, the Class Meeting of A Shareholders and the Class Meeting of H Shareholders will be held at 13th Floor, Building 2, Nos. 36, 58 Haiqu Road, China (Shanghai) Pilot Free Trade Zone, Shanghai, the PRC at 2:00 p.m., immediately after the conclusion of the EGM and immediately after the conclusion of the Class Meeting of A Shareholders, respectively, on Monday, 16 November 2020. The Notice of EGM and the Notice of the Class Meeting of H Shareholders have been despatched to the Shareholders on 29 September 2020 and have been published on the websites of the Hong Kong Stock Exchange (http://www.hkexnews.hk) and of the Company (www.junshipharma.com).

The corresponding reply slips and forms of proxy for use at the EGM and the Class Meeting of H Shareholders have been despatched on 29 September 2020 and have been published on the websites of the Hong Kong Stock Exchange (http://www.hkexnews.hk) and of the Company (www.junshipharma.com).

The Notice of the EGM and Notice of the Class Meeting of A Shareholders to the A Shareholders have also been separately published on the website of the Shanghai Stock Exchange (http://www.sse.com.cn/).

IV. CLOSURE OF REGISTER OF MEMBERS OF H SHARES

The register of members of H shares of the Company is closed from Saturday, 17 October 2020 to Monday, 16 November 2020, both days inclusive, during which period no transfer of H Shares will be registered, in order to determine the entitlements of the H Shareholders of the Company to attend and vote at the EGM and/or the Class Meeting of H Shareholders. In order to be eligible to attend and vote at the EGM and the Class Meeting of H Shareholders, holders of H Shares whose transfer documents have not been registered are required to deposit all

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LETTER FROM THE BOARD

properly completed share transfer forms together with the relevant share certificates to the Company’s H Share registrar, Tricor Investor Services Limited at Level 54, Hopewell Centre, 183 Queen’s Road East, Hong Kong (for holders of H shares) for registration before 4:30 p.m. on Friday, 16 October 2020.

V. PROXY FORMS AND REPLY SLIPS

A shareholder entitled to attend and vote at the meeting may appoint one or more persons as his/her proxy(ies) to attend and vote on his/her behalf. A proxy need not be a shareholder of the Company but must attend the meeting in person to represent the member. Shareholders who intend to attend the meeting by proxy should complete the proxy form.

For holders of H Shares, the proxy forms for the EGM and the Class Meeting of H Shareholders should be returned to the Company’s H Share registrar, Tricor Investor Services Limited at Level 54, Hopewell Centre, 183 Queen’s Road East, Hong Kong, in person or by post as soon as possible and no later than 24 hours before the time fixed for holding the meeting (i.e. not later than Sunday, 15 November 2020 at 2:00 p.m. (Hong Kong time)) or any adjournment thereof. Completion and return of the proxy form(s) will not preclude you from attending the meeting and any adjournment thereof and voting in person. In such event, the form(s) of proxy shall be deemed to be revoked.

H Shareholders who intend to attend the meeting in person or by proxy should return the reply slips for the EGM and the Class Meeting of H Shareholders to the Company’s H share registrar, Tricor Investor Services Limited on or before Thursday, 27 October 2020.

VI. VOTING BY POLL

According to Rule 13.39(4) of the Hong Kong Listing Rules, any vote of shareholders at a general meeting must be taken by poll except where the chairman, in good faith, decides to allow a resolution which relates purely to a procedural or administrative matter to be voted on by a show of hands. Accordingly, the chairman of the EGM and the Class Meetings will demand a poll for all resolutions to be proposed at the EGM and the Class Meetings in accordance with Article 87 of the Articles of Association. Poll results will be announced by the Company in the manner prescribed under Rule 13.39(5) of the Hong Kong Listing Rules after the EGM and the Class Meetings.

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LETTER FROM THE BOARD

VII. GENERAL

To the best knowledge of the Directors and according to applicable PRC laws, regulations and regulatory requirements, the following shareholders are required to abstain from voting at the EGM and the Class Meetings:

(i) Mr. Feng Hui, who is interested in 13,140,000 A Shares, representing approximately 1.51% of the Company’s total issued share capital as of the Latest Practicable Date, is required to abstain from voting on resolution no. 2 in relation to the signing of the License Agreement with Anwita at the EGM; and
(ii) To the best knowledge of the Directors, according to the applicable PRC laws, regulations and regulatory requirements, (i) Mr. Xiong Jun together with his parties acting in concert, who are interested in an aggregate of 217,231,536 A Shares and 2,600 H Shares, representing approximately 24.93% of the Company’s total issued share capital as of the Latest Practicable Date, (ii) Mr. Feng Hui, who is interested in 13,140,000 A Shares, representing approximately 1.51% of the Company’s total issued share capital as of the Latest Practicable Date, (iii) Mr. Zhang Zhuobing’s spouse, who is interested in 8,608,000 A Shares, representing approximately 0.99% of the Company’s total issued share capital as of the Latest Practicable Date, and (iv) Mr. Yao Sheng’s parent, who is interested in 8,608,000 A Shares, representing approximately 0.99% of the Company’s total issued share capital as of the Latest Practicable Date, are required to abstain from voting on resolutions nos. 6, 7 and 8 at the EGM and nos. 2, 3 and 4 at the Class Meetings.

To the best of the Directors’ knowledge, information and belief, save as disclosed in this circular, none of the Shareholders are required to abstain from voting at the EGM and the Class Meetings.

VIII. RECOMMENDATION

The Directors (including the Independent Non-executive Directors) are of the view that the proposed adoption of the Incentive Scheme (including the Specific Mandate for issue and allotment of the Restricted Shares under the Incentive Scheme and the issue and grant of the Restricted Shares (including the grant to the Connected Participants under the First Grant) under the Incentive Scheme), the Assessment Management Measures and the authorization to the Board of Directors to handle all matters relating to the Incentive Scheme are on normal commercial terms and are fair and reasonable, and in the interests of the Company and the Shareholders as a whole, although it is not in the usual and ordinary course of business of the Company due to the nature of such transaction. Accordingly, the Directors (including the Independent Non-executive Directors) recommend the Independent Shareholders to vote in favour of the relevant resolutions in relation to the above matters to be proposed at the EGM and the Class Meetings.

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LETTER FROM THE BOARD

The Board also considers that all other resolutions set out in the Notice of EGM and the Notices of the Class Meetings are fair and reasonable and in the interests of the Company and the Shareholders as a whole. Accordingly, the Board recommends that the Shareholders to vote in favour of the resolutions set out in the Notice of EGM and the Notices of the Class Meetings.

IX. ADDITIONAL INFORMATION

Your attention is drawn to the letter from the Independent Board Committee to the Independent Shareholders and the letter from the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders as set out in this circular.

By order of the Board Shanghai Junshi Biosciences Co., Ltd. * Xiong Jun Chairman

For identification purposes only.

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LETTER FROM THE INDEPENDENT BOARD COMMITTEE

The following is a full text of the letter from the Independent Board Committee to the Independent Shareholders, which has been prepared for the purpose of inclusion in this circular.

==> picture [96 x 35] intentionally omitted <==

SHANGHAI JUNSHI BIOSCIENCES CO., LTD.[] *上海君實生物醫藥科技股份有限公司**

(a joint stock company incorporated in the People’s Republic of China with limited liability)

(Stock code: 1877)

22 October 2020

To the Independent Shareholders

Dear Sir or Madam,

CONNECTED TRANSACTION THE PROPOSED ISSUE AND GRANT OF NEW A SHARES UNDER THE INCENTIVE SCHEME PURSUANT TO SPECIFIC MANDATE

We refer to the circular dated 22 October 2020 (the “ Circular ”) of Shanghai Junshi Biosciences Co., Ltd. (the “ Company* ”), of which this letter forms a part. Unless the context otherwise requires, terms used in this letter shall have the same meanings as defined in the Circular.

We have been appointed as members of the Independent Board Committee to advise the Independent Shareholders as to whether the issue and grant of the Restricted Shares by the Company to the Connected Participants under the Incentive Scheme is fair and reasonable and in the interests of the Company and the Shareholders as a whole. Rainbow Capital (HK) Limited has been appointed as the Independent Financial Adviser to advise the Independent Board Committee and the Independent Shareholders in this regard.

Your attention is drawn to the advice of Rainbow Capital (HK) Limited to the Independent Board Committee and the Independent Shareholders in respect of the issue and grant of the Restricted Shares by the Company to the Connected Participants under the Incentive Scheme as set out in the “Letter From the Independent Financial Adviser” in the Circular.

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LETTER FROM THE INDEPENDENT BOARD COMMITTEE

Having taking into account the advice of Rainbow Capital (HK) Limited, we are of the view that the issue and grant of the Restricted Shares by the Company to the Connected Participants under the Incentive Scheme are on normal commercial terms and are fair and reasonable, and in the interests of the Company and the Shareholders as a whole, although it is not in the usual and ordinary course of business of the Company due to the nature of such transaction.

Accordingly, we recommend the Independent Shareholders to vote in favour of the special resolutions to be proposed at the EGM and the Class Meetings to approve, among other things, the proposed adoption of the Incentive Scheme.

Yours faithfully,

for and on behalf of the Independent Board Committee

Dr. Chen	Mr. Chen	Mr. Qian	Mr. Zhang	Dr. Roy
Lieping	Xinjun	Zhi	Chun	Steven Herbst

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The following is the full text of a letter of advice from Rainbow Capital, the independent financial adviser to the Independent Board Committee and the Independent Shareholders in respect of the issue and grant of Restricted Shares by the Company to the Connected Participants under the Incentive Scheme, which has been prepared for the purpose of incorporation in this circular.

Rainbow Capital (HK) Limited

22 October 2020

To the Independent Board Committee and the Independent Shareholders

Shanghai Junshi Biosciences Co., Ltd. Level 13, Building 2 Nos. 36 and 58, Hai Qu Road China (Shanghai) Pilot Free Trade Zone The PRC

Dear Sir or Madam,

CONNECTED TRANSACTION ISSUE AND GRANT OF RESTRICTED SHARES BY THE COMPANY TO THE CONNECTED PARTICIPANTS UNDER THE INCENTIVE SCHEME

INTRODUCTION

We refer to our appointment as the independent financial adviser to the Independent Board Committee and the Independent Shareholders in respect of the issue and grant of Restricted Shares by the Company to the Connected Participants under the Incentive Scheme (the “ Connected Grant ”), details of which are set out in the “Letter from the Board” (the “ Letter from the Board ”) contained in the circular issued by the Company to the Shareholders dated 22 October 2020 (the “ Circular ”), of which this letter forms part. Unless the context otherwise requires, capitalised terms used in this letter shall have the same meanings as those defined in the Circular.

The Company announced on 30 September 2020 that the Board (with Directors who are Participants under the Incentive Scheme having abstained) approved the resolutions in relation to the proposed adoption of the Incentive Scheme and the proposed issue and grant of new A Shares under the Incentive Scheme pursuant to the Specific Mandate. The proposed Incentive Scheme is subject to Shareholders’ approval by way of special resolutions at the EGM and the Class Meetings.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Subject to the approval of the Independent Shareholders at the EGM and the Class Meetings, the Company will grant not more than 35,736,500 Restricted Shares to the Participants, representing approximately 4.10% of the total issued share capital of the Company as at the Latest Practicable Date, of which (i) 28,589,500 Restricted Shares will be granted under the First Grant, representing approximately 80% of the total number of Restricted Shares under the Incentive Scheme; and (ii) 7,147,000 Restricted Shares will be granted under the Reserved Grant, representing approximately 20% of the total number of Restricted Shares under the Incentive Scheme (subject to Adjustment).

Among the 28,589,500 Restricted Shares under the First Grant, (i) 6,050,000 Restricted Shares will be granted to 6 Connected Participants; and (ii) 22,539,500 Restricted Shares will be granted to 1,998 other Participants who are not connected persons of the Company.

As the Connected Participants include executive Directors and an associate of a non-executive Director who are connected persons of the Company, the issue and grant of the Restricted Shares to the Connected Participants under the Incentive Scheme constitutes non-exempt connected transactions for the Company, and is subject to reporting, announcement and independent shareholders’ approval requirements under Chapter 14A of the Hong Kong Listing Rules. To the best knowledge of the Directors, Mr. Xiong Jun together with his parties acting in concert, Mr. Feng Hui, Mr. Zhang Zhuobing’s spouse and Mr. Yao Sheng’s parent, who are Shareholders as at the Latest Practicable Date, are required to abstain from voting on resolutions in relation to the adoption of the Incentive Scheme.

The Independent Board Committee, comprising all the five independent non-executive Directors, namely Dr. Chen Lieping, Mr. Chen Xinjun, Mr. Qian Zhi, Mr. Zhang Chun and Dr. Roy Steven Herbst, has been formed to advise the Independent Shareholders on whether (i) the Connected Grant is conducted in the ordinary and usual course of business of the Group; and (ii) the terms of the Connected Grant are fair and reasonable, on normal commercial terms and in the interests of the Company and the Shareholders as a whole, and advise the Independent Shareholders as to voting. We, Rainbow Capital, have been appointed as the independent financial adviser to advise the Independent Board Committee and the Independent Shareholders in this regard.

As at the Latest Practicable Date, we did not have any relationships or interests with the Group that could reasonably be regarded as relevant to our independence. We have acted as the independent financial adviser to the independent board committee and the independent shareholders of the Company in relation to the strategic allotment of A Shares to certain participants via the collective management plan under the proposed initial public offering of the Company on the STAR Market, details of which are set out in the circular of the Company dated 27 May 2020. Other than that, there was no engagement between the Group and us in the last two years. Apart from normal professional fees paid or payable to us in connection with this appointment as the Independent Financial Adviser, no arrangements exist whereby we had received any fees or benefits from the Group. Accordingly, we are qualified to give independent advice in respect of the Issuance.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

BASIS OF OUR OPINION

In formulating our opinion and advice, we have relied on (i) the information and facts contained or referred to in the Circular; (ii) the information supplied by the Group and its advisers; (iii) the opinions expressed by and the representations of the Directors and the management of the Group; and (iv) our review of the relevant public information. We have assumed that all the information provided and representations and opinions expressed to us or contained or referred to in the Circular were true, accurate and complete in all respects as at the date thereof and may be relied upon. We have also assumed that all statements contained and representations made or referred to in the Circular are true at the time they were made and continue to be true as at the Latest Practicable Date and all such statements of belief, opinions and intentions of the Directors and the management of the Group and those as set out or referred to in the Circular were reasonably made after due and careful enquiry. We have no reason to doubt the truth, accuracy and completeness of the information and representations provided to us by the Directors and the management of the Group. We have also sought and received confirmation from the Directors that no material facts have been withheld or omitted from the information provided and referred to in the Circular and that all information or representations provided to us by the Directors and the management of the Group are true, accurate, complete and not misleading in all respects at the time they were made and continued to be so until the date of the Circular.

We consider that we have reviewed sufficient information currently available to reach an informed view and to justify our reliance on the accuracy of the information contained in the Circular so as to provide a reasonable basis for our recommendation. We have not, however, carried out any independent verification of the information provided, representations made or opinion expressed by the Directors and the management of the Group, nor have we conducted any form of in-depth investigation into the business, affairs, operations, financial position or future prospects of the Company or its substantial shareholders, subsidiaries or associates.

PRINCIPAL FACTORS AND REASONS CONSIDERED

In arriving at our opinion and recommendation, we have taken into account the following principal factors and reasons:

1. Information on the Group

(i) Business of the Group

Established in December 2012 and listed on the Stock Exchange and the STAR Market in December 2018 and July 2020 respectively, the Group is a biopharmaceutical company dedicated to the discovery and development of innovative drugs and their clinical research and commercialisation on a global scale with the vision to provide patients with treatment options that work better and cost less.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

As at 30 June 2020, the Group had a product pipeline comprising 21 drug candidates covering different research and development (“ R&D ”) stages, including 19 innovative drugs and 2 biosimilars, covering five major therapeutic areas, including malignant tumors, autoimmune diseases, chronic metabolic diseases, neurologic diseases and infectious diseases. Product types of the Group include monoclonal antibodies, fusion proteins, antibody-drug conjugates and small molecule drugs. The Group strives to expand its product pipeline through development of both macromolecular and small molecule drugs.

As disclosed in the interim report of the Company for the six months ended 30 June 2020 (the “ 2020 Interim Report ”), the Group is committed to becoming an innovative biopharmaceutical company with global competitiveness, by integrating R&D, production and commercialisation, and will continue to (a) focus on R&D with a view to developing new macromolecular and small molecule drugs; (b) expand its product pipeline through licensing and other methods; (c) increase the fermentation capacity of macromolecular drugs and explore new production processes to further reduce production costs; and (d) improve the establishment of marketing and commercialisation teams (collectively, the “ Business Objectives ”).

(ii) Financial information of the Group

Set out below is summary of the key consolidated financial information of the Group for the three years ended 31 December 2019 and the six months ended 30 June 2020 prepared in accordance with the International Financial Reporting Standards, as extracted from the annual reports of the Company for the two years ended 31 December 2019 and the 2020 Interim Report:

For the six months

	For the six	months
	ended 30	June	For the year	ended 31	December
	2020	2019	2019	2018	2017
	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000
	(unaudited)	(unaudited)	(audited)	(audited)	(audited)
Continuing operations
Revenue	574,932	309,306	775,089	934	1,148
Gross profit	484,436	268,727	684,405	667	702
R&D expenses	(708,912)	(368,737)	(946,100)	(538,183)	(275,303)
Selling and distribution
expenses	(228,170)	(110,687)	(320,056)	(20,304)	–
Administrative expenses	(144,014)	(93,315)	(244,229)	(124,837)	(73,752)
Loss attributable to the
Shareholders	(597,899)	(289,189)	(743,922)	(716,503)	(320,683)

For the two years ended 31 December 2018, the Group had not commercialised any drug and therefore did not record any revenue from drug product sales. During these periods, the Group generated its revenue from provision of consultancy services related to technology, personnel and production process and equipment for the development of drug candidates as well as pharmaceutical research services.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

In February 2019, the Group commercialised its first product, Toripalimab. As a result, revenue of the Group from continuing operations increased significantly from approximately RMB934,000 for the year ended 31 December 2018 to approximately RMB775.1 million for the year ended 31 December 2019. Revenue increased by approximately 85.9% from approximately RMB309.3 million for the six months ended 30 June 2019 to approximately RMB574.9 million for the six months ended 30 June 2020, primarily due to the recovery of sales of Toripalimab from the outbreak of the novel coronavirus in early 2020 and the sub-licensing income and service income in relation to the collaboration with Eli Lilly and Company for the development of a drug for the treatment and prevention of COVID-19 in May 2020.

Loss attributable to the Shareholders increased from approximately RMB320.7 million for the year ended 31 December 2017 to approximately RMB743.9 million for the year ended 31 December 2019 and further to approximately RMB597.9 million for the six months ended 30 June 2020. This was primarily attributable to the increasing R&D expenses, selling and distribution expenses and administrative expenses due to the increase in the number of R&D projects and business expansion, which was partially offset by the increase in revenue as mentioned above.

2. Principle terms of the Connected Grant

Details of the principle terms of the Connected Grant are set out in Appendix IV to the Circular, which are summarised below:

Participants : The Company proposed to grant 6,050,000 Restricted Shares (subject to Adjustment) to 6 Connected Participants, as follows:

Connected Participants Xiong Jun Li Ning Feng Hui Zhang Zhuobing Yao Sheng Wang Shixu Total	Number of Restricted Shares to be granted 820,000 1,560,000 820,000 820,000 2,000,000 30,000 6,050,000	Percentage to the total number of Restricted Shares 2.29% 4.37% 2.29% 2.29% 5.60% 0.08% 16.92%	Percentage to the total issued share capital of the Company as at the Latest Practicable Date 0.09% 0.18% 0.09% 0.09% 0.23% 0.00%
			0.68%

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Grant Price : A Connected Participant who has satisfied the conditions for grant and attribution is entitled to purchase new A Shares issued by the Company at the Grant Price.

The Grant Price shall be RMB55.50 per A Share (subject to Adjustment), which represents:

(i) the issue price of the A Shares under the initial public offering of the Company on the STAR Market on 15 July 2020;
(ii) a discount of approximately 34.82% to the closing price of RMB85.15 per A Share as quoted on the Shanghai Stock Exchange on the trading day immediately preceding the date of announcement of the Incentive Scheme (i.e. 30 September 2020);
(iii) a discount of approximately 37.67% to the average closing price of RMB89.04 per A Share as quoted on the Shanghai Stock Exchange for the five consecutive trading days immediately preceding the date of announcement of the Incentive Scheme (i.e. 30 September 2020); and
(iv) a discount of approximately 37.86% to the average closing price of RMB89.31 per A Share as quoted on the Shanghai Stock Exchange for the 20 consecutive trading days immediately preceding the date of announcement of the Incentive Scheme (i.e. 30 September 2020).

As disclosed in the Letter from the Board, the Grant Price of RMB55.50 per A Share is in compliance with the STAR Market Listing Rules and the Management Measures given it is not lower than:

(i) the nominal value of each Share (i.e. RMB1.00); and
(ii) the higher of the following:
(a) 50% of the average trading price of the A Shares on the trading day preceding the date of announcement of the Incentive Scheme, being RMB85.46 per A Share; and
(b) 50% of the average trading price of the A Shares for the last 20 trading days preceding the date of announcement of the Incentive Scheme, being RMB90.25 per A Share.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Validity period	:	From the Grant Date until the date on which all Restricted	From the Grant Date until the date on which all Restricted
		Shares have been attributed or lapsed, which shall not exceed 48
		months
Attributable	:	Subject to the attribution conditions having been	fulfilled, the
periods		Restricted Shares under the Connected Grant may	be attributed
		to the Connected Participants in three tranches, as follows:
			Attribution
		Tranche Attributable period	percentage
		1st tranche From the first trading day after	40%
		the expiry of 12 months
		following the Grant Date until
		the last trading day within the
		24 months following the Grant
		Date
		2nd tranche From the first trading day after	30%
		the expiry of 24 months
		following the Grant Date until
		the last trading day within the
		36 months following the Grant
		Date
		3rd tranche From the first trading day after	30%
		the expiry of 36 months
		following the Grant Date until
		the last trading day within the
		48 months following the Grant
		Date
Attributable	:	Certain conditions have to be fulfilled before the Restricted
conditions		Shares granted can be attributed, including (i)	the level of
		operating income achieved; (ii) the number of INDs filed by the
		Company and accepted; (iii) the number of NDA or extended
		indications (sNDA) projects that have been filed by the
		Company and accepted; and (iv) the performance	of individual
		Participants.
Adjustments	:	The number of Restricted Shares and the Grant Price are subject
		to adjustments under certain circumstances including dividend
		distribution, capitalisation issue, bonus issue, share split, rights
		issue or share consolidation of the Company.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

3. Information on the Connected Participants

As stated in the Letter from the Board, the Participants, including the Connected Participants, are determined in accordance with the PRC Company Law, the PRC Securities Law, the Management Measures, the Listing Rules, the STAR Market Listing Rules, the Memorandum on Information Disclosure of Companies Listed on the STAR Market of the Shanghai Stock Exchange No. 4 – Information Disclosure on Equity Incentives (《科創板上市公司信息披露業務指南第4號—股權激勵信息披露》) and other relevant laws, regulations and regulatory documents as well as the Articles of Association, with reference to the actual circumstances of the Company.

We have reviewed the background and work experience of the Connected Participants and noted that their expertise and experience are relevant to the Group’s operations. Details of the Connected Participants are set out below:

Past work experience related to the Connected Participants’
Position in Function or respective functions in the Educational
Name the Group responsibility Group background Xiong Jun Executive Director, Overall management • March 2004 – July 2006: MBA chairman and legal of the Group Research and fund representative management • Since 2007: Chairman of board of directors of Shanghai Baoying Asset Management Co., Ltd.
March 2013 – November 2015: Chairman of board of directors of Shanghai Union Biopharm
Since March 2015: Director of Sichuan Huapu Modern Agriculture Co., Ltd.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

			Past work experience related to	Past work experience related to
			the	Connected Participants’
	Position in	Function or	respective functions in the		Educational
Name	the Group	responsibility	Group		background
Li Ning	Executive Director,	Formulation of	•	Team leader of the Office of	Ph.D. degree
	chief executive	business strategies		Biostatistics, team leader of	in preventive
	officer and general	and management of		mathematical statistician and	medicine
	manager	the Group		a statistical reviewer at the
				U.S. Food and Drug
				Administration
			•	September 2009 – January
				2018 Last position: Vice
				president of Asia Regulatory
				Affairs in Global Regulatory
				Affairs at Sanofi
Feng Hui	Executive Director	Daily operation and	•	Over ten years of experience	Ph. D. degree
	and chief operations	management of the		in biotechnology and drug	in molecular
	officer	Group and		discovery, spanning across	pharmacology
		overseeing scientific		multiple areas of drug
		research		development including
				antibody discovery, protein
				engineering and immune-
				oncology
			•	Took part in the invention of
				certain registered patents and
				patents in application of the
				Group
Zhang Zuobing	Executive Director	Manufacturing of	•	Over ten years of experience	Master’s
	and deputy general	drugs, management		in the pharmaceutical industry	degree in
	manager	of the Group and			biochemistry
		overseeing scientific	•	One of the founders of the
		research		Company

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Name

Position in Function or the Group responsibility

Past work experience related to the Connected Participants’ respective functions in the Educational Group background

Yao Sheng Executive Director R&D, management and deputy general of the Group and manager overseeing scientific research

2004: Research fellow at the Ph. D. degree Johns Hopkins University from Albert School of Medicine in the Einstein Department of Dermatology College of Medicine
January 2011 – October 2011: Associate research scientist in the Human Translational Immunology Department at Yale University
October 2011 – October 2013: Senior scientist at Amplimmune Inc., a subsidiary of AstraZeneca, responsible for the tumor immunology and antiautoimmune diseases antibody project

• Took part in the invention of certain registered patents and patents in application of the Group Wang Shixu Financial manager Financial reporting Over 6 years of experience in Bachelor’s (an associate of Shanghai Junshi of Junshi financial reporting degree in of Dr. Wu Biotechnology Co., Biotechnology financial Hai, a Ltd. (“ Junshi management non-executive Biotechnology ”) Director)

Source: Prospectus of the Company dated 11 December 2018, 2019 annual report of the Company (the “ 2019 Annual Report ”) and information provided by the Company

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

4. Reasons for and benefits of the grant of Restricted Shares under the Incentive Scheme

In December 2018, the Company raised net proceeds of approximately HK$3,413 million from the listing of its H Shares on the Stock Exchange, primarily for the R&D and commercialisation of the Group’s drug candidates. With the effort from the Group’s management team and employees as a whole, the Group entered into the commercialisation stage in February 2019. In July 2020, the Company was successfully listed on the STAR Market and raised net proceeds of approximately RMB4,497 million, primarily for the R&D of innovative drugs and the construction of the production based located in the Lingang Industrial Park in Shanghai Free-Trade Zone.

The Directors believe that the future success and continual development of the Group are closely linked to the continual commitment and effort of its management team and employees. As stated in the Letter from the Board, the Incentive Scheme serves to retain, motivate and incentivise the Group’s key employees, align their interests with the Shareholders’ interests through ownership of Shares and ensure that the Group’s development strategy and business goals will be realised. As such, the Directors believe that the adoption and implementation of the Incentive Scheme would be beneficial in retaining the Participants and motivating them to achieve the Business Objectives and improve the Group’s performance through attainment of the performance targets under the Incentive Scheme.

As advised by the management of the Group, given the highly competitive industry in which the Group operates, replacing executive officers or key employees in the biopharmaceutical industry may be difficult and may take a prolonged period of time given the limited number of individuals in the industry with the breadth of expertise and experience required to successfully develop, gain regulatory approval of, manufacture and commercialise drug products. Maintaining a stable and experienced management team is therefore critical to the development and expansion of biopharmaceutical companies. Given that the Restricted Shares to be granted under the Incentive Scheme are subject to the respective attribution periods and the Participants being employed by the Group for more than 12 months before attribution of each tranche of the Restricted Shares, we consider that these features are designed to motivate the Participants’ continuing commitment and contribution towards the development of the Group with their expertise and experience and ensure stability of the Group’s operations. As the attribution of the Restricted Shares is also subject to the performance of individual Participants as well as achievement of certain performance targets including the Company’s operating income, and the number of INDs and new drugs NDA or extended indications (sNDA) filed by the Company and accepted, we consider this helps align the employees’ performance at the individual level with the Group’s overall performance and motivate them to achieve the required performance targets, promoting the growth in revenue and profitability of the Group.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Having considered that (i) the Incentive Scheme can retain and motivate the Participants to make contribution to the Group through attainment of the performance targets under the Incentive Scheme; (ii) it is a common practice for companies listed on the STAR Market to adopt restricted A share incentive schemes for their employees as set out in the section headed “5. Assessment of the principal terms of the Connected Grant – (i) Comparable grants” below; and (iii) there will not be any actual cash paid by the Group to the Participants under the Incentive Scheme, we consider that the Incentive Scheme (including the Connected Grant) is conducted in the ordinary and usual course of business of the Group and is in the interests of the Company and the Shareholders as a whole.

5. Assessment of the principal terms of the Connected Grant

(i) Comparable grants

In evaluating the fairness and reasonableness of the terms of the Connected Grant, we have, on a best effort basis, identified an exhaustive list of restricted A share incentive scheme proposals which (a) were announced by companies listed on the STAR Market during the period from 1 May 2020 to 30 September 2020 (the “ Review Period ”), being approximately five months prior to the date of announcement of the Incentive Scheme; and (b) involved grant of restricted A shares to executive directors of the relevant companies. Based on the aforesaid criteria, we identified eight restricted A share incentive scheme proposals (the “ Comparable Schemes ”). Given we have identified eight Comparable Schemes during the Review Period, we consider the Review Period to be long enough to provide a sufficient sample size for comparison purpose. Given that the Connected Grant involves the issue and grant of Restricted Shares, which represent new A Shares to be issued by the Company and listed on the STAR Market, to the Connected Participants, we consider the Comparable Schemes to be fair and representative.

Although the listed issuers involved in implementing the Comparable Schemes have different principal activities, market capitalisations, profitability and financial positions as compared to those of the Company and the sizes of the restricted A shares to be granted to the participants under the Comparable Schemes vary, we consider that the Comparable Schemes can provide a general reference to the pricing trend of recent restricted A share incentive scheme proposals as well as a sufficient sample size for comparison purpose, so as to determine whether the terms of the Incentive Scheme (including the Connected Grant) are in line with the market practice.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Percentage of	restricted A	shares to be	granted to all	participants to the	total issued share	capital of the	company	1.18%											1.04%				0.86%
Attribution conditions	which are based on,	among others, the	participants’	performance and/or	the financial	performance of the	company	Yes											Yes				Yes
				Attribution period for the first	grant (attribution percentage for	each period following the grant	date)	For class 1 participants:		25%: 12 months to 24 months	25%: 24 months to 36 months	25%: 36 months to 48 months	25%: 48 months to 60 months	For class 2 participants:	50%: 24 months to 36 months	25%: 36 months to 48 months	25%: 48 months to 60 months	(Note)	30%: 12 months to 24 months	30%: 24 months to 36 months	40%: 36 months to 48 months		25%: 12 months to 24 months	25%: 24 months to 36 months	25%: 36 months to 48 months	25%: 48 months to 60 months
Percentage of grant	price to the average	trading price of the A	shares for the last 20	trading day	immediately	preceding the	announcement	52.89%											33.95%				13.07%
Percentage of grant	price to the average	trading price of the A	shares on the last	trading day	immediately	preceding the	announcement	57.07%											36.18%				13.88%
					Validity period of	the incentive	scheme	72 months											48 months				60 months
						Company name	(Stock code)	優刻得科技股份有限	公司UCloud	Technology Co.,	Ltd. (688158.SH)	(“UCloud”)							交控科技股份有限公	司Traffic Control	Technology Co.,	Ltd. (688015.SH)	北京石頭世紀科技股	份有限公司Beijing	Roborock	Technology Co.,	Ltd. (688169.SH)
						Date of	announcement	28 May 2020											8 June 2020				31 July 2020

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Percentage of	restricted A	shares to be	granted to all	participants to the	total issued share	capital of the	company	0.63%				1.56%						3.04%					0.97%
Attribution conditions	which are based on,	among others, the	participants’	performance and/or	the financial	performance of the	company	Yes				Yes						Yes					Yes
				Attribution period for the first	grant (attribution percentage for	each period following the grant	date)	40%: 12 months to 24 months	40%: 24 months to 36 months	20%: 36 months to 48 months		30%: 12 months to 24 months	30%: 24 months to 36 months	40%: 36 months to 48 months				33%: 12 months to 24 months	33%: 24 months to 36 months	34%: 36 months to 48 months			50%: 12 months to 24 months	50%: 24 months to 36 months
Percentage of grant	price to the average	trading price of the A	shares for the last 20	trading day	immediately	preceding the	announcement	41.08%				45.70%						54.04%					42.24%
Percentage of grant	price to the average	trading price of the A	shares on the last	trading day	immediately	preceding the	announcement	36.92%				47.30%						54.08%					46.40%
					Validity period of	the incentive	scheme	48 months				48 months						48 months					36 months
						Company name	(Stock code)	湖南金博碳素股份有	限公司KBC	Corporation, Ltd.	(688598.SH)	洛陽建龍微納新材料	股份有限公司	Luoyang JALON	Micro-nano New	Materials Co., Ltd.	(688357.SH)	寧波長陽科技股份有	限公司Ningbo	Solartron	Technology Co.,	Ltd. (688299.SH)	上海先惠自動化技術	股份有限公司	Shanghai SK	Automation	Technology Co.,	Ltd. (688155.SH)
						Date of	announcement	12 August 2020				12 August 2020						19 September	2020				28 September	2020

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Percentage of grant Percentage of grant Attribution conditions Percentage of	price to the average price to the average which are based on, restricted A	trading price of the A trading price of the A among others, the shares to be	shares on the last shares for the last 20 participants’ granted to all	trading day trading day Attribution period for the first performance and/or participants to the	Validity period of immediately immediately grant (attribution percentage for the financial total issued share	Date of Company name the incentive preceding the preceding the each period following the grant performance of the capital of the	announcement (Stock code) scheme announcement announcement date) company company	30 September 江蘇天奈科技股份有 60 months 40.00% 37.90% 30%: 12 months to 24 months Yes 0.65%	2020 限公司Jiangsu 30%: 24 months to 36 months	Cnano Technology 40%: 36 months to 48 months	Co., Ltd.	(688116.SH)	Maximum 72 months 57.07% 54.04% 3.04%	Minimum 36 months 13.88% 13.07% 0.63%	Average 53 months 41.48% 40.11% 1.24%	Median 48 months 43.20% 41.66% 1.01%	30 September The Company 48 months 64.94% 61.50% 40%: 12 months to 24 months Yes 4.10%	2020 30%: 24 months to 36 months	30%: 36 months to 48 months	Source: the announcements of the respective companies	Note: UCloud classified the participants by their titles and working experience. Participants of different classes have different attribution arrangement.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Validity period of the Incentive Scheme

The Incentive Scheme will become effective upon the Grant Date of the First Grant and shall be valid until the date on which all Restricted Shares have been attributed or lapsed, which shall not exceed 48 months. The validity period of the Incentive Scheme is within the range of those of the Comparable Schemes.

Attribution conditions

As disclosed in the Letter from the Board, in order for the Restricted Shares to be attributed to the Connected Participants under the Connected Grant, certain attribution conditions have to be satisfied during a specified time period, comprising the achievement of certain performance targets both at the Company’s level and at the Participant’s individual level. This is in line with those of the Comparable Schemes.

The performance targets at the Company’s level under the Incentive Scheme include the Company’s operating income, and the number of INDs and new drugs NDA or extended indications (sNDA) filed by the Company and accepted, in the years 2020 to 2022. In order for the Restricted Shares to be fully attributed under the First Grant (including the Connected Grant), in the years 2020 to 2022, among other things, (a) the Company has to achieve an accumulated operating income of not less than RMB6.6 billion (i.e. approximately RMB2.2 billion annually); (b) there will be no less than 16 IND applications accumulatively filed and accepted (i.e. approximately 5 IND applications annually), in which the Company owns not less than 50% interest; and (c) there will be not less than 11 NDA or extended indications (sNDA) accumulatively filed and accepted (i.e. approximately 4 NDA or sNDA annually), in which the Company owns not less than 50% interest. The individual assessment of the Participants is, on the other hand, carried out according to the internal performance assessment system of the Company.

Taking into account that (a) the Group only generated revenue of approximately RMB775.1 million and RMB574.9 million for the year ended 31 December 2019 and the six months ended 30 June 2020, respectively, after commercialisation of its first drug product in February 2019; (b) the Group originally planned to submit 2 to 3 IND applications every year as disclosed in the 2019 Annual Report; (c) as at 30 June 2019, among its product pipeline, the Group only had one NDA approved and 3 NDA accepted, we consider that the aforesaid performance targets at the Company’s level are determined with a certain level of difficulty as compared to the current circumstances of the Group with a view to motivating the Participants to attain before the Restricted Shares are attributed, ensuring the achievement of the Business Objectives.

Given that (a) we consider the difficulty in achieving the performance targets is able to motivate the Participants to contribute as much as possible so as to assist the Company in achieving the Business Objectives; and (b) the Independent Shareholders can benefit

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

from the Share price performance if the Company is able to achieve the performance targets in the Incentive Scheme, we are of the view that the performance targets are fair and reasonable so far as the Independent Shareholders are concerned.

Grant Price

The Grant Price shall be RMB55.50 per A Share, which represents (a) approximately 64.94% of the average trading price of the A Shares on the trading day preceding the date of announcement of the Incentive Scheme, being RMB85.46 per A Share; and (b) approximately 61.50% of the average trading price of the A Shares for the last 20 trading days preceding the date of announcement of the Incentive Scheme, being RMB90.25 per A Share. Given that the A Shares were only listed and commenced trading on the STAR Market on 15 July 2020, the A Shares have not yet been traded for 60 or 120 trading days prior to the announcement of the Incentive Scheme.

According to Rule 23 of the Management Measures, the grant price under a restricted share incentive scheme shall not be lower than the nominal value of the shares and shall not be set at a price lower than the higher of (a) 50% of the average trading price on the trading day preceding the date of announcement of the draft incentive scheme; and (b) 50% of the average trading price for the last 20, 60 or 120 trading days preceding the date of announcement of the draft incentive scheme. If a listed company adopts other approaches to determine the grant price of restricted A shares, the details of the basis of determination of such price should be disclosed in the restricted A share incentive scheme.

Pursuant to Rule 10.6 of Chapter 10 of the STAR Market Listing Rules, the grant price under a restricted share incentive scheme is allowed to be lower than 50% of any of (a) the average trading price of the shares on the trading day preceding the date of announcement of the draft incentive scheme; and (b) the average trading price of the shares for the last 20, 60 or 120 trading days preceding the date of announcement of the draft incentive scheme, provided that an independent financial adviser is able to opine on the reasonableness of the pricing basis and pricing mechanism and that the grant price is in the interests of the shareholders and the company as a whole.

Regarding the Comparable Schemes, (a) the percentages of the grant prices to the average trading price of the A Shares on the trading day preceding the date of announcement ranged from approximately 13.88% to approximately 57.07% with an average and median of approximately 41.48% and 43.20%, respectively; and (b) the percentages of the grant prices to the average trading price of the A Shares for the last 20 trading days preceding the date of announcement ranged from approximately 13.07% to approximately 54.04% with an average and median of approximately 40.11% and 41.66%, respectively.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The Grant Price is at a substantial discount to the prevailing trading price of the A Shares. However, taking into account that (a) the Incentive Scheme serves to align the interests of the Group’s employees with those of the Shareholders and the Company and to retain and incentivise the Group’s employees to achieve the Business Objectives; (b) the Grant Price is determined in accordance with the STAR Market Listing Rules and the Management Measures; (c) the Grant Price compares favorably to those under the Comparable Schemes; and (d) the performance targets, which the Participants have to achieve before the Restricted Shares are attributed, are established with a certain level of difficulty as explained in the paragraph headed “Attribution conditions” above, we consider the Grant Price to be justifiable and therefore fair and reasonable.

Attribution periods

The Restricted Shares under the First Grant (including the Connected Grant) are attributed in three tranches in the proportion of 40%, 30% and 30%, respectively, commencing from the first trading day after expiry of 12 months following the Grant Date until the last trading day within 48 months following the Grant Date.

As shown above, the restricted A shares under the Comparable Schemes were attributed in two to four tranches with attribution periods commencing from the trading day after expiry of 12 or 24 months following the grant date until the last trading day within 36, 48 or 60 months following the grant date. As such, we consider that the attribution periods of the Restricted Shares under the First Grant (including the Connected Grant) are comparable to those under the Comparable Schemes.

Adjustments

The number of Restricted Shares and the Grant Price are subject to adjustments according to various situations including capitalisation issue, bonus issue, share split, rights issue or share consolidation of the Company. For details, please refer to the section headed “The Proposed 2020 Restricted A Share Incentive Scheme – IX. Method and Procedures for Adjustment” in the Letter from the Board. Given that the adjustment mechanism of the number of Restricted Shares and the Grant Price is comparable to those under the Comparable Schemes, we consider it to be fair and reasonable.

Number of Restricted Shares to be granted to the Participants

According to the STAR Market Listing Rules, the cumulative total number of underlying shares involved under the fully effective share incentive schemes of a listed company shall not exceed 20% of the total share capital of the company as at the date the incentive scheme is submitted for approval at the general meeting(s). Pursuant to the Management Measures, the total number of shares to be granted to any participant under all the fully effective share incentive schemes of a listed company shall not exceed 1% of the total share capital of the company.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The total number of Restricted Shares to be granted under the Incentive Scheme represents not more than approximately 4.10% of the total issued share capital of the Company as at the Latest Practicable Date, which is higher than but close to the high end of those of Comparable Schemes. Having considered that (a) the number of Restricted Shares to be attributed to the Participants shall decline or lapse if the performance targets at the individual level and the Company’s level are not fully fulfilled; (b) Independent Shareholders can benefit from the Share price performance when the performance targets in the Incentive Scheme are fulfilled; (c) the total amortised cost in relation to the grant of Restricted Shares under the Incentive Scheme is in balance with the level of difficulty of the performance targets which the Participants must achieve for the Restricted Shares to be attributed, as explained in the section headed “Financial effect of the grant of Restricted Shares under the Incentive Scheme – (i) Operating performance” below; and (d) the number of Restricted Shares to be granted to the Connected Participants under the Incentive Scheme is in compliance with the STAR Market Listing Rules and the Management Measures, we are of the view that the number of Restricted Shares to be granted to the Participants is acceptable.

The total number of Restricted Shares to be granted to each Connected Participant is up to approximately 0.23% of the total issued share capital of the Company as at the Latest Practicable Date. As set out in the section headed “2. Principle terms of the Connected Grant” above, the Company proposed to grant 2,000,000 Restricted Shares to Yao Sheng, representing 0.23% of the total issued share capital of the Company as at the Latest Practicable Date (subject to Adjustment). We consider that the number of Restricted Shares to be granted to him is acceptable after considering his remuneration package, details of which are set out in the section headed “5. Assessment of the principal terms of the Connected Grant – (ii) Comparison of remuneration packages” below.

Taking into account (a) that the number of Restricted Shares to be granted to the Connected Participants under the Incentive Scheme is in compliance with the STAR Market Listing Rules and the Management Measures; (b) the benefit of the grant of Restricted Shares under the Incentive Scheme as explained in the section headed “Reasons for and benefits of the grant of Restricted Shares under the Incentive Scheme” above; and (c) the level of difficulty in achieving the performance targets under the Incentive Scheme before the Restricted Shares can be attributed as explained in the paragraph headed “Attribution conditions” above, we consider the dilution effect of the grant of Restricted Shares under the Incentive Scheme to be acceptable.

For details of our assessment on the fairness and reasonableness of the number of Restricted Shares to be granted to the Connected Participants under the Incentive Scheme, please refer to the following sub-section.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

(ii) Comparison of remuneration packages

(a) Remuneration packages of the Connected Participants

The table below set out (1) the number of Restricted Shares to be granted to the Connected Participants under the First Grant; (2) the estimated financial impact due to the grant of Restricted Shares; and (3) total emoluments of the Connected Participants for the year ended 31 December 2019:

			Total	Total	Total
		Percentage	amortised	amortised	emoluments
	Number of	of total	cost of the	cost of the	for the
Participants	Restricted	Restricted	Restricted	Restricted	year ended
under the First	Shares to be	Shares to be	Shares in	Shares on an	31 December	Total annual
Grant	granted	granted	2020 to 2023	annual basis	2019	remuneration
			RMB	RMB	RMB	RMB
	A	C = A/B	E = C x D	F = E/4	G	F + G
	(Note 5)		(Note 1)	(Note 2)	(Note 3)	(Note 4)
Xiong Jun	820,000	2.87%	24,328,379	6,082,095	4,495,000	10,577,095
Li Ning	1,560,000	5.46%	46,283,257	11,570,814	7,472,000	19,042,814
Feng Hui	820,000	2.87%	24,328,379	6,082,095	3,713,000	9,795,095
Zhang Zhuobing	820,000	2.87%	24,328,379	6,082,095	3,434,000	9,516,095
Yao Sheng	2,000,000	6.99%	59,252,740	14,813,185	3,460,000	18,273,185
					100,000 to	311,920 to
Wang Shixu	30,000	0.10%	847,679	211,920	600,000	811,920
Sub-total	6,050,000	21.16%	179,368,813	44,842,203
Other
Participants	22,539,500	78.84%	668,309,887	167,077,472
Total (B)	28,589,500	100.00%	847,678,700 (D)	211,919,675

Notes:

As disclosed in the Letter from the Board, total amortised cost of the Restricted Shares under the First Grant (including the Connected Grant) is estimated to be approximately RMB847.7 million based on the closing price of the A Shares on the trading day prior to the announcement of the Incentive Scheme, which will be recognised over the course of the Incentive Scheme in attribution proportion in installments and will be charged to operating profit or loss. Shareholders are reminded that the actual financial impact is dependent on the closing price of the A Shares on the Grant Date.
Assuming the value of the Restricted Shares would be recognised on a straight-line basis over the validity period of the Restricted Shares.
Comprised salaries and other benefits, performance bonus and/or retirement benefit scheme contributions as disclosed in the 2019 Annual Report or provided by the Company.
Assuming total remunerations of the Connected Participants (excluding the Connected Grant) would remain the same as the level for the year ended 31 December 2019.
Subject to Adjustment.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

As set out in the table above, on the basis that (1) total emoluments of the Connected Participants (excluding the Connected Grant) would remain the same as the level for the year ended 31 December 2019; and (2) the value of the Restricted Shares would be recognised on a straight-line basis over the validity period of the Restricted Shares, the annual remunerations of the Connected Participants would range from approximately RMB0.3 million to approximately RMB19.0 million.

Among the 6 Connected Participants, taking into account the Connected Grant, (1) 4 are with annual remunerations of below or slightly above RMB10 million; and (2) 2 are with annual remunerations of slightly below RMB20 million.

(b) Remuneration packages of the Connected Participants

The Company is a biotech company initially listed on the Main Board of the Stock Exchange under Chapter 18A of the Listing Rules. The Connected Participants involved under the Connected Grant are either executive Directors or an associate of a non-executive Director. In assessing the fairness and reasonableness of the remuneration packages of the Connected Participants taking into account the Connected Grant under the Incentive Scheme, we have, based on our search on the website of the Stock Exchange, identified an exhaustive list of biotech companies which were or are listed on the Stock Exchange under Chapter 18A of the Listing Rules (the “ Comparable Company(ies) ”) and considered the remuneration packages of the executive directors of the Comparable Companies for the year ended 31 December 2019.

Set below is a summary of the remuneration packages of the executive directors of the Comparable Companies for the year ended 31 December 2019:

			Market
			capitalisation as	Range of total
			at the Latest	remunerations of
			Practicable	executive directors
Name of Comparable Companies		Stock code	Date	(Note 1)
			(HK$’ million)	(RMB)
1.	BeiGene, Limited	6160	211,489.40	96,050,429 (Note 2)
2.	Innovent Biologics, Inc.	1801	89,603.78	8,926,000 and 75,664,000
3.	CanSino Biologics Inc. – B	6185	83,233.06	1,008,000 to 2,585,000
4.	Zai Lab Limited – SB	9688	58,481.87	Not disclosed
5.	Venus Medtech (Hangzhou) Inc. – B	2500	32,293.68	736,000, 4,912,000 and
				23,275,000
6.	Shanghai Henlius Biotech Inc. – B	2696	23,370.28	3,939,000
7.	Akeso, Inc. – B	9926	20,975.08	1,792,000 to 2,321,000
8.	Peijia Medical Limited – B	9996	17,911.58	72,000, 3,267,000 and
				3,448,000

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

			Market
			capitalisation as	Range of total
			at the Latest	remunerations of
			Practicable	executive directors
Name of Comparable Companies		Stock code	Date	(Note 1)
			(HK$’ million)	(RMB)
9.	Alphamab Oncology – B	9966	14,618.07	7,203,000 and 48,152,000
10.	Ocumension Therapeutics – B	1477	13,448.44	33,242,000
11.	JHBP (CY) Holdings Limited – B	6998	11,570.25	15,923,000
12.	InnoCare Pharma Limited – B	9969	13,665.15	16,776,000 and 18,240,000
13.	CStone Pharmaceuticals – B	2616	14,288.79	6,027,000
14.	Ascentage Pharma Group	6855	6,493.15	3,512,000
	International – B
15.	Immunotech Biopharm Limited – B	6978	5,140.69	664,000 to 904,000
16.	Hua Medicine – B	2552	4,873.61	26,509,000 and 28,107,000
17.	Mabpharm Limited – B	2181	4,948.90	1,432,000 to 5,949,000
18.	SinoMab BioScience Limited – B	3681	3,270.28	2,964,000
19.	Kintor Pharmaceutical Limited – B	9939	3,287.57	Nil (Note 3)
20.	Ascletis Pharma Inc. – B	1672	3,374.32	2,258,000 and 10,938,000
21.	TOT BIOPHARM International	1875	2,308.50	3,731,000 and 4,734,000
	Company Limited – B
The	Company	1877	81,041.45	RMB311,920 to
				RMB19,042,814 (Note 4)

Source: Annual reports and/or prospectuses of the Comparable Companies

Notes:

Primarily included salaries and other allowances, performance-related bonus, retirement benefit scheme contributions and share-based payment expenses as extracted from the annual reports or prospectuses of the Comparable Companies.
Calculated based on the average exchange rate of US$1: RMB6.9106 in 2019 as extracted from Bloomberg.
No remuneration was paid to the directors for the year ended 31 December 2019.
Represented the range of the annual remunerations of the Connected Participants (comprising five executive Directors and an associate of an executive Director) taking into account the Connected Grant, which are calculated on the basis set out in the sub-section headed “(a) Remuneration packages of the Connected Participants” above.

Although details with respect to each Comparable Company and its executive director(s) such as responsibilities, experience and year of service of each executive director as well as product type, stage of clinical development and commercialisation and scale of each company may vary, we consider that the Comparable Companies can provide a general reference for common market practice in determining the remuneration packages of executive directors of biotech companies.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

As shown in the table above, the remuneration of the executive directors of the Comparable Companies ranged from nil to approximately RMB96.1 million for the year ended 31 December 2019. Among the 21 Comparable Companies identified above, there are executive directors in 9 Comparable Companies with total annual remunerations of over RMB10 million for the year ended 31 December 2019. Out of these 9 Comparable Companies, certain executive directors in 6 Comparable Companies have annual remuneration packages of over RMB20 million for the year ended 31 December 2019. On this basis, we consider that the annual remunerations of the Connected Participants are in line with those of the Comparable Companies. In other words, we are of the view that the number of Restricted Shares to be granted to the Connected Participants under the Connected Grant is fair and reasonable.

(iii) Overall comment

Overall speaking, in evaluating the fairness and reasonableness of the terms of the Connected Grant as a whole, we have considered (a) the requirements of implementing restricted A share incentive schemes by companies listed on the STAR Market under relevant rules and regulations in the PRC, including the STAR Market Listing Rules and the Management Measures; (b) the principal terms of recent restricted A share incentive schemes implemented by other companies listed on the STAR Market; (c) the emoluments of the Connected Participants taking into account the Connected Grant; and (d) the remuneration packages of the executive directors of biotech companies listed on the Stock Exchange for the year ended 31 December 2019.

Given that (a) the Grant Price of RMB55.50 per A Share is determined in accordance with the STAR Market Listing Rules and the Management Measures, which compares favorably to those under the Comparable Schemes; (b) it is common to set the performance conditions of a restricted A share incentive scheme based on the company’s operating performance and the individual performance of the participants; (c) the performance targets at the Company’s level under the First Grant (including the Connected Grant) are determined with a certain level of difficulty as compared to the current circumstances of the Group, which also justifies the substantial discount of the Grant Price to the prevailing trading price of the A Shares; (d) total remunerations of the Connected Participants, taking into account the Connected Grant, are in line with those of the Comparable Companies, and in other words, the number of Restricted Shares to be granted to the Connected Participants under the Connected Grant is not excessive; and (e) other principal terms of the Connected Grant, including the validity period, attribution periods and adjustment mechanism of the number of Restricted Shares and the Grant Price, are comparable to those under the Comparable Schemes, we consider that the terms of the Connected Grant are fair and reasonable.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

6. Financial effect of the grant of Restricted Shares under the Incentive Scheme

(i) Operating performance

As disclosed in the section headed “The Proposed 2020 Restricted A Share Incentive Scheme – XII. Accounting Treatment and Impact on the Operating Performance” in the Letter from the Board, total amortised cost of the Restricted Shares under the First Grant (including the Connected Grant) is estimated to be approximately RMB847.7 million based on the closing price of RMB85.15 per A Share on the trading day (i.e. 29 September 2020) prior to the announcement of the Incentive Scheme, which will be recognised over the course of the Incentive Scheme in attribution proportion in installments and will be charged to operating profit or loss. In the years 2020 to 2023, the amortised costs of the Restricted Shares under the First Grant (including the Connected Grant) are estimated to be approximately RMB45.9 million, RMB522.7 million, RMB201.3 million and RMB77.7 million, respectively.

Based on (a) the closing price of RMB85.15 per A Share as quoted on the Shanghai Stock Exchange on the trading day (i.e. 29 September 2020) immediately preceding the date of announcement of the Incentive Scheme; (b) the Grant Price of RMB55.50 per A Share (subject to Adjustment); and (c) a maximum of 35,736,500 Restricted Shares to be granted under the Incentive Scheme (subject to Adjustment), total amortised cost in relation to the grant of Restricted Shares under the Incentive Scheme would amount to approximately RMB1,059.6 million (the “ Total Share-based Payments ”).

As stated in the 2019 Annual Report, for the year ended 31 December 2019, total staff costs of the Group (including directors’ emoluments) amounted to approximately RMB442.7 million, representing approximately 57.1% of the Group’s total revenue. As disclosed in the 2020 Interim Report, for the six months ended 30 June 2020, total staff costs of the Group (including directors’ emoluments) amounted to approximately RMB291.5 million, which translated into approximately RMB583.0 million on an annualised basis (the “ Annualised Staff Costs ”).

Assuming that (a) the Group would achieve an accumulated operating income of not less than RMB6.6 billion in the years 2020 to 2022, being part of the performance conditions that the Group has to fulfill before the Restricted Shares can be fully attributed; (b) total staff costs of the Group (excluding the grant of Restricted Shares) for each of the years 2020 to 2022 remained at approximately RMB583.0 million, being the Annualised Staff Costs; and (c) the financial impact of the grant of Restricted Shares under the Incentive Scheme would equal to the Total Share-based Payments, total staff costs of the Group (taking into account the grant of Restricted Shares) for the entire period from 2020 to 2022 would amount to approximately RMB2,808.6 million (being RMB583.0 million multiplied by three years plus the Total Share-based Payments), accounting for approximately 42.6% of the Group’s total operating income. This is lower than the percentage of total staff costs (including directors’ emoluments) to the Group’s total revenue (i.e. approximately 57.1%) for the year ended 31 December 2019. On this basis, we consider that the total amortised cost in relation to the grant of Restricted Shares under the Incentive Scheme (i.e. the Total Share-based Payments) is in balance with the level of difficulty of the performance targets which the Participants must achieve for the Restricted Shares to be attributed.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Taking into account (a) the benefit of the grant of Restricted Shares under the Incentive Scheme as explained in the section headed “Reasons for and benefits of the grant of Restricted Shares under the Incentive Scheme” above; and (b) that the financial impact of the grant of Restricted Shares under the Incentive Scheme, which arises from the substantial discount of the Grant Price to the prevailing trading price of the A Shares, can be justified by the level of difficulty of the Group in achieving the performance targets before the Restricted Shares can be attributed, we consider the financial effect of the grant of Restricted Shares under the Incentive Scheme on the Group’s operating performance to be acceptable.

Shareholders are reminded that the actual financial impact the grant of Restricted Shares under the Incentive Scheme is dependent on the closing price of the A Shares on the Grant Date.

(ii) Working capital

As at 30 June 2020, the Group’s bank balances and cash amounted to approximately RMB676.3 million. The gearing ratio of the Group, being borrowings less bank balances and cash and divided by total equity, was approximately 16.4% as at 30 June 2020.

Based on (a) the Grant Price of RMB55.50 per A Share to be paid by the Participants to subscribe for the Restricted Shares (subject to Adjustment); and (b) a maximum of 35,736,500 Restricted Shares to be granted under the Incentive Scheme (subject to Adjustment), the Company would raise not more than approximately RMB1,983.4 million from the Participants, which will be applied towards the replenishment of the Group’s working capital. The proceeds from the issue of Restricted Shares under the Incentive Scheme is expected to strengthen the capital base, enhance the liquidity and lower the gearing of the Group.

OPINION AND RECOMMENDATION

Taking into account the above principal factors and reasons, we consider that the terms of the Connected Grant are on normal commercial terms and fair and reasonable so far as the Independent Shareholders are concerned. We also consider that the Connected Grant is conducted in the ordinary and usual course of business of the Group and in the interest of the Company and the Shareholders as a whole. We therefore advise the Independent Board Committee to recommend, and ourselves recommend, the Independent Shareholders to vote in favour of the special resolutions to be proposed at the EGM and the Class Meetings to approve the Connected Grant.

Yours faithfully, For and on behalf of Rainbow Capital (HK) Limited Larry Choi Managing Director

Mr. Larry Choi is a licensed person and a responsible officer of Rainbow Capital (HK) Limited registered with the Securities and Futures Commission to carry out type 6 (advising on corporate finance) regulated activity under the SFO. He has over ten years of experience in the corporate finance industry.

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UTILIZATION OF PART OF THE SURPLUS PROCEEDS FOR PERMANENT REPLENISHMENT OF LIQUIDITY

APPENDIX I

On 29 September 2020, the “Resolution on the Permanent Replenishment of Liquidity by Using Part of the Surplus Proceeds” (《關於使用部分超募資金永久補充流動資金的議案》) was considered and approved at the twenty-seventh meeting of the second session of the Board of Directors and the twenty-second meeting of the second session of the Board of Supervisors for the Company to permanently replenish its liquidity by using part of the surplus proceeds from the STAR Market Listing amounting to RMB539,093,400. The permanent replenishment of liquidity by using part of the surplus proceeds will not affect the capital needs of the investment projects, and there shall be no high-risk investments or financial assistance provided to parties other than controlled subsidiaries of the Company within twelve months from the replenishment of liquidity.

I. OVERVIEW OF THE PROCEEDS FROM THE STAR MARKET LISTING

In accordance with the “Approval of the Initial Public Offering and Listing of Shares of Shanghai Junshi Biosciences Co., Ltd.*” (Zheng Jian Xu Ke [2020] No. 940) (《關於同意上海君實生物醫藥科技股份有限公司首次公開發行股票註冊的批覆》(證監許可[2020]940號)) issued by the CSRC on 20 May 2020, the Company was approved to issue 87,130,000 A Shares at an issue price of RMB55.50 per share by way of public offering, with the total proceeds amounting to RMB4,835,715,000. Net proceeds after deducting issuance expenses amounted to RMB4,496,978,300. The above funds have become fully available to the Company. The said proceeds from the STAR Market Listing have been verified by RSM China (容誠會計師事務所(普通特殊合夥)), who issued the “Capital Verification Report” (Rong Cheng Yan Zi [2020] No. 230Z0103 (容誠驗字[2020]230Z0103號《驗資報告》) on 8 July 2020.

In order to regulate the management and use of proceeds of the Company and to safeguard the interests of investors, the Company established a special account for such proceeds. Upon receipt, all proceeds were deposited into the special account established with approval by the Board of Directors, and a tripartite agreement on supervision of proceeds was entered into by the Company, the Sponsor Institution and the commercial bank to which the proceeds were deposited. For details, please refer to the Company’s announcement on the completion of the issue of A Shares dated 14 July 2020.

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UTILIZATION OF PART OF THE SURPLUS PROCEEDS FOR PERMANENT REPLENISHMENT OF LIQUIDITY

APPENDIX I

II. USE OF PROCEEDS FROM THE STAR MARKET LISTING

(I) The investment projects and use of proceeds from the STAR Market Listing of the Company are as follows:

		Total	Proceeds
		investment	intended to be
No.	Name of project	amount	invested
		(RMB’0,000)	(RMB’0,000)
1	Research and development projects	120,000.00	120,000.00
	of innovative drugs
2	Junshi Biotech Industrialization	180,000.00	70,000.00
	Lingang Project
3	Repayment of bank loans and	80,000.00	80,000.00
	replenishment of liquidity
	Total	380,000.00	270,000.00

The net proceeds raised by the Company was RMB4,496,978,300, total proceeds intended for the investment projects was RMB2,700,000,000, and the surplus proceeds was RMB1,796,978,300.

(II) On 28 August 2020, the “Resolution on the Replacement of Self-raised Funds Invested in Advance with Proceeds from the Issuance” (《關於使用募集資金置換預先投入的自籌資金的議案》) was considered and approved at the twenty-sixth meeting of the second session of the Board of Directors and the twenty-first meeting of the second session of the Board of Supervisors for the Company to replace the self-raised funds invested in advance in investment projects with proceeds from the issuance of A Shares in the STAR Market Listing amounting to RMB849,714,300, and the replacement of self-raised funds used in advance for the payment of issuance expenses with proceeds raised from the issuance of A Shares in the STAR Market Listing amounting to RMB3,646,500. In aggregate, the Company will replace self-raised funds invested in advance with proceeds raised from the issuance of A Shares in the STAR Market Listing amounting to RMB853,360,800. The Independent Non-executive Directors have issued their independent opinions of consent on such matters.

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APPENDIX I

RSM China issued the “Verification Report on the Investment Projects Funded with Self-raised Funds in Advance by Shanghai Junshi Biosciences Co., Ltd.*” (《關於上海君實生物醫藥科技股份有限公司以自籌資金預先投入募集資金投資項目的鑒證報告》) (Rong Cheng Zhuan Zi [2020] No. 230Z1995) (容誠專字[2020]230Z1995 號). For details, please refer to the Company’s overseas regulatory announcement on the “Announcement on the Replacement of Self-raised Funds Invested in Advance with Proceeds from the Issuance” (《關於使用募集資金置換預先投入的自籌資金的公告》) dated 28 August 2020.

(III) On 29 September 2020, the “Resolution on Cash Management by Using Temporarily Idle Proceeds” (《關於使用暫時閒置募集資金進行現金管理的議案》) was considered and approved at the twenty-seventh meeting of the second session of the Board of Directors and the twenty-second meeting of the second session of the Board of Supervisors for the Company to manage its cash by using temporarily idle proceeds from the STAR Market Listing not exceeding RMB3,800,000,000 provided that it does not affect the normal progress of the Company’s investment plans funded with proceeds. For details, please refer to the Company’s overseas regulatory announcement on the “Announcement on Cash Management by Using the Temporarily Idle Proceeds” (《關於使用暫時閒置募集資金進行現金管理的公告》) dated 29 September 2020.

III. PLAN ON THE PERMANENT REPLENISHMENT OF LIQUIDITY BY USING PART OF THE SURPLUS PROCEEDS FROM THE STAR MARKET LISTING

To the extent that it does not affect the capital needs and normal progress of the investment projects funded with proceeds, in order to satisfy the liquidity needs of the Company, improve the efficiency of the use of proceeds, lower financial costs, further enhance the Company’s profitability and safeguard the interests of the Company and its Shareholders, pursuant to the Guidelines on the Management and Utilization of Raised Funds and the Guidelines on Standard Operation and other laws, regulations and regulatory documents, the Company intends to permanently replenish its liquidity by using the surplus proceeds amounting to RMB539,093,400 based on the Company’s actual production and operational needs and financial position while ensuring the progress of the investment projects and the satisfaction of its funding needs, which shall be primarily used for the expenses related to the principal businesses of the Company.

The part of the surplus proceeds to be used for the permanent replenishment of the liquidity amounted to RMB539,093,400, accounting about 30% of the surplus proceeds, which is in compliance with the requirement that “the excess of the actual net proceeds of the listed company over the planned proceeds (the “surplus proceeds”) may be used for permanent replenishment of liquidity and repayment of bank loans, while the cumulative amount within each 12-month period shall not exceed 30% of the total surplus proceeds” under the Guidelines on the Management and Utilization of Raised Funds, and the relevant requirements in Provision 5.3.7 under the Guidelines on Standard Operation.

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APPENDIX I

IV. EXPLANATIONS AND UNDERTAKINGS

The permanent replenishment of liquidity by using the surplus proceeds raised from the STAR Market Listing shall be used for the Company’s business expansion, daily operation and production and operation related to the principal businesses, and will not be used for allotment and subscription of new shares, or for the trading of shares and their derivatives and convertible bonds through direct or indirect arrangements. There is no circumstance where the permanent replenishment of liquidity by using the surplus proceeds raised will change the use of proceeds or affect the normal progress of the investment projects. The replenishment of liquidity shall be primarily used for the production and operation related to the principal businesses of the Company, which is in line with laws and regulations.

The Company undertakes to only use the liquidity replenished with part of the surplus proceeds for the production and operation related to its principal businesses; the Company undertakes that the cumulative amount to be used for each 12-month period shall not exceed 30% of the total surplus proceeds; the Company undertakes that the permanent replenishment of liquidity by using part of the surplus proceeds will not affect the capital needs of the investment projects funded with raised proceeds; and it will not engage in any high-risk investments or provide financial assistance to parties other than controlled subsidiaries of the Company within twelve months from the replenishment of the liquidity.

V. REVIEW PROCEDURES

On 29 September 2020, the “Resolution on the Permanent Replenishment of Liquidity by Using Part of the Surplus Proceeds” (《關於使用部分超募資金永久補充流動資金的議案》) was considered and approved at the twenty-seventh meeting of the second session of the Board of Directors and the twenty-second meeting of the second session of the Board of Supervisors for the Company to permanently replenish its liquidity by using part of the surplus proceeds from the STAR Market Listing amounting to RMB539,093,400. The Independent Nonexecutive Directors have issued their independent opinions of consent on such matters. Under the relevant stipulations including Guidelines on the Management and Utilization of Raised Funds and the Guidelines on Standard Operation as well as the Articles of Association, the permanent replenishment of liquidity by using part of the surplus proceeds raised shall be subject to the consideration and, if thought fit, approval by the Shareholders at the EGM, which may only be implemented upon consideration and approval by the Shareholders at the EGM.

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APPENDIX I

VI. SPECIAL OPINIONS

(I) Opinions of Independent Non-executive Directors

The Independent Non-executive Directors are of the opinion that the permanent replenishment of liquidity by using part of the surplus proceeds amounted to RMB539,093,400 is based on the actual business needs of the Company, is conducive to improving the efficiency of use of proceeds and the Company’s operating capabilities, and is in line with the Company’s strategic and development needs and the interests of all Shareholders. The use of surplus proceeds shall not affect the normal progress of the investment projects funded with raised proceeds, and there is no circumstance where it will change the target use of proceeds in effect or become detrimental to the interests of the Shareholders of the Company. The related content and procedures are in compliance with laws, regulations and regulatory documents including the Guidelines on the Management and Utilization of Raised Funds and the Guidelines on Standard Operation as well as the requirements under the Management Policies for Raised Funds of the Company.

In summary, the Independent Non-executive Directors agree to the permanent replenishment of liquidity by using part of the surplus proceeds amounting to RMB539,093,400 and submission to the Shareholders at the EGM for consideration.

(II) Opinions of the Board of Supervisors

The Board of Supervisors is of the opinion that the permanent replenishment of liquidity by using part of the surplus proceeds amounting to RMB539,093,400 is based on the actual business needs of the Company, conducive to improving the efficiency of use of proceeds and the Company’s operating capabilities, and is in line with the Company’s strategic and development needs and the interests of all shareholders. The use of surplus proceeds shall not affect the normal progress of the investment projects funded with raised proceeds, and there is no circumstance where it will change the target use of proceeds in effect or become detrimental to the interests of the shareholders of the Company. The related content and procedures are in compliance with laws, regulations and regulatory documents including the Guidelines on the Management and Utilization of Raised Funds and the Guidelines on Standard Operation as well as the requirements under the Management Policies for Raised Funds of the Company.

In summary, the Board of Supervisors agrees to the permanent replenishment of liquidity by using the remaining proceeds raised amounting to RMB539,093,400 and submission to the general meeting for consideration.

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(III) Verification opinion of the Sponsor Institution

Subsequent to verification, CICC, the Sponsor Institution of the Company, is of the opinion that:

The permanent replenishment of liquidity by using part of the surplus proceeds has been considered and approved by the Board of Directors and the Board of Supervisors, and the Independent Non-executive Directors have expressly issued their opinions of consent. The necessary procedures have been performed, and such matter is still subject to the consideration and approval at the general meeting of the Company. It is in compliance with the requirements under the laws, regulations and regulatory documents including the Guidelines on the Management and Utilization of Raised Funds and the Guidelines on Standard Operation. The permanent replenishment of liquidity by using part of the surplus proceeds by the Company for the production and operation relating to its principal businesses is conducive to improving the efficiency of use of proceeds and is in the interests of the Company and all Shareholders as a whole.

In summary, the Sponsor Institution has no objection to the permanent replenishment of liquidity by using part of the surplus proceeds of the Company.

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GENERAL MANDATE TO ISSUE A SHARES AND/OR H SHARES

APPENDIX II

In accordance with the requirements under the PRC Company Law and other relevant laws and regulations, listing rules of the stock exchange of the place(s) in which the shares of the Company are listed as well as the Articles of Association, to seize market opportunities and ensure flexibility to issue new shares, it is proposed at the EGM to approve the grant to the Board of Directors of an unconditional General Mandate to authorize the Board to, subject to market conditions and the needs of the Company, separately or concurrently issue, allot and deal with A Shares and/or H Shares or securities convertible into such shares, options, warrants or similar rights (“ Similar Rights ”) to subscribe for any A Shares and/or H Shares in the Company not exceeding each of 20% of the A Shares or H Shares in issue as at the date of passing the resolution at the EGM, and to approve and execute all necessary documents, submit all necessary application procedures to the relevant authorities and take other necessary actions for the completion of the above matters.

I. AUTHORIZATION MATTERS OF ADDITIONAL ISSUANCE OF A SHARES AND/OR H SHARES OR SIMILAR RIGHTS

It is proposed at the EGM to approve the grant to the Board of the Company (and the Board to authorize the chairman and any person authorized by the chairman) (unless the delegation of authority is stipulated otherwise by relevant laws and regulations), with full discretion, to separately or concurrently issue, allot and deal with A Shares and/or H Shares or Similar Rights in accordance with market conditions and the needs of the Company from time to time, and determine the terms and conditions for issuing, allotting and dealing with the news shares or Similar Rights, including but not limited to:
(1) To, subject to market conditions and the needs of the Company, issue, allot and deal with additional A Shares and/or H Shares or Similar Rights, and to make or grant offer proposals, agreements or options in respect of such shares.
(2) The amount of A Shares and/or H Shares or Similar Rights (excluding the shares issued by way of capitalization of capital reserve fund) to be allotted or agreed conditionally or unconditionally to be allotted, issued and dealt with (whether pursuant to an option or otherwise) as approved by the Board shall not exceed each of 20% of the A Shares and/or H Shares in issue as at the date of passing this resolution at the EGM.
(3) To formulate and implement specific issuance plan, including but not limited to the type, pricing method and/or issue price (including price range), issue size, allottees of the new shares to be issued and the use of proceeds, the timing and the period of issue and to determine whether to place to existing shareholders or not.

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(4) To engage intermediaries for the issuance under the General Mandate; to approve and execute all relevant acts, deeds, documents and other related matters necessary, appropriate, desirable and relevant for the issuance; to review, approve and execute on behalf of the Company the agreements related to the issuance, including but not limited to placing and underwriting agreements and engagement agreements of the intermediaries.
(5) To review, approve and execute on behalf of the Company legal documents related to the issuance submitted to relevant regulatory authorities. To perform relevant approval procedures pursuant to the requirements of regulatory authorities and the place where the Company is listed, and complete all necessary filing, registration and record procedures in relevant government departments in Hong Kong and/or any other regions and jurisdictions (if applicable).
(6) To make amendments to the relevant agreements and legal documents in the above items (4) and (5) in accordance with requirements of the regulatory authorities where the Company is listed.
(7) To approve the Company to increase its registered capital upon the issuance of additional shares and make amendments to the Articles of Association of the Company in respect of the total amount and structure of share capital and other relevant contents and to authorize the operation management of the Company to carry out relevant procedures in accordance with domestic and overseas requirements.
To agree that upon obtaining the approval and authorization granted by the Shareholders at the EGM for the above matters, the chairman of the Board and any person authorized by the chairman of the Board be further authorized by the Board to execute matters for additional issuance of A Shares and/or H Shares or Similar Rights according to the Company’s needs and other market conditions.
To authorize the chairman of the Board and any person authorized by the chairman of the Board to approve, sign and publish relevant documents, announcements and circulars and make relevant information disclosures according to applicable regulatory rules at places where the Company is listed.

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APPENDIX II

II. AUTHORIZATION PERIOD OF THE GENERAL MANDATE TO ISSUE ADDITIONAL A SHARES AND/OR H SHARES OR SIMILAR RIGHTS

Authorization period of the General Mandate to issue additional A Shares and/or H Shares or Similar Rights commence from the date of approval at the EGM to the earliest date among the following: (1) the expiration date of 12 months after the date of approval at the EGM; (2) the date of conclusion of the 2020 annual general meeting; or (3) the date of the General Mandate being revoked or modified by Shareholders through resolution at any general meeting.

Subject to all necessary approvals (if any) of relevant government authorities, the power under the abovementioned General Mandate shall only be exercised by the Board of Directors in accordance with the PRC Company Law, the Hong Kong Listing Rules and the Articles of Association.

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PROPOSED AMENDMENTS TO THE ARTICLES OF ASSOCIATION

APPENDIX III

Details of the proposed amendments to the Articles of Association are as follows:

Provisions of Current Articles

Article 1 Shanghai Junshi Biosciences Co., Ltd. (the “Company”) is a joint stock company with limited liability incorporated in accordance with the Company Law of the People’s Republic of China (the “Company Law”), the Securities Law of the People’s Republic of China (the “Securities Law”), the Special Regulations of the State Council on the Overseas Offering and Listing of Shares by Joint Stock Limited Companies, the Mandatory Provisions for Companies Listing Overseas (the “Mandatory Provisions”), the Letter of Opinions on the Amendments to Articles of Association of Companies Listed in Hong Kong of the Overseas-Listing Department of the CSRC and the Production System Department of the State Commission for Restructuring the Economic System, the Rules Governing the Listing of Securities on the STAR Market on the Shanghai Stock Exchange (“STAR Market Listing Rules”), Guidance for the Articles of Listed Company, Code of Corporate Governance for Listed Companies in China, Rules Governing the Listing of Securities on the Stock Exchange of Hong Kong Limited (the “Hong Kong Listing Rules”) and other relevant regulations.

These Articles are formulated with a view to protect the legitimate rights and interests of the Company, its shareholders and creditors and to regulate the Company’s organizations and conducts.

Provisions of Amended Articles Article 1 Shanghai Junshi Biosciences Co., Ltd. (the “Company”) is a joint stock company with limited liability incorporated in accordance with the Company Law of the People’s Republic of China (the “Company Law”), the Securities Law of the People’s Republic of China (the “Securities Law”), the Special Regulations of the State Council on the Overseas Offering and Listing of Shares by Joint Stock Limited Companies, the Mandatory Provisions for Companies Listing Overseas (the “Mandatory Provisions”), the Letter of Opinions on the Amendments to Articles of Association of Companies Listed in Hong Kong of the Overseas-Listing Department of the CSRC and the Production System Department of the State Commission for Restructuring the Economic System, the Rules Governing the Listing of Securities on the STAR Market on the Shanghai Stock Exchange (“STAR Market Listing Rules”), the Reply of the State Council on Adjusting the Provisions to Matters Including the Notice Period for Convention of General Meetings Applicable to Overseas Listed Companies (No. 97 [2019] of the State Council), Guidance for the Articles of Listed Company, Code of Corporate Governance for Listed Companies in China, Rules Governing the Listing of Securities on the Stock Exchange of Hong Kong Limited (the “Hong Kong Listing Rules”) and other relevant regulations.

These Articles are formulated with a view to protect the legitimate rights and interests of the Company, its shareholders and creditors and to regulate the Company’s organizations and conducts.

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PROPOSED AMENDMENTS TO THE ARTICLES OF ASSOCIATION

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Provisions of Current Articles

The Company was established by Shanghai Junshi Biosciences Co., Ltd.* (上海君實生物醫藥科技有限公司) by way of entire transformation and registered at the Shanghai Administration for Industry and Commerce on 5 May 2015 with a business license granted. The unified social credit code is 91310000059383413A.

The promoters of the Company are: Xiong Fengxiang (熊鳳祥), Suzhou Ruiyuan Shengben Biological Medicine Management Partnership (LP) (蘇州瑞源盛本生物醫藥管理合夥企業(有限合夥)), Du Yali (杜雅勵), Wu Yang (武洋), Feng Hui (馮輝), Liu Xiaoling (劉小玲), Wu Jun (吳軍), Wang Lifang (王莉芳), Shenzhen Benyu Tianyuan Biological Technology Partnership (LP) (深圳本裕天源生物科技有限合夥企業(有限合夥)), Ma Jing (馬靜), Li Cong (李聰), Shen Chun (沈淳), Shanghai Baoying Asset Management Co., Ltd. (上海寶盈資產管理有限公司), Liu Jiankun (劉建坤), Huang Fei (黃菲), Zhou Yuqing (周玉清), Xiong Jun (熊俊), Zhao Yun (趙雲), Jiangsu Yatong Asset Management Co., Ltd. (江蘇亞通資產管理有限公司), Zhong Lu (鍾鷺), Liu Shaolan (劉少蘭), Nanjing Runjiajiuxi Investment Partnership (LP) (南京潤嘉久熙投資合夥企業(有限合夥)), Chen Mingxi (陳銘錫), Jin Mingzhe (金明哲), Dai Longlin (戴龍林), Yang Fan (楊帆), Shanghai Yingding Investment Management Partnership (LP) (上海盈定投資管理合夥企業(有限合夥)) and He Min (賀敏).

Provisions of Amended Articles

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APPENDIX III

Provisions of Current Articles Provisions of Amended Articles Article 3 Address of the Company: Room Article 3 Address of the Company: 13/F, 602, 6/F, No. 781 Cai Lun Road, China Block 2, 36 and 58 Haiqu Road, China (Shanghai) Pilot Free Trade Zone (Shanghai) Pilot Free Trade Zone Telephone: 021-2024-8288 Telephone: 021-2250-0300 Fax: 021-2042-3282 Fax: 021-8016-4691 Postal code: 201203 Postal code: 201203 Article 5 The registered capital of the Article 5 The registered capital of the Company is RMB[●]. After new shares are Company is RMB 871,276,500 . After new issued, the Company’s registered capital shares are issued, the Company’s registered shall be adjusted according to the actual capital shall be adjusted according to the situations. Registration procedures of actual situations. Registration procedures of change in registered capital shall be handled change in registered capital shall be handled for the change in registered capital. for the change in registered capital. Article 7 These Articles of Association of Article 7 These Articles of Association of Shanghai Junshi Biosciences Co., Ltd. (上上 Shanghai Junshi Biosciences Co., Ltd. (上海君實生物醫藥科技股份有限公司)) (the 海君實生物醫藥科技股份有限公司) (the “Articles of Association”) has been “Articles of Association”) has been approved by a special resolution at a general approved by a special resolution at a general meeting of the Company. Upon approval by meeting of the Company. These Articles the relevant State departments and shall take effect from the date on which regulatory authorities, these Articles shall they are approved by relevant state take effect from the date on which the departments and regulatory authorities, Company’s shares are listed on the STAR and shall supersede previous articles of Market of Shanghai Stock Exchange (the association and its amendments filed with “STAR Market”), and shall supersede the competent administration for industry articles of association and its and commerce.

Article 7 These Articles of Association of Shanghai Junshi Biosciences Co., Ltd.* (上上海君實生物醫藥科技股份有限公司)) (the “Articles of Association”) has been approved by a special resolution at a general meeting of the Company. Upon approval by the relevant State departments and regulatory authorities, these Articles shall take effect from the date on which the Company’s shares are listed on the STAR Market of Shanghai Stock Exchange (the “STAR Market”), and shall supersede previous articles of association and its amendments filed with the competent administration for industry and commerce.

From the effective date of the Articles of Association, the Articles of Association shall become a legally binding document which regulates the Company’s organization and acts, the rights and obligations between the Company and shareholders, and amongst the shareholders.

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Provisions of Current Articles

Article 18 Upon establishment of the Company, as approved by the securities regulatory authorities under the State Council, the Company issued 158,910,000 overseas-listed foreign shares (prior to the exercise of the over-allotment option), which were listed on the Hong Kong Stock Exchange on 24 December 2018. Upon the exercise of the over-allotment option, the Company issued additional 23,836,500 overseas-listed foreign shares, which were listed on the Hong Kong Stock Exchange on 9 January 2019.

Upon the completion of the initial public offering of overseas-listed foreign shares of the Company, the share capital of the Company is 784,146,500 shares, including 601,400,000 domestic shares and 182,746,500 overseas-listed foreign shares.

Upon establishment of the Company, as approved by the securities regulatory authority, the Company issued [●] domestic shares (prior to the exercise of overallotment option), which were listed on the STAR Market on [●]; upon the exercise of over-allotment option, the Company issued additional [●] domestic shares, which were listed on the STAR Market on [●].

Upon the completion of the initial public offering and listing of the domestic shares of the Company, the share capital of the Company is [●] shares, including [●] domestic shares and 182,746,500 overseaslisted foreign shares.

Provisions of Amended Articles

Upon establishment of the Company, as approved by the securities regulatory authority, the Company issued 87,130,000 domestic shares, which were listed on the STAR Market on 15 July 2020 .

Upon the completion of the initial public offering and listing of the domestic shares of the Company, the share capital of the Company is 871,276,500 shares, including 688,530,000 domestic shares and 182,746,500 overseas-listed foreign shares.

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APPENDIX III

Provisions of Current Articles

Article 19 After the plans for issuing overseas-listed foreign shares and domestic shares have been approved by the securities regulatory authorities under the State Council, the Board of the Company may arrange for implementation of such plans by means of separate issuances.

Provisions of Amended Articles

The Company’s plan for separate issuance of overseas-listed foreign shares and domestic shares in accordance with the preceding paragraph may be implemented separately within 15 months upon approval by the securities regulatory authorities under the State Council or from the date of registration.

Article 21 Upon the establishment of the Company by way of entire transformation, its registered capital is RMB14,700,000. Prior to the issuance of H shares, the registered capital of the Company is RMB601,400,000, with total shares of 601,400,000 shares.

Article 21 Upon the establishment of the Company by way of entire transformation, its registered capital is RMB14,700,000. Prior to the initial public offering of H shares, the registered capital of the Company is RMB601,400,000, with total shares of 601,400,000 shares.

Upon the completion of the issuance of H Upon the completion of the initial public shares of the Company, the registered capital offering of H shares of the Company, the of the Company is RMB784,146,500 on the registered capital of the Company is listing date. Base on the actual issuance, the RMB784,146,500 on the listing date. Company shall complete corresponding registration procedures for the change in Upon the completion of the initial public registered capital at the administration for offering of the domestic shares of the industry and commerce, and submit the Company, the registered capital of the filing with securities regulatory authorities Company is RMB871,276,500 on the under the State Council. listing date.

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APPENDIX III

Provisions of Current Articles

Article 23 Based on the capital needs for its operation and development, the Company may, in accordance with the provisions under the laws, regulations and the Articles of Association and upon approval by way of special resolutions at the general meeting, increase its capital by the following methods:

Provisions of Amended Articles

(1) issuing new shares to unspecified investors;
(1) issuing new shares to unspecified (1) issuing new shares to unspecified investors; investors;
(2) placing new shares with existing (2) placing new shares with existing shareholders; shareholders;
(3) giving new shares to existing (3) giving new shares to existing shareholders; shareholders;
(4) issuing new shares to specified (4) issuing new shares to specified investors; investors;
(5) converting capital reserve into shares; (5) converting capital reserve into shares; (6) other means as permitted by the laws (6) other means as permitted by the laws and administrative regulations. and administrative regulations.

The Company’s increase of capital by The Company’s increase of capital by issuing new shares shall be carried out in issuing new shares shall be carried out in accordance with the procedures specified in accordance with the procedures specified in the relevant State laws, administrative the relevant State laws, administrative regulations and relevant regulatory rules in regulations and relevant regulatory rules in the place where the Company’s shares are the place where the Company’s shares are listed, after having been approved in listed, after having been approved in accordance with the Articles of Association. accordance with the Articles of Association.

Existing shareholders shall have no preemptive rights on shares publicly or nonpublicly issued by the Company.

The Company shall not issue preferred shares convertible into ordinary shares.

	The Company shall not issue preferred
	shares convertible into ordinary shares.
	Subject to the fulfillment of relevant
	conditions, the Company’s general
	meeting may authorize the Board to make
	decision on the issuance of a certain
	number of domestic shares to specific
	investors in accordance with provisions
	under relevant national laws,
	administrative regulations, and relevant
	regulatory rules of the place where the
	Company’s shares are listed.

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APPENDIX III

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APPENDIX III

Provisions of Current Articles

Article 29 In the event of a repurchase of its own shares by the Company for the reasons under sub-paragraphs (1) and (2) of Article 27 hereof or by an agreement outside of a stock exchange, prior approval shall be obtained from the shareholders at a general meeting in accordance with the procedures specified in the Articles of Association. Upon obtaining further prior approval of the shareholders at the general meeting in the same manner, the Company may terminate or amend contracts concluded in the manner set forth above or waive any of its rights under such contracts. In the event of a repurchase of its own shares by the Company for the reasons under subparagraphs (3), (5) and (6) of Article 27 hereof, the Company may, in accordance with the provisions of the Articles of Association or the authorization of general meeting, by a resolution passed by the Board by more than two third of the directors attending the meeting. The contracts for the repurchase of shares referred to in the above paragraph include (but not limited to) agreements whereby repurchase obligations are undertaken and repurchase rights are acquired.

The Company may not assign contracts for the repurchase of its own shares or any of its rights thereunder.

Provisions of Amended Articles

Article 29 In the event of a repurchase of its own shares by the Company for the reasons under sub-paragraphs (1) and (2) of Article 27 hereof or by an agreement outside of a stock exchange, prior approval shall be obtained from the shareholders at a general meeting in accordance with the procedures specified in the Articles of Association. Upon obtaining further prior approval of the shareholders at the general meeting in the same manner, the Company may terminate or amend contracts concluded in the manner set forth above or waive any of its rights under such contracts. In the event of a repurchase of its own shares by the Company for the reasons under subparagraphs (3), (5) and (6) of Article 27 hereof, the Company shall do so by a resolution passed by the Board by more than two third of the directors attending the meeting.

The contracts for the repurchase of shares referred to in the above paragraph include (but not limited to) agreements whereby repurchase obligations are undertaken and repurchase rights are acquired.

The Company may not assign contracts for the repurchase of its own shares or any of its rights thereunder.

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APPENDIX III

Provisions of Current Articles

Article 44 Shares held by promoters shall not be transferred within one (1) year from the date of establishment of the Company. The shares already issued before initial public offering of the Company shall not be transferred within one (1) year from the date when the Company’s shares are listed on the stock exchange.

Directors, supervisors, general manager and other senior management of the Company shall report to the Company their shareholdings in the Company and changes therein and shall not transfer annually during their terms of office more than 25% of the total number of shares of the same class of the Company which they hold, the shares held of the Company shall not be transferred within one (1) year from the date when the Company’s shares are listed; The aforesaid persons shall not transfer the shares of the Company held by them within six (6) months from the date of their leaving the Company.

If directors, supervisors, senior management and those shareholders holding more than 5% of shares of the Company disposes the shares within six (6) months after purchase, or purchase within six (6) months after disposal, the earnings therefrom shall belong to the Company, and the Board shall reclaim the earnings. However, a security company that holds more than 5% shares due to underwriting purchase of all remaining stock shall not be subject to the six (6) months restriction when disposing the shares.

Provisions of Amended Articles

If directors, supervisors, senior management and those shareholders holding more than 5% of shares of the Company disposes the shares or other securities with equity nature within six (6) months after purchase, or purchase within six (6) months after disposal, the earnings therefrom shall belong to the Company, and the Board shall reclaim the earnings. However, a security company that holds more than 5% shares due to underwriting purchase of all remaining stock shall not be subject to the six (6) months restriction when disposing the shares.

The shares or other securities with equity nature held by directors, supervisors, senior management and natural person shareholders mentioned in the preceding paragraph include those held by their spouses, parents, children, and held by others’ accounts.

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APPENDIX III

Provisions of Current Articles

If the Board does not implement in accordance with the above provisions, shareholders have the right to request the Board to implement them within thirty (30) days. Where the Board fails to implement within the aforesaid time limit, the shareholders shall have the right to file a lawsuit in their own name to the People’s Court for the interest of the Company. Where the Board fails to implement in accordance with the above provisions, the responsible directors shall bear joint liability in accordance with the law.

Article 45 When the Company intends to convene a general meeting, distribute dividends, enter into liquidation and engage in other activities that involve determination of shareholdings, the Board or the convener of the general meeting shall determine a specific date for the record of rights attaching to shares (record date). Shareholders named in the register of members by the end of the record date shall be the shareholders of the Company.

Any person who dissents from the register of members and requests to have his name included in or removed from the register of members may apply to the court of the relevant jurisdiction to correct the register of members.

Provisions of Amended Articles

If the Board does not implement in accordance with the provisions in the third paragraph of this Article , shareholders have the right to request the Board to implement them within thirty (30) days. Where the Board fails to implement within the aforesaid time limit, the shareholders shall have the right to file a lawsuit in their own name to the People’s Court for the interest of the Company. Where the Board fails to implement in accordance with the provisions in the third paragraph of this Article , the responsible directors shall bear joint liability in accordance with the law.

Any laws, regulations and listing rules of the place where the shares of the Company are listed concerning the book closure period prior to the holding of a general meeting or the record date for the determination of entitlements to dividend distributions by the Company shall be observed.

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APPENDIX III

Provisions of Current Articles

Article 70 When the Company convenes a general meeting, written notice of the meeting shall be given forty-five (45) days (when calculating the starting date, the Company shall not include the date of the meeting), before the date of the meeting to notify all shareholders whose names appear in the share register of the matters to be considered and the date and place of the meeting. A shareholder who intends to attend the meeting shall deliver to the Company his written reply concerning his attendance at such meeting twenty (20) days before the date of the meeting.

Notice of general meeting shall be served to any shareholder (whether has voting right on general meeting or not) either by hand or by post in a prepaid mail, addressed to such shareholder at his registered address as shown in the register of members. Subject to compliance with the laws, administrative regulations, the listing rules of the stock exchange where the Company’s shares are listed, notice of the general meeting may also be given by way of public announcement, including through publishing on the Company’s website.

Provisions of Amended Articles Article 70 When the Company convenes an annual general meeting, it shall notify each shareholder of the date and place of the meeting and the matters to be considered twenty (20) days before the date of the meeting and fifteen (15) days before the date of an extraordinary general meeting.

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APPENDIX III

Provisions of Current Articles Provisions of Amended Articles The “public announcement” referred to in The “public announcement” referred to in the preceding paragraph shall be published the preceding paragraph shall be published in one or more newspapers designated by the in one or more newspapers designated by securities supervisory and regulatory the securities supervisory and regulatory authority under the State Council and the authority under the State Council or on securities regulatory authority of the place the website of the Shanghai Stock where the Company’s shares are listed Exchange, or on media that meet the within the interval of forty-five (45) days to requirements of the securities supervisory fifty (50) days before holding of the and regulatory authority under the State meeting. All holders of domestic shares shall Council within twenty (20) days before be deemed as having been notified of the holding of the general meeting and fifteen forthcoming general meeting once the (15) days before holding of the announcement is published. The Chinese extraordinary meeting. All holders of and English versions of the announcement domestic shares shall be deemed as having shall be published on the websites of the been notified of the forthcoming general Hong Kong Stock Exchange and the meeting once the announcement is Company respectively on the same day, or published. The Chinese and English shall be published in the manner as specified versions of the announcement shall be by the Hong Kong Stock Exchange from published on the websites of the Hong time to time. Kong Stock Exchange and the Company respectively on the same day, or shall be published in the manner as specified by the Hong Kong Stock Exchange from time to time. Where there are any special provisions in the listing rules of the place where the Company’s shares are listed, such provisions shall prevail.

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APPENDIX III PROPOSED AMENDMENTS TO THE ARTICLES OF ASSOCIATION

Provisions of Current Articles Article 71 The Company shall calculate the number of voting shares represented by the shareholders who intend to attend the meeting based on the written replies received twenty (20) days prior to the holding of the general meeting. If the number of voting shares represented by the shareholders who intend to attend the meeting reaches more than one half of the total number of the Company’s voting shares, the Company may hold the general meeting. If not, the Company shall within five (5) days inform the shareholders again by public notice of the matters to be considered as well as the date and place of the meeting. Upon notification by the public announcement, the Company may hold the general meeting.

Provisions of Amended Articles Article 71 A general meeting shall not decide on matters not specified in the notice. If the general meeting cannot be held within the prescribed time limit, the reasons and subsequent plans shall be disclosed before the expiration of the time limit.

An extraordinary general meeting shall not decide on matters not specified in the notice.

If the general meeting cannot be held within the prescribed time limit, the reasons and subsequent plans shall be disclosed before the expiration of the time limit.

Article 86 A shareholder (including his proxy), when voting at a general meeting, may exercise his voting rights according to the number of voting shares which he represents. Each share shall carry one voting right. However, the Company’s shares held by the Company do not carry voting rights, and shall not be counted in the total number of voting rights represented by the shareholders present at the general meeting.

When material matters concerning the interests of medium and small investors are considered at a general meeting, voting for medium and small investors shall be counted separately. Separate-counting results shall be disclosed timely and publicly.

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PROPOSED AMENDMENTS TO THE ARTICLES OF ASSOCIATION

APPENDIX III

Provisions of Current Articles

The Board, independent directors and the shareholders who have fulfilled the relevant stipulated conditions may publicly solicit the voting rights from shareholders. When soliciting shareholders’ voting rights, the specific voting intentions and other information shall be fully disclosed to persons whose voting rights are being solicited. It is prohibited to solicit shareholder’s voting rights by means of compensation or compensation in disguised form. The Company shall not impose minimum shareholding restrictions on soliciting the voting right.

According to the applicable laws and regulations and the listing rules of the stock exchange where the Company’s shares are listed, where any shareholder is required to abstain from voting or is restricted to voting only for or against any particular resolution, any votes casted by such shareholder (or his proxy) in violation of such requirement or restriction shall not be counted in the voting results.

Provisions of Amended Articles

The Board, independent directors, shareholders holding more than 1% shares with voting rights or investor protection institutions established in accordance with laws, administrative regulations and requirements specified by CSRC, can serve as soliciting party, and publicly make request to shareholders of the Company, either in person or by entrusting securities firms, securities service institutions, to engage them as proxies to attend the general meeting and exercise shareholders’ rights including the right of proposing motions and the voting right.

When soliciting rights of shareholders in accordance with requirements set out in the paragraph above, the soliciting party shall disclose relevant documents, and the Company shall cooperate in this regard. It is prohibited to publicly solicit shareholders’ rights by means of compensation or compensation in disguised form. The Company shall not impose minimum shareholding restrictions on soliciting the voting right. Where any acts on publicly soliciting rights of shareholders in violation of laws, administrative regulations or relevant requirements specified by CSRC, resulting in losses of the Company or other shareholders, relevant party shall be liable for compensation in accordance with laws.

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PROPOSED AMENDMENTS TO THE ARTICLES OF ASSOCIATION

APPENDIX III

Provisions of Current Articles Provisions of Amended Articles According to the applicable laws and regulations and the listing rules of the stock exchange where the Company’s shares are listed, where any shareholder is required to abstain from voting or is restricted to voting only for or against any particular resolution, any votes casted by such shareholder (or his proxy) in violation of such requirement or restriction shall not be counted in the voting results. Article 110 When the Company is to hold a Article 110 When the Company is to hold a class meeting, it shall issue a written notice class meeting, it shall issue a written notice 45 days prior to the meeting informing all informing all the registered shareholders of the registered shareholders of that class of that class of the matters to be considered at the matters to be considered at the meeting the meeting as well as the date and place of as well as the date and place of the meeting. the meeting in accordance with the Shareholders who intend to attend the requirements on the notice period in meeting shall, within 20 days prior to the respect of annual general meeting and day of the meeting, deliver their written extraordinary general meetings stipulated replies to the Company of their attendance. under Article 70 of these Articles . That the That the quorum for a class meeting (other quorum for a class meeting (other than an than an adjourned meeting) to consider a adjourned meeting) to consider a variation variation of the rights of any class of shares of the rights of any class of shares shall be shall be the holders of at least one-third of the holders of at least one-third of the issued the issued shares of the class. shares of the class.

If the number of the voting shares represented by the shareholders intending to attend the meeting is more than half of the total number of voting shares of that class, the Company may hold the class meeting of shareholders. If not, the Company shall within five (5) days inform the shareholders once again of the matters to be considered at the meeting and the date and place of the meeting in the form of a public announcement. Upon notification by public announcement, the Company may hold the class meeting.

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PROPOSED AMENDMENTS TO THE ARTICLES OF ASSOCIATION

APPENDIX III

Provisions of Current Articles Provisions of Amended Articles
Article 120 The Board shall exercise the Article 120 The Board shall exercise the following functions and powers: following functions and powers: (1) to be responsible for convening general (1) to be responsible for convening general meetings, propose at general meetings meetings, propose at general meetings to pass the relevant matters and report to pass the relevant matters and report its work at the general meetings; its work at the general meetings;
(2) to implement resolutions of the general (2) to implement resolutions of the general meetings; meetings;
(3) to decide on the Company’s business (3) to decide on the Company’s business plans and investment programs; plans and investment programs;
(4) to formulate the annual financial (4) to formulate the annual financial budgets and final accounts of the budgets and final accounts of the Company; Company;
(5) to formulate the Company’s profit (5) to formulate the Company’s profit distribution plans and plans on making distribution plans and plans on making up losses; up losses;
(6) to formulate proposals for the (6) to formulate proposals for the Company to increase or decrease its Company to increase or decrease its registered capital, issue corporate registered capital, issue corporate bonds or other securities and pursue bonds or other securities and pursue any listing thereof; any listing thereof , or issue a certain number of domestic shares to specific
(7) to formulate plans for the Company’s investors according to the substantial acquisitions or disposals authorization of the general meeting ; and repurchase of shares of the Company, or merger, division, (7) to formulate plans for the Company’s dissolution and alteration of corporate substantial acquisitions or disposals form of the Company; and repurchase of shares of the Company, or merger, division, dissolution and alteration of corporate form of the Company;

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PROPOSED AMENDMENTS TO THE ARTICLES OF ASSOCIATION

APPENDIX III

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PROPOSED AMENDMENTS TO THE ARTICLES OF ASSOCIATION

APPENDIX III

Except for the Board resolutions in respect of the matters specified in paragraphs (6) and (13) which shall be passed by more than two-thirds of the directors, the Board resolutions in respect of all other matters set out in the preceding paragraph may be passed by more than half of the directors.

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PROPOSED AMENDMENTS TO THE ARTICLES OF ASSOCIATION

APPENDIX III

Provisions of Current Articles

The Board may establish certain special committees such as a strategic committee, an audit committee, a remuneration and assessment committee and a nomination committee as needed, to assist the Board to exercise its duties and powers or provide advice or consultation for the Board in respect of its decisions under the leadership of the Board. The composition of and the rules of procedures for such committees shall be decided by the Board separately. The special committees shall be responsible to the Board, and perform their duties according to the Articles of Association and the authorization granted by the Board. The proposals shall be submitted to the Board for consideration and approval. All members of the special committees are composed of directors, among which the number of independent directors shall be the majority of the audit committee, nomination committee and remuneration and assessment committee, and they shall act as the chairman of the committees. The chairman of the audit committee shall be an accounting professional.

The Board shall provide explanation for non-standard audit opinions on the financial reports of the Company given by certified public accountants at the general meeting.

Provisions of Amended Articles The Board may establish certain special committees such as a strategic committee, an audit committee, a remuneration and assessment committee and a nomination committee as needed, to assist the Board to exercise its duties and powers or provide advice or consultation for the Board in respect of its decisions under the leadership of the Board. The composition of and the rules of procedures for such committees shall be decided by the Board separately. The special committees shall be responsible to the Board, and perform their duties according to the Articles of Association and the authorization granted by the Board. The proposals shall be submitted to the Board for consideration and approval. All members of the special committees are composed of directors, among which the number of independent directors shall be the majority of the audit committee, nomination committee and remuneration and assessment committee, and they shall act as the chairman of the committees. The chairman of the audit committee shall be an accounting professional.

The Board shall provide explanation for non-standard audit opinions on the financial reports of the Company given by certified public accountants at the general meeting.

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PROPOSED AMENDMENTS TO THE ARTICLES OF ASSOCIATION

APPENDIX III

Provisions of Current Articles

Article 150 The Board of Supervisors shall be accountable to the general meeting and exercise the following functions and powers:

(1) to examine the Company’s financial position;
(2) to supervise the performance by the directors and senior management when discharging their duties to the Company, to supervise any act in violation of the laws, administrative regulations and the Articles of Association, and to propose to remove the directors or senior management who violate the laws, administrative regulations, the Articles of Association or resolutions of general meetings. The Board of Supervisors of the Company shall notify the Board or report to the general meeting, and make timely disclosure, if it discovers that the directors or senior management has violated the laws and regulations and the Articles of Association;
(3) to demand rectification from the directors or senior management when the acts of such persons are harmful to the Company’s interest;

(4)	to verify the financial information such
	as financial reports, business reports
	and profit distribution plans to be
	submitted by the Board at the general
	meetings and, should any queries arise,
	to engage, in the name of the Company,
	certified public accountants and
	practicing auditors for a re-
	examination of the aforesaid
	information;

Provisions of Amended Articles

Article 150 The Board of Supervisors shall be accountable to the general meeting and exercise the following functions and powers:

(1) to examine the Company’s financial position;
(2) to supervise the performance by the directors and senior management when discharging their duties to the Company, to supervise any act in violation of the laws, administrative regulations and the Articles of Association, and to propose to remove the directors or senior management who violate the laws, administrative regulations, the Articles of Association or resolutions of general meetings. The Board of Supervisors of the Company shall notify the Board or report to the general meeting, and make timely disclosure, if it discovers that the directors or senior management has violated the laws and regulations and the Articles of Association;
(3) to demand rectification from the directors or senior management when the acts of such persons are harmful to the Company’s interest;
(4) to verify the financial information such as financial reports, business reports and profit distribution plans to be submitted by the Board at the general meetings and, should any queries arise, to engage, in the name of the Company, certified public accountants and practicing auditors for a reexamination of the aforesaid information;

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APPENDIX III

Provisions of Current Articles Provisions of Amended Articles
(5) to propose to convene an extraordinary (5) to propose to convene an extraordinary general meeting and to convene and general meeting and to convene and preside over a general meeting when preside over a general meeting when the Board fails to perform the duties of the Board fails to perform the duties of convening and presiding over the convening and presiding over the general meeting under the Company general meeting under the Company Law; Law;
(6) to submit proposals to the general (6) to submit proposals to the general meetings; meetings;
(7) to propose the convening of (7) to propose the convening of extraordinary meetings of the Board; extraordinary meetings of the Board;
(8) to represent the Company in (8) to represent the Company in negotiating with or in bringing legal negotiating with or in bringing legal actions against the directors and senior actions against the directors and senior management according to the relevant management according to the relevant provisions under the Company Law; provisions under the Company Law;
(9) to review and audit the share issuance documents and the Company’s regular report prepared by the Board and propose written review and audit opinions . Supervisors shall sign the written confirmation opinions ;
(9) to review and audit the Company’s regular report prepared by the Board and propose written review and audit opinions;
(10) such other functions and powers as written confirmation opinions ; prescribed by the laws, administrative regulations and the Articles of (10) such other functions and powers as Association. prescribed by the laws, administrative regulations and the Articles of
Supervisors shall attend meetings of the Association. Board, and shall raise enquiries or make suggestions on the matters to be resolved by Supervisors shall attend meetings of the the Board. Board, and shall raise enquiries or make suggestions on the matters to be resolved by the Board.

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APPENDIX III

Provisions of Current Articles Article 159 Directors and senior management members shall observe the laws, administrative regulations and the Articles of Association and fulfill the following obligations of diligence to the Company:

(1) to prudently, conscientiously and diligently exercise the rights granted by the Company, so as to ensure that the business practices of the Company comply with the State laws, administrative regulations and the requirements of various economic policies of the State, and that its commercial activities are within the scope of business specified in the business license;
Provisions of Amended Articles
Article 159 Directors and senior management members shall observe the laws, administrative regulations and the Articles of Association and fulfill the following obligations of diligence to the Company: (1) to prudently, conscientiously and diligently exercise the rights granted by the Company, so as to ensure that the business practices of the Company comply with the State laws, administrative regulations and the requirements of various economic policies of the State, and that its commercial activities are within the scope of business specified in the business license;
(2) to treat all shareholders impartially;
(2) to treat all shareholders impartially;
(3) to keep informed of the operation and management conditions of the Company;
(3) to keep informed of the operation and management conditions of the Company;
(4) directors and senior management shall approve the share issuance documents and the regular reports of the Company in written form, and to assure that the information disclosed by the Company is true, accurate and complete;
(4) to approve the regular reports of the Company in written form, and to assure that the information disclosed by the Company is true, accurate and complete;
(5) to honestly provide the Board of Supervisors with relevant information and data, and not to prevent the Board of Supervisors or supervisors from performing their duties and powers;
and data, and not to prevent the Board (5) to honestly provide the Board of of Supervisors or supervisors from Supervisors with relevant information performing their duties and powers; and data, and not to prevent the Board of Supervisors or supervisors from
(6) to fulfill other obligations of diligence performing their duties and powers; as stipulated by the laws, administrative regulations, (6) to fulfill other obligations of diligence departmental rules and the Articles of as stipulated by the laws, Association. administrative regulations, departmental rules and the Articles of Association.

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APPENDIX III PROPOSED AMENDMENTS TO THE ARTICLES OF ASSOCIATION

	Provisions of Current Articles	Provisions of Current Articles
	The supervisors shall ensure the authenticity, accuracy and completeness of the information disclosed by the Company.
		disclosure.
	Article 227 Subject to the approval at the general meeting of the Company, the Articles of Association shall come into effect from the date on which the shares of the Company are traded on the STAR Market of the Shanghai Stock Exchange.

Note: The Articles of Association are written in Chinese, and the Chinese version is the only official version shall prevail.

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THE 2020 RESTRICTED A SHARE INCENTIVE SCHEME (DRAFT)

APPENDIX IV

Stock Short Name: Junshi Bio

Stock code: 688180

==> picture [96 x 35] intentionally omitted <==

**THE 2020 RESTRICTED SHARE INCENTIVE SCHEME OF SHANGHAI JUNSHI BIOSCIENCES CO., LTD.[*] (DRAFT)**

September 2020

* For identification purpose only

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THE 2020 RESTRICTED A SHARE INCENTIVE SCHEME (DRAFT)

APPENDIX IV

STATEMENT

The Company and all of its directors and supervisors undertake that there are no false records, misleading statements or material omissions in the Incentive Scheme and its summary, and assume individual and joint legal responsibility for its truthfulness, accuracy and completeness.

SPECIAL NOTE

I. The 2020 Restricted Share Incentive Scheme of Shanghai Junshi Biosciences Co., Ltd. (Draft) (the “ Incentive Scheme ”) is formulated by Shanghai Junshi Biosciences Co., Ltd. (“ Shanghai Junshi ” or the “ Company ”) in accordance with the Company Law of the People’s Republic of China (《中華人民共和國公司法》), the Securities Law of the People’s Republic of China (《中華人民共和國證券法》), the Rules Governing the Listing of Stocks on the Science and Technology Innovation Board of Shanghai Stock Exchange (《上海證券交易所科創板股票上市規則》), the Management Measures for Share Incentive Scheme Adopted by Listed Companies (《上市公司股權激勵管理辦法》), the Business Guidelines for Information Disclosure of Listed Companies on the STAR Market No. 4 — Disclosure of Equity Incentive Information (《科創板上市公司信息披露業務指南第4號—股權激勵信息披露》) and other relevant laws, administrative regulations, regulatory documents and the relevant requirements of the Articles of Association.
II. The form of incentive adopted by the Incentive Scheme is Restricted Shares (Type II Restricted Shares). The source of the shares shall be the Company’s RMB ordinary A shares issued by the Company to the Participants.
Participants that meet the conditions for the grant under the Incentive Scheme, after fulfilling the corresponding attribution conditions and attribution arrangement, shall obtain the Company’s ordinary A shares at the grant price during the attribution period. Such shares will be registered at the Shanghai Branch of China Securities Depository and Clearing Corporation Limited. Prior to the attribution, the Restricted Shares granted to the Participants do not carry any rights of the shareholders of the Company, and such Restricted Shares shall not be transferred, used to guarantee or repay debts.
III. The Restricted Shares proposed to be granted to the Participants under the Incentive Scheme shall be 35,736,500 shares, representing 4.10% of the total share capital of the Company of 871,276,500 shares as at the date of the announcement of the draft Incentive Scheme. Among which, 28,589,500 Restricted Shares are proposed to be granted under the first grant, representing 3.28% of the total share capital of the Company as at the date of the announcement of the draft Incentive Scheme and 80.00% of the total number of the Restricted Shares proposed to be granted under the Incentive Scheme; and 7,147,000

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THE 2020 RESTRICTED A SHARE INCENTIVE SCHEME (DRAFT)

APPENDIX IV

Restricted Shares are to be reserved, representing 0.82% of the total share capital of the Company as at the date of the announcement of the draft Incentive Scheme and 20.00% of the total number of the Restricted Shares proposed to be granted under the Incentive Scheme.

As of the date of the announcement of the draft Incentive Scheme, the cumulative total number of underlying shares involved under all share incentive schemes of the Company which are within their validity period shall not exceed 20.00% of the Company’s total share capital as at the date on which the Incentive Scheme is submitted for approval at a general meeting. The total number of shares to be granted to any Participant under all share incentive schemes of the Company which are within their validity period shall not exceed 1.00% of the total share capital of the Company.

IV. The number of the Participants under the Incentive Scheme shall be 2,004 persons in total, including directors, members of the senior management, core technical staff and other persons considered the board of directors to be required to be incentivized working at the Company (including its subsidiaries, the same applies below) at the time of the Company’s announcement of the Incentive Scheme, but excluding the independent directors and supervisors of Shanghai Junshi.

The Participants for the reserved grant shall mean those who are not yet determined when the Incentive Scheme is approved at a general meeting but are to be included in the Incentive Scheme during the validity period of the Incentive Scheme, and shall be determined within 12 months after the Incentive Scheme being considered and approved at a general meeting. The basis for determining the Participants for the reserved grant shall be the same as the basis for determining the Participants for the first grant.

V. The grant price of the Restricted Shares to be granted to the Participants under the Incentive Scheme shall be RMB55.50 per share. The grant price of the Restricted Shares under the reserved grant shall be the same as the grant price of the Restricted Shares under the first grant. In the event of any capitalization issue, bonus issue, dividend distribution, share split or share consolidation or rights issue of the Company during the period from the date of announcement of the Incentive Scheme to the date of completion of the attribution registration by the Participants, the grant price of the Restricted Shares and the number of Restricted Shares shall be adjusted in accordance with the Incentive Scheme accordingly.
VI. The validity period of the Incentive Scheme commences from the grant date of the Restricted Shares until the date on which all Restricted Shares granted to the Participants have been attributed or lapsed. The validity period shall not exceed 48 months.
VII. The Restricted Shares under the first grant of the Incentive Scheme shall be attributed in three tranches after the expiry of 12 months following the grant date, with the proportion of attribution in each tranche being 40%, 30% and 30%, respectively. The Restricted

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THE 2020 RESTRICTED A SHARE INCENTIVE SCHEME (DRAFT)

APPENDIX IV

Shares under the reserved grant shall be attributed in two tranches after the expiry of 12 months from the grant date of the reserved grant, with the proportion of attribution in each tranche being 50% and 50%, respectively.

The attribution arrangements, performance targets and attribution factors in relation to the Restricted Shares to be granted are shown in the following table:

Performance Target A Performance Target B Performance Target C
Attribution Arrangement Company Attribution Company Attribution Company Attribution Factor: 100% Factor: 80% Factor: 60%
Restricted Shares First The Company must meet all The Company must meet all The Company must meet all under the first attribution of the following conditions: of the following conditions: of the following conditions: grant tranche 1. Operating income: in the 1. Operating income: in the 1. Operating income: in the year 2020, the year 2020, the year 2020, the Company’s operating Company’s operating Company’s operating income shall not be less income shall not be less income shall not be less than RMB1.45 billion; than RMB1.35 billion; than RMB1.20 billion;
1. Preclinical projects: in 2. Preclinical projects: in 2. Preclinical projects: : in the year 2020, there the year 2020, there the year 2020, there shall be no less than 2 shall be no less than 2 shall be no less than 1 drugs IND applications drugs IND applications drugs IND application being filed and accepted, being filed and accepted, being filed and accepted, and in which the and in which the and in which the Company owns not less Company owns not less Company owns not less than 50% interests; than 50% interests; than 50% interests;
1. Clinical development: in 3. Clinical development: in 3. Clinical development: in the year 2020, there the year 2020, there the year 2020, there shall be no less than 2 shall be no less than 2 shall be no less than 2 new drugs NDA or new drugs NDA or new drugs NDA or extended indications extended indications extended indications (sNDA) being filed and (sNDA) being filed and (sNDA) being filed and accepted, and in which accepted, and in which accepted, and in which the Company owns not the Company owns not the Company owns not less than 50% interests. less than 50% interests. less than 50% interests.

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THE 2020 RESTRICTED A SHARE INCENTIVE SCHEME (DRAFT)

APPENDIX IV

Performance Target A Performance Target B Performance Target C
Attribution Arrangement Company Attribution Company Attribution Company Attribution Factor: 100% Factor: 80% Factor: 60%
Second The Company must meet all The Company must meet all The Company must meet all attribution of the following conditions: of the following conditions: of the following conditions: tranche 1. Operating income: in the 1. Operating income: in the 1. Operating income: in the years 2020-2021, the years 2020-2021, the years 2020-2021, the Company’s accumulated Company’s accumulated Company’s accumulated operating income shall operating income shall operating income shall not be less than RMB3.6 not be less than RMB3.3 not be less than RMB2.8 billion; billion; billion;
1. Preclinical projects: in 2. Preclinical projects: the 2. Preclinical projects: the the years 2020-2021, years 2020-2021, there years 2020-2021, there there shall be no less shall be no less than 7 shall be no less than 6 than 9 drugs IND drugs IND applications drugs IND applications applications accumulatively being accumulatively being accumulatively being filed and accepted, and filed and accepted, and filed and accepted, and in which the Company in which the Company in which the Company owns not less than 50% owns not less than 50% owns not less than 50% interests; interests; interests;
1. Clinical development: in 3. Clinical development: in 3. Clinical development: in the years 2020-2021, the years 2020-2021, the years 2020-2021, there shall be no less there shall be no less there shall be no less than 6 new drugs NDA than 5 new drugs NDA than 4 new drugs NDA or extended indications or extended indications or extended indications (sNDA) accumulatively (sNDA) accumulatively (sNDA) accumulatively being filed and accepted, being filed and accepted, being filed and accepted, and in which the and in which the and in which the Company owns not less Company owns not less Company owns not less than 50% interests. than 50% interests. than 50% interests.

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THE 2020 RESTRICTED A SHARE INCENTIVE SCHEME (DRAFT)

APPENDIX IV

	Performance Target A	Performance Target B	Performance Target C
Attribution Arrangement	Company Attribution	Company Attribution	Company Attribution
	Factor: 100%	Factor: 80%	Factor: 60%
Third	The Company must meet all	The Company must meet all	The Company must meet all
attribution	of the following conditions:	of the following conditions:	of the following conditions:
tranche
	1. Operating income: in the	1. Operating income: in the	1. Operating income: in the
	years 2020-2022, the	years 2020-2022, the	years 2020-2022, the
	Company’s accumulated	Company’s accumulated	Company’s accumulated
	operating income shall	operating income shall	operating income shall
	not be less than RMB6.6	not be less than RMB5.7	not be less than RMB4.8
	billion;	billion;	billion;
	2. Preclinical projects: in	2. Preclinical projects: in	2. Preclinical projects: in
	the years 2020-2022,	the years 2020-2022,	the years 2020-2022,
	there shall be no less	there shall be no less	there shall be no less
	than 16 drugs IND	than 13 drugs IND	than 11 drugs IND
	applications	applications	applications
	accumulatively being	accumulatively being	accumulatively being
	filed and accepted, and	filed and accepted, and	filed and accepted, and
	in which the Company	in which the Company	in which the Company
	owns not less than 50%	owns not less than 50%	owns not less than 50%
	interests;	interests;	interests;
	3. Clinical development: in	3. Clinical development: in	3. Clinical development: in
	the years 2020-2022,	the years 2020-2022,	the years 2020-2022,
	there shall be no less	there shall be no less	there shall be no less
	than 11 new drugs NDA	than 9 new drugs NDA	than 7 new drugs NDA
	or extended indications	or extended indications	or extended indications
	(sNDA) accumulatively	(sNDA) accumulatively	(sNDA) accumulatively
	being filed and accepted,	being filed and accepted,	being filed and accepted,
	and in which the	and in which the	and in which the
	Company owns not less	Company owns not less	Company owns not less
	than 50% interests.	than 50% interests.	than 50% interests.

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Performance Target A Performance Target B Performance Target C
Attribution Arrangement Company Attribution Company Attribution Company Attribution Factor: 100% Factor: 80% Factor: 60%
Restricted Shares First The Company must meet all The Company must meet all The Company must meet all under the reserved attribution of the following conditions: of the following conditions: of the following conditions: grant tranche 1. Operating income: in the 1. Operating income: in the 1. Operating income: in the years 2020-2021, the years 2020-2021, the years 2020-2021, the Company’s accumulated Company’s accumulated Company’s accumulated operating income shall operating income shall operating income shall not be less than RMB3.6 not be less than RMB3.3 not be less than RMB2.8 billion; billion; billion;
1. Preclinical projects: in 2. Preclinical projects: in 2. Preclinical projects: in the years 2020-2021, the years 2020-2021, the years 2020-2021, there shall be no less there shall be no less there shall be no less than 9 drugs IND than 7 drugs IND than 6 drugs IND applications applications applications accumulatively being accumulatively being accumulatively being filed and accepted, and filed and accepted, and filed and accepted, and in which the Company in which the Company in which the Company owns not less than 50% owns not less than 50% owns not less than 50% interests; interests; interests;
1. Clinical development: in 3. Clinical development: in 3. Clinical development: in the years 2020-2021, the years 2020-2021, the years 2020-2021, there shall be no less there shall be no less there shall be no less than 6 new drugs NDA than 5 new drugs NDA than 4 new drugs NDA or extended indications or extended indications or extended indications (sNDA) accumulatively (sNDA) accumulatively (sNDA) accumulatively being filed and accepted, being filed and accepted, being filed and accepted, and in which the and in which the and in which the Company owns not less Company owns not less Company owns not less than 50% interests. than 50% interests. than 50% interests.

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Performance Target A Performance Target B Performance Target C
Attribution Arrangement Company Attribution Company Attribution Company Attribution Factor: 100% Factor: 80% Factor: 60%
Second The Company must meet all The Company must meet all The Company must meet all attribution of the following conditions: of the following conditions: of the following conditions: tranche 1. Operating income: in the 1. Operating income: in the 1. Operating income: in the years 2020-2022, the years 2020-2022, the years 2020-2022, the Company’s accumulated Company’s accumulated Company’s accumulated operating income shall operating income shall operating income shall not be less than RMB6.6 not be less than RMB5.7 not be less than RMB4.8 billion; billion; billion;
1. Preclinical projects: in 2. Preclinical projects: in 2. Preclinical projects: in the years 2020-2022, the years 2020-2022, the years 2020-2022, there shall be no less there shall be no less there shall be no less than 16 drugs IND than 13 drugs IND than 11 drugs IND applications applications applications accumulatively being accumulatively being accumulatively being filed and accepted, and filed and accepted, and filed and accepted, and in which the Company in which the Company in which the Company owns not less than 50% owns not less than 50% owns not less than 50% interests; interests; interests;
1. Clinical development: in 3. Clinical development: in 3. Clinical development: in the years 2020-2022, the years 2020-2022, the years 2020-2022, there shall be no less there shall be no less there shall be no less than 11 new drugs NDA than 9 new drugs NDA than 7 new drugs NDA or extended indications or extended indications or extended indications (sNDA) accumulatively (sNDA) accumulatively (sNDA) accumulatively being filed and accepted, being filed and accepted, being filed and accepted, and in which the and in which the and in which the Company owns not less Company owns not less Company owns not less than 50% interests. than 50% interests. than 50% interests.

Note: The above “operating income” refers to the audited operating income of the Listed Company.

VIII. None of the following circumstances under which the implementation of the Incentive Scheme shall not be carried out as stipulated in the Management Measures for Share Incentives of Listed Companies has occurred to the Company:
(i) an audit report on the financial and accounting report for the most recent financial year in which a certified public accountant issued an adverse opinion or was unable to express an opinion;

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(ii) an audit report on internal control over financial reporting for the most recent financial year in which a certified public accountant issued an adverse opinion or was unable to express an opinion;
(iii) in the most recent 36 months upon listing, there have been cases of failure to distribute profits according to laws and regulations, the Articles of Association and public undertakings;
(iv) laws and regulations stipulate that equity incentives shall not be implemented;
(v) other circumstances as determined by the CSRC.
IX. None of the following circumstances under which one shall not be a Participant as stipulated in the Management Measures for Share Incentive Scheme Adopted by Listed Companies has occurred to a Participant under the Incentive Scheme:
(i) the Participant has been determined as an inappropriate candidate by the Stock Exchange within the most recent 12 months;
(ii) the Participant has been identified as an inappropriate candidate by the CSRC and its delegated institutions within the most recent 12 months;
(iii) the Participant has been subject to administrative punishment or market ban measures by the CSRC and its delegated institutions due to major breach of laws and regulations in the most recent 12 months;
(iv) the Participant has the circumstances stipulated in the Company Law that he/she shall not act as a director or member of the senior management of a company;
(v) laws and regulations stipulate that the Participant shall not participate in the equity incentives of listed companies;

(vi) other circumstances as determined by the CSRC.

X. Shanghai Junshi undertakes not to provide loans and any other forms of financial assistance, including providing guarantee for their loans, to the Participants to obtain their Restricted Shares through the Incentive Scheme under the Restricted Share Incentive Scheme.
XI. Shanghai Junshi undertakes that there are no false records, misleading statements or material omissions in the relevant information disclosure documents of the Incentive Scheme.

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XII. The Participants of the Incentive Scheme undertake if there are false records, misleading statements or material omissions in the Company’s information disclosure documents, resulting in non-compliance with the arrangement for granting or attributing rights and interests, the Participants shall return all the benefits obtained from the Incentive Scheme to the Company after confirming the existence of false records, misleading statements or major omissions in the relevant information disclosure documents.
XIII. The Incentive Scheme shall be implemented after being considered and approved at the general meeting of the Company by way of special resolution.
XIV. The Company shall convene a meeting of the board of directors in accordance with the relevant requirements to grant the Restricted Shares to the Participants and complete the announcement and other relevant procedures within 60 days after the Incentive Scheme is considered and approved at a general meeting (if there are conditions to the grant, then counting from the fulfilment of the conditions of grant). If the Company fails to complete the above procedures within the 60-day period, it shall promptly disclose the reasons for the failure to complete such procedures and declare the termination of the Incentive Scheme. The period during which no interests shall be granted pursuant to the Management Measures for Share Incentives of Listed Companies is excluded from the calculation of the 60-day period.
XV. The implementation of the Incentive Scheme shall not result in the shareholding structure of the Company to fail to meet the listing requirements.
For identification purpose only

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Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	120
Special Note . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	120
Chapter I Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	130
Chapter II Purpose of the Incentive Scheme . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	133
Chapter III Administrative Bodies of the Incentive Scheme . . . . . . . . . . . . . . . . .	134
Chapter IV Basis for Determining the Participants
and Scope of Participants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	135
Chapter V Restricted Shares to be Granted
under the Incentive Scheme . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	138
Chapter VI List of Participants and Allocation of
Restricted Shares to Be Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	139
Chapter VII Validity Period, Grant Date, Attribution
Arrangement and Black-out Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	141
Chapter VIII Grant Price and Basis of Determination
of the Grant Price of Restricted Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	145
Chapter IX Grant and Attribution Conditions
of the Restricted Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	147
Chapter X Methods and Procedures for Adjustment
under the Incentive Scheme . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	157
Chapter XI Accounting Treatment on the Restricted Shares . . . . . . . . . . . . . . . .	160
Chapter XII Procedures for Implementation, Grant, Attribution of and
Amendments to, and Termination of the Incentive Scheme . . . . . . . . . . . . . . .	162
Chapter XIII Other Rights and Obligations
of the Company and Participants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	167
Chapter XIV Arrangements for the Incentive Scheme in the Event of Change at
the level of Company/Participants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	170
Chapter XV Supplementary Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	174

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APPENDIX IV

CHAPTER I DEFINITIONS

Unless otherwise requires, the following expressions herein shall have the following meanings:

Term Meaning

Shanghai Junshi, : Shanghai Junshi Biosciences Co., Ltd.* (上海君實生物 Company, Listed 醫藥科技股份有限公司) Company
Restricted Share Incentive : the 2020 Restricted Share Incentive Scheme of Scheme, Incentive Shanghai Junshi Biosciences Co., Ltd.* (《上海君實生 Scheme, Scheme 物醫藥科技股份有限公司2020年限制性股票激勵計劃》)
Restricted Shares, Type II : the shares of the Company to be obtained in tranches Restricted Shares and registered by the Participants who meet the conditions for grant under the Incentive Scheme after meeting the corresponding attribution conditions
Participant(s) : the directors, members of senior management, core technical staff and other persons considered by the board of directors to be required to be incentivized of the Company (including its subsidiaries), who shall be granted the Restricted Shares pursuant to the Incentive Scheme
grant date : the date on which the Company grants the Restricted Shares to the Participants, which must be a trading day
grant price : the price at which a Participant obtains the Company’s shares, as determined at the time of grant of Restricted Shares to the Participant by the Company
attribution : the act of registering the Restricted Shares by the Listed Company to the account of a Participant after the attribution conditions having been satisfied by the Participant
attribution date : the date on which the registration of the granted Restricted Shares is completed after the attribution conditions having been satisfied by a Participant, which must be a trading day

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Term Meaning

attribution conditions : the attribution conditions as stipulated under the Restricted Share Incentive Scheme which must be satisfied by a Participant in order to obtain the incentive shares
validity period : the period commencing on the grant date of the Restricted Shares and ending on the date on which all Restricted Shares granted to the Participants have been attributed or lapsed
Remuneration Committee : the remuneration and appraisal committee of the board of directors of the Company
CSRC : the China Securities Regulatory Commission Stock Exchange : Shanghai Stock Exchange CSDC : the Shanghai Branch of China Securities Depository and Clearing Corporation Limited
Company Law : the Company Law of the People’s Republic of China (《中華人民共和國公司法》)
Securities Law : the Securities Law of the People’s Republic of China (《中華人民共和國證券法》)
Listing Rules : the Rules Governing the Listing of Stocks on the STAR Market of Shanghai Stock Exchange (《上海證券交易所科創板股票上市規則》)
Management Measures : the Management Measures for Share Incentives of Listed Companies (《上市公司股權激勵管理辦法》)
Business Guidelines : the Business Guidelines for Information Disclosure of Companies Listed on the STAR Market No. 4 — Information Disclosure of Equity Incentive (《科創板上市公司信息披露業務指南第4號—股權激勵信息披露》)
Articles of Association : the Articles of Association of Shanghai Junshi Biosciences Co., Ltd.* (《上海君實生物醫藥科技股份有限公司章程》)

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Term

Meaning

Company’s Assessment : the Management Measures for Assessment for the Management Measures Implementation of the 2020 Restricted Share Incentive Scheme of Shanghai Junshi Biosciences Co., Ltd.* (《上海君實生物醫藥科技股份有限公司2020年限制性股票激勵計劃實施考核管理辦法》
RMB/RMB’0,000/ : RMB/RMB’0,000/RMB’00,000,000, the unit of the RMB’00,000,000 lawful currency of the People’s Republic of China
IND : Investigational New Drug Application, the application and approval process required before commencing human clinical trials
NDA : New Drug Application
For identification purpose only

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CHAPTER II PURPOSE OF THE INCENTIVE SCHEME

For the purpose of further improving the corporate governance structure, establishing and improving the Company’s long-term incentive and restraint mechanism, attracting and retaining members of the management, core technical staff and other staff of the Company, fully mobilizing their enthusiasm and creativity, effectively enhancing the cohesion of the core team and core competitiveness of the enterprise, bonding the interests of shareholders, the Company and core teams together effectively, enabling all parties to jointly pay attention to the long-term development of the Company and securing the achievement of the Company’s development strategies and business objectives, and under the premise of fully safeguarding the interests of shareholders, the Incentive Scheme is formulated following the principle of income equivalent to contribution in accordance with the relevant laws, regulations and regulatory documents including the Company Law, the Securities Law, the Management Measures, the Listing Rules and the Business Guidelines, as well as the Articles of Association.

As of the date of the announcement of the Incentive Scheme, the Company is implementing the 2018 Share Incentive Scheme at the same time. As considered and approved at the Company’s 12th meeting of the second session of the board of directors and the 9th meeting of the second session of the board of supervisors held on 30 April 2019, the 2018 annual general meeting held on 17 June 2019, the 20th meeting of the second session of the board of directors and the 17th meeting of the second session of the board of supervisors held on 27 March 2020, as well as the 2019 annual general meeting held on 11 May 2020, 6,023,000 share options were granted to a total of 268 incentive targets at an exercise price of RMB9.20 per share. As considered and approved at the 26th meeting of the second session of the board of directors and the 21st meeting of the second session of the board of supervisors held on 28 August 2020, the exercise conditions for the first exercise period under the 2018 Share Incentive Scheme have been fulfilled. 207 persons were entitled to exercise share options for the first exercise period and 1,245,500 share options are exercisable at an exercise price of RMB9.20 per share. The Incentive Scheme and the 2018 Share Incentive Scheme, which is currently being implemented, are independent of each other, and there is no interrelation between them.

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CHAPTER III ADMINISTRATIVE BODIES OF THE INCENTIVE SCHEME

I. The general meeting, as the ultimate authority of the Company, shall be responsible for considering and approving the implementation, amendment and termination of the Incentive Scheme. The general meeting may, within its powers and authority, authorize the board of directors to handle certain matters relating to the Incentive Scheme.
II. The board of directors shall act as the executive and administrative body for the Incentive Scheme and be responsible for the implementation of the Incentive Scheme. The Remuneration Committee under the board of directors shall be responsible for drafting and revising the Incentive Scheme, and submitting the Incentive Scheme to the board of directors of the Company for review and approval. Upon approval by the board of directors, the Incentive Scheme shall be further submitted to the general meeting of the Company for review and approval, and the board of directors may handle matters relating to the Incentive Scheme within its scope of authority as delegated by the general meeting.
III. The board of supervisors and the independent directors shall act as the supervisory authority for the Incentive Scheme, and shall express opinions as to whether the Incentive Scheme is conducive to the sustainable development of the Company, and whether there are any situations that clearly harm the interests of the Company and all shareholders. The board of supervisors shall verify the list of the Participants under the Incentive Scheme, and shall supervise the implementation of the Incentive Scheme as to whether it is in compliance with the relevant laws, administrative regulations, regulatory documents and operational rules of the Stock Exchange. The independent directors shall solicit voting rights by proxy from all shareholders in respect of the Incentive Scheme.
IV. Where amendments are being made to the Incentive Scheme before or after the Incentive Scheme is approved at the general meeting, the independent directors and the board of supervisors shall express opinions as to whether the amended Incentive Scheme will be conducive to the sustainable development of the Company or whether there are any situations that clearly harm the interests of the Company and all shareholders.

Before the Restricted Shares are granted to a Participant, the independent directors and the board of supervisors shall express clear opinions on the conditions stipulated for the Participant to receive such Restricted Shares as set out in the Incentive Scheme. In the event of any discrepancy between the Restricted Shares to be granted to a Participant and the arrangement under the Incentive Scheme, the independent directors and the board of supervisors (where there are changes occurred to the Participants) shall express their clear opinions thereon at the same time.

Before the granted Restricted Shares are attributed to a Participant, the independent directors and the board of supervisors shall express clear opinions as to whether the attribution conditions stipulated under the Incentive Scheme for the Participant have been fulfilled.

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CHAPTER IV BASIS FOR DETERMINING THE PARTICIPANTS AND SCOPE OF PARTICIPANTS

I. Basis for Determining the Participants

(i) Legal Basis for Determining the Participants

The Participants of the Incentive Scheme are determined in accordance with the relevant laws, administrative regulations, regulatory documents including the Company Law, the Securities Law, the Management Measures, the Listing Rules and the Business Guidelines as well as the relevant provisions of the Articles of Association and the actual situation of the Company.

(ii) Positions held by the Participants

The Participants under the Incentive Scheme shall include the directors, members of the senior management, core technical staff and other persons considered by the board of directors to be required to be incentivized of the Company (including its subsidiaries, the same applies below) (excluding independent directors and supervisors of Shanghai Junshi), in accordance with the purposes of implementing the Share Incentive Scheme. The list of persons who fall within the scope of Participants of the Incentive Scheme shall be drawn up by the Remuneration Committee, and verified by the Company’s board of supervisors.

II. Scope of Participants

The total number of the Participants for the first grant under the Incentive Scheme shall be 2,004 persons, representing 91.55% of the total number of 2,189 employees of the Company as at 21 September 2020, including:

Directors and members of the senior management;
Core technical staff;
Other persons considered by the board of directors to be required to be incentivized.

The above Participants exclude independent directors and supervisors of the Company. Among the above Participants, all such directors or members of the senior management must have been elected at a general meeting of the Company or engaged by the board of directors of the Company. All Participants must have an employment or labour relationship with the Company or its subsidiaries at the time of grant and during the assessment period of the Incentive Scheme.

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APPENDIX IV

The above Participants include Xiong Jun, the de facto controller and the chairman of the Listed Company. The reasons for which he is included in the Incentive Scheme are that: Xiong Jun is the Company’s de facto controller, chairman and core management talent, and plays a pivotal role in the Company’s strategic planning, operation management and business development. The Company’s inclusion of him in the Incentive Scheme will help promote the stability and enthusiasm of the Company’s core personnel, and hence conducive to the Company’s long-term development.

The above Participants include certain foreign employees. The reasons for which they are included in the Incentive Scheme are that: the Company operates in the biopharmaceutical industry, which is characterized by its fierce competition for talents. The Company devotes its effort to an international development strategy, and the overseas businesses are a crucial part of the Company’s future sustainable development. Therefore, attracting and stabilizing international high-end talents is very important for the Company’s development; the Participants who are foreign employees play a pivotal role in areas such as the Company’s technology research and development, and business development. Equity incentives are commonly used as incentives for overseas companies, the Incentive Scheme will further promote the construction and stability of the Company’s core talent team, thereby contributing to the long-term development of the Company.

The Participants of the reserved grant shall be determined within 12 months after the Incentive Scheme being considered and approved at a general meeting. The Company will announce relevant information about the Participants on the designated website timely and accurately in accordance with the requirements after the board of directors having made such proposal, the independent directors and the board of supervisors having expressed clear opinions, and the Company’s counsel having provided professional opinions and issued legal opinions. The reserved grant shall lapse if the Participants cannot be determined within the 12-month period. The basis for determining the Participants for the reserved grant shall be the same as the basis for determining the Participants for the first grant.

III. Circumstances in which a person is prohibited from being a Participant under the Incentive Scheme:

(i) The person has been determined as an inappropriate candidate by the Stock Exchange within the most recent 12 months;
(ii) The person has been identified as an inappropriate candidate by the CSRC and its delegated institutions within the most recent 12 months;
(iii) The person has been subject to administrative punishment or market ban measures by the CSRC and its delegated institutions due to major breach of laws and regulations in the most recent 12 months;

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(iv) The person has the circumstances stipulated in the Company Law that he/she shall not act as a director or member of the senior management of a company;
(v) Laws and regulations stipulate that the person shall not participate in the equity incentives of listed companies;
(vi) Other circumstances as determined by the CSRC.

IV. Verification of Participants

(i) After the board of directors of the Company has reviewed and approved the Incentive Scheme, the Company shall publish the names and positions of the Participants internally via the Company’s website or other channels for 10 days.
(ii) The board of supervisors of the Company shall review the list of the Participants and take sufficient consideration of the public response. The Company shall disclose the information regarding the review by the board of supervisors regarding the list of Participants and the publication situation 5 days prior to the Incentive Scheme being considered at the general meeting. Any adjustments to the list of the Participants made by the board of directors of the Company shall also be reviewed by the board of supervisors of the Company.

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CHAPTER V RESTRICTED SHARES TO BE GRANTED UNDER THE INCENTIVE SCHEME

I. Form of Entitlements to Be Granted by the Incentive Scheme

The form of incentive to be adopted under the Incentive Scheme is the Type II Restricted Shares.

II. Source and Type of Underlying Shares Involved in Restricted Shares to Be Granted under the Incentive Scheme

The Company will issue RMB ordinary A shares of the Company to Participants as the source of shares under the Incentive Scheme.

III. The Number of Restricted Shares to be Granted under the Incentive Scheme and its Proportion to the Total Shares of the Company

The total number of the Restricted Shares proposed to be granted to the Participants under the Incentive Scheme shall be 35,736,500 shares, representing 4.10% of the total share capital of the Company of 871,276,500 shares as at the date of the announcement of the draft Incentive Scheme, and among which 28,589,500 Restricted Shares are proposed to be granted under the first grant, representing 3.28% of the total share capital of the Company as at the date of the announcement of the draft Incentive Scheme and 80.00% of the total number of the Restricted Shares proposed to be granted under the Incentive Scheme; and 7,147,000 Restricted Shares are to be reserved, representing 0.82% of the total share capital of the Company as at the date of the announcement of the draft Incentive Scheme and 20.00% of the total number of the Restricted Shares proposed to be granted under the Incentive Scheme.

As of the date of the announcement of the draft Incentive Scheme, the cumulative total number of underlying shares involved under all share incentive schemes of the Company which are within their validity period shall not exceed 20.00% of the Company’s total share capital as at the date on which the Incentive Scheme is submitted for approval at a general meeting. The total number of the shares to be granted to any Participant in the Incentive Scheme under all share incentive schemes of the Company which are within their validity period shall not exceed 1.00% of the total share capital of the Company.

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APPENDIX IV

CHAPTER VI LIST OF PARTICIPANTS AND ALLOCATION OF RESTRICTED SHARES TO BE GRANTED

I. List of Participants and Allocation of Restricted Shares to be Granted

			Number of	Percentage to
			the Restricted	the total
			Shares to be	number of the	Percentage to
			granted	Restricted	the current
			(’0,000	Shares to be	total share
Name	Nationality	Position	shares)	granted	capital
I. Directors, members of the senior management and core technical staff
XIONG JUN	China	Chairman	82.00	2.29%	0.09%
LI NING	U.S.	Executive director,	156.00	4.37%	0.18%
		general manager
FENG HUI	China	Executive director,	82.00	2.29%	0.09%
		core technical
		staff
YAO SHENG	U.S.	Executive director,	200.00	5.60%	0.23%
		deputy general
		manager, core
		technical staff
ZHANG ZHUOBING	China	Executive director,	82.00	2.29%	0.09%
		deputy general
		manager, core
		technical staff
WANG GANG	U.S.	Deputy general	27.00	0.76%	0.03%
		manager
DUAN XIN	China	Deputy general	36.00	1.01%	0.04%
		manager
XIN KAN	China	Deputy general	30.00	0.84%	0.03%
		manager
XIE WAN	China	Deputy general	30.00	0.84%	0.03%
		manager
MA JUN	China	Deputy general	15.00	0.42%	0.02%
		manager
YUAN LU	China	Financial director	8.00	0.22%	0.01%
CHEN YINGGE	China	Secretary of the	8.00	0.22%	0.01%
		board of directors
II. Other persons considered by the board		of directors to be	2,102.95	58.85%	2.41%
required to be incentivized (1,992 persons in total)
Reserved			714.70	20.00%	0.82%
Total			3,573.65	100.00%	4.10%

Note: Any discrepancies in this table between the total shown and the breakdowns of the amounts listed in the Incentive Scheme are due to rounding (the same applies below).

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APPENDIX IV

II. Explanatory Notes

The total number of the shares to be granted to any Participant under all share incentive schemes of the Company which are within their validity period do not exceed 1.00% of the total share capital of the Company. The cumulative total number of underlying shares involved under all share incentive schemes of the Company which are within their validity period do not exceed 20.00% of the Company’s total share capital as at the date on which the Incentive Scheme is submitted for approval at the general meeting. The percentage of the reserved shares does not exceed 20.00% of the total number of the Restricted Shares to be granted under the Incentive Scheme. If a Participant, due to personal reasons, voluntarily waives the Restricted Shares which have been granted to him/her, the board of directors shall adjust the number of granted Restricted Shares accordingly, and allocate the portion of the Restricted Shares waived by such Participant to the reserved portion or allocate such portion amongst the Participants.
The above Participants exclude independent directors and supervisors of the Company.
The Participants under the reserved grant shall be determined within 12 months after the Incentive Scheme being considered and approved at a general meeting. The Company will announce relevant information about the Participants on the designated website timely and accurately in accordance with the requirements after the board of directors having made such proposal, independent directors and the board of supervisors having expressed clear opinions, and the Company’s legal advisor having provided professional opinions and issued legal opinions.

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CHAPTER VII VALIDITY PERIOD, GRANT DATE, ATTRIBUTION ARRANGEMENT AND BLACK-OUT PERIOD

I. Validity Period of the Incentive Scheme

The validity period of the Incentive Scheme commences on the grant date of the Restricted Shares and ends on the date on which all Restricted Shares granted to the Participants have been attributed or lapsed. Such validity period shall not exceed 48 months.

II. Grant Date of the Incentive Scheme

The Company will convene a meeting of the board of directors to grant the Restricted Shares to the Participants and complete the relevant procedures including making relevant announcement(s) according to the relevant regulations, within 60 days after the Incentive Scheme having been adopted and approved at a general meeting (counting from the date on which the conditions for the grant having been satisfied, if there are any granting conditions). If the Company is unable to complete the above procedures within the 60-day period, the Company shall make a timely announcement to disclose the reason for being unable to complete the procedures and declare the termination of the Incentive Scheme. The period during which no Restricted Shares shall be granted pursuant to the Management Measures for Share Incentives of Listed Companies is excluded from the calculation of the 60-day period.

The grant date shall be determined by the board of directors of the Company after the Incentive Scheme has been considered and approved at a general meeting of the Company. The grant date must be a trading day. If the date determined pursuant to the above principles falls on a non-trading day, the grant date will be postponed to the next trading day immediately after such non-trading day.

III. Attribution Arrangement under the Incentive Scheme

The Restricted Shares granted under the Incentive Scheme may be attributed in tranches as per the agreed proportions after the expiry of 12 months following the grant date and upon the Participants satisfying the corresponding attribution conditions. The attribution date must be a trading day within the validity period of the Incentive Scheme, and shall not fall within any of the following periods:

(i) within 60 days prior to the publication of the annual report (inclusive of the date of publication of the annual report), or the period between the end of the relevant financial year and the publication of the annual report, whichever is shorter;

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(ii) within 30 days prior to the publication of the half-year report or quarterly report (inclusive of the date of publication of such half-year or quarterly report), or the period between the end of the quarter or the half-year and the publication of the relevant report, whichever is shorter;
(iii) within 10 days prior to the disclosure of results preview or preliminary financial results of the Company;
(iv) during the period from the date of occurrence of a material event which may have considerable impact on the trading price of the shares and their derivatives of the Company, or the date of entering the decision-making process, up to 2 trading days after relevant disclosure has been made in accordance with the laws;
(v) any other period stipulated by the CSRC and the Stock Exchange.

The above “material events” are the transactions or other significant events that should be disclosed by the Company in accordance with the requirement of the Listing Rules.

The attribution arrangements for the first grant of the Restricted Shares are shown in the table below:

		Attribution
Attribution arrangement	Attribution period	percentage
First attribution tranche	From the first trading day after the	40%
	expiry of 12 months following the
	grant date of the first grant of the
	Restricted Shares until the last
	trading day within the 24 months
	following the grant date of the first
	grant of the Restricted Shares
Second attribution tranche	From the first trading day after the	30%
	expiry of 24 months following the
	grant date of the first grant of the
	Restricted Shares until the last
	trading day within the 36 months
	following the grant date of the first
	grant of the Restricted Shares
Third attribution tranche	From the first trading day after the	30%
	expiry of 36 months following the
	grant date of the first grant of the
	Restricted Shares until the last
	trading day within the 48 months
	following the grant date of the first
	grant of the Restricted Shares

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The attribution arrangements for the reserved grant of the Restricted Shares are shown in the table below

Attribution
Attribution arrangement Attribution period percentage First attribution tranche From the first trading day after the 50% expiry of 12 months following the grant date of the reserved grant of the Restricted Shares until the last trading day within the 24 months following the grant date of the reserved grant of the Restricted Shares
Second attribution tranche From the first trading day after the 50% expiry of 24 months following the grant date of the reserved grant of the Restricted Shares until the last trading day within the 36 months following the grant date of the reserved grant of the Restricted Shares

Those Restricted Shares which have not been attributed during the period of their respective tranches as a result of failure to fulfil the attribution conditions are not allowed to be attributed or deferred to be attributed in the next year(s) and shall lapse according to the provisions under the Incentive Scheme.

After the attribution conditions of the Restricted Shares are met, the Company shall handle the matters in relation to the attribution of the Restricted Shares which have met the conditions.

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IV. Black-out Period under the Incentive Scheme

The requirements of black-out for the Restricted Shares granted to the Participants under the Incentive Scheme are implemented in accordance with relevant laws, administrative regulations and regulatory documents including the Company Law and the Securities Law, and the Articles of Association as follows:

(i) Where the Participant is a director or a member of the senior management of the Company, the number of shares which may be transferred each year during his/her term of office shall not exceed 25% of the total number of shares held by him/her. No shares held by him/her may be transferred within six months after his/her termination of office;
(ii) For Participants who are directors or members of the senior management of the Company and their spouses, parents or children, if they have sold the Company’s shares held by them within 6 months after purchasing such shares, or if they have purchased the shares within 6 months after selling their shares, the gains obtained therefrom shall be attributed to the Company and the board of directors shall forfeit the gains;
(iii) During the validity period of the Incentive Scheme, if the relevant requirements under the relevant laws, administrative regulations, regulatory documents including the Company Law and the Securities Law and the Articles of Association regarding the transfer of shares held by the directors and members of the senior management of the Company are changed, the transfer of the shares held by the Participants under this section shall comply with the relevant laws, regulations and regulatory documents including the Company Law and the Securities Law and the Articles of Association as amended at the time of transfer.

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CHAPTER VIII GRANT PRICE AND BASIS OF DETERMINATION OF THE GRANT PRICE OF RESTRICTED SHARES

I. Grant Price of Restricted Shares

The grant price of the first grant of the Restricted Shares shall be RMB55.50 per share. A Participant who has met the granting conditions and attribution conditions may subscribe for the Company’s share at the price of RMB55.50 per share.

The grant price of the reserved grant of the Restricted Shares shall be the same as the grant price of the first grant of the Restricted Shares.

II. Basis of Determination of the Grant Price of Restricted Shares

(i) Pricing method

The grant price of Restricted Shares under the Incentive Scheme is the price of the Company’s initial public offering, which is RMB55.50 per share.

The average trading price of the Company’s shares on the trading day immediately preceding the announcement[1] of the draft Incentive Scheme is RMB85.46 per share, and the grant price of the Restricted Shares under the Incentive Scheme represents 64.94% of the average trading price of the Company’s shares on such trading day immediately preceding the announcement of the draft Incentive Scheme;

The average trading price of the Company’s shares for the 20 trading days immediately preceding to the announcement[1] of the draft Incentive Scheme is RMB90.25 per share, and the grant price of the Restricted Shares under the Incentive Scheme represents 61.50% of the average trading price of the Company’s shares on such 20 trading days immediately preceding the announcement[1] of the draft Incentive Scheme;

As at the date of the announcement of the draft Incentive Scheme[1] , the Company’s shares have not been listed for 60 or 120 trading days.

(ii) Basis for price determination

The grant price of the Restricted Shares adopts the independent pricing method. The purpose of determining the grant price by the independent pricing method is to promote the development of the Company, safeguard the rights and interests of its shareholders, and provide mechanism and talent guarantee for the long-term and stable development of the Company.

Note 1: 29 September 2020

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The Company is a talent and technology oriented enterprise, fully ensuring the effectiveness of equity incentive is an important way to stabilize core talents. The Company’s business environment is facing many challenges, including industry cycle, technological innovation, talent competition, capital market fluctuations, etc. The grant price of the Incentive Scheme is conducive to the Company’s effective talent incentive in different cycles and business environments, so that the Company can gain advantages in the industry competition.

In addition, based on the principle of equal incentives and restraints, the Incentive Scheme has set up certain challenging performance targets, adopting an independent pricing method to determine the grant price can further stimulate the subjective initiative and creativity of the Participants. Based on this, the Incentive Scheme will have a positive effect on the Company’s future sustainable development operations and shareholder equity, and promote the smooth realization of incentive goals.

Given the above, on the basis of complying with relevant laws and regulations and regulatory documents, the Company has decided to set the grant price of Restricted Shares at RMB55.50 per share. The implementation of the Incentive Scheme will stabilize its core team and realize the deep intertwinement between employee interests and shareholders’ interests.

The independent financial adviser engaged by the Company will express its opinions on the feasibility of the Incentive Scheme, the rationality of the relevant pricing basis and pricing method, whether it is conducive to the sustainable development of the Company, and whether it harms the interests of shareholders.

For details, please refer to the independent financial adviser’s report of Shanghai Xingong Yihe Enterprise Management Consulting Co., Ltd. on the Company’s 2020 Restricted Share Incentive Scheme (Draft) (《上海信公軼禾企業管理諮詢有限公司關於公司2020年限制性股票激勵計畫(草案)之獨立財務顧問報告》) published on the website of Shanghai Stock Exchange (www.sse.com.cn) on 30 September 2020:

“After review, the independent financial adviser is of the opinion that:

The Incentive Scheme of Shanghai Junshi complies with the relevant provisions of relevant laws, regulations and regulatory documents, and is operationally feasible;

The grant price under the Incentive Scheme of Shanghai Junshi complies with Article 23 of the Management Measures and Article 10.6 of Chapter 10 of the Listing Rules. The relevant pricing basis and pricing method are reasonable and feasible, and is conducive to the smooth implementation of the Incentive Scheme, the stability of the Company’s existing team and the introduction of outstanding high-end talents, and the Company’s sustainable development. There is no situation that harms the interests of the Listed Company and all shareholders.”

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APPENDIX IV

CHAPTER IX GRANT AND ATTRIBUTION CONDITIONS OF THE RESTRICTED SHARES

I. Conditions for Grant of the Restricted Shares

(i) None of the following has occurred on the part of the Company:
an audit report on the financial and accounting report for the most recent financial year in which a certified public accountant issued an adverse opinion or was unable to express an opinion;
an audit report on internal control over financial reporting for the most recent financial year in which a certified public accountant issued an adverse opinion or was unable to express an opinion;
in the most recent 36 months upon listing, there have been cases of failure to distribute profits according to laws and regulations, the Articles of Association and public undertakings;
laws and regulations stipulate that equity incentives shall not be implemented;
other circumstances as determined by the CSRC.
(ii) None of the following has occurred on the part of the Participants:
the Participant has been determined as an inappropriate candidate by the Stock Exchange within the most recent 12 months;
the Participant has been identified as an inappropriate candidate by the CSRC and its delegated institutions within the most recent 12 months;
the Participant has been subject to administrative punishment or market ban measures by the CSRC and its delegated institutions due to major breach of laws and regulations in the most recent 12 months;
the Participant has the circumstances stipulated in the Company Law that he/she shall not act as a director or member of the senior management of a company;

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laws and regulations stipulate that the Participant shall not participate in the equity incentives of listed companies;
other circumstances as determined by the CSRC.

II. Conditions for Attribution of the Restricted Shares

For the Restricted Shares to be attributed to the Participant, all of the following conditions need to be satisfied within the attribution period:

(i) None of the following has occurred on the part of the Company:
an audit report on the financial and accounting report for the most recent financial year in which a certified public accountant issued an adverse opinion or was unable to express an opinion;
an audit report on internal control over financial reporting for the most recent financial year in which a certified public accountant issued an adverse opinion or was unable to express an opinion;
in the most recent 36 months upon listing, there have been cases of failure to distribute profits according to laws and regulations, the Articles of Association and public undertakings;
laws and regulations stipulate that equity incentives shall not be implemented;
other circumstances as determined by the CSRC.

In the event that any one of the circumstances specified in the above subparagraph (i) arises, the Restricted Shares that have been granted but have not yet been attributed to the Participant under the Incentive Scheme shall not be attributed and shall lapse.

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(ii) None of the following has occurred on the part of the Participants:
the Participant has been determined as an inappropriate candidate by the Stock Exchange within the most recent 12 months;
the Participant has been identified as an inappropriate candidate by the CSRC and its delegated institutions within the most recent 12 months;
the Participant has been subject to administrative punishment or market ban measures by the CSRC and its delegated institutions due to major breach of laws and regulations in the most recent 12 months;
the Participant has the circumstances stipulated in the PRC Company Law that he/she shall not act as a director or member of the senior management of a company;
laws and regulations stipulate that the Participant shall not participate in the equity incentives of listed companies;
other circumstances as determined by the CSRC.

In the event that any one of the circumstances specified in the above subparagraph (ii) arises in relation to a certain Participant, the Company shall terminate such Participant’s right to participate in the Incentive Scheme, and the Restricted Shares that have been granted but have not yet been attributed to such Participant under the Incentive Scheme shall not be attributed and shall lapse.

(iii) Requirements on length of employment of the Participants for attribution of Restricted Shares:

Before each tranche of Restricted Shares granted to the Participants is attributed, the length of employment of the Participant must be more than 12 months.

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(iv) Performance assessment requirements at company level:

Under the Incentive Scheme, the Company’s performance indicators will be evaluated on an annual basis for the financial years of 2020 to 2022, and the achievement of performance assessment target will be one of the attribution conditions for the Participants for the current year. The attribution arrangement of the Restricted Shares granted, the performance assessment indicators and attribution factors are shown in the following table:

Attribution Arrangement

Performance Target A Performance Target B Performance Target C Company Attribution Company Attribution Company Attribution Factor: 100% Factor: 80% Factor: 60%

Restricted First The Company must meet all The Company must meet all The Company must meet all Shares under attribution of the following conditions: of the following conditions: of the following conditions: the first grant tranche

Operating income: in 1. Operating income: in 1. Operating income: in the year 2020, the the year 2020, the the year 2020, the Company’s operating Company’s operating Company’s operating income shall not be less income shall not be less income shall not be less than RMB1.45 billion; than RMB1.35 billion; than RMB1.20 billion;
Preclinical projects: in 2. Preclinical projects: in 2. Preclinical projects: in the year 2020, there the year 2020, there the year 2020, there shall be no less than 2 shall be no less than 2 shall be no less than 1 drugs IND applications drugs IND applications drugs IND application being filed and being filed and being filed and accepted, and in which accepted, and in which accepted, and in which the Company owns not the Company owns not the Company owns not less than 50% interests; less than 50% interests; less than 50% interests;
Clinical development: 3. Clinical development: 3. Clinical development: in the year 2020, there in the year 2020, there in the year 2020, there shall be no less than 2 shall be no less than 2 shall be no less than 2 new drugs NDA or new drugs NDA or new drugs NDA or extended indications extended indications extended indications (sNDA) being filed and (sNDA) being filed and (sNDA) being filed and accepted, and in which accepted, and in which accepted, and in which the Company owns not the Company owns not the Company owns not less than 50% interests. less than 50% interests. less than 50% interests.

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	Performance Target A	Performance Target B	Performance Target C
	Company Attribution	Company Attribution	Company Attribution
Attribution Arrangement	Factor: 100%	Factor: 80%	Factor: 60%
Second	The Company must meet all	The Company must meet all	The Company must meet all
attribution	of the following conditions:	of the following conditions:	of the following conditions:
tranche
	1. Operating income: in	1. Operating income: in	1. Operating income: in
	the years 2020-2021,	the years 2020-2021,	the years 2020-2021,
	the Company’s	the Company’s	the Company’s
	accumulated operating	accumulated operating	accumulated operating
	income shall not be less	income shall not be less	income shall not be less
	than RMB3.6 billion;	than RMB3.3 billion;	than RMB2.8 billion;
	2. Preclinical projects: in	2. Preclinical projects: the	2. Preclinical projects: the
	the years 2020-2021,	years 2020-2021, there	years 2020-2021, there
	there shall be no less	shall be no less than 7	shall be no less than 6
	than 9 drugs IND	drugs IND applications	drugs IND applications
	applications	accumulatively being	accumulatively being
	accumulatively being	filed and accepted, and	filed and accepted, and
	filed and accepted, and	in which the Company	in which the Company
	in which the Company	owns not less than 50%	owns not less than 50%
	owns not less than 50%	interests;	interests;
	interests;

Clinical development: 3. Clinical development: 3. Clinical development: in the years 2020-2021, in the years 2020-2021, in the years 2020-2021, there shall be no less there shall be no less there shall be no less than 6 new drugs NDA than 5 new drugs NDA than 4 new drugs NDA or extended indications or extended indications or extended indications (sNDA) accumulatively (sNDA) accumulatively (sNDA) accumulatively being filed and being filed and being filed and accepted, and in which accepted, and in which accepted, and in which the Company owns not the Company owns not the Company owns not less than 50% interests. less than 50% interests. less than 50% interests.

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THE 2020 RESTRICTED A SHARE INCENTIVE SCHEME (DRAFT)

	Performance Target A	Performance Target B	Performance Target C
	Company Attribution	Company Attribution	Company Attribution
Attribution Arrangement	Factor: 100%	Factor: 80%	Factor: 60%
Third	The Company must meet all	The Company must meet all	The Company must meet all
attribution	of the following conditions:	of the following conditions:	of the following conditions:
tranche
	1. Operating income: in	1. Operating income: in	1. Operating income: in
	the years 2020-2022,	the years 2020-2022,	the years 2020-2022,
	the Company’s	the Company’s	the Company’s
	accumulated operating	accumulated operating	accumulated operating
	income shall not be less	income shall not be less	income shall not be less
	than RMB6.6 billion;	than RMB5.7 billion;	than RMB4.8 billion;
	2. Preclinical projects: in	2. Preclinical projects: in	2. Preclinical projects: in
	the years 2020-2022,	the years 2020-2022,	the years 2020-2022,
	there shall be no less	there shall be no less	there shall be no less
	than 16 drugs IND	than 13 drugs IND	than 11 drugs IND
	applications	applications	applications
	accumulatively being	accumulatively being	accumulatively being
	filed and accepted, and	filed and accepted, and	filed and accepted, and
	in which the Company	in which the Company	in which the Company
	owns not less than 50%	owns not less than 50%	owns not less than 50%
	interests;	interests;	interests;
	3. Clinical development:	3. Clinical development:	3. Clinical development:
	in the years 2020-2022,	in the years 2020-2022,	in the years 2020-2022,
	there shall be no less	there shall be no less	there shall be no less
	than 11 new drugs NDA	than 9 new drugs NDA	than 7 new drugs NDA
	or extended indications	or extended indications	or extended indications
	(sNDA) accumulatively	(sNDA) accumulatively	(sNDA) accumulatively
	being filed and	being filed and	being filed and
	accepted, and in which	accepted, and in which	accepted, and in which
	the Company owns not	the Company owns not	the Company owns not
	less than 50% interests.	less than 50% interests.	less than 50% interests.

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THE 2020 RESTRICTED A SHARE INCENTIVE SCHEME (DRAFT)

Attribution Arrangement

Performance Target A Performance Target B Performance Target C Company Attribution Company Attribution Company Attribution Factor: 100% Factor: 80% Factor: 60%

Restricted First The Company must meet all The Company must meet all The Company must meet all Shares under attribution of the following conditions: of the following conditions: of the following conditions: the reserved tranche grant 1. Operating income: in 1. Operating income: in 1. Operating income: in the years 2020-2021, the years 2020-2021, the years 2020-2021, the Company’s the Company’s the Company’s accumulated operating accumulated operating accumulated operating income shall not be less income shall not be less income shall not be less than RMB3.6 billion; than RMB3.3 billion; than RMB2.8 billion;
1. Preclinical projects: in 2. Preclinical projects: in 2. Preclinical projects: in the years 2020-2021, the years 2020-2021, the years 2020-2021, there shall be no less there shall be no less there shall be no less than 9 drugs IND than 7 drugs IND than 6 drugs IND applications applications applications accumulatively being accumulatively being accumulatively being filed and accepted, and filed and accepted, and filed and accepted, and in which the Company in which the Company in which the Company owns not less than 50% owns not less than 50% owns not less than 50% interests; interests; interests;
Clinical development: 3. Clinical development: 3. Clinical development: in the years 2020-2021, in the years 2020-2021, in the years 2020-2021, there shall be no less there shall be no less there shall be no less than 6 new drugs NDA than 5 new drugs NDA than 4 new drugs NDA or extended indications or extended indications or extended indications (sNDA) accumulatively (sNDA) accumulatively (sNDA) accumulatively being filed and being filed and being filed and accepted, and in which accepted, and in which accepted, and in which the Company owns not the Company owns not the Company owns not less than 50% interests. less than 50% interests. less than 50% interests.

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THE 2020 RESTRICTED A SHARE INCENTIVE SCHEME (DRAFT)

	Performance Target A	Performance Target B	Performance Target C
	Company Attribution	Company Attribution	Company Attribution
Attribution Arrangement	Factor: 100%	Factor: 80%	Factor: 60%
Second	The Company must meet all	The Company must meet all	The Company must meet all
attribution	of the following conditions:	of the following conditions:	of the following conditions:
tranche
	1. Operating income: in	1. Operating income: in	1. Operating income: in
	the years 2020-2022,	the years 2020-2022,	the years 2020-2022,
	the Company’s	the Company’s	the Company’s
	accumulated operating	accumulated operating	accumulated operating
	income shall not be less	income shall not be less	income shall not be less
	than RMB6.6 billion;	than RMB5.7 billion;	than RMB4.8 billion;
	2. Preclinical projects: in	2. Preclinical projects: in	2. Preclinical projects: in
	the years 2020-2022,	the years 2020-2022,	the years 2020-2022,
	there shall be no less	there shall be no less	there shall be no less
	than 16 drugs IND	than 13 drugs IND	than 11 drugs IND
	applications	applications	applications
	accumulatively being	accumulatively being	accumulatively being
	filed and accepted, and	filed and accepted, and	filed and accepted, and
	in which the Company	in which the Company	in which the Company
	owns not less than 50%	owns not less than 50%	owns not less than 50%
	interests;	interests;	interests;
	3. Clinical development:	3. Clinical development:	3. Clinical development:
	in the years 2020-2022,	in the years 2020-2022,	in the years 2020-2022,
	there shall be no less	there shall be no less	there shall be no less
	than 11 new drugs NDA	than 9 new drugs NDA	than 7 new drugs NDA
	or extended indications	or extended indications	or extended indications
	(sNDA) accumulatively	(sNDA) accumulatively	(sNDA) accumulatively
	being filed and	being filed and	being filed and
	accepted, and in which	accepted, and in which	accepted, and in which
	the Company owns not	the Company owns not	the Company owns not
	less than 50% interests.	less than 50% interests.	less than 50% interests.

Note: The above “operating income” refers to the audited operating income of the Listed Company.

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During the attribution period, the Company shall handle the registration of share vesting for Participants meeting the attribution conditions. If the Company’s performance level fails to meet or partially meets the performance assessment indicator requirements in each attribution period, the Restricted Shares of the Participants that cannot be attributed for the current year shall not be attributed and shall lapse.

(v) Performance assessment requirements at the Participant’s individual level:

The individual assessment of Participants is carried out according to the internal performance assessment system of the Company. The results of the individual assessment of Participants are divided into four levels – “excellence”, “good”, “qualified” and “unqualified” and the corresponding attribution percentage is as follows:

Assessment Level	Excellence	Good	Qualified	Unqualified
Individual attribution
factor	100%	80%	60%	0

Under the premise of the Company achieving above its performance assessment target C (inclusive), the number of Restricted Shares to be attributed to the Participant in the current year equals to the number of Restricted Shares planned to be attributed to the individual Participant in the current year × the Company attribution factor × the individual attribution factor.

In any event if the Restricted Shares to be attributed to the Participant under the Incentive Scheme in the current year cannot be attributed or fully attributed due to assessment reasons, such Restricted Shares shall lapse and cannot be deferred to the next year for attribution.

The specific content of the assessment under the Incentive Scheme is implemented in accordance with the Assessment Management Measures.

III. Explanation on the scientificity and reasonableness of the performance appraisal indicators of the Restricted Shares

The Company is an innovation-driven biopharmaceutical company with products that are primarily innovative biological products, most of which are from original innovation and self-developed, and also introduced through collaborative development that have synergies with the Company’s original product line. As of 30 June 2020, the Company had 1 product that has received conditional marketing approval from the National Medical Products Administration; in addition, the Company had 21 product candidates under development (including the extended indications study of the aforementioned marketed product), of which 19 are innovative drugs and 2 are biosimilars. In order to achieve the Company’s strategy and maintain its existing competitiveness, the assessment indicators of the Incentive Scheme at the

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Company level are quantitative indicators of operating income, preclinical projects and clinical development projects, which can truly reflect the Company’s operation, market situation and research and development progress, and is an effective indicator to predict the business development trend and measure the Company’s growth potential.

According to the performance indicators under the Incentive Scheme, the Company’s performance assessment indicators include operating income, the number of INDs filed by the Company and accepted, the number of NDA or extended indications (sNDA) projects that have been filed by the Company and have been accepted. The performance appraisal indicators under the Incentive Scheme are determined by the Company on the basis of comprehensive consideration of the macroeconomic environment, the Company’s historical performance, industry development, market competition and the Company’s future development plan and other relevant factors. The performance indicators under the Incentive Scheme are challenging, which will help enhance the Company’s competitiveness and motivate employees, ensure the achievement of the Company’s future growth strategy and business objectives, and deliver more efficient and sustainable returns to shareholders.

In addition to the performance assessment at the Company level, the Company has also set up a strict performance appraisal system at the Participant’s individual level, which allows a more accurate, comprehensive evaluation of the work performance of the Participants. The Company will determine whether the Participants meet the attribution conditions based on the annual performance evaluation results of the Participants.

In summary, the Company’s appraisal system under the Incentive Scheme is integrated, comprehensive and operable. Meanwhile, the scientific and reasonable performance indicators restrain the Participants and can achieve the appraisal purpose of the Incentive Scheme.

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APPENDIX IV

CHAPTER X METHODS AND PROCEDURES FOR ADJUSTMENT UNDER THE INCENTIVE SCHEME

I. Adjustment Method for the Number of the Restricted Shares

In the event of any capitalization issue, bonus issue, share split, rights issue or share consolidation of the Company during the period from the date of the announcement of the Incentive Scheme to the completion of registration of the Restricted Shares by the Participants, the number of the Restricted Shares shall be adjusted accordingly. The adjustment method is as follows:

(i) Capitalization issue, bonus issue and share split

Q = Q0 × (1 + n)

Where: Q0 represents the number of Restricted Shares before adjustment; n represents the ratio of increase per share resulting from capitalization issue, bonus issue or share split (i.e. the number of the shares increased per share upon capitalization issue, bonus issue or share split); Q represents the number of Restricted Shares after adjustment.

(ii) Rights issue

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Where: Q0 represents the number of Restricted Shares before adjustment; P1 represents the closing price as at the record date; P2 represents the price of the rights issue; n represents the ratio of the rights issue (i.e. the ratio of the number of shares to be issued under the rights issue to the total share capital of the Company before the rights issue); Q represents the number of Restricted Shares after adjustment.

(iii) Share consolidation

Q = Q0 × n

Where: Q0 represents the number of the Restricted Shares before adjustment; n represents the ratio of consolidation of shares (i.e. one share of the Company is consolidated into n share); Q represents the number of the Restricted Shares after adjustment.

(iv) New issue of shares

In the event of new issue of Shares by the Company, no adjustment shall be made to the number of Restricted Shares.

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II. Adjustment Method of the Grant Price of the Restricted Shares

In the event of any dividend distribution, capitalization issue, bonus issue, share split, rights issue or share consolidation of the Company during the period from the date of the announcement of the Incentive Scheme to the completion of registration of the Restricted Shares by the Participants, the grant price of the Restricted Shares shall be adjusted accordingly. The adjustment method is as follows:

(i) Capitalization issue, bonus issue and share split

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Where: P0 represents the grant price before the adjustment; n represents the ratio of increase per share resulting from capitalization issue, bonus issue and share split; P represents the grant price after the adjustment.

(ii) Rights issue

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Where: P0 represents the grant price before the adjustment; P1 represents the closing price as at the record date; P2 represents the price of the rights issue; n represents the ratio of the rights issue (i.e. the ratio of the number of shares to be issued under the rights issue to the total share capital of the Company before the rights issue); P represents the grant price after the adjustment.

(iii) Share consolidation

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Where: P0 represents the grant price before the adjustment; n represents the ratio of consolidation of shares per share; P represents the grant price after the adjustment.

(iv) Dividend distribution

P = P0 – V

Where: P0 represents the grant price before the adjustment; V represents the dividend per share; P represents the grant price after the adjustment. P shall be greater than 1 after the dividend distribution.

(v) New issue of shares

In the event of new issue of shares by the Company, no adjustment will be made to the grant price of the Restricted Shares.

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III. Adjustment procedures for the Incentive Scheme

The Company’s general meeting authorizes the board of directors to adjust the number and the grant price of Restricted Shares based on the reasons set forth in the Incentive Scheme. After the board of directors adjusts the number and the grant price of Restricted Shares in accordance with the above provisions, it shall promptly announce and notify the Participants. The Company shall engage legal advisers to provide professional opinions to the board of directors on whether the above adjustments comply with the requirements under the Management Measures, the Articles of Association and the Incentive Scheme.

If the number and the grant price of the Restricted Shares need to be adjusted due to matters other than the above circumstances, in addition to the approval of the relevant proposals from the board of directors, such adjustments must be submitted to the general meeting of the Company for approval.

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CHAPTER XI ACCOUNTING TREATMENT ON THE RESTRICTED SHARES

In accordance with relevant requirements of the Accounting Standards for Business Enterprises No. 11 – Share-Based Payments and the Accounting Standards for Business Enterprises No. 22 – Recognition and Measurement of Financial Instruments published by the Ministry of Finance, at each balance sheet date within the Black-out Period, the Company shall revise the number of the Restricted Shares which are expected to be attributed according to the changes in the latest available number of persons eligible to be attributed the Restricted Shares, fulfilment of the performance targets and other subsequent information, and recognize the services acquired during such period in relevant costs or expenses and capital reserve at the fair value of the Restricted Shares on the grant date.

I. Fair Value of the Restricted Shares and the Determination Method

According to relevant requirements of the Accounting Standards for Business Enterprises No. 11 – Share-based Payments and the Accounting Standards for Business Enterprises No. 22 – Recognition and Measurement of Financial Instruments, the unit cost of the Restricted Shares = Fair value of the Restricted Shares – grant price, where fair value of the Restricted Shares is the closing price on the grant date.

II. The Estimated Impact on the Operating Performance in Each Accounting Period due to of the implementation of the Restricted Shares

The Company will grant 35,736,500 Restricted Shares to the Participants, among which 28,589,500 Restricted Shares will be granted under the first grant. The fair value of the Restricted Shares was estimated based on the closing data on the trading day prior to the publication of the draft Incentive Scheme, and the total equity expense for the first grant was estimated to be RMB847,678,700. The total amount of above expenses as the incentive cost of the Company’s Incentive Scheme will be recognized over the course of the Incentive Scheme in attribution proportion in installments and will be charged to operating profit or loss. In accordance with accounting standards, the actual amount shall be based on the fair value of the Shares calculated on the “actual grant date”, assuming the grant date to be in November 2020, the amortization of cost of the Restricted Shares from the years 2020 to 2023 is as follows:

Unit: RMB0’000

Amortized	costs of the
Restricted	Shares	Year 2020	Year 2021	Year 2022	Year 2023
84,767.87		4,591.59	52,273.52	20,132.37	7,770.39

Notes:

The above costs are projected costs, and actual costs are related to the actual grant price, the grant date, the closing price on the grant date, the number of Restricted Shares granted and the best estimate of the number of attributable equity instrument;
Shareholders’ attention is drawn to the possible dilutive effect of the share-based payment described above;
The final impact of the above projected amortization expenses on the Company’s operating results is subject to the audit report issued by the accountant.

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The costs of the Incentive Scheme shall be charged to the cost expenses. Without considering the positive effect of the Incentive Scheme on the Company’s performance, the Company estimates that, based on current information, the amortization of cost expenses of the Incentive Scheme will have an impact on the net profit each year within the validity period, but the impact is not significant. Considering the positive effect of the Incentive Scheme on the Company’s operation and development, which will stimulate the enthusiasm of the management and business team, improve operating efficiency and reduce operating costs, the Incentive Scheme will have a positive effect on the Company’s long-term performance.

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APPENDIX IV

CHAPTER XII PROCEDURES FOR IMPLEMENTATION, GRANT, ATTRIBUTION OF AND AMENDMENTS TO, AND TERMINATION OF THE INCENTIVE SCHEME

I. Procedures for Implementation of the Incentive Scheme

(i) The Remuneration Committee is responsible for formulating the draft Incentive Scheme and the Company’s Assessment Management Measures.
(ii) The board of directors shall resolve on the draft Incentive Scheme and the Company’s Assessment Management Measures formulated by the Remuneration Committee. When the board of directors resolves on the Incentive Scheme, related directors shall abstain from voting.
(iii) The independent directors and the board of supervisors should express opinions as to whether the Incentive Scheme is conducive to the sustainable development of the Company and whether there are any circumstances apparently harmful to the interests of the Company and all Shareholders.
(iv) The Company will engage an independent financial adviser to give professional opinions on the feasibility of the Incentive Scheme, the reasonableness of the determination of the grant price, whether the Incentive Scheme is conducive to the sustainable development of the Company and whether there are any circumstances apparently harmful to the interests of the Company and all Shareholders. The legal adviser engaged by the Company will issue a legal opinion on the Incentive Scheme.
(v) Within two trading days after the board of directors having reviewed and approved the draft Incentive Scheme, the Company will make an announcement of the board resolutions, the draft and summary of the Incentive Scheme, the opinions of independent directors, and the opinions of the board of supervisors.
(vi) The Company shall carry out self-investigation on the trading of shares of the Company by individuals in possession of inside information within 6 months prior to the announcement of the Incentive Scheme.
(vii) Before convening a general meeting, the Company shall announce the names and positions of the Participants internally via the Company’s website or other channels for 10 days. The board of supervisors shall review the list of Participants and take sufficient consideration of the public response. The Company shall disclose the information regarding the review by the board of supervisors regarding the list of Participants and the publication responses 5 days prior to the consideration of the Incentive Scheme at the general meeting.

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(viii) During voting on the Incentive Scheme and related resolutions at the general meeting of the Company, the independent directors shall solicit proxy voting rights from all shareholders regarding the Incentive Scheme and related resolutions. When the Incentive Scheme and related resolutions are considered by way of special resolution at the general meeting, the related shareholders shall abstain from voting.
(ix) The Company will make an announcement of the resolutions of the general meeting, the Incentive Scheme as considered and approved at the general meeting, the self-investigation report on the trading of shares of the Company by individuals in possession of inside information and the legal opinions.

Where connected persons or other situations required by the listing rules of the place where the Company’s securities are listed are involved, the Company shall comply with such local laws and regulations and meet the relevant requirements (including, if necessary, obtaining prior approval from the independent Shareholders).

(x) After the Incentive Scheme has been considered and approved by the general meeting of the Company, the board of directors will grant the Restricted Shares to the Participants and complete the announcements and other relevant procedures pursuant to the authorization granted by the shareholders within 60 days after the Incentive Scheme having been adopted and approved at a general meeting. The board of directors shall handle matters including the attribution and registration of Restricted Shares in accordance with the authorization at a general meeting.

II. Procedures for Grant of the Restricted Shares

(i) The Company shall convene a meeting of the board of directors to grant the Restricted Shares to the Participants within 60 days from the date on which the Incentive Scheme has been adopted and approved at a general meeting.
(ii) Before granting the Restricted Shares to the Participants, the board of directors shall consider whether the Participants have satisfied the conditions for grant prescribed in the Incentive Scheme and make an announcement thereafter. The independent directors and the board of supervisors shall also issue their express opinions at the same time. The legal advisor shall issue a legal opinion on whether the Participants have satisfied the conditions of the grant. The board of supervisors of the Company shall verify the list of the Participants on the grant date of the Restricted Shares and issue its opinion.

When there is any discrepancy between the Company’s grant of the Restricted Shares to the Participants and the arrangement stipulated under the Incentive Scheme, the independent directors, the board of supervisors (when there are changes to the Participants), legal advisor and the independent financial adviser shall issue their clear opinions simultaneously.

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(iii) The Company shall enter into the Agreement on the Granting of Restricted Shares with the Participants setting out their respective rights and obligations.
(iv) The Company shall keep a register for management of the Restricted Shares with reference to the Agreement on the Granting of Restricted Shares signed by the Participants and the subscription situation, and such register shall record the names of the Participants, the number of Restricted Shares granted, the grant date and the serial number of the relevant Agreement on the Granting of Restricted Shares.
(v) Upon the general meeting’s consideration and approval of the Share Incentive Scheme, the Company shall grant the Restricted Shares to the Participants and make an announcement within 60 days (if there are conditions to the grant, then counting from the fulfilment of the granting conditions). If the Company fails to publish an announcement in respect of the grant of the Restricted Shares within the 60-day period, the Incentive Scheme shall be terminated, and the board of directors shall promptly disclose the reasons for the failure to complete and is prohibited from approving a share incentive scheme again within 3 months thereafter.
(vi) The Participants of the reserved grant shall be determined within 12 months after the Incentive Scheme being reviewed and approved at the general meeting. The reserved grant shall lapse if such Participants cannot be determined within the said 12-month period.
(vii) Where connected persons or other situations required by the listing rules of the place where the Company’s securities are listed are involved, the Company shall comply with such local laws and regulations and meet the relevant requirements (including, if necessary, any prior approval from the independent shareholders).

III. Procedures for the Attribution of the Restricted Shares

(i) Prior to attribution, the Company shall confirm whether the Participants have satisfied the attribution conditions. The board of directors shall consider whether the attribution conditions under the Incentive Scheme have been satisfied, and the independent directors and the board of supervisors shall express clear opinions at the same time. The legal advisor shall issue a legal opinion on whether the conditions for attributing the Restricted Shares have been satisfied.
(ii) The Participants who have fulfilled the attribution conditions shall pay the funds for the subscription of the Restricted Shares into the account designated by the Company according to the Company’s requirements, which will be verified and confirmed by a certified public accountant. Participants who have not paid the funds within the requisite period shall be deemed to have waived his/her right to subscribe for the Restricted Shares. The Company shall in a unified manner make an application to the Stock Exchange, and after confirmation by the Stock Exchange,

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APPENDIX IV

the CSDC will handle the matters for the attribution of the Restricted Shares. The Restricted Shares of the Participants who have not fulfilled the attribution conditions in the relevant tranche shall not be attributed and shall lapse. The Company shall make timely disclosure in respect of the implementation of the Incentive Scheme.

(iii) Participants may transfer their attributed Restricted Shares, however, the transfer of the Restricted Shares held by the directors and members of the senior management of the Company should comply with the requirements of the relevant laws, administrative regulations and regulatory documents.

IV. Procedures for Amendment and Termination of the Incentive Scheme

(i) Procedures for the Amendment of the Incentive Scheme

If the Company intends to make amendments to the Incentive Scheme before it is considered and approved at the general meeting, the amendments shall be considered and approved by the board of directors. If the Company intends to make amendments to the Incentive Scheme that has been adopted at the general meeting, such amendments shall be submitted to the general meeting for its approval and shall not include circumstances that would result in the acceleration of attribution or reduction of the grant price. Where other situations required by the listing rules of the place where the Company’s securities are listed are involved, the Company shall comply with such local laws and regulations.
The Company shall timely disclose the reasons for and the content of the amendments. The independent directors and the board of supervisors of the Company shall give clear opinions as to whether the amendments to the Incentive Scheme is conducive to the sustainable development of the Company and whether there are any situations that clearly harm the interests of the Company and all shareholders. The legal advisor shall express its professional opinions as to whether the amended proposal is in compliance with the requirements of the Management Measures and relevant laws and regulations, and whether there are any circumstances that clearly harm the interests of the Company and all shareholders.

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(ii) Procedures of termination of the Incentive Scheme

If the Company intends to terminate the Incentive Scheme before it is considered and approved at the general meeting, the board of directors shall consider and approve and make an announcement. If the Company intends to terminate the implementation of the Incentive Scheme after it is considered and approved at the general meeting, such termination shall be submitted to the board of directors and the general meetings for approval and be disclosed.
The Company shall timely disclose the resolutions of the general meetings or the resolutions of the board of directors. The legal advisor shall express its professional opinions as to whether the Company’s termination of the implementation of the Incentive Scheme is in compliance with the requirements of the Management Measures and relevant laws and regulations and whether there are any circumstances that clearly harm the interests of the Company and all shareholders.

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CHAPTER XIII OTHER RIGHTS AND OBLIGATIONS OF THE COMPANY AND PARTICIPANTS

I. Rights and Obligations of the Company

(i) The Company has the right to interpret and implement the Incentive Scheme, to conduct performance assessment of the Participants, and to supervise and examine whether the Participants are eligible for attribution. If a Participant fails to fulfill the attribution conditions as determined under the Incentive Scheme, upon the approval of the board of directors of the Company, the Restricted Shares that have been granted but have not yet been attributed shall not be attributed and shall lapse.
(ii) The Company has the right to require the Participants to work for the Company according to the requirements of the positions at which he/she is employed. If the Participant is not qualified for the positions or fails the assessment, or if the Participant violates the laws and professional ethics, divulges company secrets, violates the rules and regulations of the Company, and neglects his/her duty or malfeasance or has other acts that seriously damage the Company’s interests or reputation, upon the approval of the board of directors, the Restricted Shares that have been granted to the Participant but have not yet been attributed shall be attributed and shall lapse.
(iii) The Company shall withhold and pay the personal income tax and other taxes and fees payable by the Participants in accordance with relevant national tax laws and regulations.
(iv) The Company undertakes not to provide loans and any other forms of financial assistance, including providing guarantee for their loans, to the Participants to obtain relevant Restricted Shares according to the Incentive Scheme.
(v) The Company shall timely, truthfully, accurately and completely disclose the information disclosure documents related to the Incentive Scheme in accordance with relevant laws, regulations and regulatory documents, ensure that there are no false records, misleading statements or material omission and fulfil relevant reporting obligations under the Incentive Scheme in a timely manner.
(vi) In accordance with the Incentive Scheme and relevant requirements of the CSRC, the Stock Exchange and registration and clearing companies, the Company shall handle the registration of the attribution of Restricted Shares for the Participants that meet the attribution conditions. However, the Company shall not be held liable if the Participants fails to complete the registration of the attribution of Restricted Shares and causes losses to the Participants due to the reasons on the part of the CSRC, the Stock Exchange and the registration and clearing companies.
(vii) Other relevant rights and obligations as stipulated under the laws, administrative regulations and regulatory documents.

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(II) Rights and Obligations of the Participants

(i) The Participants shall be diligent and responsible, abide by professional ethics, and make due contributions to the development of the Company in accordance with the requirements of the positions at which he/she is employed by the Company.
(ii) The Participants have the right to receive the attributed Restricted Shares granted in accordance with the provisions of the Incentive Scheme, and should lock-up and deal with his/her Restricted Shares in accordance with relevant provisions.
(iii) Source of funds for the Participants shall be their own financing.
(iv) Prior to the attribution, the Restricted Shares granted to the Participants under the Incentive Scheme shall not be transferred, used to guarantee or repay debts.
(v) Prior to the attribution, the Restricted Shares granted to the Participants under the Incentive Scheme do not carry any voting rights or right to participate in the distribution of bonus shares or share dividends.
(vi) The income received by the Participants as a result of the Incentive Scheme shall be subject to personal income tax and other taxes and fees in accordance with national tax regulations.
(vii) The Participants undertake that, if there are false records, misleading statements or material omissions in the Company’s information disclosure documents, resulting in non-compliance with the arrangement for granting rights and interests, the Participants shall fulfill their undertakings and return all the benefits obtained from the Incentive Scheme to the Company after confirming the existence of false records, misleading statements or major omissions in relevant information disclosure documents.
(viii) If the Participant is no longer eligible to be a Participant under the Incentive Scheme as stipulated in Article 8 of the Management Measures during the implementation of the Incentive Scheme, the Restricted Shares that have been granted but have not yet been attributed shall not be attributed, and shall lapse.
(ix) Other relevant rights and obligations as stipulated by laws, administrative regulations, regulatory documents and the Incentive Scheme.

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III. Other Explanatory Notes

The Company shall enter into the Agreement on the Granting of Restricted Shares with each Participant after the Incentive Scheme having been considered and approved at the general meeting, setting out the parties’ respective rights and obligations under the Incentive Scheme and other relevant matters.

Any dispute between the Company and the Participants shall be resolved in accordance with the provisions of the Incentive Scheme and the Agreement on the Granting of Restricted Shares. In event of any dispute that is not clearly covered by such provisions, both parties shall negotiate and resolve their disputes in accordance with national laws and the principles of fairness and reasonableness. Where any dispute cannot be settled by negotiation, it shall be resolved through litigation by submitting to the People’s Court with jurisdiction over the Company’s place of business.

The Company’s determination of a Participant under the Incentive Scheme does not constitute an undertaking with regards to the employment period of any employee. The employment relationship between the Company and the Participants shall be determined in accordance with the labor contract or employment contract signed.

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APPENDIX IV

CHAPTER XIV ARRANGEMENTS FOR THE INCENTIVE SCHEME IN THE EVENT OF CHANGE AT THE LEVEL OF COMPANY/PARTICIPANTS

I. In the Event of any Changes Occurred at the Company Level

(i) In the event that any of the circumstances below occurs in respect of the Company, the Incentive Scheme shall be terminated and the Restricted Shares that have been granted to the Participants under the Incentive Scheme but have not yet been attributed shall not be attributed and shall lapse:
an audit report on the financial and accounting report for the most recent financial year in which a certified public accountant issued an adverse opinion or was unable to express an opinion;
an audit report on internal control over financial reporting for the most recent financial year in which a certified public accountant issued an adverse opinion or was unable to express an opinion;
in the most recent 36 months upon listing, there have been cases of failure to distribute profits according to laws and regulations, the Articles of Association and public undertakings;
laws and regulations stipulate that equity incentives shall not be implemented;
other circumstances where the Incentive Scheme should be terminated as determined by the CSRC.
(ii) Merger or division of the Company, etc.;

In case of merger or division of the Company, the board of directors of the Company shall decide whether to terminate the Incentive Scheme within five trading days from the date of merger or division.

(iii) Change of Control of the Company

In the event of a change of control of the Company, the board of directors of the Company shall decide whether to terminate the Incentive Scheme within five trading days from the date of the change of the control.

(iv) If the Company fails to meet the conditions for granting or attributing the Restricted Shares due to false records, misleading statements or major omissions in the information disclosure documents, the Restricted Shares that have been granted to the Participants but have not yet been attributed shall not be attributed and shall lapse.

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If the Restricted Shares that have been granted to the Participants have already been attributed, all the Participants shall return the granted rights and interests. If a Participant who is not responsible for the above matters suffers from losses due to the return of rights and interests, such Participant can recover such losses from the Company or the responsible targets in accordance with relevant arrangements under the Incentive Scheme. The board of directors shall recover the proceeds from the Participants in accordance with the requirements under the preceding paragraph and relevant arrangements under the Incentive Scheme.

II. In the Event of Changes in the Personal Circumstances of the Participants

(i) Change in Position of the Participants

If the position of the Participant changes but he/she still works in the Company or its subsidiaries, the Restricted Shares granted to him/her shall still be carried out in accordance with the procedures stipulated in the Incentive Scheme.
If the Participant is a supervisor or an independent director of the Company or other person who cannot hold the Restricted Shares of the Company, the Restricted Shares that have been attributed shall not be handled. The Restricted Shares that have been granted but have not yet been attributed shall not be attributed and shall lapse.
If the Participant violates the law, violates professional ethics, divulges company secrets, damages the interests or reputation of the Company due to dereliction of duty or malfeasance, or causes the Company to terminate the labor relationship with the Participant due to the above reasons, the Participants shall return all gains obtained from the attribution of the Restricted Shares. The Restricted Shares that have been granted but have not yet been attributed shall not be attributed and shall lapse. At the same time, in the event of serious circumstances, the Company may also recover the losses suffered by the Company in accordance with relevant laws and regulations.

(ii) Resignation of the Participants

If the contract of the Participant expires and he/she no longer renews the contract or resigns voluntarily, the Restricted Shares that have been attributed shall not be handled. In such case, the Restricted Shares that have been granted but have not yet been attributed shall not be attributed and shall lapse.
If the Participant leaves the Company passively due to layoffs and other reasons and there are no behaviors such as failure to pass performance evaluation, negligence or violation of laws and disciplines, the Restricted Shares that have been attributed shall not be handled. In such case, the Restricted Shares that have been granted but have not yet been attributed shall not be attributed and shall lapse.

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(iii) Retirement of the Participants

If the Participants that have retired are re-hired, the Restricted Shares that have been granted to them will be carried out in accordance with the procedures stipulated in the Incentive Scheme which took effect before the retirement. If the Participants reject the Company’s request for continued employment, or if the Participants retire and leave the Company, the Restricted Shares granted but not yet attributed shall not be attributed and shall lapse.

(iv) Incapacity of the Participants

If the Participants are incapacitated and leave the Company due to work injury, the Remuneration Committee shall decide that the Restricted Shares granted to the Participants shall be carried out in accordance with the procedures stipulated in the Incentive Scheme which takes effect before the occurrence thereof, and the personal performance assessment results will no longer be included in the attribution conditions; or the Restricted Shares that have been attributed shall not be handled and the Company shall cancel his/her Restricted Shares that have been granted but have not yet been attributed.
If the Participants leave the Company, which is not due to the incapability arising from work injury, the Restricted Shares that have been attributed shall not be handled. The Restricted Shares that have been granted but have not yet been attributed shall not be attributed and shall lapse.

(v) Death of the Participants

If the Participants die due to their duty, the Remuneration Committee shall decide that the Restricted Shares granted to them shall be held by the designated property heir or legal heir on their behalf, and shall be carried out in accordance with the procedures stipulated in the Incentive Scheme which takes effect before their death, and the results of their personal performance evaluation shall not be included in the attribution conditions; or the Company shall cancel his/her Restricted Shares that have been granted but have not yet been attributed.
If the Participants die for other reasons, the Restricted Shares that have been attributed for the Participants shall not be handled. The Restricted Shares that have been granted but have not yet been attributed shall not be attributed and shall lapse.

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(vi) Change of Control of the Subsidiary where the Participants Work

If the Participants work in a subsidiary controlled by the Company, and if the Company loses control of the subsidiary and the Participants still work in the Company, the Restricted Shares that have been attributed shall not be handled. The Restricted Shares that have been granted but have not yet been attributed shall not be attributed and shall lapse.

(vii) Changes in Eligibility of Participants

If the Participant no longer meets the eligibility of the Participant due to any one of the following circumstances, the Restricted Shares that have been attributed shall not be handled; and the Restricted Shares that have been granted but have not yet been attributed shall not be attributed and shall lapse:

the Participant has been determined as an inappropriate candidate by the Stock Exchange within the most recent 12 months;
the Participant has been identified as an inappropriate candidate by the CSRC and its delegated institutions within the most recent 12 months;
the Participant has been subject to administrative punishment or market ban measures by the CSRC and its delegated institutions due to major breach of laws and regulations in the most recent 12 months;
the Participant has the circumstances stipulated in the Company Law that he/she shall not act as a director or member of the senior management of a company;
laws and regulations stipulate that the Participant shall not participate in the equity incentives of listed companies;
other circumstances as determined by the CSRC.

III. Others

The Remuneration Committee shall be responsible for making decisions on other unspecified situations and the methods of handling them.

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APPENDIX IV

CHAPTER XV SUPPLEMENTARY PROVISIONS

I. The Incentive Scheme shall become effective after being considered and approved at the general meeting of the Company;
II. The board of directors of the Company shall be responsible for the interpretation of the Incentive Scheme.

Shanghai Junshi Biosciences Co., Ltd.* Board of directors 30 September 2020

For identification purpose only

Should there be any discrepancy between the Chinese and English versions of the 2020 Restricted A Share Incentive Scheme, the Chinese version shall prevail.

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THE MANAGEMENT MEASURES FOR ASSESSMENT FOR THE IMPLEMENTATION OF THE 2020 RESTRICTED A SHARE INCENTIVE SCHEME

APPENDIX V

**SHANGHAI JUNSHI BIOSCIENCES CO., LTD.* THE MANAGEMENT MEASURES FOR ASSESSMENT FOR THE IMPLEMENTATION OF THE 2020 RESTRICTED SHARE INCENTIVE SCHEME**

To further perfect the corporate governance structure of Shanghai Junshi Biosciences Co., Ltd. (the “ Company ”), establish and improve the Company’s long-term incentive and restraint mechanism, attract and retain the Company’s management personnel, core technical personnel and other personnel, fully mobilize their enthusiasm and creativity, effectively strengthen the cohesion of the core team and core competitiveness of the enterprise, align the interests of shareholders, the Company and core teams effectively, bring their attention to the long-term development of the Company and ensure the achievement of the Company’s development strategies and business goals. Under the premise of fully safeguarding the interests of shareholders, the Company has formulated the 2020 Restricted Share Incentive Scheme (Draft) of Shanghai Junshi Biosciences Co., Ltd. (the “ Share Incentive Scheme ” or the “ Incentive Scheme ”) following the principles of income equivalent to contribution.

To ensure the smooth implementation of the Share Incentive Scheme of the Company, these measures are specially formulated according to the Company Law of the People’s Republic of China (《中華人民共和國公司法》), the Securities Law of the People’s Republic of China (《中華人民共和國證券法》), the Management Measures for Share Incentives of Listed Companies (《上市公司股權激勵管理辦法》) and other relevant laws, administrative regulations, regulatory documents, relevant articles of the Articles of Association as well as the actual situation of the Company.

Article 1 Purpose of Assessment

The purposes of these measures are to strengthen the planned implementation of the Company’s Share Incentive Scheme, quantify the specific objectives set by the Company’s Share Incentive Scheme, promote the scientific, standardized and institutionalized assessment management of Participants, and ensure the realization of the various performance indicators under the Company’s Share Incentive Scheme; at the same time, these measures are to guide the Participants to improve work performance and competence and evaluate employees’ performance and contribution in an objective and fair manner, to provide an objective and comprehensive evaluation basis for the implementation of the Incentive Scheme.

Article 2 Principles of Assessment

(i) Assessment and evaluation of the Participants shall be conducted in strict accordance with these measures following the principles of fairness, justice, and openness;

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THE MANAGEMENT MEASURES FOR ASSESSMENT FOR THE IMPLEMENTATION OF THE 2020 RESTRICTED A SHARE INCENTIVE SCHEME

(ii) The assessment indicators shall be combined with the Company’s medium and long-term development strategies and annual business objectives; as well as the work performance, work competence and work attitude of the Participants.

Article 3 Scope of Assessment

These measures apply to all Participants identified in the Incentive Scheme, including directors, senior management personnel, core technical staff and other persons considered the board of directors to be required to be incentivized of the Company (including its subsidiaries, the same applies below) but excluding the independent directors and supervisors of Shanghai Junshi. All Participants must have an employment or labour relationship with the Company or its subsidiaries at the time of grant under and during the assessment period of the Incentive Scheme.

Article 4 Assessment Body and Implementation Body

(i) The remuneration and appraisal committee of the board of directors (the “ Remuneration Committee ”) is responsible for organizing and implementing the Share Incentive Scheme;
(ii) The human resources department of the Company shall form an assessment team that is responsible for the specific assessment work and reporting to the Remuneration Committee;
(iii) Under the supervision of the internal audit department of the Company, the human resources department, finance department and other relevant departments of the Company are responsible for the collection and provision of relevant assessment data, as well as the authenticity and reliability of the data;
(iv) The board of directors of the Company is responsible for reviewing the assessment results.

Article 5 Performance Assessment Indicators and Standards

The attribution of the Restricted Shares that have been granted to the Participants will depend on the assessment results at both the Company level and at the level of the Participants.

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THE MANAGEMENT MEASURES FOR ASSESSMENT FOR THE IMPLEMENTATION OF THE 2020 RESTRICTED A SHARE INCENTIVE SCHEME

(i) Performance assessment requirements at the Company level

Under the Incentive Scheme, in the accounting years of 2020 to 2022, the Company’s performance indicators will be evaluated on an annual basis and the achievement of the performance assessment targets will be one of the attribution conditions for the Participants for the current year. The performance assessment objectives and attribution factors of the Incentive Scheme are shown in the following table:

Attribution Arrangement

Performance Target A Performance Target B Performance Target C Company Attribution Company Attribution Company Attribution Factor: 100% Factor: 80% Factor: 60%

Restricted Shares First The Company must meet all The Company must meet all The Company must meet all under the first attribution of the following conditions: of the following conditions: of the following conditions: grant tranche
Operating income: in the 1. Operating income: in the 1. Operating income: in the year 2020, the operating year 2020, the year 2020, the income of the Company Company’s operating Company’s operating shall not be less than income shall not be less income shall not be less RMB1.45 billion; than RMB1.35 billion; than RMB1.20 billion;
Preclinical project: in the 2. Preclinical project: in the 2. Preclinical project: in the year 2020, there shall be year 2020, there shall be year 2020, there shall be no less than 2 IND no less than 2 IND no less than 1 IND applications being filed applications being filed application being filed and accepted, and in and accepted, and in and accepted, and in which the Company which the Company which the Company owns not less than 50% owns not less than 50% owns not less than 50% interests; interests; interests;
Clinical development: in 3. Clinical development: in 3. Clinical development: in the year 2020, there the year 2020, there the year 2020, there shall be no less than 2 shall be no less than 2 shall be no less than 2 new drugs NDA or new drugs NDA or new drugs NDA or extended indications extended indications extended indications (sNDA) being filed and (sNDA) being filed and (sNDA) being filed and accepted, and in which accepted, and in which accepted, and in which the Company owns not the Company owns not the Company owns not less than 50% interests. less than 50% interests. less than 50% interests.

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THE MANAGEMENT MEASURES FOR ASSESSMENT FOR THE IMPLEMENTATION OF THE 2020 RESTRICTED A SHARE INCENTIVE SCHEME

Attribution Arrangement

Performance Target A Performance Target B Performance Target C Company Attribution Company Attribution Company Attribution Factor: 100% Factor: 80% Factor: 60%

Second The Company must meet all The Company must meet all The Company must meet all attribution of the following conditions: of the following conditions: of the following conditions: tranche

Operating income: in the 1. Operating income: in the 1. Operating income: in the years 2020-2021, the years 2020-2021, the years 2020-2021, the Company’s accumulated Company’s accumulated Company’s accumulated operating income shall operating income shall operating income shall not be less than RMB3.6 not be less than RMB3.3 not be less than RMB2.8 billion; billion; billion;
Preclinical project: in the 2. Preclinical project: in the 2. Preclinical project: in the years 2020-2021, there years 2020-2021, there years 2020-2021, there shall be no less than 9 shall be no less than 7 shall be no less than 6 IND applications IND applications IND applications accumulatively being accumulatively being accumulatively being filed and accepted, and filed and accepted, and filed and accepted, and in which the Company in which the Company in which the Company owns not less than 50% owns not less than 50% owns not less than 50% interests; interests; interests;
Clinical development: in 3. Clinical development: in 3. Clinical development: in the years 2020-2021, the years 2020-2021, the years 2020-2021, there shall be no less there shall be no less there shall be no less than 6 new drugs NDA than 5 new drugs NDA than 4 new drugs NDA or extended indications or extended indications or extended indications (sNDA) accumulatively (sNDA) accumulatively (sNDA) accumulatively being filed and accepted, being filed and accepted, being filed and accepted, and in which the and in which the and in which the Company owns not less Company owns not less Company owns not less than 50% interests. than 50% interests. than 50% interests.

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THE MANAGEMENT MEASURES FOR ASSESSMENT FOR THE IMPLEMENTATION OF THE 2020 RESTRICTED A SHARE INCENTIVE SCHEME

Attribution Arrangement

Performance Target A Performance Target B Performance Target C Company Attribution Company Attribution Company Attribution Factor: 100% Factor: 80% Factor: 60%

Third The Company must meet all The Company must meet all The Company must meet all attribution of the following conditions: of the following conditions: of the following conditions: tranche

Operating income: in the 1. Operating income: in the 1. Operating income: in the years 2020-2022, the years 2020-2022, the years 2020-2022, the Company’s accumulated Company’s accumulated Company’s accumulated operating income shall operating income shall operating income shall not be less than RMB6.6 not be less than RMB5.7 not be less than RMB4.8 billion; billion; billion;
Preclinical project: in the 2. Preclinical project: in the 2. Preclinical project: in the years 2020-2022, there years 2020-2022, there years 2020-2022, there shall be no less than 16 shall be no less than 13 shall be no less than 11 IND applications IND applications IND applications accumulatively being accumulatively being accumulatively being filed and accepted, and filed and accepted, and filed and accepted, and in which the Company in which the Company in which the Company owns not less than 50% owns not less than 50% owns not less than 50% interests; interests; interests;
Clinical development: in 3. Clinical development: in 3. Clinical development: in the years 2020-2022, the years 2020-2022, the years 2020-2022, there shall be no less there shall be no less there shall be no less than 11 new drugs NDA than 9 new drugs NDA than 7 new drugs NDA or extended indications or extended indications or extended indications (sNDA) accumulatively (sNDA) accumulatively (sNDA) accumulatively being filed and accepted, being filed and accepted, being filed and accepted, and in which the and in which the and in which the Company owns not less Company owns not less Company owns not less than 50% interests. than 50% interests. than 50% interests.

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THE MANAGEMENT MEASURES FOR ASSESSMENT FOR THE IMPLEMENTATION OF THE 2020 RESTRICTED A SHARE INCENTIVE SCHEME

Attribution Arrangement

Performance Target A Performance Target B Performance Target C Company Attribution Company Attribution Company Attribution Factor: 100% Factor: 80% Factor: 60%

Restricted Shares First The Company must meet all The Company must meet all The Company must meet all reserved to be attribution of the following conditions: of the following conditions: of the following conditions: granted tranche

Operating income: in the 1. Operating income: in the 1. Operating income: in the years 2020-2021, the years 2020-2021, the years 2020-2021, the Company’s accumulated Company’s accumulated Company’s accumulated operating income shall operating income shall operating income shall not be less than RMB3.6 not be less than RMB3.3 not be less than RMB2.8 billion; billion; billion;
Preclinical project: in the 2. Preclinical project: in the 2. Preclinical project: in the years 2020-2021, there years 2020-2021, there years 2020-2021, there shall be no less than 9 shall be no less than 7 shall be no less than 6 IND applications IND applications IND applications accumulatively being accumulatively being accumulatively being filed and accepted, and filed and accepted, and filed and accepted, and in which the Company in which the Company in which the Company owns not less than 50% owns not less than 50% owns not less than 50% interests; interests; interests;
Clinical development: in 3. Clinical development: in 3. Clinical development: in the years 2020-2021, the years 2020-2021, the years 2020-2021, there shall be no less there shall be no less there shall be no less than 6 new drugs NDA than 5 new drugs NDA than 4 new drugs NDA or extended indications or extended indications or extended indications (sNDA) accumulatively (sNDA) accumulatively (sNDA) accumulatively being filed and accepted, being filed and accepted, being filed and accepted, and in which the and in which the and in which the Company owns not less Company owns not less Company owns not less than 50% interests. than 50% interests. than 50% interests.

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THE MANAGEMENT MEASURES FOR ASSESSMENT FOR THE IMPLEMENTATION OF THE 2020 RESTRICTED A SHARE INCENTIVE SCHEME

Attribution Arrangement

Performance Target A Performance Target B Performance Target C Company Attribution Company Attribution Company Attribution Factor: 100% Factor: 80% Factor: 60%

Second The Company must meet all The Company must meet all The Company must meet all attribution of the following conditions: of the following conditions: of the following conditions: tranche

Operating income: in the 1. Operating income: in the 1. Operating income: in the years 2020-2022, the years 2020-2022, the years 2020-2022, the Company’s accumulated Company’s accumulated Company’s accumulated operating income shall operating income shall operating income shall not be less than RMB6.6 not be less than RMB5.7 not be less than RMB4.8 billion; billion; billion;
Preclinical project: in the 2. Preclinical project: in the 2. Preclinical project: in the years 2020-2022, there years 2020-2022, there years 2020-2022, there shall be no less than 16 shall be no less than 13 shall be no less than 11 IND applications IND applications IND applications accumulatively being accumulatively being accumulatively being filed and accepted, and filed and accepted, and filed and accepted, and in which the Company in which the Company in which the Company owns not less than 50% owns not less than 50% owns not less than 50% interests; interests; interests;
Clinical development: in 3. Clinical development: in 3. Clinical development: in the years 2020-2022, the years 2020-2022, the years 2020-2022, there shall be no less there shall be no less there shall be no less than 11 new drugs NDA than 9 new drugs NDA than 7 new drugs NDA or extended indications or extended indications or extended indications (sNDA) accumulatively (sNDA) accumulatively (sNDA) accumulatively being filed and accepted, being filed and accepted, being filed and accepted, and in which the and in which the and in which the Company owns not less Company owns not less Company owns not less than 50% interests. than 50% interests. than 50% interests.

Note: The above “operating income” refers to the audited operating income of the Listed Company.

During the attribution period, the Company will handle the registration of attributed Restricted Shares for Participants who have satisfied the attribution conditions. In the event that the performance assessment requirements at the Company level have not been reached or have been partially reached within the respective attribution tranche, the Restricted Shares that have been granted but are yet to be attributed to the Participants for the current assessment year shall not be attributed and shall lapse.

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THE MANAGEMENT MEASURES FOR ASSESSMENT FOR THE IMPLEMENTATION OF THE 2020 RESTRICTED A SHARE INCENTIVE SCHEME

APPENDIX V

(ii) Performance assessment requirements at the individual level of Participants:

The individual assessment of Participants is carried out according to the internal performance assessment system of the Company. The results of the individual assessment of Participants are divided into four levels: “excellence”, “good”, “qualified”, and “unqualified” and the corresponding attribution are as follows:

Assessment Level	Excellence	Good	Qualified	Unqualified
Individual Attribution Factor	100%	80%	60%	0

Under the premise of the Company achieving its performance target C (inclusive) or higher, the number of actual attributable Restricted Shares to the Participant for the current year = the number attributable to the individual under the scheme for the current year × company attribution factor × individual attribution factor.

The Restricted Shares of a Participant that have been granted but are yet to be attributed or fully attributed for the current year due to assessment shall not be attributed shall lapse, and shall not be deferred to the next year.

Article 6 Assessment Procedures

The human resources department of the Company is responsible for the specific assessment work under the guidance of the Remuneration Committee and retaining the assessment results. On this basis, a performance assessment report shall be prepared and submitted to the Remuneration Committee, and the board of directors of the Company is responsible for reviewing the assessment results.

Article 7 Period and Times of Assessment

(i) Assessment Period

The accounting year prior to attribution of each tranche of Restricted Shares of the Participants.

(ii) Number of times of assessment

The assessment years of the Incentive Scheme are the three accounting years of 2020-2022, and the assessment shall be conducted once a year.

Article 8 Management of Assessment Results

(i) Feedback and application of assessment results

The assessment targets are entitled to know their own assessment results. The direct supervisor of the employees shall inform the assessment targets of the assessment results within 5 working days after the completion of the assessment.

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THE MANAGEMENT MEASURES FOR ASSESSMENT FOR THE IMPLEMENTATION OF THE 2020 RESTRICTED A SHARE INCENTIVE SCHEME

If the assessment targets have objections against the assessment results, they can communicate with the human resources department to resolve. If the objections cannot be resolved through communication, the assessment objects may appeal to the Remuneration Committee which shall review and determine the final assessment result or level within 10 working days.
The assessment results shall be the basis for the attribution of Restricted Shares.

(ii) Filing of assessment records

After the completion of assessment, the human resources department shall retain all the records of the performance assessment. The assessment results shall be kept as confidential information.
In order to ensure the validity of the performance records, the performance records are not allowed to be altered. If the records are to be revised or re-recorded, it must be signed by the parties concerned.
The performance assessment records shall be kept for 10 years. Documents and records that exceed the storage period shall be uniformly destroyed by the Remuneration Committee.

Article 9 Supplementary Provisions

(i) The board of directors is responsible for the formulation, interpretation and revision of these measures.
(ii) If the relevant provisions of these measures conflict with the relevant national laws, administrative regulations, regulatory documents, and the draft of the Share Incentive Scheme, the relevant national laws, administrative regulations, regulatory documents, and the draft of the Share Incentive Scheme shall prevail. If there are no clear provisions in these measures, the relevant national laws, administrative regulations, regulatory documents, and the Share Incentive Scheme shall be implemented.
(iii) These measures shall be subject to consideration and approval at the general meeting and become effective upon the Share Incentive Scheme becoming effective.

Shanghai Junshi Biosciences Co., Ltd.* Board of Directors 30 September 2020

For identification purpose only

Should there be any discrepancy between the Chinese and English versions of the Management Measures for Assessment for the Implementation of the 2020 Restricted Share Incentive Scheme, the Chinese version shall prevail.

– 183 –

GENERAL INFORMATION

APPENDIX VI

1. RESPONSIBILITY STATEMENT

This circular, for which the Directors collectively and individually accept full responsibility, includes particulars given in compliance with the Hong Kong Listing Rules for the purpose of giving information with regard to the Company. The Directors, having made all reasonable enquiries, confirm that to the best of their knowledge and belief, the information contained in this circular is accurate and complete in all material respects and not misleading or deceptive, and there are no other matters the omission of which would make any statement herein or this circular misleading.

2. DISCLOSURE OF INTERESTS

Directors’, chief executives’ and Supervisors’ interests and short positions in shares, underlying shares and debentures

As at the Latest Practicable Date, the following Directors, Supervisors or chief executives of the Company had interests and/or short positions in the Shares, underlying Shares or debentures of the Company or its associated corporations (within the meaning of Part XV of the SFO) which will have to be notified to the Company and the Hong Kong Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests or short positions which he/she is taken or deemed to have under such provisions of the SFO) or which will be required, pursuant to Section 352 of the SFO, to be recorded in the register referred to therein, or will be required, pursuant to the Model Code, to be notified to the Company and the Hong Kong Stock Exchange.

			Number of	Approximate	Approximate
Name of Director/			Shares/	percentage in	percentage in
Supervisor/Chief			Underlying	relevant class	total share
Executive	Nature of interests	Class of Shares	Shares(1)	of Shares(1)	capital(1)
Xiong Jun	Beneficial owner	A Shares	87,252,968 (L)	12.67%	10.01%
	Parties acting in	A Shares	129,978,568 (L)	18.88%	14.92%
	concert/Interest in
	controlled
	corporations(2)
	Beneficial owner	H Shares	2,600 (L)	0.00%	0.00%
Feng Hui	Beneficial owner	A Shares	13,140,000 (L)	1.91%	1.51%
Li Cong	Beneficial owner	A Shares	3,657,600 (L)	0.53%	0.42%
Tang Yi	Beneficial owner	A Shares	7,774,500 (L)	1.13%	0.89%
	Interest in controlled	A Shares	195,550,736 (L)	28.40%	22.44%
	corporations(3)
	Interest in controlled	H Shares	2,600 (L)	0.00%	0.00%
	corporations(3)

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GENERAL INFORMATION

APPENDIX VI

			Number of	Approximate	Approximate
Name of Director/			Shares/	percentage in	percentage in
Supervisor/Chief			Underlying	relevant class	total share
Executive	Nature of interests	Class of Shares	Shares(1)	of Shares(1)	capital(1)
Zhang Zhuobing	Interest of spouse(4)	A Shares	8,608,000 (L)	1.25%	0.99%
Lin Lijun	Interest in controlled	A Shares	78,852,000 (L)	11.45%	9.05%
	corporations(5)
	Founder of a	H Shares	37,189,000 (L)	20.35%	4.27%
	discretionary trust
	who can influence
	how the trustee
	exercises his
	discretion(5)

Notes:

As at the Latest Practicable Date, the Company had 871,276,500 issued Shares, comprising 688,530,000 A Shares and 182,746,500 H Shares.
Pursuant to (i) a concert party agreement dated 25 December 2017 entered into among Mr. Xiong Jun, Mr. Xiong Fengxiang, Suzhou Ruiyuan Shengben Biological Medicine Management Partnership (LP) (“ Suzhou Ruiyuan ”), Suzhou Benyu Tianyuan Biological Technology Partnership (LP) (“ Suzhou Benyu ”), Shanghai Baoying Asset Management Co., Ltd. (“ Shanghai Baoying ”), Meng Xiaojun, Gao Shufang, Zhuhai Huapu Investment Management Co., Ltd. and Zhao Yun (the “ 2017 Concert Party Agreement ”), Mr. Xiong Jun was deemed to be interested in an aggregate of 108,297,768 A Shares held by the other parties to the 2017 Concert Party Agreement as at the Latest Practicable Date under the SFO (including the 41,060,000 A Shares directly held by Mr. Xiong Fengxiang, the father of Mr. Xiong Jun); and (ii) a concert party agreement dated 26 July 2019 entered into between Mr. Xiong Jun and Ms. Zhou Yuqing (the “ 2019 Concert Party Agreement ”), Mr. Xiong Jun was further deemed to be interested in the 21,680,800 A Shares held by the other party to the 2019 Concert Party Agreement as at the Latest Practicable Date under the SFO.

As at the Latest Practicable Date, Mr. Xiong Jun (i) was an executive director and was directly interested in 20% of the equity share capital of Shanghai Baoying, which directly held 4,372,144 A Shares; Shanghai Baoying was also a party to the 2017 Concert Party Agreement; (ii) was the chairman of the board of directors and was directly interested in 40% of the equity share capital of Shenzhen Qianhai Yuanben Equity Investment Fund Management Co., Ltd. (“ Shenzhen Yuanben* ”), which was the general partner of each of Suzhou Benyu and Suzhou Ruiyuan, which in turn directly held 4,600,000 and 43,584,000 A Shares, respectively, and were each a party to the 2017 Concert Party Agreement. Shenzhen Yuanben also held a limited partner interest of approximately 86.28% of Suzhou Benyu. Mr. Xiong Jun was deemed to be interested in an aggregate of such 52,556,144 A Shares under the SFO.

As at the Latest Practicable Date, Mr. Tang Yi directly held 7,774,500 A Shares. Mr. Tang Yi was a director of and directly interested in 60% of the equity share capital of Shenzhen Yuanben, which was the general partner of each of Suzhou Benyu and Suzhou Ruiyuan. Shenzhen Yuanben also held a limited partner interest of approximately 86.28% of Suzhou Benyu. Therefore, he was deemed to be interested in Shares in which Suzhou Benyu and Suzhou Ruiyuan were interested (including the Shares they are deemed to be interested in pursuant to the 2017 Concert Party Agreement) under the SFO.

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GENERAL INFORMATION

APPENDIX VI

As at the Latest Practicable Date, Mr. Zhang Zhuobing’s spouse, Ms. Liu Xiaoling, directly held 8,608,000 A Shares.
As at the Latest Practicable Date, Shanghai Tanying Investment Partnership (“ Shanghai Tanying ”) was directly interested in 76,590,000 A Shares and Shanghai Tanzheng Investment Partnership (“ Shanghai Tanzheng ”) was directly interested 2,262,000 A Shares. Mr. Lin Lijun was a director and wholly interested in Shanghai Shengge Asset Management Co., Ltd. (“ Shanghai Shengge ”), which was the general partner of Shanghai Tanying and Shanghai Tanzheng. Mr. Lin Lijun was also the general partner of Shanghai Shengdao Investment Partnership, which was the general partner of Shanghai Lejin Investment Partnership, which in turn held 99.99% interest in Shanghai Tanying. Therefore, Mr. Lin Lijun was deemed to be interested in the Shares held by Shanghai Tanying and Shanghai Tanzheng under the SFO.

As at the Latest Practicable Date, Loyal Valley Capital Advantage Fund LP (“ LVC Fund I ”), Loyal Valley Capital Advantage Fund II LP (“ LVC Fund II ”) and LVC Renaissance Fund LP (“ LVC Renaissance Fund ”, together with LVC Fund I and LVC Fund II, the “ LVC Funds ”) directly held 10,106,000 H Shares, 12,127,000 H Shares and 14,956,000 H Shares, respectively. Loyal Valley Capital Advantage Fund GP Limited (“ LVC Fund I GP ”) was the general partner of LVC Fund I, Loyal Valley Capital Advantage Fund II Limited (“ LVC Fund II GP ”) was the general partner of LVC Fund II and LVC Renaissance Limited (“ LVC Renaissance GP ”) was the general partner of LVC Renaissance Fund. Each of LVC Fund I GP, LVC Fund II GP and LVC Renaissance GP was wholly-owned by LVC Holdings Limited, which was wholly-owned by LVC Innovate Limited (previously known as LVC Bytes Limited), which was in turn wholly-owned by Jovial Champion Investments Limited, which was wholly-owned by Vistra Trust (Singapore) Pte. Limited, which was controlled by Mr. Lin Lijun. Also, LVC Renaissance Fund was owned as to (i) 20.13% by Golden Valley Global Limited, which was wholly-owned by Shanghai Lehong Investment Partnership (“ Shanghai Lehong ”). Shanghai Tanying (a controlled corporation of Mr. Lin Lijun) held 99.99% interest in Shanghai Lehong and Shanghai Shengge (a corporation wholly-owned by Mr. Lin Lijun) was the general partner of Shanghai Lehong; and (ii) 33.28% by Loyal Valley Innovation Capital (HK) Limited, which was wholly-owned by Mr. Lin Lijun. Therefore, Mr. Lin Lijun was deemed to be interested in an aggregate of 37,189,000 H Shares held by the LVC Funds under the SFO.

Save as disclosed above, as at the Latest Practicable Date, none of the Directors, Supervisors and the chief executive of the Company had or was deemed to have any interests or short positions in the Shares, underlying Shares or debentures of the Company or its associated corporations (within the meaning of Part XV of the SFO) that was required to be recorded in the register of the Company required to be kept under Section 352 of the SFO, or as otherwise notified to the Company and Hong Kong Stock Exchange pursuant to the Model Code.

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GENERAL INFORMATION

APPENDIX VI

Interests and short positions of substantial shareholders in shares and underlying shares of the Company

As at the Latest Practicable Date, so far as is known to the Directors, the following persons (other than the Directors, the Supervisors or chief executives of the Company) had interests or short positions in the Shares or underlying Shares of the Company which would be required to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO and which were recorded in the register required to be kept by the Company pursuant to section 336 of the SFO:

				Approximate	Approximate
			Number of	percentage in	percentage in
			Underlying	relevant class	total share
Name of Shareholder	Nature of interests	Class of Shares	Shares(1)	of Shares(2)	capital(2)
Xiong Fengxiang(3)(4)	Beneficial owner	A Shares	41,060,000 (L)	5.96%	4.71%
	Parties acting in	A Shares	154,490,736 (L)	22.44%	17.73%
	Concert
Suzhou Ruiyuan Shengben	Beneficial owner	A Shares	43,584,000 (L)	6.33%	5.00%
Biological Medicine	Parties acting in	A Shares	151,966,736 (L)	22.07%	17.44%
Management Partnership	Concert
(LP)*
蘇州瑞源盛本生物醫藥管理合
夥企業(有限合夥))(4)
Suzhou Benyu Tianyuan	Beneficial owner	A Shares	4,600,000 (L)	0.67%	0.53%
Biological Technology	Parties acting in	A Shares	190,950,736 (L)	27.73%	21.92%
Partnership (LP)*	Concert
蘇州本裕天源生物科技合夥企
業(有限合夥)(4)
Shanghai Baoying Asset	Beneficial owner	A Shares	4,372,144 (L)	0.63%	0.50%
Management Co., Ltd.*	Parties acting in	A Shares	191,178,592 (L)	27.77%	21.94%
上海寶盈資產管理有限公司(4)	Concert
Meng Xiaojun	Beneficial owner	A Shares	4,288,400 (L)	0.62%	0.49%
孟曉君(4)	Parties acting in	A Shares	191,262,336 (L)	27.78%	21.95%
	Concert
Gao Shufang	Beneficial owner	A Shares	3,789,720 (L)	0.55%	0.43%
高淑芳(4)	Parties acting in	A Shares	191,761,016 (L)	27.85%	22.01%
	Concert
Zhuhai Huapu Investment	Beneficial owner	A Shares	3,719,504 (L)	0.54%	0.43%
Management Co., Ltd.*	Parties acting in	A Shares	191,831,232 (L)	27.86%	22.02%
珠海華樸投資管理有限公司(4)	Concert
Zhao Yun	Beneficial owner	A Shares	2,884,000 (L)	0.42%	0.33%
趙雲(4)	Parties acting in	A Shares	192,666,736 (L)	27.98%	22.11%
	Concert

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GENERAL INFORMATION

APPENDIX VI

				Approximate	Approximate
			Number of	percentage in	percentage in
			Underlying	relevant class	total share
Name of Shareholder	Nature of interests	Class of Shares	Shares(1)	of Shares(2)	capital(2)
Zhou Yuqing	Beneficial owner	A Shares	21,680,800 (L)	3.15%	2.49%
周玉清(5)	Parties acting in	A Shares	87,252,968 (L)	12.67%	10.01%
	Concert
Shanghai Tanying Investment	Beneficial owner	A Shares	76,590,000 (L)	11.12%	8.79%
Partnership(6)
Shanghai Shengge Asset	Interest of controlled	A Shares	78,852,000 (L)	11.45%	9.05%
Management Co., Ltd.(6)	corporation
Shanghai Lejin Investment	Interest of controlled	A Shares	76,590,000 (L)	11.12%	8.79%
Partnership(6)	corporation
Shanghai Shengdao Investment	Interest of controlled	A Shares	76,590,000 (L)	11.12%	8.79%
Partnership(6)	corporation
Gong Ruilin	Interest of controlled	A Shares	76,590,000 (L)	11.12%	8.79%
龔瑞琳	corporation(6)(8)
	Interest of spouse(8)	A Shares	2,262,000 (L)	0.33%	0.26%
	Interest of	H Shares	37,189,000 (L)	20.35%	4.27%
	spouse(7)(8)
Loyal Valley Capital	Beneficial owner	H Shares	10,106,000 (L)	5.53%	1.16%
Advantage Fund LP(7)(9)
Loyal Valley Capital	Interest of controlled	H Shares	10,106,000 (L)	5.53%	1.16%
Advantage Fund GP	corporation
Limited(7)
Loyal Valley Capital	Beneficial owner	H Shares	12,127,000 (L)	6.64%	1.39%
Advantage Fund II LP(7)(10)
Loyal Valley Capital	Interest of controlled	H Shares	12,127,000 (L)	6.64%	1.39%
Advantage Fund II	corporation
Limited(7)
LVC Renaissance Fund LP(7)	Beneficial owner	H Shares	14,956,000 (L)	8.18%	1.72%
LVC Renaissance Limited(7)	Interest of controlled	H Shares	14,956,000 (L)	8.18%	1.72%
	corporation
LVC Holdings Limited(7)	Interest of controlled	H Shares	22,233,000 (L)	12.17%	2.55%
	corporation
LVC Management Holdings	Interest of controlled	H Shares	22,233,000 (L)	12.17%	2.55%
Limited(7)	corporation
LVC Bytes Limited (now	Interest of controlled	H Shares	37,189,000 (L)	20.35%	4.27%
known as LVC Innovate	corporation
Limited)(7)
Jovial Champion Investments	Interest of controlled	H Shares	37,189,000 (L)	20.35%	4.27%
Limited(7)	corporation
Vistra Trust (Singapore) Pte.	Trustee	H Shares	37,189,000 (L)	20.35%	4.27%
Limited(7)

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GENERAL INFORMATION

APPENDIX VI

				Approximate	Approximate
			Number of	percentage in	percentage in
			Underlying	relevant class	total share
Name of Shareholder	Nature of interests	Class of Shares	Shares(1)	of Shares(2)	capital(2)
Sun Yongjian	Interest of controlled	H Shares	10,106,000 (L)	5.53%	1.16%
孫勇堅(9)	corporation
Eminent Azure Limited(9)	Interest of controlled	H Shares	10,106,000 (L)	5.53%	1.16%
	corporation
Prosperous Wealth Global	Interest of controlled	H Shares	10,106,000 (L)	5.53%	1.16%
Limited(9)	corporation
Highbury Investment Pte	Beneficial owner	H Shares	15,226,289 (L)	8.33%	1.39%
Ltd(10)	Interest of controlled	H Shares	12,127,000 (L)	6.64%	1.39%
	corporation
GIC (Ventures) Pte. Ltd.(10)	Interest of controlled	H Shares	27,353,289 (L)	14.97%	3.14%
	corporation
GIC Special Investments	Investment manager	H Shares	27,353,289 (L)	14.97%	3.14%
Private Limited(10)
GIC Private Limited(10)	Interest of controlled	H Shares	28,986,600 (L)	15.86%	3.33%
	corporation/
	Investment manager
Wang Shujun	Beneficial owner	H Shares	13,339,000 (L)	7.30%	1.53%
王樹君
Yu Jianwu	Beneficial owner	H Shares	13,339,000 (L)	7.30%	1.53%
俞建午
Gaoling Fund, L.P.(11)	Beneficial owner	H Shares	10,715,000 (L)	5.86%	1.23%
Hillhouse Capital Advisors,	Investment manager	H Shares	11,400,000 (L)	6.24%	1.31%
Ltd.(11)
China International Capital	Beneficial owner	H Shares	9,271,700 (L)	5.07%	1.06%
Corporation Limited(12)

Notes:

The letter “L” denotes the long position in the Shares, the letter “S” denotes short position in the Shares and the letter “P” denotes lending pool.
As at the Latest Practicable Date, the Company had an issued share capital of 871,276,500 Shares, comprising 688,530,000 A Shares and 182,746,500 H Shares.
As at the Latest Practicable Date, Mr. Xiong Fengxiang directly held 41,060,000 A Shares. Pursuant to the 2017 Concert Party Agreement, Mr. Xiong Fengxiang was deemed to be interested in an aggregate of 154,490,736 A Shares held by the other parties to the 2017 Concert Party Agreement under the SFO (including the 87,252,968 A Shares directly held by Mr. Xiong Jun, son of Mr. Xiong Fengxiang).
Each of them is a party to the 2017 Concert Party Agreement, and was therefore deemed to be interested in the A Shares held by the other parties to the 2017 Concert Party Agreement under the SFO.
Ms. Zhou Yuqing is a party to the 2019 Concert Party Agreement, and was therefore deemed to be interested in the A Shares held by Mr. Xiong Jun who was the other party to the 2019 Concert Party Agreement under the SFO.

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GENERAL INFORMATION

APPENDIX VI

As at the Latest Practicable Date, Shanghai Tanying Investment Partnership (“ Shanghai Tanying ”) was directly interested in 76,590,000 A Shares. Shanghai Shengge Asset Management Co., Ltd. (“ Shanghai Shengge ”) was the general partner of Shanghai Tanying. Shanghai Shengdao Investment Partnership (“ Shanghai Shengdao ”) was the general partner of Shanghai Lejin Investment Partnership (“ Shanghai Lejin ”), which in turn held 99.99% interest in Shanghai Tanying. Therefore, each of Shanghai Shengge, Shanghai Shengdao and Shanghai Lejin was deemed to be interested in the 76,590,000 A Shares held by Shanghai Tanying under the SFO. Shanghai Shengge was also the general partner of Shanghai Tanzheng Investment Partnership (“ Shanghai Tanzheng ”), which directly held 2,262,000 A Shares. Therefore, Shanghai Shengge was also deemed to be interested in the A Shares held by Shanghai Tanzheng under the SFO.
As at the Latest Practicable Date, Loyal Valley Capital Advantage Fund LP (“ LVC Fund I ”), Loyal Valley Capital Advantage Fund II LP (“ LVC Fund II ”) and LVC Renaissance Fund LP (“ LVC Renaissance Fund ”, together with LVC Fund I and LVC Fund II, the “ LVC Funds ”) directly held 10,106,000 H Shares, 12,127,000 H Shares and 14,956,000 H Shares, respectively. Loyal Valley Capital Advantage Fund GP Limited (“ LVC Fund I GP ”) was the general partner of LVC Fund I and was deemed to be interested in the H Shares held by it. Loyal Valley Capital Advantage Fund II Limited (“ LVC Fund II GP ”) was the general partner of LVC Fund II and was deemed to be interested in the H Shares held by it. LVC Renaissance Limited (“ LVC Renaissance GP ”) was the general partner of LVC Renaissance Fund and was deemed to be interested in the H Shares held by it.

Each of LVC Fund I GP and LVC Fund II GP was wholly-owned by LVC Holdings Limited, which was wholly-owned by LVC Management Holdings Limited. Therefore, each of LVC Holdings Limited and LVC Management Holdings Limited was deemed to be interested in the aggregate H Shares held by LVC Fund I and LVC Fund II. Each of LVC Fund I GP, LVC Fund II GP and LVC Renaissance GP was directly or indirectly wholly-owned by LVC Innovate Limited (previously known as LVC Bytes Limited), which was wholly-owned by Jovial Champion Investments Limited, which was in turn wholly-owned by Vistra Trust (Singapore) Pte. Limited. Therefore, each of LVC Innovate Limited (previously known as LVC Bytes Limited), Jovial Champion Investments Limited and Vistra Trust (Singapore) Pte. Limited was deemed to be interested in the aggregate H Shares held by the LVC Funds under the SFO.

Ms. Gong Ruilin is the spouse of Mr. Lin Lijun and was therefore deemed to be interested in the Shares in which he was interested under the SFO.
As at the Latest Practicable Date, Sun Yongjian wholly-owned Eminent Azure Limited, which wholly-owned Prosperous Wealth Global Limited, which held 33.34% interest in LVC Fund I. Each of them was therefore deemed to be interested in the 10,106,000 H Shares held by LVC Fund I under the SFO.
As at the Latest Practicable Date, Highbury Investment Pte Ltd (“ Highbury ”) directly held 15,226,289 H Shares. Highbury also held 90.90% interest in LVC Fund II and was deemed to be interested in the 12,127,000 H Shares held by LVC Fund II. Highbury was wholly-owned by GIC (Ventures) Pte. Ltd. (“ GIC Ventures ”), which was wholly-owned by GIC Special Investments Private Limited (“ GIC SIPL ”), which was in turn wholly-owned by GIC Private Limited (“ GIC Private ”). Therefore, each of GIC Ventures, GIC SIPL and GIC Private was interested in the H Shares in which Highbury was interested under the SFO.
As at the Latest Practicable Date, Hillhouse Capital Advisors, Ltd. controlled Gaoling Fund, L.P. and YHG Investment, L.P. and was therefore deemed to be interested in the 10,715,000 H Shares and 685,000 H Shares held by Gaoling Fund, L.P. and YHG Investment, L.P., respectively under the SFO.
As at the Latest Practicable Date, China International Capital Corporation Limited (“ CICC ”) controlled China International Capital Corporation Hong Kong Securities Limited (“ CICC Securities ”), which directly held 8,871,700 H Shares, and controlled CICC Financial Trading Limited (“ CICC Financial Trading ”), which directly held 400,000 H Shares. Therefore, CICC was deemed to be interested in the H Shares in which CICC Securities and CICC Financial Trading are interested under the SFO.

Save as disclosed above, as at the Latest Practicable Date, the Directors were not aware of any persons (other than the Directors, the Supervisors or chief executives of the Company) who had interests and/or short positions in the Shares or underlying Shares of the Company which would be required to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO and which were recorded in the register required to be kept by the Company pursuant to section 336 of the SFO.

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GENERAL INFORMATION

APPENDIX VI

3. COMPETING INTERESTS

As at the Latest Practicable Date, none of the Directors, proposed Director, and their respective associates had any interest in a business which competes or is likely to compete with the business of the Group save as the below:

Dr. Chen Lieping, an Independent Non-executive Director, is the chairman of the board of directors and directly interested in 60% of the equity interest of Fuzhou Tuoxin Tiancheng Biological Technology Co., Ltd. (福州拓新天成生物科技有限公司) (“ Fuzhou Tuoxin* ”), which was a limited liability company established in the PRC on 17 April 2017 with a registered capital of RMB2 million. According to its business licence, Fuzhou Tuoxin is licensed to engage in business activities including, among others, R&D in biological and pharmaceutical areas. As confirmed by Dr. Chen, Fuzhou Tuoxin focused on the area of cellular immunotherapy in practice and it currently maintains a minimal operation with no substantial business. The Company is of the view that as Fuzhou Tuoxin has no substantial business operation or R&D activities, Fuzhou Tuoxin is not in competition with the Group. Dr. Chen has undertaken to the Company to keep the Company promptly and fully informed of his business or other activities which would or is likely to be in conflict or in competition (or may potentially compete) with the Group.

Dr. Chen is a director and directly interested in 15% of the equity interest of Dayou Huaxia Biotech Medical Group Co. Ltd. (大有華夏生物醫藥集團有限公司) (“ Dayou Huaxia”* ), which was a limited liability company established in the PRC on 27 September 2016 with a registered capital of RMB300 million. According to its business licence, Dayou Huaxia is licensed to engage in business activities including, among others, R&D in biopharmaceutical technology and diagnostic technology, medical research and tests. As confirmed by Dr. Chen, Dayou Huaxia is engaged in development of new antibody drug candidates and immunotherapy in practice, and it is currently at an early stage of R&D, and as of the Latest Practicable Date, it had not registered or applied for registration of any patents, and there is currently no overlap between the Group’s biologic drug candidates and those of Dayou Huaxia. The Company is of the view that since Dayou Huaxia is only at an early stage of R&D and with reference to the progress the Group has already achieved, there is no actual competition between the Group and Dayou Huaxia, notwithstanding that there may be potential competition in the future if Dayou Huaxia achieves any significant advancement in their R&D.

4. DIRECTORS’ AND SUPERVISORS’ INTEREST IN ASSETS OR CONTRACTS

As at the Latest Practicable Date, none of the Directors, proposed Director or the Supervisors: (a) had any direct or indirect interest in any assets acquired or disposed of by or leased to, or proposed to be acquired or disposed of by or leased to any member of the Group since 31 December 2019, being the date to which the latest published audited consolidated financial statements of the Group were made up; or (b) was materially interested in any contract or arrangement subsisting as at the Latest Practicable Date which was significant in relation to the business of the Group.

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APPENDIX VI

5. MATERIAL ADVERSE CHANGES

As at the Latest Practicable Date, the Directors were not aware of any material adverse change in the financial or trading position of the Group since 31 December 2019, being the date to which the latest published audited consolidated financial statements of the Group were made up.

6. SERVICE CONTRACTS OF DIRECTORS AND SUPERVISORS

As at the Latest Practicable Date, none of the Directors or Supervisors has entered into or intends to enter into a service contract with any member of the Group (other than contracts expiring or terminable by the relevant employer within one year without payment of compensation (other than statutory compensation)).

7. MATERIAL LITIGATION

As at the Latest Practicable Date, neither the Company nor any of its subsidiaries was engaged in any material litigation or claims. To the knowledge of the Directors, no member of the Group had any pending or threatened material litigation or claims.

8. MATERIAL CONTRACTS

During the two years prior to the date of this circular, the Group and its subsidiaries had entered into the following material contracts (except those entered into in the Group’s ordinary course of business):

(a) a cornerstone investment agreement dated 9 December 2018, entered into between the Company, Loyal Valley Capital Advantage Fund LP and China International Capital Corporation Hong Kong Securities Limited (“ CICC HK ”), pursuant to which Loyal Valley Capital Advantage Fund LP agreed to subscribe for the H Shares in the aggregate amount of US$25,000,000 at the offer price at the Company’s global offering;
(b) a cornerstone investment agreement dated 9 December 2018, entered into between the Company, Loyal Valley Capital Advantage Fund II LP and CICC HK, pursuant to which Loyal Valley Capital Advantage Fund II LP agreed to subscribe for the H Shares in the aggregate amount of US$30,000,000 at the offer price at the Company’s global offering;
(c) a cornerstone investment agreement dated 9 December 2018, entered into between the Company, LVC Renaissance Fund LP and CICC HK, pursuant to which LVC Renaissance Fund LP agreed to subscribe for the H Shares in the aggregate amount of US$37,000,000 at the offer price at the Company’s global offering;

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APPENDIX VI

(d) a cornerstone investment agreement dated 9 December 2018, entered into between the Company, Highbury Investment Pte Ltd and CICC HK, pursuant to which Highbury Investment Pte Ltd agreed to subscribe for the H Shares in the aggregate amount of US$45,000,000 at the offer price at the Company’s global offering;
(e) a cornerstone investment agreement dated 9 December 2018, entered into between the Company, Beijing Dinglianxin Technology Development Co., Ltd. (北京鼎聯鑫科技發展有限公司) and CICC HK, pursuant to which Beijing Dinglianxin Technology Development Co., Ltd. (北京鼎聯鑫科技發展有限公司) agreed to subscribe for the H Shares in the aggregate amount of US$21,000,000 at the offer price at the Company’s global offering;
(f) a cornerstone investment agreement dated 9 December 2018, entered into between the Company, Yu Jianwu (俞建午) and CICC HK, pursuant to which Yu Jianwu (俞建午) agreed to subscribe for the H Shares in the aggregate amount of US$33,000,000 at the offer price at the Company’s global offering;
(g) a cornerstone investment agreement dated 9 December 2018, entered into between the Company, Megastar Investment Management Limited, CICC HK and China Securities (International) Corporate Finance Company Limited (中信建投(國際)融資有限公司) pursuant to which Megastar Investment Management Limited agreed to subscribe for the H Shares in the aggregate amount of US$15,000,000 at the offer price at the Company’s global offering;
(h) a cornerstone investment agreement dated 9 December 2018, entered into between the Company, TR Capital III, L.P. and CICC HK, pursuant to which TR Capital III, L.P. agreed to subscribe for the H Shares in the aggregate amount of US$3,000,000 at the offer price at the Company’s global offering;
(i) a cornerstone investment agreement dated 9 December 2018, entered into between our Company, Wang Shujun (王樹君) and CICC HK, pursuant to which Wang Shujun (王樹君) agreed to subscribe for the H Shares in the aggregate amount of US$33,000,000 at the offer price at the Company’s global offering;
(j) the Hong Kong underwriting agreement dated 10 December 2018 relating to the Hong Kong public offering of the Company (details of which are set out in the Company’s prospectus dated 11 December 2018) entered into among the Company, Xiong Jun, Xiong Fengxiang, CICC HK, Citigroup Global Markets Asia Limited, Credit Suisse (Hong Kong) Limited, Fosun Hani Securities Limited, China Securities (International) Corporate Finance Company Limited and Caitong International Securities Company Limited;

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APPENDIX VI

(k) the international underwriting agreement dated 16 December 2018 relating to the international offering of the Company (details of which are set out in the Company’s prospectus dated 11 December 2018) entered into among the Company, Xiong Jun, Xiong Fengxiang, CICC HK, Citigroup Global Markets Asia Limited, Credit Suisse (Hong Kong) Limited and Fosun Hani Securities Limited;
(l) a technology transfer and cooperation agreement dated 19 February 2019 entered into between the Company and Runjia (Suzhou) Biosciences Co., Ltd.* (潤佳(蘇州) 醫藥科技有限公司) in relation to the acquisition of interests in the drug projects at a consideration of RMB150 million;
(m) an underwriting agreement dated 28 April 2020 in relation to the STAR Market Listing entered into among the Company, CICC, Guotai Junan Securities Co., Ltd. and Haitong Securities Co., Ltd.;
(n) a supplemental agreement dated 18 June 2020 to the underwriting agreement in relation to the STAR Market Listing entered into among the Company, CICC, Guotai Junan Securities Co., Ltd. and Haitong Securities Co., Ltd.;
(o) a strategic investor placing agreement in relation to the STAR Market Listing dated 19 June 2020 entered into among the Company, Shanghai Guotai Junan Securities Asset Management Co., Ltd. and CICC; and
(p) a joint venture agreement dated 19 August 2020 entered into between the Company and IMPACT Therapeutics, Inc.* (南京英派藥業有限公司) in relation to the formation of a joint venture company.

9. EXPERT’S QUALIFICATION AND CONSENT

The following is the qualification of the expert who has given advice and recommendations which are contained in this circular:

Name Qualification

Rainbow Capital

A licensed corporation to carry out Type 6 (advising on corporate finance) regulated activity under the SFO

The Independent Financial Adviser issued a letter dated 22 October 2020 in respect of its recommendation to the Independent Board Committee and the Independent Shareholders for the purpose of incorporation in this circular. As at the Latest Practicable Date, the Independent Financial Adviser has given and has not withdrawn its written consent to the issue of this circular with the inclusion of its letter in this circular, and the references to its name and opinion in the form and context in which they appear.

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GENERAL INFORMATION

APPENDIX VI

10. EXPERT’S INTERESTS

As at the Latest Practicable Date, the Independent Financial Adviser:

(a) did not have any direct or indirect interest in any assets acquired or disposed of by or leased to, or proposed to be acquired or disposed of by or leased to any member of the Group since 31 December 2019, being the date to which the latest published audited consolidated financial statements of the Group were made up; and
(b) did not have any shareholding in any member of the Group or the right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in any member of the Group.

11. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents are available for inspection during normal business hours on any working day (public holidays excepted) at the Company’s principal place of business in Hong Kong at Level 54, Hopewell Centre, 183 Queen’s Road East, Hong Kong for a period of 14 days (including the day) from the date of this circular:

(a) the letter from the Independent Board Committee as set out in pages 60 to 61 of this circular;
(b) the letter from the Independent Financial Adviser as set out in pages 62 to 86 of this circular;
(c) the material contracts referred to in the paragraph headed “8. Material Contracts” above;
(d) the written consent of Rainbow Capital, the Independent Financial Adviser, referred to in the paragraph headed “9. Expert’s Qualification and Consent” above; and
(e) this circular.

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GENERAL INFORMATION

APPENDIX VI

12. GENERAL INFORMATION

(a) The joint company secretaries of the Company are Ms. Chen Yingge and Ms. Wong Yik Han. Ms. Wong is a Chartered Secretary and an Associate of both The Hong Kong Institute of Chartered Secretaries and The Chartered Governance Institute (formerly The Institute of Chartered Secretaries and Administrators).
(b) The registered address of the Company is Level 13, Building 2, Nos. 36 and 58, Hai Qu Road, China (Shanghai) Pilot Free Trade Zone, the PRC. The principal place of business of the Company in Hong Kong is at Level 54, Hopewell Centre, 183 Queen’s Road East, Hong Kong.
(c) The H share registrar of the Company is Tricor Investor Services Limited located at Level 54, Hopewell Centre, 183 Queen’s Road East, Hong Kong.
(d) In the event of any inconsistency, the English version of this circular shall prevail over the Chinese version.

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NOTICE OF EGM

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement.

==> picture [96 x 35] intentionally omitted <==

SHANGHAI JUNSHI BIOSCIENCES CO., LTD.[] *上海君實生物醫藥科技股份有限公司**

(a joint stock company incorporated in the People’s Republic of China with limited liability) (Stock code: 1877)

NOTICE OF THE 2020 THIRD EXTRAORDINARY GENERAL MEETING

NOTICE IS HEREBY GIVEN that the 2020 third extraordinary general meeting (the “ EGM ”) of Shanghai Junshi Biosciences Co., Ltd. (the “ Company* ”) will be held at 13th Floor, Building 2, Nos. 36, 58 Haiqu Road, China (Shanghai) Pilot Free Trade Zone, Shanghai, the People’s Republic of China on Monday, 16 November 2020 at 2:00 p.m., to consider and, if thought fit, approve the following resolutions:

ORDINARY RESOLUTIONS[(10)]

The proposal in relation to appointment of candidate nominated for Independent Non-executive Director of the Company.[(11)]
(i) to nominate Mr. Jiang Hualiang as an independent non-executive Director of the second session of the Board of the Company.
The proposal in relation to signing the license agreement with Anwita and related party transaction.
The proposal in relation to utilising part of the over subscription proceeds for permanent replenishment of liquidity.

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NOTICE OF EGM

SPECIAL RESOLUTIONS[(10)]

The proposal in relation to the general mandate to issue additional A Shares and/or H Shares of the Company.

In accordance with the requirements under the Company Law of the People’s Republic of China (the “ Company Law ”) and other relevant laws and regulations, listing rules of the stock exchange of the place(s) in which the shares of the Company are listed as well as the Articles of Association of Shanghai Junshi Biosciences Co., Ltd. (上海君實生物醫藥科技股份有限公司) (the “ Articles of Association ”), to seize market opportunities and ensure flexibility to issue new shares, it is proposed at the general meeting of the Company to approve the grant to the Board of Directors of the Company (the “ Board ”) of an unconditional general mandate to authorize the Board to, subject to market conditions and the needs of the Company, separately or concurrently issue, allot and deal with A Shares and/or H Shares or securities convertible into such shares, options, warrants or similar rights (“ Similar Rights* ”) to subscribe for any A Shares and/or H Shares in the Company not exceeding each of 20% of the issued A Shares of the Company or overseas-listed foreign shares (H Shares) in issue as at the date of passing the resolutions at the general meeting, and to approve and execute all necessary documents, submit all necessary application procedures to the relevant authorities and take other necessary actions for the completion of the above matters.

I. Authorization matters of additional issuance of A Shares and/or H Shares or Similar Rights

It is proposed at the general meeting of the Company to approve the grant to the Board of the Company (and the Board to authorize the chairman and any person authorized by the chairman) (unless the delegation of authority is stipulated otherwise by relevant laws and regulations), with full discretion, separately or concurrently issue, allot and deal with A Shares and/or H Shares or Similar Rights in accordance with market conditions and the needs of the Company from time to time, and determine the terms and conditions for issuing, allotting and dealing with the news shares or Similar Rights, including but not limited to:
(1) To, subject to market conditions and the needs of the Company, issue, allot and deal with additional shares of A Shares and/or H Shares, and to make or grant offer proposals, agreements or options in respect of such shares.

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NOTICE OF EGM

(2) The amount of A Shares and/or H Shares (excluding the shares issued by way of capitalization of capital reserve fund) to be allotted or agreed conditionally or unconditionally to be allotted, issued and dealt with (whether pursuant to an option or otherwise) as approved by the Board shall not exceed each of 20% of the A Shares and/or H Shares in issue as at the date of passing this resolution at the general meeting of the Company.
(3) To formulate and implement particular issue plan, including but not limited to the type, pricing method and/or issue price (including price range), issue size, allottees of the new shares to be issued and the use of raised funds, the timing and the period of issue and determine whether to place to existing shareholders or not.
(4) To engage intermediaries for the issuance under the general mandate; to approve and execute all relevant acts, deeds, documents and other related matters necessary, appropriate, desirable and relevant for the issuance; to review, approve and execute on behalf of the Company the agreements related to the issuance, including but not limited to placing and underwriting agreements and intermediaries engagement agreements.
(5) To review, approve and execute on behalf of the Company legal documents related to the issuance submitted to relevant regulatory authorities. To perform relevant approval procedures pursuant to the requirements of regulatory authorities and the place where the Company is listed, and complete all necessary filing, registration and record procedures in relevant government departments in Hong Kong and/or any other regions and jurisdictions (if applicable).
(6) To make amendments to the relevant agreements and legal documents in the above items (4) and (5) in accordance with requirements of the regulatory authorities where the Company is listed.
(7) To approve the Company to increase its registered capital upon the issuance of additional shares and make amendments to the Articles of Association of the Company in respect of the total amount and structure of share capital and other relevant contents and to authorize the operation management of the Company to carry out relevant procedures in accordance with domestic and overseas requirements.

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NOTICE OF EGM

To agree that upon obtaining the approval and authorization granted by the general meeting for the above matters, the chairman and any person authorized by the chairman be further authorized by the Board to execute matters for additional issuance of A Shares and/or H Shares or Similar Rights according to the Company’s needs and other market conditions.
To authorize the chairman and any person authorized by the chairman to approve, sign and publish relevant documents, announcements and circulars and make relevant information disclosures according to applicable regulatory rules at places where the Company is listed.

II. Authorization period of additional issuance of A Shares or H Shares or Similar Rights

Authorization matters of additional issuance of A Shares and/or H Shares or Similar Rights commence from the date of approval at the 2020 third EGM of the Company to the earliest date among the following three: (1) the expiration date of 12 months after the date of approval at the 2020 third EGM; (2) the date of conclusion of the 2020 annual general meeting; or (3) the date of the general mandate being revoked or modified by shareholders through resolution at any general meeting.

Subject to all necessary approvals (if any) of relevant government authorities, the power under the abovementioned general mandate shall only be exercised by the Board of the Company in accordance with the Company Law, the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (as amended from time to time) and the Articles of Association.

The proposal in relation to amendment of the Articles of Association and industrial and commercial registration of the changes.[(12)]
The proposal in relation to the 2020 restricted A share incentive scheme of the Company (draft) and its summary.[(13)]
The proposal in relation to the assessment management measures for the implementation of the 2020 restricted A share incentive scheme of the Company.[(13)]
The proposal in relation to the authorization granted by the general meeting to the Board of Directors to deal with matters relating to the restricted A share incentives.[(13)]

By Order of the Board Shanghai Junshi Biosciences Co., Ltd.* Mr. Xiong Jun Chairman

Shanghai, PRC, 29 September 2020

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NOTICE OF EGM

Notes:

Pursuant to the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “ Stock Exchange ”) (the “ Listing Rules ”), any vote of shareholders at a general meeting will be taken by poll. As such, each of the resolutions set out in the notice of EGM will be voted by poll. Results of the poll will be published on the Company’s website at www.junshipharma.com and the Stock Exchange’s website at www.hkexnews.hk after the EGM in accordance with the Listing Rules.
The register of members of H shares of the Company will be closed from Saturday, 17 October 2020 to Monday, 16 November 2020, both days inclusive, during which period no transfer of H shares of the Company will be registered, in order to determine the entitlements of the shareholders of the Company to attend and vote at the EGM. In order to be eligible to attend and vote at the EGM, holders of H shares of the Company whose transfer documents have not been registered are required to deposit all properly completed share transfer forms together with the relevant share certificates to the Company’s H share registrar, Tricor Investor Services Limited at Level 54, Hopewell Centre, 183 Queen’s Road East, Hong Kong (for holders of H shares) for registration before 4:30 p.m. on Friday, 16 October 2020.
A shareholder entitled to attend and vote at the meeting may appoint one or more persons as his/her proxy(ies) to attend and vote on his/her behalf. A proxy need not be a shareholder of the Company but must attend the meeting in person to represent the member.
The instrument appointing a proxy must be in writing and signed by the appointing shareholder or his duly authorized attorney in writing. Where the appointing shareholder is a legal entity, such instrument must be either under its common seal or duly signed by its legal representative, director(s) or duly authorized attorney(s).
Shareholders who intend to attend the meeting by proxy should complete the proxy form. For holders of H shares, the proxy form should be returned to the Company’s H Share registrar, Tricor Investor Services Limited at Level 54, Hopewell Centre, 183 Queen’s Road East, Hong Kong, in person or by post as soon as possible not less than 24 hours before the time fixed for holding the meeting or any adjournment thereof. Completion and return of the proxy form will not preclude you from attending the meeting and any adjournment thereof and voting in person. In such event, the form of proxy shall be deemed to be revoked.
Shareholders who intend to attend the meeting in person or by proxy should return the reply slip (for holders of H shares) to the Company’s H share registrar, Tricor Investor Services Limited on or before Tuesday, 27 October 2020.
The EGM is expected to last for less than half a day. Shareholders (in person or by proxy) who attend the EGM should bear their own transportation and accommodation expenses. Shareholders or their proxies attending the EGM shall present their identification documents.
Where there are joint registered holders of any share, any one of such persons may vote at the meeting, either in person or by proxy, in respect of such share as if he were solely entitled thereto; but if more than one of such joint holders be present at the meeting, the vote of the senior holder who tenders a vote, whether in person or by proxy, shall be accepted to the exclusion of the votes of the other joint holders and, for this purpose, seniority shall be determined by the order in which the names stand in the register of members of the Company in respect of the joint holding.
References to times and dates in this notice are to Hong Kong local times and dates.
Further details of the resolutions will be included in the circular to be despatched to shareholders by the Company.
Further details of the resolution are set out in the announcement of the Company dated 29 September 2020 in relation to the proposed appointment of Mr. Jiang Hualiang as an independent non-executive director of the Company.
Further details of the resolution are set out in the announcement of the Company dated 29 September 2020 in relation to the proposed amendments to the Articles of Association of the Company.

– 201 –

NOTICE OF EGM

Further details of the resolutions are set out in the announcement of the Company dated 29 September 2020 in relation to, among others the proposed adoption of the 2020 restricted A share incentive scheme of the Company.
This notice of EGM is despatched to the holders of H shares only. The notice of EGM to the holders of A Shares is separately published on the website of the Shanghai Stock Exchange (http://www.sse.com.cn/).
For identification purpose only.

– 202 –

NOTICE OF CLASS MEETING OF H SHAREHOLDERS

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SHANGHAI JUNSHI BIOSCIENCES CO., LTD.[] *上海君實生物醫藥科技股份有限公司**

(a joint stock company incorporated in the People’s Republic of China with limited liability)

(Stock code: 1877)

NOTICE OF THE 2020 SECOND CLASS MEETING OF H SHAREHOLDERS

NOTICE IS HEREBY GIVEN that the 2020 second class meeting of H Shareholders (the “ Class Meeting of H Shareholders ”) of Shanghai Junshi Biosciences Co., Ltd. (the “ Company* ”) will be held immediately after the conclusion of the 2020 second class meeting of A shareholders of the Company (or any adjournment thereof) at 13th Floor, Building 2, Nos. 36, 58 Haiqu Road, China (Shanghai) Pilot Free Trade Zone, Shanghai, the People’s Republic of China on Monday, 16 November 2020, to consider and, if thought fit, approve the following resolutions:

SPECIAL RESOLUTIONS[(9)]

The proposal in relation to amendment of the Articles of Association and industrial and commercial registration of the changes.[(10)]
The proposal in relation to the 2020 restricted A share incentive scheme of the Company (draft) and its summary.[(11)]
The proposal in relation to the assessment management measures for the implementation of the 2020 restricted A share incentive scheme of the Company.[(11)]
The proposal in relation to the authorization granted by the general meeting to the Board of Directors to deal with matters relating to the restricted A share incentives.[(11)]

By Order of the Board Shanghai Junshi Biosciences Co., Ltd.* Mr. Xiong Jun Chairman

Shanghai, PRC, 29 September 2020

– 203 –

NOTICE OF CLASS MEETING OF H SHAREHOLDERS

Notes:

The register of members of H shares of the Company will be closed from Saturday, 17 October 2020 to Monday, 16 November 2020, both days inclusive, during which period no transfer of H shares of the Company will be registered, in order to determine the entitlements of the shareholders of the Company to attend and vote at the Class Meeting of H Shareholders. In order to be eligible to attend and vote at the Class Meeting of H Shareholders, holders of H shares of the Company whose transfer documents have not been registered are required to deposit all properly completed share transfer forms together with the relevant share certificates to the Company’s H share registrar, Tricor Investor Services Limited at Level 54, Hopewell Centre, 183 Queen’s Road East, Hong Kong (for holders of H shares) for registration before 4:30 p.m. on Friday, 16 October 2020.
A shareholder entitled to attend and vote at the meeting may appoint one or more persons as his/her proxy(ies) to attend and vote on his/her behalf. A proxy need not be a shareholder of the Company but must attend the meeting in person to represent the member.
The instrument appointing a proxy must be in writing and signed by the appointing shareholder or his duly authorized attorney in writing. Where the appointing shareholder is a legal entity, such instrument must be either under its common seal or duly signed by its legal representative, director(s) or duly authorized attorney(s).
Shareholders who intend to attend the meeting by proxy should complete the proxy form. For holders of H shares, the proxy form should be returned to the Company’s H Share registrar, Tricor Investor Services Limited at Level 54, Hopewell Centre, 183 Queen’s Road East, Hong Kong, in person or by post as soon as possible not less than 24 hours before the time fixed for holding the meeting or any adjournment thereof. Completion and return of the proxy form will not preclude you from attending the meeting and any adjournment thereof and voting in person. In such event, the form of proxy shall be deemed to be revoked.
Shareholders who intend to attend the meeting in person or by proxy should return the reply slip (for holders of H shares) to the Company’s H share registrar, Tricor Investor Services Limited on or before Tuesday, 27 October 2020.
The Class Meeting of H Shareholders is expected to last for less than half a day. Shareholders (in person or by proxy) who attend the Class Meeting of H Shareholders should bear their own transportation and accommodation expenses. Shareholders or their proxies attending the Class Meeting of H Shareholders shall present their identification documents.
Where there are joint registered holders of any share, any one of such persons may vote at the meeting, either in person or by proxy, in respect of such share as if he were solely entitled thereto; but if more than one of such joint holders be present at the meeting, the vote of the senior holder who tenders a vote, whether in person or by proxy, shall be accepted to the exclusion of the votes of the other joint holders and, for this purpose, seniority shall be determined by the order in which the names stand in the register of members of the Company in respect of the joint holding.
References to times and dates in this notice are to Hong Kong local times and dates.
Further details of the resolutions will be included in the circular to be despatched to shareholders by the Company.
Further details of the resolution are set out in the announcement of the Company dated 29 September 2020 in relation to the proposed amendments to the Articles of Association of the Company.
Further details of the resolutions are set out in the announcement of the Company dated 29 September 2020 in relation to, among others, the proposed adoption of the 2020 restricted A share incentive scheme of the Company.
This notice of Class Meeting of H Shareholders is despatched to the holders of H shares only.
For identification purpose only.

– 204 –

	Provisions of Current Articles		Provisions of Amended Articles
Article 27 The Company may repurchase its		Article 27 The Company may repurchase its
own shares after completing the procedures		own	shares after completing the procedures
as stipulated in the Articles of Association		as stipulated in the Articles of Association
and	with the approval of the relevant State	and	with the approval of the relevant State
authorities under the following		authorities under the following
circumstances:		circumstances:
(1)	to cancel shares for the purpose of	(1)	to cancel shares for the purpose of
	reducing the registered capital of the		reducing the registered capital of the
	Company;		Company;
(2)	to merge with other companies that	(2)	to merge with other companies that
	hold shares in the Company;		hold shares in the Company;
(3)	to use the shares for Employee Stock	(3)	to use the shares for Employee Stock
	Ownership Plan or as equity		Ownership Plan or as equity
	incentives;		incentives;
(4)	to acquire the shares of shareholders	(4)	to acquire the shares of shareholders
	(upon their request) who vote against		(upon their request) who vote against
	to any resolution adopted at any		to any resolution adopted at any
	general meetings on the merger or		general meetings on the merger or
	division of the Company;		division of the Company;
(5)	to use the shares in the conversion of	(5)	to use the shares in the conversion of
	the convertible corporate bonds issued		the convertible corporate bonds issued
	by the Company;		by the Company;
(6)	necessary for the Company to protect	(6)	necessary for the Company to protect
	the Company value and the		the Company value and the
	shareholders’ equity;		shareholders’ equity;
(7)	other circumstances as permitted by the	(7)	other circumstances as permitted by the
	laws and administrative regulations.		laws and administrative regulations.
The Company shall not trade the Company’s		The	Company shall not acquire the
shares save and except for the aforesaid		Company’s shares save and except for the
conditions.		aforesaid conditions.

	Provisions of Current Articles		Provisions of Amended Articles
(8)	within the scope authorized by the	(8)	within the scope authorized by the
	general meeting, to decide, among		general meeting, to decide, among
	others, the Company’s external		others, the Company’s external
	investment, purchase and sale of		investment, purchase and sale of
	assets, charge of assets, external		assets, charge of assets, external
	guarantees, wealth management		guarantees, wealth management
	entrustment and related party		entrustment and related party
	transactions;		transactions;
(9)	to decide on establishment of internal	(9)	to decide on establishment of internal
	management organizations of the		management organizations of the
	Company;		Company;
(10)	to appoint or dismiss general manager	(10)	to appoint or dismiss general manager
	and secretary to the Board, and to		and secretary to the Board, and to
	decide on their remunerations, to		decide on their remunerations, to
	appoint or dismiss vice general		appoint or dismiss vice general
	manager(s), the chief financial officer		manager(s), the chief financial officer
	and other senior management in		and other senior management in
	accordance with the nominations by		accordance with the nominations by
	general manager, and to decide on their		general manager, and to decide on their
	remunerations and others;		remunerations and others;
(11)	to decide on the plans such as	(11)	to decide on the plans such as
	alteration of corporate form, division,		alteration of corporate form, division,
	restructuring or dissolution of the		restructuring or dissolution of the
	Company’s wholly-owned subsidiaries		Company’s wholly-owned subsidiaries
	and associated companies;		and associated companies;
(12)	to formulate the basic management	(12)	to formulate the basic management
	system of the Company, to determine		system of the Company, to determine
	the salary, benefits, rewards and		the salary, benefits, rewards and
	punishments policies and programs of		punishments policies and programs of
	the Company’s employees;		the Company’s employees;
(13)	to formulate proposals to amend the	(13)	to formulate proposals to amend the
	Articles of Association;		Articles of Association;
(14)	to formulate proposals of the equity	(14)	to formulate proposals of the equity
	incentive scheme of the Company;		incentive scheme of the Company;

	Provisions of Current Articles	Provisions of Amended Articles
(15)	to decide on the establishment of the	(15) to decide on the establishment of the
	Company’s sub-branches;	Company’s sub-branches;
(16)	to decide on the establishment of	(16) to decide on the establishment of
	special committees under the Board	special committees under the Board
	and to appoint or remove its person-in-	and to appoint or remove its person-in-
	charge;	charge;
(17)	to propose at the general meeting the	(17) to propose at the general meeting the
	appointment, re-appointment or	appointment, re-appointment or
	dismissal of the accounting firms	dismissal of the accounting firms
	which provide audit services to the	which provide audit services to the
	Company;	Company;
(18)	to listen to work reports submitted by	(18) to listen to work reports submitted by
	the general manager and review his	the general manager and review his
	work;	work;
(19)	to decide on other major affairs and	(19) to decide on other major affairs and
	administrative matters of the Company,	administrative matters of the Company,
	to sign other material agreements, save	to sign other material agreements, save
	and except for matters to be approved	and except for matters to be approved
	at the general meetings as required by	at the general meetings as required by
	the Company Law and the Articles of	the Company Law and the Articles of
	Association;	Association;
(20)	to manage information disclosure of	(20) to manage information disclosure of
	the Company;	the Company;
(21)	other powers and duties authorized by	(21) other powers and duties authorized by
	the Articles of Association or general	the Articles of Association or general
	meetings;	meetings;
(22)	other matters as required by the PRC	(22) other matters as required by the PRC
	laws and regulations.	laws and regulations.

AI assistant

Shanghai Junshi Biosciences Co., Ltd. — Proxy Solicitation & Information Statement 2020

50236_rns_2020-10-22_8417d80c-74a5-427f-8d3a-06b0deaa89e0.pdf

SHANGHAI JUNSHI BIOSCIENCES CO., LTD.[] 上海君實生物醫藥科技股份有限公司*

APPOINTMENT OF INDEPENDENT NON-EXECUTIVE DIRECTOR LICENSE AGREEMENT WITH A RELATED PARTY

AMENDMENTS TO THE ARTICLES OF ASSOCIATION

Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

SHANGHAI JUNSHI BIOSCIENCES CO., LTD.[] 上海君實生物醫藥科技股份有限公司*

APPOINTMENT OF INDEPENDENT NON-EXECUTIVE DIRECTOR LICENSE AGREEMENT WITH A RELATED PARTY

I. INTRODUCTION

II. DETAILS OF THE RESOLUTIONS

(1) Appointment of Independent Non-executive Director

LETTER FROM THE BOARD

(2) License Agreement with a Related Party

I. License Scope

II. Financial Terms

(I) Upfront payment

(II) Milestone payment

(III) Royalties

(IV) Sublicense revenue sharing

(V) Payment for the development of cell line

Information about the Licensed Products

Information about Anwita

Reasons for and benefits of entering into the License Agreement

(4) Proposed Grant of the General Mandate to Issue A Shares and/or H Shares of the Company

(5) Proposed Amendments to the Articles of Association

(6) Proposed Adoption of the Incentive Scheme (draft) and its summary

The Proposed 2020 Restricted A Share Incentive Scheme

I. Purpose of the Incentive Scheme

II. Form and Source of the Restricted Shares to be Granted

III. Number of the Restricted Shares to be Granted

IV. Participants of the Incentive Scheme

A. Basis for determining the Participants

2. Positions held by the Participants in the Company

B. Scope of the Participants

LETTER FROM THE BOARD

V. Grant Price and Basis of Determination of the Grant Price

A. Grant Price of the Restricted Shares

B. Basis of determination of the Grant Price

LETTER FROM THE BOARD

VI. Validity Period, Grant Date, Attribution Arrangements and Black-Out Periods

A. Validity period of the Incentive Scheme

B. Grant Date of the Restricted Shares

C. Attribution arrangements under the Incentive Scheme

D. Black-out periods

LETTER FROM THE BOARD

VII. Conditions for Grant and Attribution of Restricted Shares

LETTER FROM THE BOARD

LETTER FROM THE BOARD

LETTER FROM THE BOARD

Tranche

LETTER FROM THE BOARD

LETTER FROM THE BOARD

LETTER FROM THE BOARD

5. Performance assessment requirements at the Participant’s individual level

VIII. Implementation, Grant and Attribution Procedures

LETTER FROM THE BOARD

LETTER FROM THE BOARD

IX. Method and Procedures for Adjustment

2. Rights issue

Q = Q0 × P1 × (1 + n)/(P1 + P2 × n)

4. New issue of shares

B. Adjustment method of the Grant Price of the Restricted Shares

2. Rights issue

5. New issue of shares

C. Adjustment procedures

X. Other Rights and Obligations of the Company and the Participants and Dispute Mechanism

LETTER FROM THE BOARD

LETTER FROM THE BOARD

XI. Amendment and Termination of the Incentive Scheme

LETTER FROM THE BOARD

LETTER FROM THE BOARD

LETTER FROM THE BOARD

3. Retirement of the Participants

Shanghai Junshi Biosciences Co., Ltd. Proxy Solicitation & Information Statement 2020

SHANGHAI JUNSHI BIOSCIENCES CO., LTD.[] *上海君實生物醫藥科技股份有限公司**

SHANGHAI JUNSHI BIOSCIENCES CO., LTD.[] *上海君實生物醫藥科技股份有限公司**

SHANGHAI JUNSHI BIOSCIENCES CO., LTD.[] *上海君實生物醫藥科技股份有限公司**