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(A joint stock company incorporated in the People’s Republic of China with limited liability)
Stock Code: 1497
GLOBAL
OFFERING
廈門燕之屋燕窩產業股份有限公司
Xiamen Yan Palace Bird's Nest Industry Co., Ltd.
廈門燕之屋燕窩產業股份有限公司
Xiamen Yan Palace Bird's Nest Industry Co., Ltd.
Joint Sponsors
Overall Coordinators, Joint Global Coordinators, Joint Bookrunners and Joint Lead Managers
Joint Global Coordinator, Joint Bookrunner and Joint Lead Manager


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If you are in any doubt about any of the contents of this prospectus, you should obtain independent professional advice.
XIAMEN YAN PALACE BIRD’S NEST INDUSTRY CO., LTD.
ʮ̡
(a joint stock company incorporated in the People’ s Republic of China with limited liability)
Global Offering
Number of Offer Shares under
the Global Offering
: 32,000,000 H Shares (subject to the Over-
allotment Option)
Number of Hong Kong Offer Shares : 3,200,000 H Shares (subject to reallocation)
Number of International Offer Shares : 28,800,000 H Shares (subject to reallocation
and the Over-allotment Option)
Maximum Offer Price : HK$11.00 per H Share, plus brokerage of 1%,
SFC transaction levy of 0.0027%, AFRC
transaction levy of 0.00015% and Stock
Exchange trading fee of 0.00565% (payable
in full on application and subject to refund)
Nominal value : RMB0.2 per H Share
Stock code : 1497
Joint Sponsors
Overall Coordinators, Joint Global Coordinators, Joint Bookrunners and Joint Lead Managers
Joint Global Coordinator, Joint Bookrunner and Joint Lead Manager
Hong Kong Exchanges and Clearing Limited, The Stock Exchange of Hong Kong Limited and Hong Kong Securities Clearing Company Limited take no responsib ility for the contents of this prospectus, make
no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in relian ce upon the whole or any part of the contents of this prospectus.
A copy of this prospectus, having attached thereto the documents specified in “Documents Delivered to the Registrar of Companies in Hong Kong and Avai lable on Display—1. Documents Delivered to the
Registrar of Companies” in Appendix V has been registered by the Registrar of Companies in Hong Kong as required by Section 342C of the Companies (Windi ng Up and Miscellaneous Provisions) Ordinance
(Chapter 32 of the Laws of Hong Kong). The Securities and Futures Commission and the Registrar of Companies in Hong Kong take no responsibility for the c ontents of this prospectus or any other documents
referred to above.
The Offer Price is expected to be fixed by agreement between the Overall Coordinators (for themselves and on behalf the Underwriters), and our Company on or around Friday, December 8, 2023, but in any
event no later than 12:00 noon on Friday, December 8, 2023. The Offer Price will be not more than HK$11.00 per Offer Share and is currently expected to be n ot less than HK$8.80 per Offer Share. If, for any
reason, the Overall Coordinators (for themselves and on behalf the Underwriters), and our Company are unable to reach an agreement on the Offer Price b y 12:00 noon on Friday, December 8, 2023, the Global
Offering will not become unconditional and will lapse immediately. Applicants for Hong Kong Offer Shares are required to pay, on application, the max imum Offer Price of HK$11.00 per Hong Kong Offer Share
together with brokerage of 1%, SFC transaction levy of 0.0027%, AFRC transaction levy of 0.00015% and Stock Exchange trading fee of 0.00565%, subject to refund if the Offer Price should be less than HK$11.00
per Hong Kong Offer Share.
The Overall Coordinators (for themselves and on behalf the Underwriters), may, with consent of our Company, reduce the number of Hong Kong Offer Share s and/or the indicative Offer Price range
below that stated in this prospectus at any time on or prior to the morning of the last day for lodging applications under the Hong Kong Public Offering. I n such a case, notices of the reduction in
the number of Hong Kong Offer Shares and/or the indicative Offer Price range will be published on the websites of the Stock Exchange at www.hkexnews.hk and our Company at
http://www.yanzhiwu.com as soon as practicable but in any event not later than the morning of the day which is the last day for lodging applications under the Hong Kong Public Offe ring. For further
information, please refer to the sections headed “Structure of the Global Offering” and “How to Apply for Hong Kong Offer Shares” in this prospectus.
The obligations of the Hong Kong Underwriters under the Hong Kong Underwriting Agreement to subscribe for, and to procure applicants for the subscrip tion for, the Hong Kong Offer Shares, are subject to
termination by the Overall Coordinators (for themselves and on behalf the Underwriters) if certain grounds arise prior to 8:00 a.m. on the Listing Dat e. Further details of such circumstances are set out in the
section headed “Underwriting—Underwriting Arrangements—Hong Kong Public Offering—Grounds for Termination.” It is important that you refer to th at section for further details.
The Offer Shares have not been and will not be registered under the U.S. Securities Act or any state securities laws in the United States, and may not be of fered, sold, pledged or transferred within
the United States, except pursuant to an available exemption from, or in transactions not subject to, the registration requirements of the U.S. Secur ities Act. The Offer Shares are being offered and
sold outside the United States in offshore transactions in reliance on Regulation S.
A TTENTION
We have adopted a fully electronic application process for the Hong Kong Public Offering. We will not provide printed copies of this prospectus to the p ublic in relation to the Hong Kong Public Offering.
This prospectus is available at the website of the Hong Kong Stock Exchange at www.hkexnews.hk and our website at http://www.yanzhiwu.com .
If you require a printed copy of this prospectus, you may download and print from the website addresses above.
IMPORTANT
November 30, 2023


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IMPORTANT NOTICE TO INVESTORS:
FULLY ELECTRONIC APPLICATION PROCESS
We have adopted a fully electronic application process for the Hong Kong Public Offering. We
will not provide printed copies of this prospectus to the public in relation to the Hong Kong Public
Offering.
This prospectus is available at the website of the Hong Kong Stock Exchange at
www.hkexnews.hk under the “ HKEXnews > New Listings > New Listing Information ” section,
and our website at http://www.yanzhiwu.com . If you require a printed copy of this prospectus, you
may download and print from the website addresses above.
To apply for the Hong Kong Offer Shares, you may use one of the following application
channels:
Application Channel Platform Target Investors Application Time
HK eIPO White
Form service IPO App (which can be downloaded
by searching “ IPO App ” in App
Store or Google Play or
downloaded at
www.hkeipo.hk/IPOApp or
www.tricorglobal.com/IPOApp )
or www.hkeipo.hk
Investors who would
like to receive a
physical H Share
certificate. Hong
Kong Offer Shares
successfully
applied for will be
allotted and issued
in your own name.
From 9:00 a.m. on
Thursday, November
30, 2023 to 11:30 a.m.
on Thursday, December
7, 2023, Hong Kong
time.
The latest time for
completing full payment
of application monies
will be 12:00 noon on
Thursday, December 7,
2023, Hong Kong time.
HKSCC EIPO
channel
Y our broker or custodian who is a
HKSCC Participant will submit an
EIPO application on your behalf
through HKSCC’s FINI system in
accordance with your instruction
Investors who would
not like to receive
a physical H Share
certificate. Hong
Kong Offer Shares
successfully
applied for will be
allotted and issued
in the name of
HKSCC Nominees,
deposited directly
into CCASS and
credited to your
designated HKSCC
Participant’s stock
account.
Contact your broker or
custodian for the
earliest and latest time
for giving such
instructions, as this
may vary by broker or
custodian.
We will not provide any physical channels to accept any application for the Hong Kong Offer
Shares by the public. The contents of the electronic version of this prospectus are identical to the
printed document as registered with the Registrar of Companies in Hong Kong pursuant to Section
342C of the Companies (Winding Up and Miscellaneous Provisions) Ordinance.
If you are an intermediary , broker or agent , please remind your customers, clients or
principals, as applicable, that this prospectus is available online at the website addresses above.
Please refer to the section headed “How to apply for Hong Kong Offer Shares” for further
details of the procedures through which you can apply for the Hong Kong Offer Shares
electronically.
IMPORTANT


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Y our application through the HK eIPO White Form service or the HKSCC EIPO channel must be
for a minimum of 400 Hong Kong Offer Shares and in one of the numbers set out in the table. If you are
applying through the HK eIPO White Form service, you may refer to the table below for the amount
payable for the number of H Shares you have selected. Y ou must pay the respective maximum amount
payable on application in full upon application for Hong Kong Offer Shares. If you are applying through
the HKSCC EIPO channel, you are required to prefund your application based on the amount specified by
your broker or custodian, as determined based on the applicable laws and regulations in Hong Kong.
No. of
Hong Kong
Offer Shares
applied for
Maximum
Amount
payable (2) on
application/
successful
allotment
No. of
Hong Kong
Offer Shares
applied for
Maximum
Amount
payable (2) on
application/
successful
allotment
No. of
Hong Kong
Offer Shares
applied for
Maximum
Amount
payable (2) on
application/
successful
allotment
No. of
Hong Kong
Offer Shares
applied for
Maximum
Amount
payable (2) on
application/
successful
allotment
HK$ HK$ HK$ HK$
400 4,444.38 8,000 88,887.48 70,000 777,765.46 900,000 9,999,841.50
800 8,888.75 10,000 111,109.36 80,000 888,874.80 1,000,000 11,110,935.00
1,200 13,333.13 12,000 133,331.22 90,000 999,984.16 1,200,000 13,333,122.00
1,600 17,777.50 14,000 155,553.09 100,000 1,111,093.50 1,400,000 15,555,309.00
2,000 22,221.86 16,000 177,774.95 200,000 2,222,187.00 1,600,000
(1) 17,777,496.00
2,400 26,666.24 18,000 199,996.84 300,000 3,333,280.50
2,800 31,110.62 20,000 222,218.70 400,000 4,444,374.00
3,200 35,554.99 30,000 333,328.06 500,000 5,555,467.50
3,600 39,999.37 40,000 444,437.40 600,000 6,666,561.00
4,000 44,443.75 50,000 555,546.76 700,000 7,777,654.50
6,000 66,665.61 60,000 666,656.10 800,000 8,888,748.00
Notes:
(1) Maximum number of Hong Kong Offer Shares you may apply for and this is 50% of the Hong Kong Offer Shares initially
offered.
(2) The amount payable is inclusive of brokerage, the SFC transaction levy, the Stock Exchange trading fee and the AFRC
transaction levy. If your application is successful, brokerage will be paid to the Exchange Participants (as defined in the
Listing Rules) or to the HK eIPO White Form Service Provider (for applications made through the HK eIPO White Form
service), while the SFC transaction levy, the Stock Exchange trading fee and the AFRC transaction levy will be paid to the
SFC, the Stock Exchange and the AFRC, respectively.
No application for any other number of Hong Kong Offer Shares will be considered and any such
application is liable to be rejected.
IMPORTANT


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If there is any change in the following expected timetable (1) of the Hong Kong Public Offering,
we will issue an announcement in Hong Kong to be published on the Company’ s website at
http://www.yanzhiwu.com and the website of the Stock Exchange at www.hkexnews.hk .
Hong Kong Public Offering commences .................................... .9:00 a.m. on
Thursday, November 30, 2023
Latest time to complete electronic applications under
the HK eIPO White Form service through one
of the below ways (2)
(1) the IPO App , which can be downloaded by
searching “IPO App ” in App Store or Google
Play or downloaded at www.hkeipo.hk/IPOApp
or www.tricorglobal.com/IPOApp
(2) the designated website at www.hkeipo.hk .............................. 1 1:30 a.m. on
Thursday, December 7, 2023
Application lists open (3) ................................................ 1 1:45 a.m. on
Thursday, December 7, 2023
Latest time for completing payment of
HK eIPO White Form applications by effecting
internet banking transfers(s) or PPS payment
transfer(s) and giving electronic application
instructions to HKSCC
(4) ........................................... .12:00 noon on
Thursday, December 7, 2023
If you are instructing your broker or custodian who is a CCASS Clearing Participant or a CCASS
Custodian Participant to give electronic application instructions via HKSCC’s FINI system to apply for
the Hong Kong Offer Shares on your behalf, you are advised to contact your broker or custodian for the
latest time for giving such instructions which may be different from the latest time as stated above.
Application lists close (3) .............................................. .12:00 noon on
Thursday, December 7, 2023
Expected Price Determination Date (5) ............................ .Friday, December 8, 2023
Announcement of the Offer Price, the level
of indications of interest in the International
Offering, the level of applications in the
Hong Kong Public Offering and the basis
of allocation of the Hong Kong Public
Offering to be published and on the website
of the Stock Exchange at www.hkexnews.hk
and the Company’s website at
http://www.yanzhiwu.com (6) at or before ................................. 1 1:00 p.m. on
Monday, December 11, 2023
EXPECTED TIMETABLE
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The results of allocations in the Hong Kong Public
Offering (with successful applicants’ identification
document numbers, where appropriate) to be
available through a variety of channels, including:
 in the announcement to be posted on our
website and the website of the Stock
Exchange at http://www.yanzhiwu.com
and www.hkexnews.hk respectively ........................ a to r before 11:00 p.m. on
Monday, December 11, 2023
 from the “IPO Results” function in the
IPO App or at www.hkeipo.hk/IPOResult
(or www.tricor.com.hk/ipo/result ) .................................. 1 1:00 p.m. on
Monday, December 11, 2023
to 12:00 midnight on
Sunday, December 17, 2023
 from the allocation results telephone enquiry
line by calling +852 3691 8488 between
9:00 a.m. and 6:00 p.m. from ........................ T uesday, December 12, 2023 to
Friday, December 15, 2023
For those applying through HKSCC EIPO channel,
you may also check with your broker
or custodian from ................................................... 6:00 p.m. on
Friday, December 8, 2023
H Share certificates in respect of wholly or partially
successful applications to be dispatched
or deposited into CCASS on or before
(7) ...................... .Monday, December 11, 2023
HK eIPO White Form e-Auto Refund payment
instructions/refund checks in respect of wholly or
partially successful applications if the final Offer
Price is less than the maximum Offer Price per
Offer Share initially paid on application (if applicable)
or wholly or partially unsuccessful applications to be
dispatched on or before
(8)(9) ................................ T uesday, December 12, 2023
Dealings in the H Shares on the Hong Kong Stock
Exchange expected to commence at ..................................... .9:00 a.m. on
Tuesday, December 12, 2023
The application for the Hong Kong Offer Shares will commence on Thursday, November 30,
2023 through Thursday, December 7, 2023, being longer than normal market practice of three and
a half days. Investors should be aware that the dealings in H Shares on the Stock Exchange are
expected to commence on Tuesday, December 12, 2023.
Notes:
(1) Unless otherwise stated, all times and dates refer to Hong Kong local times and dates.
(2) Y ou will not be permitted to submit your application under the HK eIPO White Form service through the IPO App or the
designated website at www.hkeipo.hk after 11:30 a.m. on the last day for submitting applications. If you have already
submitted your application and obtained an application reference number from the IPO App or the designated website prior
to 11:30 a.m., you will be permitted to continue the application process (by completing payment of application monies) until
12:00 noon on the last day for submitting applications, when the application lists close.
EXPECTED TIMETABLE
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(3) If there is/are a “black” rainstorm warning or a tropical cyclone warning signal number 8 or above and/or Extreme Conditions
in force in Hong Kong at any time between 9:00 a.m. and 12:00 noon on Thursday, December 7, 2023, the application lists
will not open and will close on that day. For further details, please see the section headed “How to Apply for Hong Kong Offer
Shares—E. Severe Weather Arrangements” in this prospectus.
(4) Applicants who apply for Hong Kong Offer Shares by giving electronic application instructions to HKSCC should refer to
the section headed “How to Apply for Hong Kong Offer Shares—A. Application for Hong Kong Offer Shares” in this
prospectus.
(5) The Price Determination Date is expected to be on or about Friday, December 8, 2023 (which, at the earliest, could be
Thursday, December 7, 2023), and, in any event, not later than 12:00 noon on Friday, December 8, 2023. If, for any reason,
the Offer Price is not agreed between the Overall Coordinators (for themselves and on behalf of the Underwriters) and us by
12:00 noon on Friday, December 8, 2023, the Global Offering will not proceed and will lapse.
(6) None of the websites or any of the information contained on the websites forms part of this prospectus.
(7) H Share certificates will only become valid at 8:00 a.m. on the Listing Date provided that the Global Offering has become
unconditional and the right of termination described in the section headed “Underwriting—Underwriting Arrangements and
Expenses—Hong Kong Public Offering—Grounds for Termination” in this prospectus has not been exercised. Investors who
trade H Shares on the basis of publicly available allocation details prior to the receipt of H Share certificates or prior to the
H Share certificates becoming valid evidence of title do so entirely at their own risk.
(8) e-Auto Refund payment instructions/refund cheques will be issued in respect of wholly or partially unsuccessful applications
pursuant to the Hong Kong Public Offering and in respect of wholly or partially successful applications in the event that the
final Offer Price is less than the price payable per Offer Share on application. Part of the applicant’s identification document
number, or, if the application is made by joint applicants, part of the identification document number of the first-named
applicant, provided by the applicant(s) may be printed on the refund check, if any. Such data would also be transferred to a
third party for refund purposes. Banks may require verification of an applicant’s identification document number before
encashment of the refund check. Inaccurate completion of an applicant’s identification document number may invalidate or
delay encashment of the refund check.
(9) Applicants who have applied on the HK eIPO White Form service for 1,000,000 or more Hong Kong Offer Shares may
collect any refund checks (where applicable) and/or H Share certificates in person from our H Share Registrar, Tricor Investor
Services Limited, at 17/F, Far East Finance Centre, 16 Harcourt Road, Hong Kong from 9:00 a.m. to 1:00 p.m. on Tuesday,
December 12, 2023 or such other date as notified by us as the date of dispatch/collection of H Share certificates/e-Auto
Refund payment instructions. Applicants being individuals who are eligible for personal collection may not authorize any
other person to collect on their behalf. If you are a corporate applicant which is eligible for personal collection, your
authorized representative must bear a letter of authorization from your corporation stamped with your corporation’s chop.
Both individuals and authorized representatives must produce evidence of identity acceptable to our H Share Registrar at the
time of collection.
Applicants who have applied for Hong Kong Offer Shares through the HKSCC EIPO channel should refer to the section
headed “How to Apply for Hong Kong Offer Shares—D. Despatch/Collection of H Share Certificates and Refund of
Application Monies” in this prospectus for details.
Applicants who have applied through the HK eIPO White Form service and paid their applications monies through single
bank accounts may have refund monies (if any) dispatched to the bank account in the form of e-Auto Refund payment
instructions. Applicants who have applied through the HK eIPO White Form service and paid their application monies
through multiple bank accounts may have refund monies (if any) dispatched to the address as specified in their application
instructions in the form of refund checks in favor of the applicant (or, in the case of joint applications, the first-named
applicant) by ordinary post at their own risk.
H Share certificates and/or refund checks for applicants who have applied for less than 1,000,000 Hong Kong Offer Shares
and any uncollected H Share certificates will be dispatched by ordinary post, at the applicants’ risk, to the addresses specified
in the relevant applications.
Further information is set out in the sections headed “How to Apply for Hong Kong Offer Shares—D. Despatch/Collection
of H Share Certificates and Refund of Application Monies”.
EXPECTED TIMETABLE
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The above expected timetable is a summary only. For further details of the structure of the
Global Offering, including its conditions, and the procedures for applications for Hong Kong Offer
Shares, please see the sections headed “Structure of the Global Offering” and “How to Apply for the
Hong Kong Offer Shares” in this prospectus, respectively.
If the Global Offering does not become unconditional or is terminated in accordance with its terms,
the Global Offering will not proceed. In such case, the Company will make an announcement as soon as
practicable thereafter.
EXPECTED TIMETABLE
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This prospectus is issued by our Company solely in connection with the Hong Kong Public
Offering and the Hong Kong Offer Shares and does not constitute an offer to sell or a solicitation
of an offer to buy any security other than the Hong Kong Offer Shares offered by this prospectus
pursuant to the Hong Kong Public Offering. This prospectus may not be used for the purpose of
marketing, and does not constitute, an offer or invitation in any other jurisdiction or in any other
circumstances. No action has been taken to permit a public offering of the Offer Shares in any
jurisdiction other than Hong Kong and no action has been taken to permit the distribution of this
prospectus in any jurisdiction other than Hong Kong. The distribution of this prospectus and the
offering and sale of the Offer Shares in other jurisdictions are subject to restrictions and may not
be made except as permitted under the applicable securities laws of such jurisdictions pursuant to
registration with or authorization by the relevant securities regulatory authorities or an exemption
therefrom.
You should rely only on the information contained in this prospectus to make your investment
decision. We have not authorized anyone to provide you with information that is different from what
is contained in this prospectus. Any information or representation not made in this prospectus must
not be relied on by you as having been authorized by us, the Joint Sponsors, the Overall
Coordinators, the Joint Global Coordinators, the Joint Bookrunners, the Joint Lead Managers, the
Underwriters, the Capital Market Intermediaries, any of our or their respective directors or any
other person or party involved in the Global Offering.
Page
Expected Timetable ....................................................... i
Contents ............................................................... v
Summary .............................................................. 1
Definitions .............................................................. 1 6
Glossary ............................................................... 2 7
Forward-Looking Statements ............................................... 2 9
Risk Factors ............................................................ 3 1
Waivers from Strict Compliance with the Listing Rules ........................... 6 6
Information about this Prospectus and the Global Offering ........................ 7 0
Directors, Supervisors and Parties Involved in the Global Offering .................. 7 4
Corporate Information .................................................... 8 1
Industry Overview ....................................................... 8 3
Regulatory Overview ...................................................... 9 6
History, Development and Corporate Structure ................................. 1 1 7
CONTENTS
–v–


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Business ............................................................... 1 4 0
Relationship with Our Controlling Shareholders ................................. 2 2 2
Connected Transactions ................................................... 2 2 7
Directors, Supervisors and Senior Management ................................. 2 3 5
Substantial Shareholders ................................................... 2 4 8
Cornerstone Investors ..................................................... 2 5 2
Share Capital ........................................................... 2 5 7
Financial Information ..................................................... 2 6 0
Future Plans and Use of Proceeds ............................................ 3 1 3
Underwriting ............................................................ 3 1 6
Structure of the Global Offering ............................................. 3 2 6
How to Apply for Hong Kong Offer Shares ..................................... 3 3 6
Appendix I — Accountants’ Report .................................... I - 1
Appendix II — Unaudited Pro Forma Financial Information ................. II-1
Appendix III — Summary of Articles of Association of the Company ............ III-1
Appendix IV — Statutory and General Information ......................... I V - 1
Appendix V — Documents Delivered to the Registrar of Companies in
Hong Kong and Available On Display ..................... V - 1
CONTENTS
–v i–


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This summary aims to give you an overview of the information contained in this prospectus and
should be read in conjunction with the full text of this prospectus. As it is a summary, it does not
contain all the information that may be important to you. You should read the whole prospectus,
including our financial statements and the accompanying notes, before you decide to invest in the
Offer Shares. There are risks associated with any investment. Some of the particular risks in
investing in the Offer Shares are set out in “Risk Factors” in this prospectus. You should read that
section carefully before you decide to invest in the Offer Shares.
OVERVIEW
We are a leading brand in China’s edible bird’s nest (“EBN”) product market, dedicated to the
development, production and marketing of high-quality modern EBN products. We are the largest EBN
product company in the traceable EBN market in China with a market share of 14.0% in terms of retail
value in 2022, according to the F&S Report. We also ranked No. 1 by the number of EBN specialty
storefronts and the volume of CAIQ-certified imports in the EBN product market in China in 2022,
according to the same source. We have developed an advanced and sophisticated product research and
development capability, a diversified product portfolio, a robust quality assurance scheme, and an
established sales network, which has allowed us to prevail in the market competition.
With the broad and venerable cultural foundations and history of consumptions, China has been the
preeminent market and home to the largest consumer base for EBN products. Driven by the rising living
standard and the growing health awareness among Chinese consumers, EBN has been perceived as healthy
food products with various functional benefits among many Chinese consumers. As an industry leader, we
have outperformed industry average, with a revenue growth from RMB1,301.2 million in 2020 to
RMB1,729.9 million in 2022, at a CAGR of 15.3%. Our total retail value in the market also increased at
a high CAGR of 12.3% from 2020 to 2022, which was 8.6 percentage points higher than the industry
average and was the highest among the top five EBN brands during the same years, according to the F&S
Report. According to the same source, China’s EBN market, in terms of retail value, is expected to grow
from RMB43.0 billion in 2022 to RMB92.1 billion in 2027, at a CAGR of 16.5%. We believe we are
well-positioned to capture the substantial market opportunity, leveraging our market share and revenue
growth.
Consumer experience is our top priority. We leverage modern technology to continually drive
product innovation that elevates consumer experience. Our product portfolio primarily consists of three
product categories, i.e., pure EBN products, “EBN+” products and “+EBN” products, to meet the
differentiated consumer needs for experience in different life scenarios. In 2022, we had 250 SKUs, among
which 194 were pure EBN SKUs under four major product series, including One Nest (ມዲ), Freshly
Stewed Bird’s Nest ( ᒻዮዲ၊), Crystal Sugar Bird’s Nest (ዲ), and dried EBN ( ৻ዲ၊). In
addition, leveraging our extensive research of active ingredients extraction from EBN, we have expanded
the value chain of the EBN industry by developing other EBN products, including “EBN+” products
(which are ready-to-serve EBN products enhanced with other ingredients and/or nutrients), such as One
Nest — Vitality (ມዲ–ʩंಛ) and Crystal Sugar Bird’s Nest with Ginseng (ዲ), and “+EBN”
products (which are products that feature EBN as an enhancement for elevated nutrition or other benefits),
such as EBN porridge and EBN skincare products.
We have developed a geographically diverse brick-and-mortar sales network, consisting of both
self-operated stores and distributor-operated stores. As of May 31, 2023, we had a nationwide offline sales
network consisting of 91 self-operated stores and 214 offline distributors covering 614 distributor-
operated stores in China. The number of our offline distributors increased from 136 as of January 1, 2020
to 214 as of May 31, 2023. Among the 136 distributors as of January 1, 2020, 111, or 81.6%, of them had
remained with us as of May 31, 2023. To capture the rapid growth of e-commerce in recent years, we have
SUMMARY
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also expanded our online presence on major e-commerce or social media platforms, such as Tmall,
JD.com, Douyin and Xiaohongshu. In addition, we have launched products specifically designed for online
channels, such as Freshly Stewed Bird’s Nest, which has quickly gained popularity among younger
consumers.
We stay close to our customers. Through the Y an Palace (܊membership mini program, our
Golden Y an Club (ዲ⸭) membership program, and other membership programs on major e-commerce
platforms, we have cultivated a loyal membership network of customers with a tiered membership system
to drive customer stickiness and repeated purchase. As of the Latest Practicable Date, we had over 1.8
million customers registered in our membership programs. Through this membership network, we organize
various interactive events to maintain direct engagement with our customers. We have gained considerable
insight from our interaction with customers, which allows us to continually optimize our product offerings
and customer services. In 2020, 2021 and 2022, we had approximately 143,700, 168,200 and 204,800
paying customers registered in our membership programs, respectively, accounting for 25.0%, 22.1% and
23.5% of our total registered customers as of December 31, 2020, 2021 and 2022, respectively. In the five
months ended May 31, 2023, we had approximately 117,600 paying customers registered in our
membership programs, accounting for 7.2% of our total registered customers as of May 31, 2023. In 2020,
2021, 2022 and the five months ended May 31, 2023, purchases from such paying customers registered
in our membership programs was RMB616.0 million, RMB806.4 million, RMB1,057.5 million and
RMB500.0 million, respectively, representing an average purchase amount per registered paying customer
of approximately RMB4,280, RMB4,790, RMB5,150 and RMB4,240, respectively.
Our philosophy and primary focus are bringing people beauty and wellness, quality and heritage of
EBN products. We collaborate with upstream suppliers to ensure strict control over raw material
procurement, implement stringent supplier selection process, and source natural, high-quality and
cruelty-free EBN from Southeast Asia. We relentlessly bring EBN to consumers in their natural and pure
form.
We achieved robust growth and profitability during the Track Record Period. Our revenue increased
from RMB1,301.2 million in 2020 to RMB1,729.9 million in 2022, at a CAGR of 15.3%, and increased
by 12.3% from RMB696.9 million in the five months ended May 31, 2022 to RMB782.6 million in the
five months ended May 31, 2023. Our net profit increased from RMB123.4 million in 2020 to RMB205.9
million in 2022, at a CAGR of 29.2%, and increased by 20.0% from RMB83.8 million in the five months
ended May 31, 2022 to RMB100.5 million in the five months ended May 31, 2023. Our net profit margin
was 9.5%, 11.4%, 11.9%, 12.0% and 12.8% for 2020, 2021, 2022 and the five months ended May 31, 2022
and 2023, respectively. Our adjusted net profit (non-IFRS measure) increased from RMB123.9 million in
2020 to RMB211.1 million in 2022, at a CAGR of 30.5%, and increased by 32.4% from RMB85.9 million
in the five months ended May 31, 2022 to RMB113.7 million in the five months ended May 31, 2023.
According to the F&S Report, our profitability during the Track Record Period was higher than the
industry average, which was estimated to be 5.0% to 9.0% during the same periods. See “Financial
Information” for more information.
SUMMARY
–2–


--- page 13 ---
Our Products
We currently have primarily three major product categories, i.e., pure EBN products, EBN+ products
and +EBN products. During the Track Record Period, our pure EBN products (with an EBN feed rate of
over 1% and up to 6% for ready-to-serve products) consisted primarily of (1) One Nest (ມዲ), our
bowl-shape-canned EBN product series which promotes the lifestyle of beauty and wellness, (2) Freshly
Stewed Bird’s Nest ( ᒻዮዲ၊), our bottle-canned EBN product series primarily targeting e-commerce
consumers, (3) Crystal Sugar Bird’s Nest (ዲ), our primary bottle-canned crystal sugar flavored
EBN product series, and (4) dried EBN, our traditional EBN product series for customers to prepare their
own serving of delicacy. In addition to pure EBN products, we have also developed (i) EBN+ products,
primarily including EBN-based products with additional ingredients added to create enhanced flavors and
cater to different consumption scenarios, and (ii) +EBN products, primarily including food products using
EBN or EBN extracts to enhance flavors and functions such as EBN porridge, and EBN skincare products
that use bird’s nest peptides as an enhancement. We will continue to iterate and diversify our product
portfolio in response to the evolving consumer demand. The following diagram is a simplified illustration
of our product matrix.
One Nest–
Vitality
One Nest
Crystal Sugar
Bird’s Nest
Crystal Sugar Bird’s
Nest with ginsengs
EBN facial maskEBN cleanser
EBN essence
spray
Drinkable bird’s
nest peptide
essence
Little Blue
Bottle
Drinkable EBN
essence with
ginsengs
EBN with quinoa and
gas bladder
Iced EBN zongzi
EBN
porridge
C
r
y
s
Bi
r
s
t
al
 S
ug
a
r
C
r
y
s
Freshly Stewed
Bird’s Nest
Dried EBN
SUMMARY
–3–


--- page 14 ---
The following table sets forth a breakdown of our revenue by product category for the periods
indicated.
Y ear ended December 31, Five months ended May 31,
2020 2021 2022 2022 2023
RMB
Percentage
of total
revenue RMB
Percentage
of total
revenue RMB
Percentage
of total
revenue RMB
Percentage
of total
revenue RMB
Percentage
of total
revenue
(Unaudited)
(RMB in thousands except for percentages)
Pure EBN products .... 1,253,900 96.4 1,442,951 95.8 1,638,127 94.7 665,161 95.4 738,613 94.3
— One Nest ...... 559,288 43.0 661,412 44.0 672,640 38.9 287,958 41.3 283,406 36.2
— Freshly Stewed Bird’s
Nest ....... 321,144 24.7 423,264 28.1 485,372 28.1 188,664 27.1 215,168 27.5
— Other bottle-canned
bird’s nest (1) . . . 201,298 15.5 193,318 12.8 305,105 17.6 122,816 17.6 169,259 21.6
— Dried EBN ..... 172,170 13.2 164,957 10.9 175,010 10.1 65,723 9.4 70,780 9.0
EBN+ and +EBN
products ....... 43,051 3.3 56,115 3.7 73,103 4.2 28,619 4.1 37,237 4.8
Others (2) ........ 4,206 0.3 7,931 0.5 18,715 1.1 3,096 0.5 6,726 0.9
Total revenue ...... 1,301,157 100.0 1,506,997 100.0 1,729,945 100.0 696,876 100.0 782,576 100.0
Notes:
(1) Include primarily Crystal Sugar Bird’s Nest.
(2) Include non-EBN products, promotional gifts to customers, and products for internal sales.
Pure EBN Products
One Nest ( ມዲ)
One Nest features ready-to-serve EBN contained in bowl-shaped cans. Launched in 2012, One Nest
is our signature product series that revolutionarily standardized the manufacturing process of EBN.
According to the F&S Report, One Nest was one of the earliest mass-produced, ready-to-serve EBN
products in China. By standardizing the manufacturing process of ready-to-serve EBN products, we
believe One Nest allows consumers to avoid the intricate and time-consuming process of cooking, which
frustrates many consumers and deters them from purchasing EBN products. Our standardized
manufacturing process enables us to preserve EBN’s original taste in One Nest, and at the same time,
ensures consistent quality and safety of the products. Through One Nest , we have established ourselves as
a leading EBN product brand, according to the F&S Report. In 2022, we had 54 pure EBN SKUs sold
under One Nest product series.
Freshly Stewed Bird’ s Nest (
ᒻዮዲ၊)
We believe e-commerce consumers have the demand for higher freshness requirements and launched
our Freshly Stewed Bird’s Nest, which is available primarily for online channels. Our fresh stewed EBN
products are bottle-canned and stewed at 115 degrees Celsius, which led to a relatively short shelf life but
ensures the freshness. Consumers could order our weekly, monthly or annual packages for such products
at different prices. Depending on the consumption frequency specified in a particular package, we deliver
three or seven bottles in different volumes to consumers every six or seven days. We believe this package
ordering program has enhanced customer stickiness. In addition to our cooperation with industry-leading
express courier companies, we have also established a production base that primarily manufactures
Freshly Stewed Bird’s Nest in Songjiang District, Shanghai to ensure faster delivery. See “Business
—Production—Production Bases.” In 2022, we had 75 SKUs sold under Freshly Stewed Bird’s Nest
product series.
Other Bottle-canned Bird’s Nest
Other bottle-canned bird’s nest is our traditional EBN product series, primarily including Crystal
Sugar Bird’s Nest. This product series is produced in accordance with traditional Chinese recipes that
preserve the original taste of EBN as a delicious dish in traditional Chinese cuisine. Compared to Freshly
Stewed Bird’s Nest, Crystal Sugar Bird’s Nest products generally have a longer shelf life of 24 months.
In 2022, we had 35 pure EBN SKUs sold under other bottle-canned bird’s nest.
Dried EBN
We rigorously select high-quality raw nests in the intact shape of a shallow cup for customers to
prepare their own serving of delicacy. We grade such intact raw nests depending on their length, height
and weight. For example, we grade intact raw nests with a length not less than 12.5 cm, a height not less
SUMMARY
–4–


--- page 15 ---
than 4.0 cm, and a weight not less than 6.5 grams as 6A nests. Consumers could turn these intact raw nests
into various dishes of their choosing through their own preparation process, which at least includes
soaking and feather picking. In addition, we also provide consumers with dried EBN that have gone
through certain processes, such as soaking, feather picking, cleaning and drying, so that these products are
available for instant stewing, avoiding hours of preparation by our customers. In 2022, we had 30 SKUs
sold under our dried EBN product series.
The following table sets forth a breakdown of our sales volume and average selling price per
minimum unit or gram by product series for the periods indicated.
Y ear ended December 31, Five months ended May 31,
2020 2021 2022 2022 2023
Sales
volume
Average
selling
price (1)
Sales
volume
Average
selling
price (1)
Sales
volume
Average
selling
price (1)
Sales
volume
Average
selling
price (1)
Sales
volume
Average
selling
price (1)
One Nest (pure EBN) .... 3,430,930
bowls
RMB163
per bowl
3,855,506
bowls
RMB172
per bowl
3,868,281
bowls
RMB174
per bowl
1,648,520
bowls
RMB175
per bowl
1,596,938
bowls
RMB177
per bowl
Freshly Stewed Bird’s Nest . . 5,943,315
bottles
RMB54
per bottle
8,116,586
bottles
RMB52
per bottle
8,941,642
bottles
RMB54
per bottle
3,564,531
bottles
RMB53
per bottle
4,066,314
bottles
RMB53
per bottle
Other bottle-canned bird’s nest
(pure EBN) (2) ......
5,162,726
bottles
RMB39
per bottle
4,366,735
bottles
RMB44
per bottle
7,162,425
bottles
RMB43
per bottle
2,719,766
bottles
RMB45
per bottle
4,056,142
bottles
RMB42
per bottle
Dried EBN ........ 6,064
kilograms
RMB28
per gram
5,949
kilograms
RMB28
per gram
6,497
kilograms
RMB27
per gram
2,319
kilograms
RMB28
per gram
2,658
kilograms
RMB27
per gram
Notes:
(1) Calculated by dividing the total revenue from a given product series in the period indicated with the total sales volume
of such product series sold in same period.
(2) Includes primarily Crystal Sugar Bird’s Nest.
EBN+ Products
We have also developed EBN+ products (with an EBN feed rate of 1% or above and up to 5%),
primarily including EBN-based products with additional tonic ingredients to create enhanced flavors and
cater to different consumption scenarios, such as One Nest — Vitality (ມዲ–ʩंಛ) and Crystal Sugar
Bird’s Nest with Ginseng (ዲ). In addition, we have also launched Little Blue Bottle (ૉτʃ
ᔝଧ) product series, other innovative products that contain gamma-aminobutyric acid, which is known for
producing a calming effect to improve sleep quality. By our combination of EBN and other ingredients,
we believe that the flavor and the perceived health benefits of our EBN+ products were further enhanced.
In 2022, we had 22 SKUs for EBN+ products.
+EBN Products
Leveraging our in-depth understanding of EBN extract accumulated over decades of product
research and development, we have expanded the value chain of the EBN industry by developing
innovative +EBN products, including food products, such as EBN porridge, EBN zongzi, various EBN
beverages, and introduced a line of EBN skincare products that use bird’s nest peptides as an enhancement.
Our +EBN products contain EBN or EBN extracts as an enhancement for elevated nutrition or other
benefits. +EBN food products are products that use EBN (with an EBN feed rate of less than 1%) and other
food ingredients as raw materials. +EBN skincare products are products that contain EBN or EBN extracts.
In 2022, we had 34 SKUs for +EBN products.
In March 2023, we commercially launched our skincare product series featuring small molecule
bird’s nest peptide as an enhancement under the sub-brand of “ Yan Palace — Yan Bao Shi ”( ዲᘒ་). With
our proprietary modern enzymatic hydrolysis technology, we are able to convert functional
macromolecular protein of EBN extracts into active small molecules peptide, which has the functions of
repairing skin damage, anti-aging and anti-oxidation, among others. We are one of the first movers in the
industry that launched skincare products featuring bird’s nest peptide, according to the same source. As
of the Latest Practicable Date, our skincare product series included facial masks, essence, essence mist,
facial cleanser and hand cream.
SUMMARY
–5–


--- page 16 ---
The following table sets forth a breakdown of our gross profit and gross profit margin by product
category for the periods indicated.
Y ear ended December 31, Five months ended May 31,
2020 2021 2022 2022 2023
Gross
Profit
Gross
Profit
Margin
Gross
Profit
Gross
Profit
Margin
Gross
Profit
Gross
Profit
Margin
Gross
Profit
Gross
Profit
Margin
Gross
Profit
Gross
Profit
Margin
(Unaudited)
(RMB in thousands except for percentages)
Pure EBN products. . . 544,891 43.5% 706,375 49.0% 845,427 51.6% 347,947 52.3% 389,141 52.7%
— One Nest ...... 310,900 55.6% 385,406 58.3% 414,195 61.6% 177,914 61.8% 176,711 62.4%
— Freshly Stewed
Bird’s Nest .... 83,598 26.0% 156,209 36.9% 202,817 41.8% 76,605 40.6% 98,361 45.7%
— Other bottle-canned
bird’s nest (1) . . . 86,664 43.1% 98,733 51.1% 158,830 52.1% 65,642 53.4% 84,852 50.1%
— Dried EBN ..... 63,729 37.0% 66,027 40.0% 69,585 39.8% 27,786 42.3% 29,217 41.3%
EBN+ and +EBN
products ...... 14,520 33.7% 25,355 45.2% 36,169 49.5% 14,331 50.1% 18,818 50.5%
Others (2) ....... (3,702) (88.0)% (4,947) (62.4)% (3,344) (17.9)% (2,715) (87.7)% (1,948) (29.0)%
Total ......... 555,709 42.7% 726,783 48.2% 878,252 50.8% 359,563 51.6% 406,011 51.9%
Notes:
(1) Includes primarily Crystal Sugar Bird’s Nest.
(2) Includes non-EBN products, promotional gifts to customers, and products for internal sales.
Our Sales Network
We have a broad sales network for our products, covering both online and offline channels. In
addition to the engagement of distributors to distribute our products through their online and offline stores,
we also sell directly to customers through self-operated online and offline stores. Furthermore, we have
engaged e-commerce platforms as our customers to further expand our online channels. As of May 31,
2023, we had a nationwide offline sales network consisting of 91 self-operated stores and 214 offline
distributors covering 614 distributor-operated stores in China. The following table sets forth the number
of our offline stores by type as of the date indicated.
As of December 31, As of May 31,
20232020 2021 2022
Offline stores
Self-operated stores ............. 4 0 8 9 8 9 9 1
Distributor-operated stores ........ 4 8 3 5 4 4 6 1 5 6 1 4
Total ........................ 523 633 704 705
Our online sales network consists of self-operated online stores, distributor-operated online stores
and e-commerce platforms. As of May 31, 2023, we had 23 self-operated online stores and 13
distributor-operated online stores on mainstream e-commerce or social media platforms such as JD.com,
Tmall and Douyin. In addition, we began to engage e-commerce platforms to distribute our products
through platform-operated online stores in 2018 to further expand our online presence. As of May 31,
2023, we had 15 e-commerce platforms as our customers, including JD.com, Vipshop and Tmall
Supermarket, among others. The following table sets forth the number of our online stores by type as of
the dates indicated.
As of December 31, As of May 31,
20232020 2021 2022
Online stores
Self-operated stores ............. 1 2 1 8 2 3 2 3
Distributor-operated stores ........ 6 8 1 3 1 3
Total ........................ 18 26 36 36
SUMMARY
–6–


--- page 17 ---
The following table sets forth a breakdown of our revenue by sales channel for the periods indicated.
Y ear ended December 31, Five months ended May 31,
2020 2021 2022 2022 2023
RMB
Percentage
of total
revenue RMB
Percentage
of total
revenue RMB
Percentage
of total
revenue RMB
Percentage
of total
revenue RMB
Percentage
of total
revenue
(Unaudited)
(RMB in thousands except for percentages)
Offline channels ........ 578,506 44.5 738,711 49.0 791,991 45.8 333,941 47.9 353,209 45.2
— Sales to offline distributors . . . 409,777 31.5 509,917 33.8 477,525 27.6 198,716 28.5 208,563 26.7
— Direct sales to offline
customers ........ 168,729 13.0 228,794 15.2 314,466 18.2 135,225 19.4 144,646 18.5
Online channels ........ 722,651 55.5 768,286 51.0 937,954 54.2 362,935 52.1 429,367 54.8
— Direct sales to online
customers ........ 575,220 44.1 564,587 37.4 695,265 40.2 264,361 38.0 327,802 41.8
— Direct sales to e-commerce
platforms
(1) ....... 137,545 10.6 189,196 12.6 227,071 13.1 92,228 13.2 93,700 12.0
— Sales to online distributors . . . 9,886 0.8 14,503 1.0 15,618 0.9 6,346 0.9 7,865 1.0
Total ............ 1,301,157 100.0 1,506,997 100.0 1,729,945 100.0 696,876 100.0 782,576 100.0
Note:
(1) Include sales to platform-operated online stores by JD.com, Vipshop and Tmall Supermarket, among others.
Raw Materials and Packaging Materials
The principal raw materials we use in the production of our products are raw nests. During the Track
Record Period, substantially all of raw nests used in our production process were sourced from suppliers
in Indonesia, the largest raw nest production country in the world. We have built strong and stable
relationships with various suppliers for raw nests in Indonesia. In 2020 and 2021, we also sourced a total
of RMB1.9 million of raw nests from suppliers in China, which, to the best knowledge of our Directors,
imported these raw nests from Malaysia and Thailand. We currently do not intend to further diversify our
raw nest supplier base by engaging relevant suppliers in Malaysia and Thailand, primarily because we
intend to focus on procuring raw nests from Indonesia, as such raw nests are of a higher and more
consistent quality and Indonesia is the largest raw nest production country. In the event where we are to
source raw nests from suppliers in these countries, the supplier candidates will be subject to our
comprehensive supplier selection and management policy. See “Business—Raw Materials, Packaging
Materials and Suppliers—Our Suppliers—Supplier Selection and Management.” In 2020, 2021, 2022 and
the five months ended May 31, 2022 and 2023, our purchase for raw nests was RMB770.1 million,
RMB603.5 million, RMB617.0 million, RMB195.0 million and RMB284.3 million, respectively.
According to the F&S Report, we ranked first for four consecutive years from 2019 to 2022 in terms of
procurement volume of imported raw nests with the CAIQ traceability labels. Apart from raw materials,
we also source packaging materials, which primarily consist of polypropylene bowls (an FDA-approved
food contact plastic), glass bottles, as well as cardboard and metal packaging materials, to produce our
products. In 2020, 2021, 2022 and the five months ended May 31, 2022 and 2023, our purchase for
packaging materials was RMB86.7 million, RMB85.3 million, RMB110.9 million, RMB38.3 million and
RMB36.4 million, respectively. During the Track Record Period, we did not experience any significant
shortage of raw material and packaging material supplies, and the raw materials and packaging materials
provided by our suppliers did not have any significant quality issues.
Our Suppliers
We purchase raw materials, packaging materials, and logistics and transportation services from
suppliers for our business operations. During the Track Record Period, substantially all of our suppliers
for raw nests were located in Indonesia. Our suppliers for packaging materials are primarily located in
Zhejiang, Fujian and Jiangxi provinces, China. We have maintained long-term and stable business
relationships with major raw nest suppliers in Indonesia and expect to maintain amicable relationships
with them. In the five months ended May 31, 2023, more than 46% of our purchase amount of raw nests
were attributable to suppliers with over five years’ business relationship with us. We believe our long-term
stable business relationships with these suppliers also enable us to minimize the risks of unexpected
fluctuation in the price of raw nests. During the Track Record Period and up to the Latest Practicable Date,
we did not experience any material breach of supply agreements that had a significant impact on our
production and did not have any material disputes with our suppliers.
SUMMARY
–7–


--- page 18 ---
Production Bases
As of the Latest Practicable Date, we had three production bases in China, located in Xiamen City,
Fujian Province, Songjiang District, Shanghai and Guanghe County, Gansu Province, respectively, with an
aggregate gross floor area of approximately 39,300 square meters. As of December 31, 2022, we had the
largest production bases for EBN products in China in terms of aggregate gross floor areas, according to
the F&S Report.
Our production base in Xiamen, with a gross floor area of approximately 31,100 square meters, is
our first and primary production base, where we focus on the production of substantially all the series of
our products. Our production base in Shanghai, with a gross floor area of approximately 6,200 square
meters, is our secondary production base, which is mostly designed for the production of Freshly Stewed
Bird’s Nest. We established our Shanghai production base in 2021 to shorten the delivery distance in light
of the short shelf life of our Freshly Stewed Bird’s Nest. In 2019, we established our Guanghe production
base with a gross floor area of approximately 2,000 square meters, primarily for the lowered labor costs
and the availability of production facilities. Our Guanghe production base is designed primarily for the
feather picking process, through which we manually remove impurities such as feathers from raw nests.
COMPETITIVE STRENGTHS
We believe the following competitive strengths have contributed to our success and differentiated us
from our competitors: (1) our leadership in China’s EBN product market with sustained growth; (2) our
continued product innovation and success underpinned by our research and development capabilities; (3)
our high-quality and scientifically validated EBN products in their natural and pure form; (4) our
established sales network with differentiated product offerings; (5) our distinguished status as a leader in
formulating industry standards and an active contributor to public welfare; and (6) our dedicated, visionary
and experienced management team leading a group of elite talents in the industry.
GROWTH STRATEGIES
We intend to pursue the following strategies to further grow our business: (1) expand our product
portfolio and strengthen our research and development capabilities; (2) continue to expand and deepen our
sales network; (3) continue to invest in branding building and foster strong and lasting customer
relationships; (4) strengthen operational capacities in supply chain, expand production capacities and
invest in intelligent manufacturing; and (5) strengthen the digitalization of our business processes.
RISKS AND CHALLENGES
Our business and the Global Offering involve certain risks, which are set out in the section headed
“Risk Factors” in this prospectus. Some of the major risk factors that we face include: (1) damage to our
brand or reputation; (2) failure to successfully upgrade our existing products or to develop, launch and
promote new products; (3) product quality and safety issue; (4) shift in consumer demand for our products;
(5) failure to further increase sales revenue from our online channels or to manage the coordination of our
offline and online channels; (6) deterioration in relationships with distributors; (7) fluctuations in prices
and changes in the quality of raw materials and packaging materials; (8) dependence on suppliers for raw
nests in Indonesia; (9) failure to comply with laws and regulations on environmental, social and corporate
governance matters; (10) failure to manage our inventory effectively; (11) our distributors’ failure to
manage their inventory level effectively; and (12) incidents or publicity involving food-related illnesses
and adverse public or medical opinions about the health effects of consuming our products. As different
investors may have different interpretations and criteria when determining the significance of a risk, you
should carefully read the “Risk Factors” section in its entirety before you decide to invest in our Shares.
SUMMARY OF HISTORICAL FINANCIAL INFORMATION
The following is a summary of our historical financial information as of and for the years ended
December 31, 2020, 2021 and 2022 and the five months ended May 31, 2022 and 2023, extracted from
the Accountants’ Report set out in Appendix I to this prospectus. The summary below should be read in
conjunction with the consolidated financial information in Appendix I to this prospectus, including the
accompanying notes, and the information set forth in the section headed “Financial Information” in this
prospectus. Our consolidated financial information was prepared in accordance with IFRSs.
SUMMARY
–8–


--- page 19 ---
Summary of Results of Operations
The following table sets forth a summary of our results of operations for the periods indicated. Our
historical results presented below are not necessarily indicative of the results that may be expected for any
future period.
Y ear ended December 31, Five months ended May 31,
2020 2021 2022 2022 2023
(Unaudited)
(RMB in thousands)
Revenue ................... 1,301,157 1,506,997 1,729,945 696,876 782,576
Cost of sales ................. (745,448) (780,214) (851,693) (337,313) (376,565)
Gross profit ................. 555,709 726,783 878,252 359,563 406,011
Profit before taxation .......... 159,826 230,173 264,566 107,851 129,528
Profit and total comprehensive
income for the year/period ..... 123,425 172,359 205,878 83,755 100,497
Attributable to:
Equity shareholders of
the Company ............... 122,017 167,353 191,840 78,772 95,058
Non-controlling interests ......... 1,408 5,006 14,038 4,983 5,439
Profit and total comprehensive
income for the year/period ..... 123,425 172,359 205,878 83,755 100,497
Non-IFRS Measure
In order to supplement our consolidated financial statements presented in accordance with the IFRSs,
we use adjusted net profit (non-IFRS measure) as an additional financial measure, which is not required
by, or not presented in accordance with IFRSs. Our adjusted net profit (non-IFRS measure) represents our
profit and total comprehensive income for the year/period, adjusted to add back equity-settled share-based
payment expenses and listing expenses that we recognized in our consolidated statements of profit or loss
and other comprehensive income during the Track Record Period less related income tax. Equity-settled
share-based payment expenses are adjusted for as they are non-cash in nature and were not expected to
result in future cash payments. We believe that the non-IFRS measure facilitates comparisons of operating
performance from period to period and company to company by eliminating potential impacts of certain
items. However, adjusted net profit (non-IFRS measure) presented by us may not be comparable to the
similar financial measure presented by other companies. There are limitations to the non-IFRS measure
used as an analytical tool, and you should not consider it in isolation or regard it as a substitute for our
results of operation or financial position analysis that is in accordance with IFRSs.
Y ear ended December 31, Five months ended May 31,
2020 2021 2022 2022 2023
(Unaudited)
(RMB in thousands)
Profit and total
comprehensive income for
the year/period ......... 123,425 172,359 205,878 83,755 100,497
Add:
Equity-settled share-based
payment expenses ...... 4 3 8 21,813 5,253 2,189 2,189
Listing expenses ......... — — — — 14,650
Less:
Income tax in relation to
listing expenses ........ — — — — 3,663
Adjusted net profit
(non-IFRS measure) ..... 123,863 194,172 211,131 85,944 113,673
SUMMARY
–9–


--- page 20 ---
Our net profit increased from RMB123.4 million in 2020 to RMB205.9 million in 2022, at a CAGR
of 29.2%, and increased by 20.0% from RMB83.8 million in the five months ended May 31, 2022 to
RMB100.5 million in the five months ended May 31, 2023, primarily as a result of our continued efforts
to grow our business, optimize sales channels and launch products that cater to the evolving consumer
demand.
Summary of Consolidated Statements of Financial Position
The following table sets forth a summary of our consolidated statements of financial position as of
the dates indicated.
As of December 31, As of May 31,
20232020 2021 2022
(RMB in thousands)
Total non-current assets ............ 70,839 191,147 205,031 203,154
Total current assets ............... 578,935 605,579 773,323 599,487
Total current liabilities ............. 418,817 424,257 493,145 365,924
Net current assets ................ 160,118 181,322 280,178 233,563
Total assets less current liabilities ...... 230,957 372,469 485,209 436,717
Total non-current liabilities .......... 19,192 19,332 13,199 22,021
Net assets ..................... 2 1 1,765 353,137 472,010 414,696
Non-controlling interests ............ 4,378 16,184 17,614 23,053
Our net current assets increased from RMB160.1 million as of December 31, 2020 to RMB181.3
million as of December 31, 2021, primarily due to (1) an increase of RMB33.4 million in prepayments,
(2) an increase of RMB18.9 million in cash and cash equivalents, (3) an increase of RMB17.0 million in
trade and other receivables, and (4) a decrease of RMB8.9 million in trade and other payables, partially
offset by (i) an increase of RMB36.7 million in contract liabilities, and (ii) an increase of RMB30.7
million in current taxation. Our net current assets increased from RMB181.3 million as of December 31,
2021 to RMB280.2 million as of December 31, 2022, primarily due to (1) an increase of RMB181.3
million in cash and cash equivalents, and (2) a decrease of RMB9.0 million in current taxation, partially
offset by (i) an increase of RMB34.9 million in trade and other payables, and (ii) an increase of RMB37.7
million in contract liabilities. Our net current assets decreased from RMB280.2 million as of December
31, 2022 to RMB233.6 million as of May 31, 2023, primarily due to a decrease of RMB163.4 million in
cash and cash equivalents, partially offset by (1) a decrease of RMB72.9 million in trade and other
payables, and (2) a decrease of RMB30.9 million in current taxation.
Our net assets increased from RMB211.8 million as of December 31, 2020 to RMB353.1 million as
of December 31, 2021 and further to RMB472.0 million as of December 31, 2022, and decreased to
RMB414.7 million as of May 31, 2023, primarily due to the combined effect of (1) the profit and total
comprehensive income generated, dividends paid, and equity settled share-based transactions conducted
in each period during the Track Record Period, and (2) issuance of new shares in 2021. In particular, (i)
our net profit was RMB123.4 million, RMB172.4 million, RMB205.9 million and RMB100.5 million in
2020, 2021, 2022 and the five months ended May 31, 2023, respectively; (ii) we declared dividends to our
then Shareholders of RMB120.0 million, RMB100.0 million, RMB80.0 million and RMB160.0 million in
the same periods, respectively; (iii) we conducted equity settled share-based transactions of RMB0.4
million, RMB21.8 million, RMB5.3 million and RMB2.2 million in the same periods, respectively; and
(iv) we issued new shares of RMB40.4 million in 2021. See also consolidated statements of changes in
equity in the Accountants’ Report in Appendix I to this prospectus.
SUMMARY
–1 0–


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Summary of Consolidated Statements of Cash Flows
The following table sets forth a summary of our cash flows for the periods indicated.
Y ear ended December 31, Five months ended May 31,
2020 2021 2022 2022 2023
(Unaudited)
(RMB in thousands)
Net cash generated from operating
activities ................... 49,013 213,722 305,879 85,344 10,610
Net cash generated from/(used in)
investing activities ............ 60,085 (46,450) (21,024) (53,768) 1,470
Net cash used in financing activities . . (54,166) (148,400) (103,532) (92,472) (175,495)
Cash and cash equivalents at end of
the year ................... 150,573 169,495 350,818 108,599 187,403
KEY FINANCIAL RATIOS
The following table sets forth certain of our key financial ratios for the periods indicated.
As of/for the year ended December 31,
As of/for the five months
ended May 31,
2020 2021 2022 2022 2023
(Unaudited)
Profitability ratios
Gross profit margin ......... 42.7% 48.2% 50.8% 51.6% 51.9%
Net profit margin .......... 9.5% 11.4% 11.9% 12.0% 12.8%
Return on equity ........... 59.2% 61.0% 49.9% 23.7% 22.7%
Return on total assets ........ 22.3% 23.8% 23.2% 11.2% 11.3%
Liquidity ratios
Current ratio ............. 1.4x 1.4x 1.6x 1.5x 1.6x
Gearing ratio ............. 42.6% 9.3% 5.7% 8.5% 8.7%
See “Financial Information—Key Financial Ratios” for details.
OUR GROUP OF CONTROLLING SHAREHOLDERS
During the Track Record Period, Mr. Huang, our founder, chairman and executive Director, Mr.
Zheng, our vice chairman and executive Director, Mr. Li, our general manager and executive Director,
Xiamen Suntama, an entity controlled by Mr. Huang (together with Mr. Huang, Mr. Zheng and Mr. Li, the
“Concert Parties”) acted in concert and are our group of Controlling Shareholders. In addition, Jinyan
Tengfei LP (Mr. Huang is its general partner) and Ms. Xue (the spouse of Mr. Zheng) are also deemed as
our group of Controlling Shareholders pursuant to the Listing Rules. As of the Latest Practicable Date,
pursuant to the Listing Rules, approximately 41.40% of the total issued share capital of our Company are
owned by our group of Controlling Shareholders collectively. See “Relationship with Our Controlling
Shareholders” for more information.
CONNECTED TRANSACTIONS
We have entered into certain transactions with certain connected persons (as defined under Chapter
14A of the Listing Rules), and following the Listing, the transactions contemplated thereunder will
continue and constitute continuing connected transactions under Chapter 14A of the Listing Rules. We
have applied to the Stock Exchange for, and the Stock Exchange has granted to us, a waiver from strict
compliance with the announcement, circular and independent shareholders’ approval requirement as
applicable, as set out in Chapter 14A of the Listing Rules in respect of such continuing connected
transaction. See “Connected Transactions” for details of the connected transactions.
SUMMARY
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PRE-IPO INVESTMENTS
Since 2014, with confidence in our business development and management, many investors invested
in our Company, such as Guangyao Tianxiang, Hongyan Investment, Y angming Kangyi, Jingjun Hongyan,
Xiamen Jinyanlai, Torch Investment, Tianyi Runli and certain individual investors. See “History,
Development and Corporate Structure—Pre-IPO Investments” for details of the principal terms of our
Pre-IPO Investments and the identity and background of our Pre-IPO Investors.
APPLICATION FOR LISTING ON THE STOCK EXCHANGE
We have applied to the Listing Committee of the Stock Exchange for the grant of the listing of, and
permission to deal in, our H Shares to be issued pursuant to the Global Offering (including any H Shares
which may be issued pursuant to the exercise of the Over-allotment Option) and the Conversion of
Unlisted Shares into H Shares, on the basis that, among other things, we satisfy the profit test under Rule
8.05(1) of the Listing Rules.
LISTING EXPENSES
We expect to incur a total of RMB49.8 million of listing expenses (assuming an Offer Price of
HK$9.90 per Offer Share, being the mid-point of the indicative Offer Price range between HK$8.80 and
HK$11.00, and assuming that the Over-allotment Option is not exercised) until the completion of the
Global Offering. We recognized listing expenses of RMB14.7 million in our consolidated statement of
profit or loss and other comprehensive income for the five months ended May 31, 2023. We estimate that
RMB20.5 million of listing expenses will be charged to our consolidated statement of profit or loss and
other comprehensive income after the Track Record Period. The remaining RMB14.6 million is directly
attributable to the issue of our Shares to the public and is expected to be deducted from equity.
Listing expenses include RMB22.4 million of fees for legal advisors and the Reporting Accountants,
RMB16.2 million of other fees unrelated to the underwriting, and RMB11.2 million of underwriting
commissions payable to the Underwriters and transaction fees (including SFC transaction levy, AFRC
transaction levy, and Stock Exchange trading fee) in connection with the offering of Offer Shares under
the Global Offering. The listing expenses above represent approximately 17.1% of our gross proceeds
from the Global Offering and were our best estimate as of the Latest Practicable Date and for reference
only. The actual amount may differ from this estimate.
OFFERING STATISTICS
All statistics in the following table are based on the fact that (1) the Global Offering and sub-division
have been completed and 32,000,000 Offer Shares are issued pursuant to the Global Offering and
sub-division; and (2) the Over-allotment Option is not exercised.
Based on an Offering
Price of HK$8.80 per
Offer Share
Based on an Offering
Price of HK$11.00 per
Offer Share
Market Capitalization of our Shares (1) ............. HK$4,096.4 million HK$5,120.5 million
Unaudited pro forma adjusted consolidated net tangible
assets attributable to equity shareholders of the
Company per Share
(2) ...................... HK$1.26 HK$1.41
Notes:
(1) The calculation of market capitalization is based on 465,500,000 Shares expected to be in issue immediately upon
completion of the Global Offering and sub-division (assuming the Over-allotment Option is not exercised).
(2) The unaudited pro forma consolidated net tangible assets attributable to equity shareholders of the Company per Share
is arrived at after adjusting for the estimated net proceeds from the Global Offering and sub-division and on the basis
that 465,500,000 Shares were in issue, assuming that the Global Offering and sub-division have been completed on
May 31, 2023 but takes no account of any Shares which may be allotted and issued pursuant to the exercise of the
Over-allotment Option or any Shares which may be issued or repurchased by the Company.
SUMMARY
–1 2–


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FUTURE PLANS AND USE OF PROCEEDS
We estimate the net proceeds of the Global Offering which we will receive, assuming an Offer Price
of HK$9.90 per Offer Share (being the mid-point of the Offer Price range stated in this prospectus), will
be approximately HK$262.6 million, after deduction of underwriting fees and commissions and other
estimated expenses in connection with the Global Offering assuming the Over-allotment Option is not
exercised. We intend to use the net proceeds of the Global Offering for the following purposes: (1)
approximately 10%, or HK$26.3 million for research and development activities to expand our product
portfolio and our product features; (2) approximately 25%, or HK$65.7 million for expanding and
consolidating our sales network; (3) approximately 15%, or HK$39.4 million for strengthening our brand
building and marketing promotion efforts; (4) approximately 35%, or HK$92.0 million for strengthening
our supply chain management capabilities; (5) approximately 5%, or HK$12.9 million for strengthening
our digital infrastructure; and (6) approximately 10.0%, or HK$26.3 million for working capital and other
general corporate purposes.
See “Future Plans and Use of Proceeds” for further information relating to our future plans and use
of proceeds from the Global Offering, including the adjustment on the allocation of the proceeds in the
event that the Offer Price is fixed at a higher or lower level compared to the midpoint of the estimated
Offer Price range.
DIVIDENDS
According to the Articles of Association and applicable laws and regulations, our profit distribution
proposal is formulated by our Board, and upon approval by the Board and the Board of Supervisors, it is
submitted to a Shareholders’ general meeting for consideration where it must be passed by Shareholders
representing more than half of the voting rights of the Shareholders who attend the general meeting. Our
Board will declare dividends, if any, in RMB with respect to the H Shares on a per Share basis and will
pay such dividends in Hong Kong dollars. All of our Shareholders have equal rights to distributable
profits, and our profits will be distributed on a pro-rata basis.
Our future declarations of dividends may or may not reflect our historical declarations of dividends
and will be at the discretion of our Board. Both current and new Shareholders are entitled to our
accumulated retained earnings prior to the Listing, subject to compliance with our Articles of Association
and relevant regulatory requirements.
During the Track Record Period, we declared dividends to our then Shareholders of RMB120.0
million, RMB100.0 million, RMB80.0 million and RMB160.0 million in 2020, 2021, 2022 and the five
months ended May 31, 2023, respectively, in light of our cumulative business growth. As of May 31, 2023,
all of such dividends declared during the Track Record Period had been fully settled by bank transfer to
our then Shareholders. See also Note 30(b) to the Accountants’ Report in Appendix I to this prospectus.
RECENT DEVELOPMENT
Subsequent to the Track Record Period and up to the date of this prospectus, our business operation
remained stable in all material aspects. We continued to expand our nationwide offline sales network and
the number of our offline distributors increased from 214 as of May 31, 2023 to 225 as of the Latest
Practicable Date. During the same period, the numbers of our self-operated offline stores and
distributor-operated offline stores both slightly increased from 91 and 614 as of May 31, 2023 to 94 and
632 as of the Latest Practicable Date, respectively.
NO MATERIAL ADVERSE CHANGE
Our Directors confirmed that subsequent to the Track Record Period and up to the date of this
prospectus, (1) there was no material adverse change in the market conditions and the regulatory
environment in which our Group operates that would affect our financial or operating position materially
SUMMARY
–1 3–


--- page 24 ---
and adversely; (2) there was no material adverse change in our business, revenue structure, profitability,
cost structure, financial position and prospects; and (3) no event had occurred that would affect the
information shown in our Accountants’ Report in Appendix I to this prospectus materially and adversely.
REGULATORY DEVELOPMENTS
Regulation on Overseas Listing
On February 17, 2023, the CSRC promulgated the Trial Administrative Measures of Overseas
Securities Offering and Listing by Domestic Companies (ج)
the “Overseas Listing Trial Measures”) and relevant supporting guidelines, which came into effect on
March 31, 2023. The Overseas Listing Trial Measures comprehensively improve and reform the existing
regulatory regime for overseas offering and listing of PRC domestic companies’ securities and regulate
both direct and indirect overseas offering and listing of PRC domestic companies’ securities.
Pursuant to the Overseas Listing Trial Measures, where a PRC domestic company submits an
application for initial public offering to competent overseas regulators or overseas stock exchanges, such
issuer must file with the CSRC within three business days after such application is submitted. We received
the filing notice issued by the CSRC dated September 25, 2023 indicating that we have completed the
filing application. Nonetheless, in the event of any future events that are material to us or failure to
complete overseas securities offering and listing within 12 months from the date of the filing notice, we
are under the obligation to report such events to or update the filing application with the CSRC.
Regulation on Cybersecurity Review and Data Security
On December 28, 2021, the Cyberspace Administration of China (the “CAC”) and several other PRC
authorities jointly issued the Cybersecurity Review Measures (جwhich became
effective on February 15, 2022. The Cybersecurity Review Measures provides that a critical information
infrastructure operator purchasing network products and services, and platform operators carrying out data
processing activities that affect or may affect national security, must apply for cybersecurity review. The
Cybersecurity Review Measures also provide that a platform operator with more than one million users’
personal information aiming to list abroad must apply for cybersecurity review. On November 14, 2021,
the CAC published Regulations on Cyber Data Security Management (Draft for Comments) ( ၣഖᅰኽτ
Ό၍ଣૢԷ(ᅄӋจԈᇃ)) (the “Draft Regulations on Cyber Data Security Management”) for public
comments, which applies to activities relating to the use of networks to carry out data processing activities
in China.
Our Directors and our PRC Legal Advisor are of the view that the Cybersecurity Review Measures
and the Draft Regulations on Cyber Data Security Management, if implemented in current form, will not
have material adverse effects on our business operations or the proposed Listing, and that they do not
foresee any material impediments for us to comply with the Cybersecurity Review Measures and the Draft
Regulations on Cyber Data Security Management in all material aspects, on the following basis:
(1) The relevant PRC authorities are unlikely to identify us as a critical information infrastructure
operator, primarily because (i) as of the Latest Practicable Date, we had not received any notice
or determination from relevant PRC authorities identifying us as a critical information
infrastructure operator, (ii) our business does not and will not involve the operation of critical
information infrastructure as defined under the Security Protection Regulations for Critical
Information Infrastructure (ᚐૢԷ), which, in case of destruction,
loss of function or leak of data, may result in serious damage to the national security, the
national economy and the people’s livelihood and public interests, (iii) as of the Latest
Practicable Date, we had not encountered any incident of data or personal information leakage,
SUMMARY
–1 4–


--- page 25 ---
violation of data protection and privacy laws and regulations, or investigation or other legal
proceeding that may materially and adversely affect our business operation, and (iv) we have
installed a well-established system to prevent such data and personal information leakage.
(2) The membership data management platform which we plan to develop as part of our growth
strategies would not collect any information outside of the scope of that collected and
maintained by our current membership system. In particular, the main function of our planed
membership data management platform is to integrate our members’ information from various
channels. See “Future Plans and Use of Proceeds.”
However, as of the Latest Practicable Date, the scope of critical information infrastructure operators
and the scope of network products or services or data processing activities that affect or may affect
national security remain unclear and are subject to interpretation by relevant government authorities. See
“Risk Factors—Risks Relating to Our Business—We may be subject to additional cybersecurity review or
inspection by government authorities.”
COVID-19 OUTBREAK AND EFFECTS ON OUR BUSINESS
The outbreak of COVID-19 has affected the Chinese and global economy. During the COVID-19
outbreak, we experienced temporary suspension to our production bases and disruptions to the operations
of our stores in affected regions from time to time. We also had to reduce the regular visits to our offline
stores and distributors due to uncertainties regarding the pandemic. The COVID-19 outbreak also affected
our suppliers for logistics and transportation services, and caused some delays in our product delivery. Our
Directors confirmed that, during the Track Record Period and up to the Latest Practicable Date, the
COVID-19 outbreak had not had a material adverse effect on our business, results of operations and
financial condition. However, any future impact caused by the COVID-19 pandemic will depend on its
subsequent development. We are closely monitoring the development of the COVID-19 pandemic and
continually evaluating any potential impact on our business operations. See “Risk Factors—Risks Relating
to Our Business—An occurrence of a natural disaster, widespread health epidemic or other outbreaks, such
as the outbreak of COVID-19, could have a material adverse effect on the demand for our products and
our business operations.”
SUMMARY
–1 5–


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In this prospectus unless the context otherwise requires the following terms shall have the
following meanings. Certain technical terms are explained in the section headed “Glossary” in this
prospectus.
“Accountants’ Report” the accountants’ report for three years ended December 31, 2022
and the five months ended May 31, 2023 prepared by KPMG, the
text of which is set out in Appendix I to this prospectus
“affiliate” with respect to any specified person, any other person, directly or
indirectly, controlling or controlled by or under direct or indirect
common control with such specified person
“AFRC” the Accounting and Financial Reporting Council of Hong Kong
“Articles” or “Articles of
Association”
the articles of association of our Company, as amended, which
shall become effective on the Listing Date, a summary of which is
set out in Appendix III to this prospectus
“Audit Committee” the audit committee of the Board
“Beijing Tianfeiyan” Beijing Tianfeiyan Trading Co., Ltd. (ப΂ʮ
̡), a limited liability company established in the PRC on March
22, 2021, a non-wholly owned subsidiary of our Company
“Board” or “Board of Directors” the board of Directors of our Company
“business day” a day on which banks in Hong Kong are generally open for normal
business to the public and which is not a Saturday, Sunday or
public holiday in Hong Kong
“CAC” the Cyberspace Administration of China (ʝ
܃)
CAGR” compound annual growth rate
“CAIQ” the Chinese Academy of Inspection and Quarantine (ޥ
Ӻ৫)
“Capital Market Intermediary(ies)”
or “CMI(s)”
the capital market intermediaries participating in the Global
Offering and has the meaning ascribed thereto under the Listing
Rules
“CCASS” the Central Clearing and Settlement System established and
operated by HKSCC
“CCASS Clearing Participant” a person admitted to participate in CCASS as a direct clearing
participant or a general clearing participant
DEFINITIONS
–1 6–


--- page 27 ---
“CCASS Custodian Participant” a person admitted to participate in CCASS as a custodian
participant
“CCASS Investor Participant” a person admitted to participate in CCASS as an investor
participant who may be an individual or joint individuals or a
corporation
“CCASS Operational Procedures” the Operational Procedures of HKSCC in relation to CCASS,
containing the practices, procedures and administrative
requirements relating to operations and functions of CCASS, as
from time to time in force
“Changchun Jinyanhui” Changchun Jinyanhui Trading Co., Ltd. (ப
΂ʮ̡), a limited liability company established in the PRC on
March 19, 2021, a non-wholly owned subsidiary of our Company
“China” or “PRC” the People’s Republic of China excluding, for the purpose of this
prospectus, Hong Kong, the Macau Special Administrative Region
of the PRC and Taiwan
“Companies Ordinance” the Companies Ordinance (Chapter 622 of the Laws of Hong
Kong), as amended, supplemented or otherwise modified from
time to time
“Companies (Winding Up and
Miscellaneous Provisions)
Ordinance”
the Companies (Winding Up and Miscellaneous Provisions)
Ordinance (Chapter 32 of the Laws of Hong Kong), as amended,
supplemented or otherwise modified from time to time
“Company”, “our Company” or
“the Company”
Xiamen Y an Palace Bird’s Nest Industry Co., Ltd. (ዲ
ʮ̡) (formerly known as Xiamen Y an Palace
Bioengineering Co., Ltd. (ʮ̡)), a
joint stock company established in the PRC with limited liability
on December 23, 2020, or, where the context requires (as the case
may be), its predecessor, Xiamen Y an Palace Biological
Engineering Development Co., Ltd. (Ϟ
ʮ̡), a company established in the PRC with limited liability
on October 31, 2014
“Company Law” or
“PRC Company Law”
the Company Law of the PRC (جas
amended, supplemented or otherwise modified from time to time
“Controlling Shareholders” has the meaning ascribed thereto under the Listing Rules and
unless the context requires otherwise, refers to Mr. Huang, Mr.
Zheng, Mr. Li, Ms. Xue, Xiamen Suntama and Jinyan Tengfei LP
“Conversion of Unlisted Shares
into H shares”
the conversion of 296,919,300 Unlisted Shares into H Shares on a
one-for-five basis upon the completion of Global Offering, as
described in further detail in “Share Capital”
DEFINITIONS
–1 7–


--- page 28 ---
“CSDC” China Securities Depositary and Clearing Corporation Limited ( ʕ
ப΂ʮ̡)
“CSDC (Hong Kong)” China Securities Depository and Clearing (Hong Kong) Company
Limited
“CSRC” the China Securities Regulatory Commission ( ʕ਷ᗇՎ္ຖ၍ଣ
ึ)
“Director(s)” the director(s) of our Company
“Extreme Conditions” the occurrence of “extreme conditions” as announced by any
government authority of Hong Kong due to serious disruption of
public transport services, extensive flooding, major landslides,
large-scale power outage or any other adverse conditions before
Typhoon Signal No. 8 or above is replaced with Typhoon Signal
No. 3 or below
“F&S Report” a commissioned industry report prepared by Frost & Sullivan
“Filing Measures” the Notice on Filing Management Arrangements for Overseas
Listing of Domestic Enterprises (ࣩ
ٝpromulgated by the CSRC on February 17, 2023
“FINI” Fast Interface for New Issuance, a new digital platform through
which IPO market participants and regulators can manage the
end-to-end settlement process for new listings in Hong Kong
“Frost & Sullivan” Frost & Sullivan (Beijing) Inc., Shanghai Branch Co. (౶तӍ
л˖(̏ԯ)ʮ̡ɪऎʱʮ̡), a consulting firm that
provides market research and analysis
“Fuzhou Bao Y anlai” Fuzhou Bao Y anlai Trading Co., Ltd. (ʮ̡), a
limited liability company established in the PRC on June 29, 2017,
and a wholly owned subsidiary of our Company
“Global Offering” the Hong Kong Public Offering and the International Offering
“Group”, “our Group”,
“the Group”, “we”, or “us”
the Company and its subsidiaries from time to time or, where the
context so requires, in respect of the period prior to our Company
becoming the holding company of its present subsidiaries, such
subsidiaries as if they were subsidiaries of our Company at the
relevant time
“Guanghe Y an Palace” Guanghe Y an Palace Biotechnology Development Co., Ltd. (ئ
ʮ̡), a limited liability company
established in the PRC on August 20, 2019, and a wholly owned
subsidiary of our Company
DEFINITIONS
–1 8–


--- page 29 ---
“Guangyao Tianxiang Company” Xiamen Guangyao Tianxiang Investment Co., Ltd. (Έᘴ˂ୂ
ʮ̡), a limited company established in the PRC on
September 1, 2014
“Guangyao Tianxiang LP” Xiamen Guangyao Tianxiang Equity Investment Partnership LP
(ᛆҳ༟ΥྫΆุ(Υྫ)), a limited partnership
established in the PRC on July 29, 2015 and one of our substantial
shareholders
“Guangzhou Wanyan” Guangzhou Wanyan Trading Co., Ltd. (ʮ̡), a
limited liability company established in the PRC on December 25,
2017, and a wholly owned subsidiary of our Company
“H Share(s)” ordinary share(s) in the share capital of our Company with a
nominal value of RMB0.2 each, which is/are to be subscribed for
and traded in HK dollars and to be listed on the Stock Exchange
“H Share Registrar” Tricor Investor Services Limited
“Harbin Jinyanhui” Harbin Jinyanhui Trading Co., Ltd. (ப΂
ʮ̡), a limited liability company established in the PRC on March
16, 2021, a non-wholly owned subsidiary of our Company
“HK eIPO White Form ” the application for Hong Kong Offer Shares to be issued in the
applicant’s own name by submitting applications online through
the IPO App or the designated website at www.hkeipo.hk
“HK eIPO White Form
Service Provider”
the HK eIPO White Form service provider as designated by our
Company as specified in the IPO App or the designated website at
www.hkeipo.hk
“HKSCC” Hong Kong Securities Clearing Company Limited, a wholly-owned
subsidiary of Hong Kong Exchanges and Clearing Limited
“HKSCC EIPO” the application for the Hong Kong Offer Shares to be issued in the
name of HKSCC Nominees and deposited directly into CCASS to
be credited to your or a designated HKSCC Participant’s stock
account through causing HKSCC Nominees to apply on your
behalf, including by instructing your broker or custodian who is a
Clearing Participant or a Custodian Participant to give electronic
application instructions via HKSCC’s FINI system to apply for the
Hong Kong Offer Shares on your behalf
“HKSCC Nominees” HKSCC Nominees Limited, a wholly-owned subsidiary of HKSCC
“HKSCC Participant” a CCASS Clearing Participant, a CCASS Custodian Participant or
a CCASS Investor Participant
DEFINITIONS
–1 9–


--- page 30 ---
“Hong Kong” or “HK” the Hong Kong Special Administrative Region of the People’s
Republic of China
“Hong Kong dollars” or
“HK dollars” or “HK$”
Hong Kong dollars, the lawful currency of Hong Kong
“Hong Kong Offer Shares” the 3,200,000 H Shares initially being offered by the Company for
subscription under the Hong Kong Public Offering (subject to
reallocation as described in “Structure of the Global Offering”)
“Hong Kong Public Offering” the offer by the Company of the Hong Kong Offer Shares for
subscription by the public in Hong Kong at the Offer Price (plus
brokerage of 1%, SFC transaction levy of 0.0027%, AFRC
transaction levy of 0.00015% and Stock Exchange trading fee of
0.00565%) on the terms and subject to the conditions described in
“Structure of the Global Offering—The Hong Kong Public
Offering”
“Hong Kong Stock Exchange”
or “Stock Exchange”
The Stock Exchange of Hong Kong Limited
“Hong Kong Underwriters” the underwriters of the Hong Kong Public Offering as listed in
“Underwriting—Hong Kong Underwriters”
“Hong Kong Underwriting
Agreement”
the underwriting agreement dated November 29, 2023 relating to
the Hong Kong Public Offering entered into by the Joint Sponsors,
the Overall Coordinators, Hong Kong Underwriters, our Company,
Mr. Huang, Mr. Zheng, Mr. Li, Ms. Xue, Xiamen Suntama and
Jinyan Tengfei LP , as further described in
“Underwriting—Underwriting Arrangements and Expenses—Hong
Kong Public Offering”
“Hongyan Investment LP” Beijing Hongyan Equity Investment Center (Limited Partnership)
(ᛆҳ༟ʕː(Υྫ)), a limited partnership
established in the PRC on October 20, 2014
“IDR” Indonesian Rupiah, the official currency of Indonesia
“IFRS” International Financial Reporting Standards
“Independent Third Party(ies)” any entity(ies) or person(s) who is not a connected person of our
Company within the meaning of the Hong Kong Listing Rules
“International Offer Shares” the 28,800,000 H Shares being initially offered for subscription at
the Offer Price under the International Offering together with,
where relevant, any additional H Shares that may be issued
pursuant to any exercise of the Over-allotment Option, subject to
reallocation as described under “Structure of the Global Offering”
DEFINITIONS
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“International Offering” the conditional placing of the International Offer Shares at the
Offer Price outside the United States in offshore transactions in
reliance on Regulation S, in each case on and subject to the terms
and conditions described in the section headed “Structure of the
Global Offering” in this prospectus
“International Underwriters” the group of international underwriters who are expected to enter
into the International Underwriting Agreement to underwrite the
International Offering
“International Underwriting
Agreement”
the underwriting agreement relating to the International Offering
and expected to be entered into by the Joint Sponsors, the Overall
Coordinators, the International Underwriters, our Company, Mr.
Huang, Mr. Zheng, Mr. Li, Ms. Xue, Xiamen Suntama and Jinyan
Tengfei LP on or about the Price Determination Date, as further
described in “Underwriting—Underwriting Arrangements and
Expenses— International Offering”
“IPO App ” the mobile application for the HK eIPO White Form service
which can be downloaded by searching “ IPO App ” in App Store or
Google Play or downloaded at www.hkeipo.hk/IPOApp or
www.tricorglobal.com/IPOApp
“Jinjun Hongyan LP” Pingtan Jinjun Hongyan Investment Partnership LP (ᒺᒿዲ
ҳ༟ΥྫΆุ(Υྫ)), a limited partnership established in the
PRC on April 20, 2018
“Jinyan Tengfei LP” Xiamen Jinyan Tengfei Equity Investment Partnership (Limited
Partnership) (ᛆҳ༟ΥྫΆุ(Υྫ)), a
limited partnership established in the PRC on December 14, 2020
and an employee incentive platform of our Group and one of our
Controlling Shareholders
“Joint Bookrunners” China International Capital Corporation Hong Kong Securities
Limited, GF Securities (Hong Kong) Brokerage Limited, Citigroup
Global Markets Asia Limited (in relation to the Hong Kong Public
Offering) , Citigroup Global Markets Limited (in relation to the
International Offering) and V aluable Capital Limited
“Joint Global Coordinators” China International Capital Corporation Hong Kong Securities
Limited, GF Securities (Hong Kong) Brokerage Limited and
Citigroup Global Markets Asia Limited
“Joint Lead Managers” China International Capital Corporation Hong Kong Securities
Limited, GF Securities (Hong Kong) Brokerage Limited, Citigroup
Global Markets Asia Limited (in relation to the Hong Kong Public
Offering) , Citigroup Global Markets Limited (in relation to the
International Offering) , V aluable Capital Limited, Futu Securities
International (Hong Kong) Limited and Tiger Brokers (HK) Global
Limited
DEFINITIONS
–2 1–


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“Joint Sponsors” China International Capital Corporation Hong Kong Securities
Limited and GF Capital (Hong Kong) Limited
“Latest Practicable Date” November 20, 2023, being the latest practicable date for
ascertaining certain information in this prospectus before its
publication
“Listing” the listing of the H Shares on the Main Board
“Listing Committee” the Listing Committee of the Stock Exchange
“Listing Date” the date, expected to be on or about December 12, 2023, on which
the H Shares are listed and on which dealings in the H Shares are
first permitted to take place on the Stock Exchange
“Listing Rules” the Rules Governing the Listing of Securities on The Stock
Exchange of Hong Kong Limited, as amended, supplemented or
otherwise modified from time to time
“Main Board” the stock exchange (excluding the option market) operated by the
Stock Exchange which is independent from and operates in parallel
with the GEM of the Stock Exchange
“Mr. Huang” Mr. HUANG Jian ( ර਄), our chairman of the Board of Directors,
executive Director and one of our Controlling Shareholders
“Mr. Li” Mr. LI Y ouquan (ݰour general manager, executive Director
and one of our Controlling Shareholders
“Mr. Zheng” Mr. ZHENG Wenbin ( ቍ˖Ᏽ), our vice chairman of the Board of
Directors, executive Director and one of our Controlling
Shareholders
“Ms. Xue” Ms. XUE Fengying (ߵone of our Controlling Shareholders
and the spouse of Mr. Zheng
“NDRC” the National Development and Reform Commission of the PRC ( ʕ
ึ)
“Offer Price” the final price per Offer Share (exclusive of any brokerage, SFC
transaction levy, AFRC transaction levy and the Stock Exchange
trading fee) at which the Offer Shares are to be subscribed for and
issued pursuant to the Global Offering as described in “Structure of
the Global Offering”
“Offer Share(s)” the Hong Kong Offer Shares and the International Offer Shares
DEFINITIONS
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--- page 33 ---
“Over-allotment Option” the option expected to be granted by our Company to the
International Underwriters, exercisable by the Overall
Coordinators (for themselves and on behalf of the other
International Underwriters), pursuant to which we may be required
to issue up to an aggregate of 4,800,000 additional H Shares
(representing 15% of the Offer Shares initially being offered under
the Global Offering) to cover over-allocations in the International
Offering, if any, details of which are described in “Structure of the
Global Offering—Over-allotment Option”
“Overall Coordinator(s)” China International Capital Corporation Hong Kong Securities
Limited and GF Securities (Hong Kong) Brokerage Limited
“PRC Legal Advisor” Hylands Law Firm, being the legal advisor to the Company as to
the PRC laws
“Pre-IPO Investor(s)” the investor(s) investing our Company, details of which are set out
in the section headed “History, Development and Corporate
Structure—Pre-IPO Investments”
“Price Determination Date” the date, expected to be on or about Friday, December 8, 2023
(Hong Kong time), when the Offer Price is determined and, in any
event, no later than 12:00 noon on Friday, December 8, 2023
“Regulation S” Regulation S under the U.S. Securities Act
“RMB” or “Renminbi” Renminbi, the lawful currency of the PRC
“SAFE” the State Administration of Foreign Exchange of the PRC ( ʕശɛ
̮ි၍ଣ҅)
“SAMR” the State Administration for Market Regulation of the PRC ( ʕശ
̹ఙ္ຖ၍ଣᐼ҅)
“SA T” the State Administration of Taxation (೼ਕᐼ҅)
“SCNPC” Standing Committee of the National People’s Congress, the
permanent body of the National People’s Congress of the PRC
“Securities and Futures
Ordinance” or “SFO”
the Securities and Futures Ordinance (Chapter 571 of the Laws of
Hong Kong), as amended, supplemented or otherwise modified
from time to time
“SFC” the Securities and Futures Commission of Hong Kong
“Shanghai Y an Palace” Shanghai Y an Palace Sinong Biotechnology Co., Ltd. (܊
ப΂ʮ̡), a limited liability company
established in the PRC on May 8, 2021, and a wholly owned
subsidiary of our Company
DEFINITIONS
–2 3–


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“Share(s)” ordinary share(s) in the share capital of our Company with a
nominal value of RMB0.2 each upon the completion of the Share
Subdivision; before the completion of the Share Subdivision,
ordinary share(s) in the share capital of our Company with a
nominal value of RMB1.0 each
“Share Subdivision” the sub-division of the Shares by the Company where the Company
subdivided its Share from one Share of RMB1.0 each into five
Shares of RMB0.2 each, which is approved on May 25, 2023 and
effective upon the Listing
“Shareholder(s)” holder(s) of our Share(s)
“Shenzhen Jinyanlai” Shenzhen Jinyanlai Trading Co., Ltd. (ʮ̡),
a limited liability company established in the PRC on April 21,
2017, and a wholly owned subsidiary of our Company
“Stabilizing Manager” GF Securities (Hong Kong) Brokerage Limited
“State Council” the State Council of the PRC ( ʕശɛ͏΍ձ਷਷ਕ৫)
“Strategy Committee” the strategy committee of the Board
“subsidiary(ies)” has the meaning ascribed thereto under the Listing Rules
“Supervisor(s)” the supervisor(s) of our Company
“Taiyuan Jixiangyan” Taiyuan Jixiangyan Trading Co., Ltd. (ʮ
̡), a limited liability company established in the PRC on May 20,
2021, a non-wholly owned subsidiary of our Company
“Takeovers Code” the Codes on Takeovers and Mergers and Share Buy-backs issued
by the SFC, as amended, supplemented or otherwise modified from
time to time
“Tianyi Runli LP” Jinjiang Tianyi Runli Equity Investment Partnership (Limited
Partnership)ᛆҳ༟ΥྫΆุ(Υྫ), a limited
partnership established in the PRC on April 24, 2023
“Tianyi Tongchuang LP” Fuzhou Tianyi Tongchuang Investment Partnership (Limited
Partnership) ( ၅ψ˂ఠΝ௴ҳ༟ΥྫΆุ(Υྫ)), a limited
partnership established in the PRC on July 29, 2020
“Torch Investment” Xiamen Torch Industrial Development Equity Investment Fund
Co., Ltd. (ʮ̡), a limited
liability company established in the PRC on March 10, 2015
“Track Record Period” the period consisting of the three years ended December 31, 2022
and the five months ended May 31, 2023
DEFINITIONS
–2 4–


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“Trial Measures” the Trial Administrative Measures of Overseas Securities Offering
and Listing by Domestic Enterprises ( ྤʫΆุྤ̮೯БᗇՎձɪ
جpromulgated by the CSRC on February 17, 2023
“Underwriters” the Hong Kong Underwriters and the International Underwriters
“Underwriting Agreements” the Hong Kong Underwriting Agreement and the International
Underwriting Agreement
“United States” or the “U.S.” the United States of America, its territories and possessions, any
State of the United States, and the District of Columbia
“Unlisted Share(s)” ordinary share(s) in the share capital of the Company with a
nominal value of RMB0.2 each upon the completion of the Share
Subdivision, which are not listed on any stock exchange; before the
completion of the Share Subdivision, ordinary share(s) in the share
capital of our Company with a nominal value of RMB1.0 each,
which are not listed on any stock exchange
“U.S. Securities Act” the U.S. Securities Act of 1933, as amended, supplemented or
otherwise modified from time to time, and the rules and regulations
promulgated thereunder
“US$” or “US dollars” United States dollars, the lawful currency of the United States
“Xiamen Jinyange” Xiamen Jinyange Trading Co., Ltd. (ʮ̡), a
limited liability company established in the PRC on January 8,
2018, and a wholly owned subsidiary of our Company
“Xiamen Jinyanlai LP” Xiamen Jinyanlai Investment Partnership (Limited Partnership)
(ዲԸҳ༟ΥྫΆุ(Υྫ)), a limited partnership
established in the PRC on July 17, 2015
“Xiamen Suntama” Xiamen Shuangdanma Industrial Development Co., Ltd. (̹ᕐ
ʮ̡), a limited liability company established in
the PRC on November 11, 1997 and one of our Controlling
Shareholders
“Y an E-Commerce” Xiamen Y an Palace Electronic Commerce Technology Co., Ltd. ( ข
ʮ̡), a limited liability company
established in the PRC on May 6, 2020, and a wholly owned
subsidiary of our Company
“Y an Health” Y an Palace Health Technology Development Co., Ltd. (਄ੰ
ʮ̡), a limited liability company established in the
PRC on January 7, 2019, and a wholly owned subsidiary of our
Company
DEFINITIONS
–2 5–


--- page 36 ---
“Y an Sinong” Xiamen Y an Palace Si Nong Food Co., Ltd. (࠮
ʮ̡), a limited liability company established in the PRC on
November 23, 2007, and a wholly owned subsidiary of our
Company
“Y angming Kangyi LP” Fujian Y angming Kangyi Biopharmaceutical V enture Capital
LP (ᔼᖹ௴ุҳ༟Άุ(Υྫ)), a limited
partnership established in the PRC on November 17, 2014
“Y unnan Zanlong” Y unnan Zanlong Trading Co., Ltd. (ʮ̡), a
limited liability company established in the PRC on October 31,
2014, a non-wholly owned subsidiary of our Company
“Zhiqiao Industry” Xiamen Zhiqiao Industry Co., Ltd. (ʮ̡), a
limited liability company established in the PRC on November 2,
2017, and a wholly owned subsidiary of our Company
“%” Percent
In this prospectus, the terms “associate,” “close associate,” “connected person,” “core connected
person,” “connected transaction,” “controlling shareholder” and “substantial shareholder” shall have the
meanings given to such terms in the Listing Rules, unless the context otherwise requires.
Certain amounts and percentage figures included in this prospectus have been subject to rounding.
Accordingly, figures shown as totals in certain tables may not be an arithmetic aggregation of the figures
preceding them. Any discrepancies in any table or chart between the total shown and the sum of the
amounts listed are due to rounding.
For ease of reference, the names of Chinese laws and regulations, governmental authorities,
institutions, natural persons or entities have been included in this prospectus in both the Chinese and
English languages; the English versions are for identification purposes only and in the event of any
inconsistency, the Chinese versions shall prevail.
DEFINITIONS
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--- page 37 ---
This glossary contains certain technical terms used in this prospectus in connection with us
and our business. Such terms and their meaning may not correspond to standard industry definitions
or usage.
“distributor-operated stores” our retail stores that are controlled or operated by our distributors
and sub-distributors
“edible bird’s nests” or “EBN” nests created by swiftlets with their saliva. EBN is highly valued
in Chinese culture and has been a renowned delicacy in Chinese
cuisine for over 400 years. It is known for its nutritional profile,
which includes, among others, sialic acid, amino acid, collagen,
glycoprotein, antioxidants, calcium, potassium, iron, magnesium
and hormones. Traditional Chinese medicine attributes various
health benefits to EBN, such as promoting overall wellness,
boosting the immune system, enhancing focus and concentration,
increasing energy and metabolism and regulating circulation.
Modern scientific studies conducted by authoritative sources have
further validated the perceived health benefits of EBN products
“EBN feed rate” EBN content as a percentage of the net weight of a particular EBN
product
“EBN+ products” ready-to-serve EBN products (with an EBN feed rate of 1% or
above and up to 5%) enhanced with other ingredients and/or
nutrients, such as ginseng and gamma-aminobutyric acid
“ISO 9001” the international standard that specifies requirements for a quality
management system and helps organizations ensure they meet
customer and other stakeholder needs within statutory and
regulatory requirements related to a product or service
“new tier-1 cities” Hangzhou, Chengdu, Suzhou, Nanjing, Chongqing, Wuhan,
Tianjin, Changsha, Xi’an, Qingdao, Zhengzhou, Ningbo, Foshan,
Dongguan and Hefei
“our stores” offline retail stores in our sales network, including self-operated
and distributor-operated stores
“pure EBN products” include dried EBN and ready-to-serve products made from EBN
(with an EBN feed rate of over 1% and up to 6%) and water, with
or without crystal sugar or sugar substitutes
“self-operated stores” our retail stores that are controlled and operated by us
“SKU” short for stock keeping unit, a unique identifier for each distinct
product that can be purchased
GLOSSARY
–2 7–


--- page 38 ---
“swiftlet” a small bird of the swift family which is found in Southeast Asia.
Its opaque and whitish bird nest is made exclusively of solidified
saliva and is the main ingredient of bird’s nest soup, a delicacy of
Chinese cuisine
“swiftlet farming” the practice of responsibly cultivating and harvesting the nests of
swiftlets by constructing purpose-built houses that mimic the
birds’ natural nesting conditions, allowing for the sustainable
production of valuable nests while minimizing disruption to the
swiftlets’ natural habitats
“tier-1 cities” Beijing, Shanghai, Guangzhou and Shenzhen
“tier-2 cities” Kunming, Shenyang, Dalian, Jinan, Linyi, Weifang, Y antai, Wuxi,
Changzhou, Xuzhou, Nantong, Fuzhou, Quanzhou, Wenzhou,
Jinhua, Jiaxing, Shaoxing, Harbin, Guiyang, Nanning,
Shijiazhuang, Baoding, Changchun, Nanchang, Huizhou, Zhuhai,
Zhongshan, Taiyuan and Lanzhou
“+EBN products” include certain food and skincare products that contain EBN or
EBN extracts as an enhancement for elevated nutrition or other
benefits. +EBN food products are products that use EBN (with an
EBN feed rate of less than 1%) and other food ingredients as raw
materials, such as EBN porridge. +EBN skincare products are
products that contain EBN or EBN extracts, such as EBN facial
masks and EBN essence
GLOSSARY
–2 8–


--- page 39 ---
We have included in this prospectus forward looking statements. Statements that are not
historical facts, including statements about our intentions, beliefs, expectations or predictions for
the future, are forward looking statements.
This prospectus contains forward-looking statements that are, by their nature, subject to significant
risks and uncertainties, including the risk factors described in this prospectus. Forward-looking statements
can be identified by words such as “may,” “will,” “should,” “would,” “could,” “believe,” “expect,”
“anticipate,” “intend,” “plan,” “continue,” “seek,” “estimate” or the negative of these terms or other
comparable terminology. Examples of forward-looking statements include, but are not limited to,
statements we make regarding our projections, business strategy and development activities as well as
other capital spending, financing sources, the effects of regulation, expectations concerning future
operations, margins, profitability and competition. The foregoing is not an exclusive list of all
forward-looking statements we make.
Forward-looking statements are based on our current expectations and assumptions regarding our
business, the economy and other future conditions. We give no assurance that these expectations and
assumptions will prove to have been correct. Because forward-looking statements relate to the future, they
are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. Our
results may differ materially from those contemplated by the forward-looking statements. They are neither
statements of historical fact nor guarantees or assurances of future performance. We caution you therefore
against placing undue reliance on any of these forward-looking statements. Important factors that could
cause actual results to differ materially from those in the forward-looking statements include regional,
national or global political, economic, business, competitive, market and regulatory conditions and the
following:
 our business prospects;
 our business strategies and plans to achieve these strategies;
 future developments, trends and conditions in and competitive environment for the industries
and markets in which we operate;
 general economic, political and business conditions in locations where we operate;
 our financial condition and performance;
 our capital expenditure plans;
 changes to the regulatory environment, policies, operating conditions of and general outlook in
the industries and markets in which we operate;
 our expectations with respect to our ability to acquire and maintain regulatory licenses or
permits;
 the amount and nature of, and potential for, future development of our business;
 the actions of and developments affecting our competitors;
 the actions of and developments affecting our major customers and suppliers; and
 certain statements in the sections headed “Risk Factors,” “Industry Overview,” “Regulatory
Overview,” “Business,” “Financial Information,” “Relationship with Our Controlling
Shareholders” and “Future Plans and Use of Proceeds” with respect to trends in interest rates,
foreign exchange rates, prices, volumes, operations, margins, risk management and overall
market trends.
FORW ARD-LOOKING STATEMENTS
–2 9–


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Any forward-looking statement made by us in this prospectus speaks only as of the date on which
it is made. Factors or events that could cause our actual results to differ may emerge from time to time,
and it is not possible for us to predict all of them. Subject to the requirements of applicable laws, rules
and regulations, we undertake no obligation to update any forward -looking statement, whether as a result
of new information, future developments or otherwise. All forward-looking statements contained in this
prospectus are qualified by reference to this cautionary statement.
FORW ARD-LOOKING STATEMENTS
–3 0–


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Potential investors should read and consider carefully all the information set out in this
prospectus, and, in particular , should evaluate the following risks and uncertainties before deciding
to make any investment in our H Shares. You should pay particular attention to the fact that we
conduct our operations in China, the legal and regulatory environment of which in some respects
may differ from that in Hong Kong. Any of the risks and uncertainties listed below could have a
material adverse effect on our business, results of operations, financial condition or on the trading
price of our H Shares and could cause you to lose all or part of your investment.
RISKS RELATING TO OUR BUSINESS
Any damage to our brand or reputation may materially and adversely affect our business and results
of operations. Government investigations over food safety incidents in China’s EBN industry and the
resulting negative publicity could adversely affect our business and reputation.
Our business relies on consumers’ recognition of and their trust in our brand. Our brand and
reputation may be damaged by distributors’ improper conduct, counterfeit of our products, product defects,
product liability claims, consumer complaints, negative rumors, negative media coverage or any other
form of negative publicity. In particular, we engage distributors to distribute our products and authorize
them to use our brand name and images in their course of sales for our products. In 2020, 2021, 2022 and
the five months ended May 31, 2022 and 2023, the revenue generated from our distributors, both online
and offline, as a percentage of our total revenue was 32.3%, 34.8%, 28.5%, 29.4% and 27.7%,
respectively. Any improper conduct of our distributors may materially and adversely affect our business
and results of operations. In addition, we have established ourselves as the leader in China’s EBN industry.
Counterfeiters may illegally manufacture and market EBN products under our brand. The occurrence of
such incidents may have a negative impact on our reputation and brands.
Negative publicity about our business creates the possibility of heightened attention from the public,
the regulators and the media. Heightened regulatory and public concerns over customer protection and
customer safety issues may subject us to additional legal and social responsibilities and increased scrutiny
and negative publicity over these issues, due to our large number of transactions and continued business
expansion. Any negative report regarding our business, profitability, financial condition and results of
operations, regardless of its truthfulness, could damage our brand image and severely affect the sales of
our products and possibly lead to product liability claims, litigations or damages. Government
investigations over food safety incidents in China’s EBN industry and the resulting negative publicity may
materially and adversely affect our business and reputation. The EBN industry in China has historically
faced governmental scrutiny over food safety issues, in particular, prior to the publication of the first
industry standard for EBN products in China in 2014. For instance, a high level of nitrite content was
discovered in certain red EBN products by the industry and commerce department of Zhejiang Province
in 2011 (the “Red EBN Incident”). This incident involved EBN product manufacturers in China who
sourced raw nests from Malaysia, including Xiamen Suntama, and caused widespread distrust of EBN
products among consumers. As advised by our PRC Legal Advisor, at the time of the Red EBN Incident,
there were neither regulatory requirements on nitrite content generally applicable to all food products nor
regulatory requirements specifically applicable to EBN products, and such incident prompted the
introduction of the first regulatory requirement on nitrite content in EBN products in February 2012.
Therefore, the red EBN products then sold by Xiamen Suntama did not violate any regulatory requirements
on nitrite content. As further advised by our PRC Legal Advisor, Xiamen Suntama was not subject to any
food safety litigation, government investigation, regulatory proceeding or penalty in connection with the
Red EBN Incident, given that (1) there is no public record of food safety litigations, government
investigations, regulatory proceedings or penalties against Xiamen Suntama relating to the Red EBN
Incident according to desktop searches conducted by our PRC Legal Advisor, and (2) as confirmed by
Xiamen Suntama, it did not receive any notice of any food safety litigation, government investigation,
RISK FACTORS
–3 1–


--- page 42 ---
regulatory proceeding or penalty in connection with the Red EBN Incident. However, any similar
government investigation or negative publicity in the future, whether directed at our business or the
industry as a whole, could have adverse effects on our brand image and severely impact the success of our
products. There is no assurance that our business would not become a target of regulatory or public
scrutiny in the future, or that such scrutiny would not significantly damage our reputation, undermine our
operations, and hinder our business prospects.
In addition, improper behaviors or statements of our spokespersons, endorsers and other celebrities
we have cooperated with, and our employees may result in substantial harm to our brand, reputation and
operations. There is no assurance that we would not become a target for regulatory or public scrutiny in
the future or that scrutiny and public exposure would not severely damage our reputation as well as our
business and prospects.
Any failure to successfully upgrade our existing products or to develop, launch and promote new
products may adversely affect our business development plans and profitability.
The choices and preferences of consumers may be influenced by new products that appear in the
market. To support our product upgrade and expansion plans, we need to devote significant resources in
researching and developing our products and recruiting production and marketing professionals as well as
selecting raw material and packaging material suppliers that are appropriate for our products. All these
tasks require substantial planning, effective execution, significant expenditures, and as a result, we face
the risk of wasting all such resources without yielding desirable results. We cannot assure you that our
upgraded or new products will be able to generate positive cash flows or become profitable within a short
period of time or at all. If we fail to bring upgraded or new products to the market in a cost-effective
manner, our profitability, results of operations and business prospects may be adversely affected.
Any product quality and safety issue could materially and adversely affect our results of operations.
We believe that the quality of our products is critical to our success. Our quality control systems
primarily consist of quality control measures for raw materials and packaging materials, production
process, inventory storage, and delivery and sales. See “Business—Production—Production Process” and
“—Quality Control.” The effectiveness of our quality control systems depends on a number of factors,
including the design of our quality control systems and our ability to ensure that our employees comply
with our quality control policies and procedures. We cannot assure you that the design of our quality
control systems will be effective at all times. We also cannot assure you that all our employees will always
comply with the quality control policies and will not make any mistakes when executing quality control
procedures. In addition to risks associated with the processing and labeling of our products, certain third
parties, such as (1) suppliers of raw materials and packaging materials, (2) logistics service providers, and
(3) distributors, could also affect the quality of our products or lead to inventory obsolescence if these
third parties fail to provide raw materials, packaging materials or services to us with satisfactory quality.
Any product quality issue resulted from failure of our quality control systems or other reasons could
expose us to product liability claims, negative publicity, government scrutiny, investigation or
intervention, administrative actions and product recalls or returns, which could materially and adversely
affect our brand, reputation, results of operations, financial condition and business prospects.
Our business relies on consumer demand for our products. Any shift in consumer demand, or any
unexpected situation with a negative impact on consumer demand may materially and adversely
affect our business and results of operations.
Our business relies on consumer demand for our products, which depends substantially on factors
such as consumers’ spending patterns, preferences and tastes, income, perceptions of and confidence in our
product quality and food safety, and awareness of healthy lifestyle. Changes in any of the above factors
RISK FACTORS
–3 2–


--- page 43 ---
at any time could result in decline in consumer demand for our products. In particular, consumers’
perceptions of and confidence in our product quality and food safety may significantly affect consumer
demand for our products. Additionally, consumers’ preference over EBN products may be influenced by
their perceptions of the health benefits of EBN. Consumer perception of the health benefits of EBN will
develop with scientific advancement, which may in turn affect consumer demand for our products. EBN
consumption could have an adverse effect on health. The potential health risks of EBN consumption
include excessive nitrite content, which can cause serious health effects such as methaemoglobinaemia.
For instance, a high level of nitrite content was discovered in certain red EBN products by the industry
and commerce department of Zhejiang Province in 2011. For details of the Red EBN Incident, see “—Any
damage to our brand or reputation may materially and adversely affect our business and results of
operations. Government investigations over food safety incidents in China’s EBN industry and the
resulting negative publicity could adversely affect our business and reputation.” Hormonal compounds
have been detected in EBN, and its use has been occasionally linked to hormonal side effects, such as
precocious puberty. In addition, EBN might potentially pose a risk of triggering allergic reactions for
individuals with sensitivities to its proteins. Notably, allergies to EBN have been reported to occur with
greater frequency in children between 0 to 15 years old than to other allergens, causing symptoms
including angioedema, wheezing, urticaria, and abdominal cramps. As EBN contains epidermal growth
factor, which may contribute to cellular and vascular proliferation, there is a potential risk that this could
influence the progression of cancerous cells or the symptoms of uterine fibroids. Furthermore, the
presence of bacteria in EBN, if any, could, in exceptional cases, lead to food-borne illnesses, ranging from
severe diarrhea to infections such as meningitis. Traces of excessive heavy metal content have also been
identified in certain EBN products. Perceptions of these risks may have been shaped by publications
associating EBN with potential health risks among potential consumers. These negative publications (if
taken by consumers) may cause consumer preference to shift away from EBN products and adversely
affect consumer demand for our products. Any incidents involving food-related illnesses, adulteration,
contamination or mislabeling, whether or not accurate, as well as adverse public or medical opinions about
the health effects of consuming our products, could negatively affect consumer confidence in our product
quality and food safety.
Our business development will depend, in part, on our ability to (1) anticipate, identify or adapt to
such changes, (2) introduce new products and adjust marketing strategies in a timely manner, and (3)
develop appropriate sales and distribution networks accordingly. Although we dedicate manpower and
financial resources to consumer-centric market research and analysis to upgrade our existing products and
to develop, design and launch new products, we cannot assure you that our product portfolio will lead or
follow the market trends. Any changes in consumer preferences and tastes may impose downward pressure
on the sales and pricing of our products or lead to increases in our selling and distribution expenses.
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We may not be successful in further increasing sales revenue from our online channels or may fail
to manage the coordination of our offline and online channels, both of which could adversely affect
our results of operations.
Our revenue generated from sales made through our online channels experienced increases during
the Track Record Period. Our online sales network consists of self-operated online stores, distributor-
operated online stores, and e-commerce platforms. As of May 31, 2023, we had 23 self-operated online
stores and 13 distributor-operated online stores on mainstream e-commerce or social media platforms such
as JD.com, Tmall and Douyin. In addition, we began to engage e-commerce platforms to distribute our
products through platform-operated online stores in 2018 to further expand our online presence. As of May
31, 2023, we had acquired 15 e-commerce platforms as our customers, including JD.com, Vipshop and
Tmall Supermarket, among others. In 2020, 2021, 2022 and the five months ended May 31, 2022 and 2023,
the revenue generated from sales made through our online channels accounted for 55.5%, 51.0%, 54.2%,
52.1% and 54.8% of our total revenue in the same periods, respectively. However, as online and social
media platforms continue to grow in popularity, any significant growth in our sales through online
channels in the future may give rise to competition between offline and online channels. If we fail to
balance the marketing efforts or optimize product mix and pricing strategies among our online and offline
channels, or otherwise fail to effectively manage the integration of these channels, the competition among
these channels may adversely affect our business, financial condition and results of operations.
We expect to further enhance our online strategies and increase sales revenue from our online
channels. However, we may not be able to maintain a high growth rate of our online sales. If we fail to
manage the continuous development of our online sales, our business, financial condition and results of
operations may be adversely affected. In addition, we may incur additional expenses in connection with
service fees that we are contractually required to pay to the relevant parties in order to continue using their
e-commerce platforms, which in turn may have a material adverse impact on our results of operations and
profitability.
Our results of operations could also be affected by our online brand marketing and advertising
activities. If our online marketing and advertising activities do not continue to be successful, our business
and operating results may be materially and adversely affected. In addition, we believe marketing trends
in China are evolving, which requires us to experiment with new sales channels to keep pace with industry
developments and consumer preferences. Moreover, as we continue to make efforts in this regard, we
expect our operational and marketing expenses relating to cooperation with new channels to continue to
increase.
We depend on sales to our distributors for considerable amount of our revenue, and distributors are
expected to remain important in our sales network. If distributors are not able to operate
successfully or we fail to maintain good relationships with such distributors, our business, financial
condition and results of operations could be materially and adversely affected.
Our distributors are important to our business. As of December 31, 2020, 2021 and 2022 and May
31, 2023, there were 161, 203, 238 and 227 distributors in our distribution network, respectively. In 2020,
2021, 2022 and the five months ended May 31, 2022 and 2023, revenue generated from our distributors
accounted for 32.3%, 34.8%, 28.5%, 29.4% and 27.7% of our total revenue, respectively. Despite the
majority of our revenue was generated from direct sales to retail customers during the Track Record
Period, we expect that distributorship will remain an important component of our sales network.
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Our distributors may not be able to market and sell our products successfully or maintain their
competitiveness as a result of various factors. For example, our offline distributors may not be able to find
suitable locations to operate distributor-operated stores, and they may not be able to renew their leasing
contracts with lessors upon expiration, both of which may adversely affect our offline distributors’
operations and competitiveness. In addition, our online distributors may not be able to successfully
organize online marketing campaigns or promotional events that achieve desired results. If the sales
volumes of our products to consumers are not maintained at a satisfactory level, our distributors may not
place orders for new products with us, or they may reduce orders or request discounts on the purchase
price. The loss of our distributors, or reduced orders from them, could adversely affect our access to
consumers and our sales volume and revenue.
Although we require our distributors to comply with their distribution agreements with us,
non-compliance with the distribution agreements by any of our distributors could disrupt our sales and
may even affect our results of operations. We also could be liable for damages or fines due to defects or
spoilage on the products marketed and sold by our distributors, which may have an adverse effect on our
financial condition.
If we fail to successfully maintain our relationships with a significant number of distributors or our
distributors fail to operate successfully, our ability to effectively sell our products could be negatively
impacted. These and similar actions could also negatively affect our corporate and product image, which
could result in loss of customers and a decline in sales. In addition, distributors selling the same products
at uniform retail prices may result in marketing overlaps, cannibalization or even competition among these
distributors. We cannot assure you that the expansion of our sales network will continue to be successful
or will generate income as expected.
Fluctuations in prices and changes in the quality of raw materials and packaging materials could
materially and adversely affect our profitability and results of operations.
Our ability to control our costs, in part, depends on our ability to secure raw nests, our primary raw
materials, from Indonesia, and packaging materials, that meet our quality standards at reasonable prices.
Our packaging materials primarily consist of polypropylene bowls (an FDA-approved food contact
plastic), glass bottles, cardboard, and metal packaging materials. The cost of raw materials accounted for
76.7%, 79.3%, 77.3%, 77.8% and 77.7% of our total cost of sales in 2020, 2021, 2022 and the five months
ended May 31, 2022 and 2023, respectively. Going forward, we expect our cost of raw materials to
continue to account for a large portion of our cost of sales.
The procurement price of raw nests and packaging materials could be volatile due to a variety of
factors beyond our control. The price of raw nests and packaging materials may be affected by factors such
as the global and PRC economic condition, relevant government regulations and policies, and changes in
supply and demand. In particular, the supply of raw nests from Indonesia may be negatively affected by
factors such as adverse climate conditions and relationship between Indonesia and China.
We rely on suppliers to supply raw nests and packaging materials that meet our quality standards.
We may fail to ensure the comprehensiveness and effectiveness of their quality control systems. Although
we conduct sampling inspection for raw nests and packaging materials after they are delivered to us by
suppliers, we cannot assure you that we will be able to detect all quality defects in a timely manner.
Any increase in the prices of raw nests and packaging materials may cause us to adjust our product
prices upward, which could in turn reduce the competitiveness of our products. In cases where raw nests
and packaging materials prices increase, and we choose not to increase the price of our products to
maintain competitiveness despite the increases in costs, it would render us unable to pass on such costs
to our customers and adversely affect our profitability.
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We do not conduct any swiftlet farming and primarily depend on suppliers in Indonesia for raw
nests. If we are not able to source adequate raw nests from suppliers in Indonesia or fail to maintain
good relationships with such suppliers, our business, financial condition and results of operations
could be materially and adversely affected.
Suppliers in Indonesia are crucial to our business. We source substantially all of raw nests as primary
raw materials for our products from them. In the five months ended May 31, 2023, more than 46% of our
purchase amount of raw nests were attributable to suppliers with over five years’ business relationship
with us. However, if we fail to successfully maintain our business relationships with a significant number
of suppliers for raw nests, or our suppliers are prohibited from or are not able to supply raw nests to us
due to regulatory measures or administrative penalties imposed on them by the relevant authorities in
Indonesia or China, or we fail to secure alternative suppliers, our ability to effectively produce our
products could be negatively impacted. In addition, the customs clearance procedures for importing raw
nests could be lengthy and may adversely affect the timely supply of such raw materials for our EBN
products. If we encounter lengthy customs clearance for imported raw nests, we may experience delays
in the production of our products. Potential trade or regulatory embargoes imposed either by Indonesia or
China could result in delays or shortages of the supply for raw nests. If we are not able to source adequate
raw nests, our business, financial condition and results of operations could be materially and adversely
affected.
Increasing focus with respect to environmental, social and corporate governance matters may
impose additional costs on us or expose us to additional risks. Failure to comply with the laws and
regulations on environmental, social and corporate governance matters, and failure to achieve or
potential modification or discontinuation of certain or all environmental, social and corporate
governance targets and/or plans, may subject us to penalties and/or adversely affect our business,
financial condition and results of operations.
Relevant regulatory authorities and public advocacy groups have been increasingly focused on
environment, social and corporate governance (“ESG”)-related issues in recent years, making our business
more sensitive to ESG-related issues and changes in governmental policies and laws and regulations
associated with environment protection and other ESG-related matters. Investor advocacy groups, certain
institutional investors, investment funds and other influential investors have also been increasingly
focused on ESG practices and in recent years have placed increasing importance on the implications and
social cost of their investments. Regardless of the industry, increased focus from investors and relevant
regulatory authorities on ESG and similar matters may hinder access to capital, as investors may decide
to reallocate capital or to not commit capital as a result of their assessment of the ESG practices of the
target companies. Any ESG concern or issue could also increase our regulatory compliance costs.
If we do not adapt to or comply with the evolving expectations and standards on ESG matters from
investors and relevant regulatory authorities or are perceived to have not responded appropriately to the
growing concern for ESG-related issues, regardless of whether there is a legal requirement to do so, we
may suffer from reputational damage and the business, financial condition and the price of our Shares
could be materially and adversely affected. Furthermore, to promote environmental responsibility and
reduce our environmental footprint, we have established certain environmental targets and plans that are
aligned with our overall business strategy and objectives. See “Business—Environmental, Social And
Corporate Governance Policy.” Failure to achieve or potential modification or discontinuation of certain
or all such ESG targets and/or plans may also adversely affect our corporate image, which could in turn
result in adverse impacts on our business, financial condition and results of operations.
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Any failure to manage our inventory effectively would materially and adversely affect our results of
operations, financial condition and cash flows.
As of December 31, 2020, 2021 and 2022 and May 31, 2023, we had inventories of RMB277.0
million, RMB279.7 million, RMB271.8 million and RMB260.4 million, respectively. In 2020, 2021, 2022
and the five months ended May 31, 2023, our inventory turnover days were 91.2 days, 130.2 days, 118.2
days and 106.7 days, respectively. Our business relies on consumer demand for our products, which in turn
depends substantially on factors such as consumers’ spending patterns, preferences and tastes, income,
perceptions of and confidence in our product quality and food safety, and awareness of healthy lifestyle.
Any change in consumer demand for our products or the occurrences of catastrophic events may have an
adverse impact on our product sales, which may lead to inventory obsolescence, decline in inventory value
or inventory write-off.
In addition, maintaining a certain amount of inventory also exposes us to the risk of inventory loss.
As we have not purchased inventory insurance in full, in the event of natural disasters or other accidents
such as fires caused by our employees or third parties, we may not be able to obtain sufficient
compensation from the insurance company to cover our losses.
Furthermore, as we will not be able to recoup our cash paid for raw materials and packaging
materials during the production process until the finished products are sold to our customers, and the
purchase price is settled, our business is subject to significant working capital requirements given our
considerable inventory level and inventory turnover days. If our inventory level increases substantially in
the future, our financial condition and cash flows could be materially and adversely affected.
Our distributors may not be able to manage their inventory level effectively and we may not be able
to accurately track their sales and inventory level, which could cause us to incorrectly predict sales
trends and may damage the stability of our distribution network.
Failure to manage inventory level may strain our distributors’ financial resources and impair their
liquidity, which may lead to their reluctance or inability to purchase new products from us. If they
experience decreased profitability or suffer losses as a result, they may quit our distribution network. Also,
distributors may, with or without any merit, blame their slow turnover on us, harming our relationship with
such distributors and potentially damaging our reputation among distributors. If any of such incident
happens to our distributors, the stability of our distribution network may be severely impaired, and our
business, financial condition and results of operations may be materially and adversely affected. In
addition, we may not be able to accurately track their sales and inventory level. This could in turn lead
to our inability to correctly predict sales trends and accurately forecast customer demand, resulting in
excess inventory levels or a shortage of products. There can be no assurance that we will be able to
successfully manage our inventory at a level appropriate for future customer demand.
Incidents or publicity involving food-related illnesses, tampering, adulteration, contamination or
mislabeling, whether or not accurate, as well as adverse public or medical opinions about the health
effects of consuming our products, could harm our business. Any quality related issues for the EBN
industry in general could also adversely affect our business and reputation.
Instances or reports, whether true or not, of food-safety issues, such as illnesses, tampering,
adulteration, contamination or mislabeling, either during manufacturing, packaging, transportation,
storing or preparation, employee hygiene and cleanliness failures or improper employee conduct, have in
the past severely injured the reputations of companies in the food sector. Other enterprises in the EBN
industry may experience problems related to product quality and safety due to the quality standards they
implement, quality defect, and inadequate compliance with and enforcement of inspection procedures
under the food safety regulations. While we may not be involved in any of these events, any report linking
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us to such instances could cause consumers to be doubtful or fearful and could possibly lead to product
liability claims, litigation and/or temporary store closures, severely hurting our sales. In addition,
instances of food or beverage-safety issues, even those involving solely the stores of competitors or
distributors (regardless of whether those distributors are associated with us), could, by resulting in
negative publicity about us, the EBN industry or the food industry in general, adversely affect our sales
on a regional, national or global basis. A decrease in consumer traffic as a result of food-safety concerns
or negative publicity, or as a result of a temporary closure of any of our stores, product recalls or food
safety claims or litigation, could materially harm our business and results of operations.
Failure to maintain effective pricing strategies and any downward changes in the prices of our
products may have a material adverse effect on our business and results of operations.
Demand for our products is generally sensitive to price. Our approach to pricing our products has
had, and may continue to have, a significant impact on our revenue and profit margin. In addition, our
competitors’ pricing strategies are beyond our control and could significantly affect the results of our
pricing strategies. If we fail to meet our customers’ price expectations, or if we are unable to compete
effectively with our competitors when they engage in aggressive pricing strategies and could not
effectively adjust our cost structure due to potential downward changes in the prices of our products, it
could have a material adverse effect on our business, financial condition and results of operations.
We may be subject to liability for placing advertisements with content that is deemed inappropriate
or misleading under PRC laws.
Our advertising materials are produced by our in-house advertising department or relevant third party
service providers. PRC laws and regulations prohibit advertising companies from producing, distributing
or publishing any advertisement with content that violates PRC laws and regulations, impairs the national
dignity of the PRC, involves designs of the PRC national flag, national emblem or national anthem, is
considered reactionary, obscene, superstitious or absurd, is fraudulent, or disparages similar products. We
may also be subject to claims by customers misled by information in our advertisements. If the advertising
materials produced by our third-party service providers contain inappropriate or misleading information,
we may not be able to recover our losses from such advertisers by enforcing the indemnification provisions
in the contracts, which may result us in diverting management’s time and other resources from our
business and operations to defend against these infringement claims. As a result, our business, financial
condition and results of operations could be materially and adversely affected. Although we had not been
subject to any non-compliance incident, government investigation or material consumer claim or
complaint in connection with advertising during the Track Record Period and up to the Latest Practicable
Date, we cannot assure you that no such incident will occur in the future.
Our sales and marketing activities may not be effective in attracting consumers, which may in turn
adversely affect our results of operations.
We adopt a multi-channel marketing approach that allows us to reach and influence a broad target
customer base. Our focus is on maintaining and enhancing brand awareness through professional
marketing and branding strategies. We conduct advertising campaigns via traditional channels such as
television, radio and billboards. Additionally, we leverage e-commerce and social media platforms to
promote our brand and products, collaborating with influencers and implementing targeted marketing
campaigns on emerging platforms, such as Douyin and Xiaohongshu. Our marketing efforts also include
sponsorship and celebrity endorsements. See “Business—Marketing and Branding.” We may incur
considerable selling and distribution expenses for our sales and marketing activities. In 2020, 2021, 2022
and the five months ended May 31, 2022 and 2023, our selling and distribution expenses were RMB317.8
million, RMB399.0 million, RMB503.9 million, RMB205.8 million and RMB208.5 million, respectively,
representing 24.4%, 26.5%, 29.1%, 29.5% and 26.6% of our total revenue in the same periods,
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respectively. In the same periods, our advertising and promotion fees were RMB236.0 million, RMB269.0
million, RMB326.3 million, RMB137.3 million and RMB125.1 million, respectively, representing 74.3%,
67.4%, 64.8%, 66.7% and 60.0% of our selling and distribution expenses, respectively.
We cannot assure you that our sales and marketing activities will enable us to achieve our sales
targets. The effectiveness of sales and marketing activities is relatively difficult to predict and evaluate.
Their effects may be delayed, resulting in a delayed revenue growth which may not be fully reflected
during the period in which the sales and marketing activities took place. If the results of our sales and
marketing activities fail to meet our expectation, or if we fail to conduct the sales and marketing activities
as planned, our results of operations, financial condition, market share, brand and reputation may be
adversely affected.
We rely on our distributors to place our products into the market, and our distributor management
may not be as effective as we anticipate. Our offline distributors have the autonomy to further
develop his offline sub-distributors within the designated city, over whom we are not able to assert
direct control.
As of May 31, 2023, our distributor sales network consisted of 214 offline distributors and 13 online
distributors, covering 614 distributor-operated offline stores and 13 distributor-operated online stores in
China. As we believe that distributorship is an important component of our sales network, any one of the
following events could cause fluctuations or declines in our revenue and could have an adverse effect on
our financial condition and results of operations:
 reduction, delay or cancelation of orders from one or more of our distributors;
 failure to renew distribution agreements and maintain relationships with our existing
distributors;
 failure to establish relationships with new distributors on favorable or even standard terms; and
 inability to timely identify and appoint additional or replacement distributors upon the loss of
one or more of our distributors.
We may not be able to successfully manage our distributors, and the cost of any consolidation or
further expansion of our distributor sales network may exceed the revenue generated from these efforts.
There can be no assurance that we will be successful in detecting any non-compliance by our distributors
with the provisions of their distribution agreements. Non-compliance by our distributors may, among other
things, negatively affect our brand, demand for our products and our relationships with other distributors.
Furthermore, if the sales volumes of our products to distributors are not maintained at a satisfactory level,
or if distribution orders fail to track end customers’ demand, our distributors may not place orders for new
products from us or decrease the quantity of their usual orders. If any of our distributors fail to distribute
our products to their customers in a timely manner, overstock or carry out actions inconsistent with our
business strategies, it may affect our future sales. The occurrence of any of these factors could result in
a significant decrease in the sales volume of our products, and therefore, adversely affect our financial
condition and results of operations.
During the Track Record Period, our offline distributors have the autonomy to further develop his
offline sub-distributors within the designated regions. We cannot assure you that offline sub-distributors
will at all times comply with our overall sales and distribution policies or that they will not compete with
each other for market share in respect of our products. If any of offline sub-distributors fail to distribute
our products to their customers in a timely manner, overstock, or carry out actions inconsistent with our
business strategies, it may affect our future sales, which may in turn materially and adversely affect our
business, financial condition and results of operations.
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Our historical financial condition and results of operations may not be representative of our future
performance. If we are unable to successfully manage our growth, our business and prospects may
be materially and adversely affected.
We experienced rapid expansion during the Track Record Period. In 2020, 2021, 2022 and the five
months ended May 31, 2022 and 2023, our revenue was RMB1,301.2 million, RMB1,507.0 million,
RMB1,729.9 million, RMB696.9 million and RMB782.6 million, respectively. Our net profit margin in
2020, 2021, 2022 and the five months ended May 31, 2022 and 2023 was 9.5%, 11.4%, 11.9%, 12.0% and
12.8%, respectively. Our significant revenue growth during the Track Record Period was attributable to
our continued efforts to grow our business, optimize sales channels, and launch products that cater to the
evolving consumer demand. We cannot assure you that the demand for our products will continue to grow
at a similar rate in the future due to reasons including market saturation as well as competition from new
market participants and alternative products. We also cannot assure you that we will be able to sustain high
profitability in the future, which depends on whether we can continue (1) generating a high level of sales
revenue; (2) managing effectively the production costs; and (3) managing effectively the costs and
expenses associated with operations, sales and marketing. If we fail to effectively manage our growth or
sustain our profitability, our business, financial condition and results of operations could be adversely
affected.
In addition, as we believe that our business will continue to grow, we will continue to encounter
challenges in implementing our managerial, operating and financial strategies to keep up with our growth.
The major challenges in managing our business growth include, among other things:
 effectively managing the daily operations of our retail sales network, including our self-
operated online stores and self-operated offline stores;
 effectively managing our distribution network expansion;
 controlling costs in a competitive environment;
 continuing to introduce new products and timely upgrade existing products to cater to evolving
consumers’ tastes;
 promoting, maintaining and capitalizing on our brand awareness;
 retaining existing customers and attracting new customers;
 remaining competitive in our industry;
 effectively managing our supply chain and ensuring our third-party suppliers continue to meet
our quality and other standards and satisfy our future operations’ needs;
 maintaining and upgrading our technology systems and market analytical capabilities in a
cost-effective manner;
 attracting, training and retaining a growing workforce to support our operations;
 implementing a variety of new and upgraded internal systems and procedures as our business
continues to grow; and
 ensuring full compliance with relevant laws and regulations.
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In particular, we may not be able to effectively manage the daily operations of our self-operated
stores to maintain or increase the sales volume of products. For example, each day our self-operated online
stores receive a significant number of inquiries from e-commerce consumers, our customer service team
may not be always able to efficiently communicate with them and increase customer satisfaction with our
brand. In addition, we may not always be able to ship our products in a timely manner, subject to the
capacities of our suppliers for logistics and transportation services, especially during certain e-commerce
festivals.
Furthermore, we may not be able to effectively manage the expansion of our distribution network.
The number and timing of distributor-operated stores opened during any given period are subject to a
number of factors, including our distributors’ ability to identify suitable locations for opening new stores,
secure leases on commercially reasonable terms, obtain adequate funding for store expansion, execute the
stores opening process efficiently and obtain all required licenses, permits and approvals for new stores,
and our ability to effectively manage supply chain and control product quality, and recruit, train and retain
skilled employees, among other things.
Any foregoing factors, either individually or in aggregate, may delay or hinder our plan to increase
the number of stores in desirable locations at manageable cost levels. In addition, we may incur additional
operating expenses at the store, distributor and headquarters levels as we continue to expand our sales
network. If we fail to manage our expansion of stores in a cost-effective manner, our business, results of
operations and financial condition may be materially adversely impacted. Furthermore, consumers’
demand for our products may not be as strong as we expect to support our business growth, which may
result in over-expansion of our sales network. In particular, we plan to expand our offline presence through
the addition of both self-operated stores and distributor-operated stores. Although such expansion plan
was determined by our management based on market analysis, we cannot assure you that actual market
demands will meet our expectation. If our expansion plan proves to be too aggressive, we may experience
a significant decrease in sales of our existing stores, and as a result, our business, results of operation,
liquidity and financial condition would be materially adversely impacted.
We also face significant challenges in continuing to introduce new products and timely upgrade
existing products to cater to the evolving consumers’ tastes. To support our product upgrade and new
product launching plans, we need to devote significant resources to researching and developing our
products and recruiting production and marketing professionals that are appropriate for our products. We
cannot assure you that our upgraded or new products will be able to generate positive cash flows or
become profitable within a short period of time or at all. If we fail to bring upgraded or new products to
the market in a cost-effective manner, our profitability, results of operations and business prospects may
be adversely affected.
All of our efforts to address the challenges of our growth require significant managerial, financial
and human resources. We cannot assure you that we will be able to execute managerial, operating and
financial strategies to keep up with our growth. If we are not able to manage our growth or execute our
strategies effectively, our growth may slow down, and our business and results of operations may be
materially and adversely affected.
An occurrence of a natural disaster, widespread health epidemic or other outbreaks, such as the
outbreak of COVID-19, could have a material adverse effect on the demand for our products and our
business operations.
Our business could be materially and adversely affected by natural disasters, such as snowstorms,
earthquakes, fires or floods, the outbreak of a widespread health epidemic or other events, such as wars,
acts of terrorism, environmental accidents, power shortage or communication interruptions. The
occurrence of such a disaster or prolonged outbreak of an epidemic illness or other adverse public health
RISK FACTORS
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developments in China or elsewhere, including but not limited to the severe acute respiratory syndrome,
or SARS, the H5N1 avian flu, the human swine flu, also known as Influenza A (H1N1), or the novel
coronavirus (COVID-19), could materially disrupt our business and operations.
The outbreak of COVID-19 has affected the Chinese and global economy. During the COVID-19
outbreak, we experienced temporary suspension to our production bases and disruptions to the operations
of our stores in affected regions from time to time. We also had to reduce the regular visits to our offline
stores and distributors due to uncertainties regarding the pandemic. The COVID-19 outbreak also affected
our suppliers for logistics and transportation services, and caused some delays in our product delivery. The
COVID-19 pandemic may also have the effect of heightening other risks disclosed in this section,
including but not limited to those related to: (1) decreased consumer demand for our products, which may
be caused by their fear of an economic downturn; (2) decreased offline marketing activities, caused by
circumstances beyond our control; (3) disruption of the operations of our business partners, including our
logistics service providers and suppliers for raw materials and packaging materials; and (4) increase
volatility or significant disruption of global capital markets due in part to the COVID-19 pandemic, which
may adversely affect our ability to access capital markets and other funding sources on acceptable terms
or at all.
Any future impact caused by the COVID-19 pandemic will depend on its subsequent development.
We cannot be entirely certain as to when the COVID-19 pandemic will be fully contained, and its impact
will be completely alleviated. There remain significant uncertainties surrounding the COVID-19 outbreak
and its further development as a global pandemic, considering the severe global situation and occasional
regional resurgence of COVID-19 cases in certain areas in China. We are closely monitoring the
development of the COVID-19 pandemic and continually evaluating any potential impact on our business
operations.
Any delivery delay, improper handling of goods or increase in transportation costs of our logistic
service providers could adversely affect our business and results of operations.
We engage logistics service providers to transport products to our customers, including direct sale
customers, distributors and e-commerce platform customers. In 2020, 2021, 2022 and the five months
ended May 31, 2022 and 2023, our courier fees were RMB38.8 million, RMB37.0 million, RMB40.0
million, RMB16.1 million and RMB17.0 million, respectively, accounting for 5.2%, 4.7%, 4.7%, 4.8% and
4.5% of our cost of sales, respectively. The services provided by our logistics service providers may be
suspended or cancelled due to unforeseen events, which could cause interruption to the sales or delivery
of our products. In addition, delivery delays may occur for various reasons beyond our control, including
improper handling by our logistics service providers, labor disputes or strikes, acts of war or terrorism,
outbreaks of epidemics, earthquakes and other natural disasters.
Any improper handling of our products by the logistics service providers could also result in product
contamination or damage, which may in turn lead to product recalls, product liabilities, increased costs and
damage to our reputation. As such, our business, financial condition and results of operations could be
materially and adversely affected.
The transportation costs of our logistics service providers are subject to factors beyond our control,
such as the fluctuation in the gasoline price, increases in road tolls and bridge tolls, and changes in
transportation regulations. Any increase in the service costs of our logistics service providers may lead to
an increase to our logistic expenses, which may in turn negatively affect our results of operations.
Any natural disaster or other catastrophic event affecting our supply chain management, production
process or the demand for our products may materially and adversely affect our business.
Our ability in supply chain management and efficient manufacturing is critical to our success. Any
delay or disruption in our supply chain may adversely affect our ability to perform our contractual
obligations to our customers.
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Our EBN products are manufactured through a series of sophisticated processes. Problems may arise
during the production process for a variety of reasons, including quality defects in raw materials or
packaging materials, lack of production conditions or suspension of production due to natural disasters
(such as storms, earthquakes, fires and floods) or other catastrophic events (such as explosions, acts of
terrorism, wars and outbreaks of epidemics), strikes, power outages, technical or mechanical problems,
failure to follow production safety protocols, failure to promptly upgrade equipment and production and
operational software systems, and the infection or hacking of such software systems. Any of the above
occurrences could impair our business or our suppliers, which would in turn impede our ability to
manufacture and deliver our products to our customers in a timely manner.
Our investment in research and development, including relevant collaborations with third parties,
may not generate expected outcomes.
Our future success, in part, depends on our ability to continue to upgrade our existing products and
to develop, design and launch new products, which requires significant human and capital resources. In
2020, 2021, 2022 and the five months ended May 31, 2022 and 2023, our research and development
expenses was RMB17.7 million, RMB19.0 million, RMB24.3 million, RMB8.8 million and RMB9.6
million, respectively. We intend to continue to strengthen our research and development capabilities,
which can be capital intensive and time consuming. If we are unable to design, develop, manufacture and
market new products successfully in a timely manner, our business and results of operations may be
adversely affected. While we expect to continue to collaborate with third parties such as academicians,
experts and professors from reputable research or education institutions in China, we cannot assure you
that such efforts will be successful or that the new products we introduce will achieve widespread market
acceptance. If we fail to generate ideal results from our research and development, there may be a waste
of capital and human resources, which may adversely affect our business, results of operations and
financial condition.
Any major changes in relation to food safety regulations and relevant policies may affect our
business.
Manufacturers within the EBN industry in China must comply with PRC food safety laws and
regulations. These food safety laws and regulations require all enterprises engaged in the production of
food and beverages to obtain the food production permits. They also set out safety standards with respect
to food and food additives, packaging and containers, information to be disclosed on packaging as well
as requirements for food production and sites, facilities and equipment used for the transportation and sale
of food. In recent years, the PRC government has been strengthening the supervision of food safety. The
revised Food Safety Law of the People’s Republic of China (جand the
Regulation on the Implementation of the Food Safety Law of the People’s Republic of China ( ʕശɛ͏
ૢԷ) stipulate that businesses engaged in food production should conduct their
production and operation activities according to the applicable laws and regulations and food safety
standards, establish a comprehensive food safety management system, and take effective measures to
prevent and control food safety related risks to ensure the safety of the food produced. This may increase
the compliance costs of companies similar to us in China. In the event that the PRC government further
makes changes on food safety regulation, our production, sales and distribution costs may increase, and
we may be unable to successfully pass on these additional costs to our customers, which could adversely
affect our business, results of operations and financial condition.
We may be exposed to the risk of product infringement.
We may be exposed to the risk of product infringement. We cannot assure you that there will be no
counterfeit or forgery of our products, trademarks or brands in the market. Counterfeiters may illegally
manufacture and market EBN products under our brand. Such counterfeit or forged products are usually
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difficult to be detected or banned in a timely manner. We are also not able to control the quality of these
counterfeit or forged products, which may fail to meet relevant health and safety or other laws and
regulations and could cause illness or health issues. The occurrence of such incidents may have an impact
on our reputation and brand. Our reputation and brand are crucial to our profitability and competitiveness,
any damage to our reputation or brand resulting from product infringement may adversely affect our
profitability and competitiveness.
Our investment, maintenance or upgrade regarding our production equipment and facilities,
technologies and other equipment related to operations may not be carried out successfully, which
may in turn adversely affect our business growth.
In order to ensure the continuous operation and expansion of our business, we maintain the existing
production equipment and facilities, expand the production capacity through upgrading our existing
equipment and establishing new production facilities, purchase new production equipment and improve
production techniques. In addition, we allocate our human resources and other resources to manage these
undertakings. We cannot assure you that such investments, maintenance and upgrades could be carried out
successfully, or generate positive cash flows or profitable return within a short period of time. Such
investments, maintenance and upgrades may become ineffective or obsolete as a result of updates in
technology or industry standards, which could result in a material adverse effect on our business and
financial condition.
Our ability to achieve business growth is also subject to a wide range of market, operational and
financial risks, including those arising from the competition with existing competitors, changing consumer
spending patterns, as well as maintaining our high food safety standards and our relationships with
customers. Under the influence of these risks, our investments and upgrades may not be able to generate
the expected business growth, which may materially and adversely affect our financial condition and
results of operations.
We may not be able to retain or promptly recruit senior management members or other key
personnel required for our operations.
Our current business performance and future success depend substantially on the abilities and
contributions of our senior management members, including Mr. Huang, founder and chairman of our
Company, all executive Directors and other key personnel with industry expertise, know-how or
experience in areas such as research and development, production, sales, marketing, financial
management, human resources or risk management. Any loss of such personnel could materially and
adversely affect our ability to sustain and develop our business. Moreover, we cannot assure you that our
key personnel will not join a competitor or form a competing business or will follow the terms and
conditions of their employment contracts. As competition for talents such as skilled technical personnel
and experienced management is fierce in our industry, any loss of key personnel or failure to promptly
recruit such personnel for our future business development may adversely affect our business.
Our performance depends on our ability to maintain good relationship with our employees, and any
deterioration in relationships with our employees, shortage of labor or material increase in wages
may have an adverse effect on our results of operations.
Our continued success, in part, depends on our ability to attract, motivate, retain and maintain good
relationships with a sufficient number of qualified employees, such as production workers, retail store
managers, marketing and sales specialists, and other administrative and management personnel. We cannot
assure you that we will be able to recruit or retain a sufficient number of qualified employees for our
business or maintain good relationships with them, nor can we assure you that we will not experience any
shortage in labor. If there is a high turnover rate of employees and we fail to recruit enough qualified
personnel and retain them due to various factors, such as failure to keep up with the rising employee salary
levels, we may fail to implement our growth strategies.
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We strive to provide a safe and desirable working environment to our employees to prevent
occupational hazards. However, we may be subject to liability claim, negative publicity and government
investigation or intervention in relation to workplace safety or occupational hazards, in particular if our
employees, third party service providers or the public suffer from personal injuries or casualties at our
facilities or during the transportation of our products. Such incidents could worsen our relationship with
our employees and damage our brand and reputation.
We cannot assure you that we will not have any labor disputes in the future. Any deterioration of our
relationships with our employees could result in disputes, strikes, claims and relevant legal proceedings,
which may disrupt our production and operations, and lead to loss of know-how and trade secrets. Any
labor shortage could hinder our ability to maintain or expand our business operations, which may
adversely affect our business operations and results of operations.
We, our Directors, management and employees may be subject to litigation and regulatory
investigations and proceedings, such as claiming in relation to food safety, commercial, labor,
employment, antitrust or securities matters, and may not always be successful in defending ourselves
against such claims or proceedings.
We face potential liability, expenses for legal claims and harm due to our business nature. For
example, customers could assert legal claims against us in connection with personal injuries related to
food poisoning or tampering. The PRC government, media outlets and public advocacy groups have been
increasingly focused on customer protection in recent years. See “Regulatory Overview—Laws and
Regulations Relating to Consumer Protection.” Sales of defective products may expose us to liabilities
associated with customer protection laws. Sellers may be responsible for compensation on customers’ loss
even if the contamination of food is not caused by the sellers. We may also be held liable if our suppliers
or other business partners fail to comply with applicable food-safety related rules and regulations. Though
we can seek indemnity from the responsible parties, our reputation could still be adversely affected. In
addition, our Directors, management and employees may from time to time be subject to litigation and
regulatory investigations and proceedings or otherwise face potential liability and expense in relation to
commercial, labor, employment, antitrust, securities or other matters, which could adversely affect our
reputation and results of operations.
After we become a publicly listed company, we may face additional exposure to claims and lawsuits.
These claims could divert management time and attention away from our business and result in significant
costs to investigate and defend, regardless of the merits of the claims. In some instances, we may elect or
be forced to pay substantial damages if we are unsuccessful in our efforts to defend against these claims,
which could harm our business, financial condition and results of operations.
We may undertake strategic partnerships which may not be successful. If our collaboration with any
of our strategic partners is terminated or curtailed, or if we are no longer able to benefit from the
business collaborations with our strategic partners, our business may be adversely affected.
Our business has benefited from our collaborations with our strategic partners in the areas such as
online ordering and payment, supply chains and joint marketing. We cannot assure you that such alliances
or partnerships will contribute to our business, and we might not be able to maintain our cooperative
relationships with our strategic partners and their respective affiliates in the future. If the services provided
by these strategic partners become limited, compromised, restricted, curtailed or less effective or become
more expensive or unavailable to us for any reason, our business may be materially and adversely affected.
To the extent we cannot maintain our cooperative relationships with any of these strategic partners, it may
be difficult for us to identify other alternative partners at commercially reasonable terms, which may divert
significant management attention from existing business operations and adversely impact our daily
operation and customer experience.
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Our employment practices may be adversely impacted under PRC labor-related laws.
Implementation of the labor laws and regulations in China may adversely affect our business and
results of operation.
The Standing Committee of the National People’s Congress (ึ)
promulgated the Labor Contract Law of the PRC (جthe “Labor Contract
Law”), which became effective on January 1, 2008 and was amended on December 28, 2012, and the State
Council promulgated implementing rules for the Labor Contract Law on September 18, 2008. The Labor
Contract Law and the implementing rules impose requirements concerning, among others, the execution
of written contracts between employers and employees, the time limits for probationary periods, and the
length of employment contracts. The interpretation and implementation of these regulations are still
evolving, our employment practices may violate the Labor Contract Law and related regulations and we
could be subject to penalties, fines or legal fees as a result. If we are subject to severe penalties or incur
significant legal fees in connection with labor law disputes or investigations, our business, financial
condition and results of operations may be adversely affected.
We may not be able to detect or prevent fraud, bribery, or other misconduct committed by our
employees, customers or other third parties.
We may be exposed to fraud, bribery, or other misconduct committed by our employees, customers
or third parties, which could subject us to financial losses and penalties from governmental authorities.
Although our internal control procedures are designed to monitor our operations and ensure overall
compliance, our internal control procedures may be unable to identify all non-compliances, suspicious
transactions, fraud, corruption or bribery in a timely manner. Any illegal, fraudulent, corrupt or collusive
activities by our employees, customers, suppliers or other third parties, including, but not limited to, those
in violation of anti-corruption or anti-bribery laws such as kickbacks or bribery to our distributors by our
employees, could subject us to negative publicity that could severely damage our brand and reputation
and, if conducted by our employees, could further subject us to significant financial and other liabilities
to third parties and fines and other penalties imposed by governmental authorities. Accordingly, our failure
to detect and prevent fraudulent or illegal activities or other misconduct by our employees, customers,
suppliers or other third parties could materially and adversely affect our business, financial condition,
results of operations and prospects.
Any failure to protect our intellectual property rights could undermine our competitive position, and
litigation to protect our intellectual property rights may be costly and ineffective.
We consider our trade secrets, trademarks, trade names, patents and other intellectual property
important to our business. From time to time, our intellectual properties may have been infringed by third
parties. Preventing intellectual property infringement is difficult, costly and time-consuming, and
continued unauthorized use of our intellectual properties by unrelated third parties may damage our
reputation and brand image. The measures we take to protect our trademarks, patents, trade secrets and
other intellectual property rights may not be adequate to prevent intellectual property infringement by
third parties. If we are unable to adequately protect our trademarks, patents, trade secrets and other
intellectual property rights, we may lose these rights, our brand image may be harmed, and our competitive
position and business may suffer.
We may face intellectual property infringement claims by third parties, which could disrupt our
business, cause substantial legal costs, and damage our reputation.
We cannot assure you that our products will not infringe any intellectual property rights held by third
parties in the future. We may face claims of infringement of third parties’ proprietary rights or claims for
indemnification resulting from infringement arising from our products. A third-party individual submitted
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an application to the National Intellectual Property Administration seeking to invalidate two of our
registered trademarks. The National Intellectual Property Administration has rejected the invalidation
application for one of these two trademarks and supported the invalidation application for the other. As
of the Latest Practicable Date, we had filed all necessary materials with the relevant intellectual property
court for an administrative proceeding against the later unfavorable result, and had not received the notice
of the trial date. See “Business—Intellectual Property.” We cannot assure you, however, that we could
succeed in this administrative proceeding or that similar incidents will not occur in the future. In addition,
we may be unaware of intellectual property registrations or applications relating to our products or
business operations that may give rise to potential infringement claims against us. There may also be
technologies licensed to and relied on by us that are subject to infringement or other corresponding
allegations or claims by third parties. We are subject to additional risks as a result of the hiring of our
current and new employees, especially those that were previously employed by our competitors, who may
misappropriate intellectual properties from their former employers.
Parties making infringement claims may be able to obtain an injunction to prevent us from delivering
our products or using relevant technology. Intellectual property litigation is expensive and time-consuming
and could divert management’s attention from our business. A successful infringement claim against us
could, among others things, make us to pay substantial damages, develop non-infringing technology, or
enter into royalty or license agreements that may not be available on acceptable terms, if at all, and cease
manufacturing, selling or using products that have infringed a third party’s intellectual property rights.
Any intellectual property claim or litigation, regardless whether we ultimately win or lose, could damage
our reputation and have a material adverse effect on our business, results of operations or financial
condition.
We are subject to various risks relating to third-party payments.
During the Track Record Period, we had 21 customers that settled their payments with us through
third-party payors (the “Third-party Payment Arrangements”). Many small-sized EBN product distributors
operated their business in the form of sole proprietorship (᜗ʈਠ˒), which is a type of organization
that typically prefers not to open a separate business bank account but to settle payments through personal
bank accounts due to the complexity of using corporate bank accounts. In 2020, 2021, 2022 and the five
months ended May 31, 2023, the aggregate amount of third-party payments was RMB23.5 million,
RMB15.3 million, nil and nil, respectively, accounting for 1.8%, 1.0%, nil and nil of our total revenue in
the same periods, respectively. We have ceased all Third-party Payment Arrangements since January 1,
2022. See “Business—Third-party Payment Arrangements.”
We are subject to various risks relating to such Third-party Payment Arrangements during the Track
Record Period, including possible claims from third-party payors for return of funds as they were not
contractually indebted to us and possible claims from liquidators of third-party payors. In the event of any
claims from third-party payors or their liquidators, or legal proceedings (whether civil or criminal)
instituted or brought against us in respect of third-party payments, we will have to spend financial and
managerial resources to defend against such claims and legal proceedings, and our financial condition and
results of operations may as a result be adversely affected. In addition, Third-party Payment Arrangements
also exposed us to the risk of money laundering, as such arrangements may not be based on genuine
business transactions. In the event that any of funds received by us under the Third-party Payment
Arrangements were illegal proceeds, we may be subject to criminal liability, the funds we receive as well
as the revenue we generate from such arrangements may be confiscated, and further fines may be imposed
on us. Additionally, persons directly involved in these arrangements may face imprisonment, detention and
fines.
We may not fully recover our deferred tax assets, which may affect our financial positions in the
future.
We had deferred tax assets of RMB4.3 million, RMB16.3 million, RMB36.1 million and RMB29.9
million as of December 31, 2020, 2021 and 2022 and May 31, 2023, respectively. Our deferred tax assets
relate to deductible temporary differences between the tax bases of assets and liabilities and their carrying
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amounts to the extent that the utilization of such differences and losses against future taxable profits is
probable. Deferred tax assets also arise from unused tax losses and unused tax credits. This requires
significant judgment on the tax treatments of transactions and an assessment of the probability that
adequate future taxable profits will be available for the deferred tax assets to be utilized. The carrying
amount of deferred income tax assets is reviewed at the end of each period and reduced to the extent that
it is no longer probable that sufficient taxable profits will be available to allow all or part of the assets
to be recovered. We cannot guarantee we can recover or predict the movement of our deferred tax assets.
Failure to recover deferred tax assets may adversely affect our financial position in the future. See Note
29(b) to the Accountants’ Report in Appendix I to this prospectus for details of our deferred tax assets
during the Track Record Period.
Our failure to recover a significant portion of our trade receivables in a timely manner may have a
material adverse effect on our business, results of operations and financial condition.
We generate trade receivables in the ordinary course of business. Our trade receivables primarily
consist of receivables due from third parties in connection with their purchases of our EBN products. For
offline distributors, we require them to make payment before the delivery of our products. We may provide
short-term payment period for certain offline distributors with excellent qualifications and stable business
relationships with us. For online distributors, we generally deliver our products after receiving the orders
from e-commerce consumers who have made the payments online and settle full payments with online
distributors on a monthly basis for such orders. For e-commerce platform customers, we settle payment
with them according to respective cooperation agreements with such customers and typically have an
agreed payment cycle of 60 days. As of December 31, 2020, 2021 and 2022 and May 31, 2023, our trade
receivables was RMB24.4 million, RMB39.7 million, RMB67.0 million and RMB62.2 million,
respectively. In the event that our trade receivables increase significantly, and we fail to collect these
receivables in a timely manner, our financial condition and business operations may be materially and
adversely affected. See “Financial Information —Discussion of Certain Items from the Consolidated
Statements of Financial Position—Trade and Other Receivables.”
If we fail to perform our contractual obligation, our liquidity and financial positions may be
materially and adversely affected in the future.
As of December 31, 2020, 2021 and 2022 and May 31, 2023, our contract liabilities were RMB102.1
million, RMB138.8 million, RMB176.5 million and RMB157.1 million, respectively. Our contract
liabilities mainly represent advance payments received from our customers. Contract liabilities would be
recognized as revenue upon the delivery of our products. All of our contract liabilities balance as of
December 31, 2020, 2021 and 2022 and May 31, 2023 was recognized or expected to be recognized as
revenue within our normal operating cycle. See “Financial Information—Discussion of Certain Items from
the Consolidated Statements of Financial Position— Contract Liabilities” and Note 24 to the Accountants’
Report in Appendix I to this prospectus. However, if we fail to fulfill our obligations with respect to our
contract liabilities, we may not be able to convert such contract liabilities into revenue as expected.
Furthermore, if we fail to fulfill our obligations with respect to our contract liabilities, customers may
request not to prepay us in the future. Any of these circumstances could materially and adversely affect
our business, results of operations, cash flow and liquidity condition.
We may record impairment losses for goodwill and intangible assets in the future.
As of December 31, 2020, 2021 and 2022 and May 31, 2023, we recorded goodwill of nil, RMB75.2
million, RMB75.2 million and RMB75.2 million, respectively. Such goodwill arose from our strategic
acquisitions of Beijing Tianfeiyan, Harbin Jinyanhui, Changchun Jinyanhui, and Taiyuan Jixiangyan, all
of which engage in offline sales of EBN products. Goodwill is mainly attributable to the sales talent of
these entities’ work force and the synergies expected to be achieved from integrating such entities into our
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existing sales channels. See “History, Development and Corporate Structure—Major Acquisitions,
Disposals and Mergers.” Our intangible assets consisted primarily of computer software and patent rights.
We had intangible assets of RMB0.7 million, RMB0.9 million, RMB1.3 million and RMB1.0 million as
of December 31, 2020, 2021 and 2022 and May 31, 2023, respectively. Although no impairment loss for
goodwill or intangible assets was recognized during the Track Record Period, we are required to test our
goodwill for impairment annually or more frequently if events or changes in circumstances indicate that
they may be impaired, and to test our intangible assets for impairment when there are impairment
indicators. Material impairment losses could negatively affect our financial condition and results of
operations.
We are exposed to risks associated with the fair value change in financial assets measured at fair
value through profit or loss.
We had financial assets measured at fair value through profit or loss of RMB46.2 million, nil,
RMB5.0 million and nil as of December 31, 2020, 2021 and 2022 and May 31, 2023, respectively. Our
financial assets measured at fair value through profit or loss represented our investments in short-term
wealth management products issued by reputable commercial banks in China. During the Track Record
Period, we measured our financial assets at fair value through profit or loss using observable inputs. See
Note 31(d) to the Accountants’ Report in Appendix I to this prospectus. We cannot assure you that we will
not have our financial assets at fair value measured using unobservable inputs in the future. We are subject
to the risks that any of our counterparties, such as the banks that issued wealth management products, may
not perform their contractual obligations, including the event where any such counterparty declares
bankruptcy or becomes insolvent. Any material non-performance by our counterparties with respect to the
financial products we invested in could materially and adversely affect our financial position and cash
flow. Furthermore, the wealth management products issued by banks are subject to the overall market
conditions, including the capital markets. Any volatility in the market or fluctuations in interest rates may
reduce our financial position or cash flow, which, in turn, could materially and adversely impact our
financial condition. In addition, general economic and market conditions affect the fair value of these
products.
We have incurred and may continue to incur substantial share-based payment expenses.
We believe the grant of share-based compensation is important to our ability to attract, retain and
motivate our management team and qualified employees. We recorded equity-settled share-based payment
expenses of RMB0.4 million, RMB21.8 million, RMB5.3 million, RMB2.2 million and RMB2.2 million
in 2020, 2021, 2022 and the five months ended May 31, 2022 and 2023, respectively. Any additional grant
of share-based compensation will further increase our share-based payment expenses, which may
adversely affect our financial performance and dilute existing shareholders’ shareholding.
Our information technology and software systems may encounter malfunction, unexpected system
failure, interruption, insufficiency or security breaches.
We rely on our information technology and software systems to effectively manage various sales and
distribution data, marketing activities and expenses data, production and operation data, and financial and
human resources data. Any significant failure in our information technology and software systems could
result in transaction errors, processing inefficiencies and loss of sales and customers, or lead to loss or
leakage of confidential information. We collect and store sensitive personal information such as customer
contact information and their addresses for the purpose of our business needs. The security of such
information is of paramount importance. Any security and privacy breaches on customer information may
damage our customer relations and our reputation and may expose us to legal liability.
Our information technology and software systems may be subject to damage or interruption,
primarily due to unexpected emergency circumstances beyond our control, including power outages, fire,
natural disasters, systems failures, security breaches, unauthorized access to our information systems,
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hackings intended to cause malfunctions, loss or corruption of data, software, hardware or other computer
equipment, intentional or inadvertent transmission of computer viruses and other similar events. We may
also encounter problems when upgrading our systems, which could disrupt our operations and adversely
affect our results of operations.
We are in possession of certain information regarding our customers, and the improper collection,
storage, use or disclosure of such information could materially and adversely affect our business and
reputation.
With the prior consent of our customers, we collect and maintain personal information of our
customers to the extent necessary for the sales and delivery of our products through e-commerce platforms
or our membership program. The types of personal information we collect primarily include customer
names, contact information and addresses for delivery. Unless otherwise provided in laws and
administrative regulations, Personal Information Protection Law (جthe “PIPL”) only
allows us to collect personal information of customers with their prior consents and to the extent
necessary. The PIPL also requires us to protect the privacy of our customers and prohibit unauthorized
disclosure of their personal information. We may be liable for damages caused by divulging our
customers’ personal information without consent. In addition, there is a risk that such information could
be compromised in the event of a security breach at our internal system. Such information could be
divulged due to, for example, theft or misuse arising from staff misconduct or negligence.
We may be subject to additional cybersecurity review or inspection by government authorities.
On June 10, 2021, the Data Security Law (جwas adopted by the Standing Committee of
the National People’s Congress and became effective on September 1, 2021. On August 20, 2021, the PIPL
was adopted by the Standing Committee of the National People’s Congress and became effective on
November 1, 2021. Pursuant to the Measures for Cybersecurity Review (جthe
“Cybersecurity Review Measures”), which became effective in February 2022, critical information
infrastructure operators that purchase network products and services and data processing operators
engaging in data processing activities that affect or may affect national security must be subject to the
cybersecurity review, reflecting the increased attention of the government authorities on data security and
protection. However, the Cybersecurity Review Measures provides no further explanation or interpretation
for “listed abroad.” Given that the expression used in the Cybersecurity Review Measures is “listing in a
foreign country” rather than “offshore listing” and that Hong Kong is likely to be considered as “offshore”
rather than “foreign country,” it is not likely that a listing in Hong Kong will be considered as “listing in
a foreign country.” Furthermore, the exact scope of “critical information infrastructure operators” under
the Cybersecurity Review Measures and the current regulatory regime remains unclear, and the
identification rules of critical information infrastructure operators still need to be formulated and clarified
by relevant Protection Work Departments (the competent departments and supervision and management
departments of important industries and sectors) in future legislation.
On November 14, 2021, the Cyberspace Administration of China (the “CAC”) published Regulations
on Cyber Data Security Management (Draft for Comments) ( ၣഖᅰኽτΌ၍ଣૢԷ(ᅄӋจԈᇃ)) (the
“Draft Regulations on Cyber Data Security Management”), which further elaborated a listing in Hong
Kong should not be treated as “listing in a foreign country,” which was mentioned in the Cybersecurity
Review Measures. According to Draft Regulations on Cyber Data Security Management, seeking to be
listed in Hong Kong that affects or may affect the national security should be reported and undergo the
cybersecurity review. According to the National Security Law of the PRC (ج)
issued by Standing Committee of the National People’s Congress on July 1, 2015 and became effective on
the same date, national security refers to a status in which the regime, sovereignty, unity, territorial
integrity, welfare of the people, sustainable economic and social development, and other major interests
of the state are relatively not faced with any danger and not threatened internally or externally and the
capability to maintain a sustained security status.
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However, we cannot assure you that we will not be deemed as a data processor that “affects or may
affect national security” in the future. We may be subject to cybersecurity review by the competent
government authority even upon completion of our Listing. If the data processing activities of a Hong
Kong listed company or a company that is in the process of applying for listing in Hong Kong are deemed
as “affecting or may affect national security” and such company has failed to conduct cybersecurity review
according to the relevant laws and regulations, such company will be requested to take rectification
actions, subject to disciplinary warning, and/or imposed an administrative penalty ranging from
RMB50,000 to RMB500,000 for a single violation incident. Furthermore, if such violation causes material
impact or such company refuses to rectify the violation, such company may be subject to more severe
penalties, such as revocation of relevant licenses and/or permits. Therefore, if our business is deemed to
involve activities that “affect or may affect national security” when the Draft Regulations on Cyber Data
Security Management become effective and we fail to conduct cybersecurity review according to the
relevant laws and regulations and/or take rectification actions as required by the relevant competent
government authority, we might be subject to more severe penalties, warnings or revocation of our licenses
and/or permits, which could materially and adversely affect our business, reputation as well as financial
performance.
On July 7, 2022, the CAC promulgated the Measures on Security Assessment of Outbound Data
Transfer (جeffective September 1, 2022. These measures shall apply to the security
assessment of the provision of important data and personal information collected and generated by data
processors in the course of their operations within the territory of the PRC by such data processors to
overseas recipients, or the outbound data transfer. Where there are other provisions in laws and
administrative regulations, such other provisions shall prevail. These measures specify that an outbound
data transfer by a data processor that falls under any of the following circumstances, the data processor
shall apply to the CAC for the security assessment via the local provincial-level cyberspace administration
authority: (1) outbound transfer of important data by a data processor; (2) outbound transfer of personal
information by a critical information infrastructure operator or a personal information processor who has
processed the personal information of more than 1,000,000 people; (3) outbound transfer of personal
information by a personal information processor who has made outbound transfers of the personal
information of 100,000 people cumulatively or the sensitive personal information of 10,000 people
cumulatively since January 1 of the previous year; or (4) other circumstances where an application for the
security assessment of an outbound data transfer is required as prescribed by the CAC. As advised by our
PRC Legal Advisor, there is no outbound data transfer involved during our daily business operations.
Our Directors and our PRC Legal Advisor are of the view that the Cybersecurity Review Measures
and the Draft Regulations on Cyber Data Security Management, if implemented in current form, will not
have material adverse effects on our business operations or the proposed Listing. However, with the
continuous expansion of our business and growth of our customer base, there can be no assurance that we
will not be subject to national security review or the recent tightening of regulations on the collection and
use of personal information by relevant government authorities in China will have no material adverse
effect to our business operations in the future. If we cannot meet relevant requirements under the evolving
applicable laws or regulations relating to data privacy, data protection or information security or any
additional tax related requirements relating to data, or any compromise of security that results in
unauthorized access, use or leakage of our customers’ personal information, we could face damage in our
reputation or other negative consequences, such as investigations, fines, or suspension of our business, any
of which could materially and adversely affect our business, financial condition and results of operations.
In addition, complying with various laws and regulations on cybersecurity and data security could cause
us to incur additional costs or require us to change our business practices, including our data practices,
which may significantly distract our management’s attention and adversely affect our business.
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Our online sales depend on the proper operation of third-party e-commerce platforms and any
serious interruptions of these platforms could adversely affect our operations.
Our revenue generated from online sales channels was RMB722.7 million, RMB768.3 million,
RMB938.0 million, RMB362.9 million and RMB429.4 million in 2020, 2021, 2022 and the five months
ended May 31, 2022 and 2023, respectively. As of May 31, 2023, we had 23 self-operated online stores
and 13 distributor-operated online stores on mainstream e-commerce or social media platforms such as
JD.com, Tmall and Douyin. During the Track Record Period, our revenue generated from online sales
channels was primarily attributable to our business operations on or relating to JD.com and Tmall. Our
online sales depend on the proper operation of those third-party e-commerce platforms. However, we do
not have control over the operation of such third-party e-commerce platforms, and they may be vulnerable
to damage or interruptions such as power failure, computer viruses, acts of hacking, vandalism and similar
events. Any serious interruption or damage to the e-commerce platforms may have an adverse effect on
our business, financial condition and results of operations.
We are subject to various risks relating to third-party payment applications and services.
We accept a variety of payment methods including WeChat Pay, Alipay and UnionPay through
third-party payment services. We pay service fees for such payment services, which may increase over
time and raise our operating costs. We may also be subject to fraud, security breaches and other illegal
activities in connection with the various payment methods we offer. If any of these happens, we may be
subject to fines or higher service fees for these payment services, and our business, financial condition and
results of operations may be materially and adversely affected.
If we fail to effectively implement our future expansion plans, our business prospects may be
adversely affected.
We may encounter risks when we develop new sales channels and markets in China and overseas.
New sales channels and markets may have different regulatory requirements, competitive landscape,
consumer preferences, spending patterns and operation environment from our existing channels and
markets. We may need to increase our promotion efforts in these new sales channels and markets, establish
appropriate operation model, distribution system, talent reserve, strengthen the financial management
capability, and develop or adjust the information technology and software systems. In addition, we may
need to search for suppliers and construct new production facilities based on the conditions of the new
sales channels and markets. As a result, it may be relatively expensive and risky to expand new sales
channels and markets and may take longer to reach targeted sales and profit levels.
We may from time to time pursue acquisitions that we believe would benefit our business. We have
limited experience in acquisitions. We may not be able to successfully execute any proposed acquisitions.
In addition, we may be exposed to challenges in integrating the acquired companies into our existing
operations. If we fail to achieve the desired results from acquisitions, our financial condition and results
of operations may be materially and adversely affected.
We require a significant amount of capital to fund our operations and respond to business
opportunities. If we cannot obtain sufficient capital on acceptable terms, our business, financial
condition and prospects may be materially and adversely affected.
Expanding our store network, building a well-known brand, and accumulating a large and growing
customer base is costly and time-consuming. A vast majority of our capital is invested to fund the capital
expenditures and associated costs arising from our daily operations. Our capital expenditures during the
Track Record Period, consisting primarily of payments for purchase of property, plant and equipment and
purchase of intangible assets, were RMB11.7 million, RMB24.8 million, RMB22.5 million, RMB9.2
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million and RMB4.7 million in 2020, 2021, 2022 and the five months ended May 31, 2022 and 2023,
respectively. Our ability to obtain additional capital in the future, however, is subject to a number of
uncertainties, including those relating to our future business development, financial condition and results
of operations, general market conditions for financing activities by companies in our industry, and
macro-economic and other conditions in China and globally. If we cannot obtain sufficient capital on
acceptable terms to meet our capital needs, we may not be able to execute our growth strategies, and our
business, financial condition and results of operations may be materially and adversely affected.
We lease properties in various place as premises primarily for our self-operated stores, office spaces,
warehouses or production bases. Any non-renewal of leases, substantial increase in rent, or any
third-party or government challenge to our leasehold interest may affect our business and financial
performance.
As most of our self-operated stores are currently located at leased properties, our operations are
susceptible to fluctuations in the property rental market. Before the expiry of each of our leases, we have
to negotiate the terms of renewal with our respective lessors. The term of the lease agreements for our
self-operated stores typically varies from one to two years, and the term for our office space typically
varies from one to three years. There is no assurance that our existing leases would be renewed on similar
or favorable terms or at all, in particular with respect to the amount of rent and the term of the lease. Any
substantial increase in the rent of our leased properties may increase our property rental and related
expenses, which could materially and adversely affect our profitability.
There is also no assurance that our existing leases will not be terminated early by the lessors before
the expiry of the relevant term. In the event that we are required to relocate our self-operated stores or
office space, there is no assurance that we will be able to identify comparable locations in a timely manner
or at all or that we will secure a lease on comparable terms. We may also incur substantial reinstatement,
relocation and renovation costs. In addition, it typically takes new stores a period of time to achieve a
profitability rate comparable to the existing ones, due to factors such as the time needed to find suitable
locations, build consumer awareness in the local community, renovate new stores, and integrate the
operations of such stores into our existing sales network. Any non-renewal of lease of either of our
self-operated stores or office space may have a material adverse effect on our business, results of
operations and financial condition.
As of the Latest Practicable Date, we had entered into lease agreements with respect to 34 of our
leased properties (accounting for 1.1% of the aggregate gross floor area of our leased properties relating
to our business operations), where the lessors have not provided us with valid title certificates, real estate
purchase agreements or permits from the landowner for sublease. If these lessors are not the legal owners
or have not obtained the proper authorization from the legal owners of such premises, the legal owners of
such premises or third-party tenants that have leased from the legal owners will have ground to challenge
the validity of our leasehold interest in the affected premises. Additionally, as of the same date, the
intended purposes contained in the title certificates or relevant authorization documents were inconsistent
with the actual use of four leased properties (accounting for 0.3% of the aggregate gross floor area of our
leased properties relating to our business operations). Among these four leased properties, the intended
purpose contained in the title certificates or relevant authorization documents of three leased properties
is residence and that for the remaining one is garage. However, as of the Latest Practicable Date, one was
occupied as office space and three were occupied as warehouses.
Additionally, we did not register the lease agreements in respect of 119 lease properties with the
competent authorities as of the Latest Practicable Date. Under the relevant PRC laws and regulations, the
parties to a lease agreement have the obligation to register and file the executed lease agreement. As
advised by our PRC Legal Advisor, the validity and enforceability of the lease agreements are not affected
by the failure to register or file the lease agreements with the relevant government authorities. According
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to the relevant PRC regulations, we may be ordered by the relevant government authorities to register the
relevant lease agreements within a prescribed period, failing which we may be subject to a fine ranging
from RMB1,000 to RMB10,000 for each non-registered lease.
Should disputes or government actions due to title or usage challenges arise to the above-described
properties, we may encounter difficulties in continuing to lease such properties and may be required to
relocate. If any of our leases are terminated or voided as a result of challenges from third parties or
government agencies, we would need to seek alternative premises and incur relocation costs. We cannot
assure you that we will be able to relocate such operations to suitable alternative premises, and any such
relocation may result in disruption to our business operations and result in loss of earnings. We also cannot
assure you that we will be able to effectively mitigate the possible adverse effects that may be caused by
such disruption, including loss and costs. Any of such disruption, loss or costs could materially and
adversely affect our business, financial condition and results of operations.
We received government grants during the Track Record Period, and any significant reduction of
government grants offered to us may adversely affect our financial condition and results of
operations.
During the Track Record Period, we received certain government grants as rewards for our
contribution to the local economic development. In 2020, 2021, 2022 and the five months ended May 31,
2022 and 2023, we recognized government grants of RMB17.2 million, RMB36.5 million, RMB24.6
million, RMB4.4 million and RMB1.1 million as other net income, respectively. We cannot assure you that
we will continue to receive such government grants or that the amount of such grants will not be reduced
in the future. Any significant reduction of government grants received by us may adversely affect our
financial condition and results of operations.
If our preferential tax treatment becomes unavailable or if the calculation of our tax liability is
challenged by the PRC tax authorities, our results of operations may be adversely affected.
During the Track Record Period, we enjoyed preferential tax treatment under relevant preferential
tax policies. We cannot assure you that we will continue to enjoy similar preferential tax treatment in the
future. The PRC Enterprise Income Tax Law and its implementation rules have adopted a flat statutory
enterprise income tax rate of 25% to all enterprises in China (if not entitled to any preferential tax
treatment). During the Track Record Period, we paid an enterprise income tax rate of 25%, except for
Guanghe Y an Palace, one of our subsidiaries, which enjoyed preferential tax treatment of an income tax
rate of 15% and is expected to enjoy such preferential income tax treatment until December 31, 2030. If
we cease to be entitled to preferential tax treatment, our income tax expenses may increase, which would
adversely affect our results of operations.
We may be required to make additional contributions of social insurance fund and/or housing
provident fund and late payments and fines under PRC laws and regulations.
Companies operating in the PRC are required to participate in various employee benefit plans,
including social insurance fund and housing provident fund and contribute to the amounts equal to certain
percentage of salaries, including bonuses and allowances, of their employees up to a maximum amount
specified by the local government from time to time at locations where they operate their business. The
requirement of employee benefit plans has not been implemented consistently by the local governments
in China given the different levels of economic development in different locations. During the Track
Record Period, we did not make adequate contributions to the social insurance and housing provident
funds with respect to certain of our employees such as production line workers, as required by the relevant
PRC laws and regulations. As a result, we may be required to make additional contributions of social
insurance fund and/or housing provident fund and late payments and fines under PRC laws and
regulations. See “Business—Our Employees.”
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As advised by our PRC Legal Advisor, if the competent PRC government authority determines that
the social insurance contributions we made for our employees violate the requirements under the relevant
PRC laws and regulations, we may be required to pay all outstanding social insurance contributions within
a prescribed period, with late fees at a daily rate of 0.05% of the outstanding amount, accruing from the
date when the social insurance contributions were due. If this payment is not made within the stipulated
period, the competent authority may further impose a fine of one to three times of the overdue amount on
us. In addition, pursuant to relevant PRC laws and regulations, in case of a failure to pay the full amount
of housing provident fund, the housing provident fund management center may require us to pay the
outstanding amount within a prescribed period. If the payment is not made within such time limit, an
application may be made to the PRC courts for compulsory enforcement. We made provisions of RMB3.9
million, RMB5.6 million, RMB7.9 million and RMB9.9 million as of December 31, 2020, 2021 and 2022
and May 31, 2023, respectively. We cannot assure you that we will not be subject to any order to rectify
the non-compliance in the future, nor can we assure you that there are no, or will not be any, employee
complaints regarding payment of the outstanding amount of the social insurance and housing provident
fund contributions against us, or that we will not receive any claims in respect of the outstanding amount
of the social insurance and housing provident fund contributions under national laws and regulations. In
addition, we may incur additional expenses to comply with such laws and regulations promulgated by the
PRC government or relevant local authorities.
Our insurance coverage is limited and may not be sufficient to cover all of our potential losses.
We believe that we have purchased and maintained various insurances in accordance with relevant
laws and regulations. See “Business—Insurance.” We cannot assure you that our insurances will provide
adequate coverage for all the risks in connection with our business operations. If we were to incur
substantial losses and liabilities that are not covered by our insurance policies, we may be required to bear
our losses to the extent that our insurance coverage is insufficient. As a result, we could suffer significant
costs and diversion of our resources, which could have a material adverse effect on our financial condition
and results of operations.
Our Controlling Shareholders have substantial influence over us, and their interests may not be
aligned with the interests of our other Shareholders.
Our Controlling Shareholders have substantial influence over us, including matters relating to our
management, policies and decisions regarding acquisitions, mergers, expansion plans, sales of all or
substantially all of our assets, election of directors and other significant corporate actions. Immediately
following the completion of the Global Offering and the Conversion of Unlisted Shares into H Shares
(assuming that the Over-allotment Option is not exercised), our Controlling Shareholders will directly or
indirectly, individually or together with others control 38.56% of the issued share capital of our Company.
This concentration of ownership may discourage, delay or prevent a change in control of the Company,
which could deprive other Shareholders of an opportunity to receive a premium for their Shares (as part
of a sale of the Company) and might reduce the price of our Shares. These events may occur even if they
are opposed by our other Shareholders. In addition, the interests of our Controlling Shareholders may
differ from the interests of our other Shareholders. It is possible that our Controlling Shareholders may
exercise their substantial influence over us and cause us to enter into transactions or take, or fail to take,
actions or make decisions that conflict with the best interests of our other Shareholders.
We could be involved in claims, disputes and legal proceedings in our ordinary course of business.
From time to time, we may be involved in claims, disputes and legal proceedings in our ordinary
course of business. These may concern issues relating to, among others, breach of contract, employment
or labor disputes, infringement of intellectual property rights and environmental matters. In particular, the
manufacture and sales of our products subject us to potential product liability claims if our products are
proven to have failed to meet relevant health and safety or other laws and regulations, or cause or are
alleged to have caused illness or health issues.
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If we are unsuccessful in any product liability claims, we may be subject to substantial damages to
compensate the claimants. Any claims, disputes or legal proceedings initiated by us or brought against us,
with or without merit, may result in substantial costs and diversion of resources and materially harm our
reputation.
Claims, disputes or legal proceedings against us may be due to defects of supplies, such as raw
materials and packaging materials, sold to us by our suppliers, who may not be able to indemnify us in
a timely manner, or at all, for any costs that we incur as a result of such claims, disputes and legal
proceedings.
RISKS RELATING TO OUR INDUSTRY
Failure to compete effectively may adversely affect our market share and profitability.
Our industry is highly competitive, and the competition may further intensify. Some of our
competitors have solid positions in the EBN market with long operating histories, global vision or greater
financial, research and development or other resources. As a result, our competitors may introduce better
products or adapt more quickly to the evolving industry trends or market demands. Our current or potential
competitors may provide products that are highly similar to ours. We cannot assure you that imitation or
counterfeiting of our products, logos or brands will not occur in the market. It is often difficult to identify
or eliminate those imitated or counterfeit products in a timely manner. Such incidents may affect our
reputation and brand.
It is also possible that there will be significant consolidation or development of alliances in our
industry, which may enable our competitors to rapidly acquire significant market share. Furthermore,
competition may cause competitors to substantially increase their advertising expenses and marketing
activities or to engage in unreasonable or predatory pricing behavior, or may even result in activities,
whether legal or illegal, designed to undermine our brand and reputation or to influence consumers’
confidence in our products. Any failure to respond to such competition effectively may materially and
adversely affect our brand, reputation, results of operations, financial condition and business prospects.
The market in which we operate may be saturated with a growing number of EBN brands.
According to the F&S Report, the number of EBN product companies in China grew steadily from
approximately 8,000 in 2017 to 13,000 in 2022. However, we cannot assure you that there can always be
sufficient customer demand, if at all, to support the continued expansion of China’s EBN industry. If the
key players within our industry continue to rapidly broaden their store network to out-compete each other
and capture more market share, the market may be saturated to the extent our sales, results of operations
and financial condition may be adversely impacted.
Any slowdown or decline in the Chinese economy or EBN market in China could have an adverse
impact on our business, results of operations and financial condition.
We derive substantially all of our revenue from the sales of our products in China. The success of
our business depends on the condition and growth of the Chinese market, which in turn depends on
macro-economic conditions and individual income levels in China. We cannot assure you that projected
growth rates of the Chinese economy and the Chinese consumer market will be realized under the current
economic situation. Any future slowdowns, declines or instability in the Chinese economy or consumer
spending could adversely affect our business, operating results and financial condition. We believe that
consumer spending habits could be adversely affected during a period of recession in the economy and that
uncertainties regarding future economic prospects could also affect consumer spending habits, any of
which may have an adverse effect on certain enterprises operating within the EBN market in China,
including us.
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RISKS RELATING TO DOING BUSINESS IN CHINA
The economic, political and social conditions in China could affect our business, results of
operations, financial conditions and prospects.
During the Track Record Period, substantially all of our revenue was derived from our businesses in
China. Accordingly, our business, financial condition, results of operations and prospects are, to a material
extent, subject to economic, political, and legal developments in China. In particular, factors such as
consumer, corporate and government spending, business investment, level of economic development, and
resource allocation could affect the growth of our business.
The PRC economy has experienced significant growth over the past decades since the
implementation of China’s reform and opening-up policy. In recent years, the PRC government has
implemented measures emphasizing the utilization of market forces in economic reform and the
establishment of sound corporate governance practices in business enterprises. These economic reform
measures may be adaptively adjusted from industry to industry or across different regions of the country.
If the business environment in China changes, our business in China may also be affected.
The development of the PRC legal system and changes in the interpretation and enforcement of PRC
laws, regulations and policies in China could affect us.
Our Company is incorporated under the laws of the PRC. The PRC legal system is based on written
statutes. Since the late 1970s, the PRC government has promulgated laws and regulations dealing with
economic matters, such as foreign investment, corporate organization and governance, commerce, taxation
and trade, with a view towards developing a comprehensive system of commercial law. However, as many
of these laws and regulations are relatively new and continue to evolve, these laws and regulations may
be subject to different interpretation. As other civil law countries, there is a limited volume of published
court decisions, which may be cited for reference but are not binding on subsequent cases and have limited
precedential value unless the Supreme People’s Court otherwise provides. As these laws and regulations
are continually evolving in response to the economic development and other conditions, the interpretation
and implementation of PRC laws and regulations may affect the legal protections and remedies that are
available to investors and us.
PRC government’s control of currency conversion and restrictions on the remittance of RMB into
and out of China could limit our ability to utilize our revenues effectively, to pay dividends and other
obligations, and affect the value of our H Shares.
The remittance of currency in and out of China is subject to various laws and regulations. Our
revenues and expenses are substantially denominated in Renminbi, and the net proceeds from the Global
Offering and any dividends we pay on our H Shares will be in Hong Kong dollars. Under China’s existing
foreign exchange regulations, following the completion of the Global Offering, we will be able to make
current account foreign exchange transactions, including paying dividends in foreign currencies without
prior approval from SAFE.
Foreign exchange transactions under our capital account are subject to foreign exchange controls
under relevant regulations and require SAFE’s approval. These limitations could affect our ability to
obtain foreign exchange through offshore financing.
Furthermore, the net proceeds from the Global Offering are expected to be deposited in currencies
other than Renminbi until we obtain necessary approvals from relevant PRC regulatory authorities to
convert these proceeds into onshore Renminbi. If we cannot convert the net proceeds into onshore
Renminbi in a timely manner, our ability to deploy these proceeds efficiently may be affected as we will
not be able to invest these proceeds on RMB denominated assets onshore or deploy them in uses onshore
where Renminbi is required. All of these factors could affect our business, results of operations, financial
condition and prospects.
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Fluctuations in exchange rates of Renminbi against Hong Kong dollar, U.S. dollar or other foreign
currencies could affect our results of operations and the value of your investment.
Fluctuations in the exchange rate of Renminbi against Hong Kong dollar, U.S. dollar and other
foreign currencies are affected by, among other things, the changes in China’s and international political
and economic conditions. The proceeds from the Global Offering will be denominated in Hong Kong
dollars. As a result, any appreciation of Renminbi against U.S. dollar, Hong Kong dollar or any other
foreign currencies may result in a decrease in the value of our foreign currency-denominated assets and
our proceeds from the Global Offering. Conversely, any depreciation of Renminbi may adversely affect
the value of, and any dividends payable on our H Shares in foreign currencies. We have not utilized, and
may not in the future utilize, any instrument to reduce our foreign currency risk exposure. All of these
factors could affect our business, results of operations, financial condition and prospects, and could affect
the value of, and dividends payable on, our H Shares in foreign currency terms.
We may be subject to the approval or other requirements of the China Securities Regulatory
Commission or other PRC governmental authorities in connection with future security activities.
On July 6, 2021, the General Office of the CPC Central Committee and the General Office of the
State Council jointly promulgated the Opinions on Strictly Combatting Illegal Securities Activities (׵
จԈ) (the “July 6 Opinion”), which called for the enhanced administration
and supervision of overseas-listed China-based companies, proposed to revise the relevant regulation
governing the overseas issuance and listing of shares by such companies and clarified the responsibilities
of competent domestic industry regulators and government authorities. The July 6 Opinion aims to achieve
this by establishing a regulatory system and revising the existing rules for overseas listings of Chinese
entities and affiliates including potential extraterritorial application of Chinese securities laws.
On February 17, 2023, the CSRC promulgated the Trial Administrative Measures of Overseas
Securities Offering and Listing by Domestic Companies (ج)
the “Overseas Listing Trial Measures”) and relevant supporting guidelines, which came into effect on
March 31, 2023. The Overseas Listing Trial Measures comprehensively improve and reform the existing
regulatory regime for overseas offering and listing of PRC domestic companies’ securities and
regulate both direct and indirect overseas offering and listing of PRC domestic companies’ securities.
Pursuant to the Overseas Listing Trial Measures, where a PRC domestic company submits an application
for initial public offering to competent overseas regulators or overseas stock exchanges, such issuer
must file with the CSRC within three business days after such application is submitted. We received the
filing notice issued by the CSRC dated September 25, 2023 indicating that we have completed the filing
application. Nonetheless, in the event of any future events that are material to us or failure to complete
overseas securities offering and listing within 12 months from the date of the filing notice, we are under
the obligation to report such events to or update the filing application with the CSRC.
In addition, we cannot guarantee that new rules or regulations promulgated in the future pursuant to
the July 6 Opinion and any other related PRC rules and regulations will not impose any additional
requirement on us or otherwise tightening the regulations on us. If it is determined that we are subject to
any CSRC approval, filing, other governmental authorization or requirements for future capital raising
activities, we may fail to obtain such approval or meet such requirements in a timely manner or at all. Such
failure may adversely affect our ability to finance the development of our business and may have a
material adverse effect on our business and financial conditions. Furthermore, any uncertainty and/or
negative publicity regarding such an approval, filing or other requirements may also have a material
adverse effect on the price of our H Shares.
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Investors of our H Shares may become subject to PRC taxation on dividends received from us and
gains from the disposition of our H Shares.
Non-Chinese resident individual holders of H Shares whose names appear on the register of members
of H Shares (“Non-Chinese Resident Individual Holders”), are subject to Chinese individual income tax
on dividends received from us. Pursuant to the Circular on Questions Concerning the Collection of
Individual Income Tax Following the Repeal of Guo Shui Fa [1993] No. 045 (Guo Shui Han [2011] No.
348) (਷೼೯[1993]045ٝ(਷೼Ռ[2011]348 ໮) dated
June 28, 2011 and issued by the SA T, the tax rate applicable to dividends paid to Non-Chinese Resident
Individual Holders of H Shares varies from 5% to 20% (usually 10%), depending on whether there is any
applicable tax treaty between China and the jurisdiction in which the Non-Chinese Resident Individual
Holder of H Shares resides, as well as the tax arrangement between China and Hong Kong. Non-Chinese
Resident Individual Holders who reside in jurisdictions that have not entered into tax treaties with the PRC
are subject to a 20.0% withholding tax on dividends received from us. See “Regulatory Overview.” In
addition, under the Individual Income Tax Law of the PRC (جand its
implementation regulations, Non-Chinese Resident Individual Holders of H Shares are subject to
individual income tax at a rate of 20% on gains realized upon the sale or other disposition of H Shares.
However, pursuant to the Circular Declaring that Individual Income Tax Continues to be Exempted over
Income of Individuals from Transfer of Shares (ٝ)
issued by the Ministry of Finance and the SA T on March 30, 1998, gains of individuals derived from the
transfer of listed shares of enterprises may be exempt from individual income tax. As of the Latest
Practicable Date, none of the aforesaid provisions has expressly provided that whether individual income
tax shall be levied from non-mainland China resident individual holders on the transfer of shares in
mainland China resident enterprises listed on overseas stock exchanges. To the best of our knowledge, the
Chinese tax authorities have not in practice sought to collect individual income tax on such gains. If such
tax is collected in the future, the value of such individual holders’ investments in H Shares may be
materially and adversely affected.
Under the EIT Law and its implementation regulations, a non-Chinese resident enterprise is
generally subject to enterprise income tax at a rate of 10% with respect to its Chinese-sourced income,
including dividends received from a Chinese company and gains derived from the disposition of equity
interests in a Chinese company. This rate may be reduced under any special arrangement or applicable
treaty between the China and the jurisdiction in which the non-Chinese resident enterprise resides.
Pursuant to the Circular on Questions Concerning Withholding of Enterprise Income Tax for Dividends
Distributed by Resident Enterprises in China to Non-resident Enterprises Holding H-shares of the
Enterprises (Guo Shui Han [2008] No. 897) (͏ΆุΣྤ̮H˾ϔ
ٝ(਷೼Ռ[2008]897 ໮)) promulgated by the SA T on November 6, 2008, we
intend to withhold tax at 10% from dividends payable to non-Chinese resident enterprise holders of H
Shares (including HKSCC Nominees). Non-Chinese resident enterprises that are entitled to be taxed at a
reduced rate under an applicable income tax treaty or arrangement will be required to apply to the Chinese
tax authorities for a refund of any amount withheld in excess of the applicable treaty rate, and payment
of such refund will be subject to the Chinese tax authorities’ approval. See “Regulatory Overview.” There
are uncertainties as to the interpretation and implementation of the EIT Law and its implementation rules
by the Chinese tax authorities, including whether and how enterprise income tax on gains derived upon
the sale or other disposition of H Shares will be collected from non-Chinese resident enterprise holders
of H Shares. If such tax is collected in the future, the value of such non-Chinese resident enterprise
holders’ investments in H Shares may be materially and adversely affected.
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Payment of dividends is subject to restrictions under PRC law.
Under PRC law, dividends may be paid only out of distributable profits. Distributable profits are
defined as our profits after taxes as determined under PRC GAAP less any recovery of accumulated losses
and appropriations to statutory and other reserves that we are required to make. As a result, we may not
have sufficient, if any, distributable profits to enable us to make dividend distributions to our Shareholders
in the future, including periods for which our financial statements indicate that our operations have been
profitable. Any distributable profits not distributed in a given year are retained and available for
distribution in subsequent years.
Moreover, because the calculation of distributable profits under PRC GAAP is different from the
calculation under IFRS in certain respects, our subsidiaries may not have distributable profits as
determined under PRC GAAP , even if they have profits for that year as determined under IFRS, or vice
versa. Accordingly, we may not receive sufficient distributions from our subsidiaries. Failure by our
subsidiaries to pay dividends to us could have a negative impact on our cash flow and our ability to make
dividend distributions to our Shareholders in the future, including those periods in which our financial
statements indicate that our operations have been profitable.
It may be difficult to effect service of process, enforce foreign judgments or bring original actions
against us, our Directors, Supervisors and senior management residing in China.
We are a company incorporated under the laws of China, and a substantial majority of our assets are
located in China. In addition, most of our Directors, Supervisors and senior management reside within
Mainland China. As a result, the service of process, investigation, collection of evidence, ratification, and
enforcement procedure inside China should follow the rules set forth in the Civil Procedure Law of the
People’s Republic of China. As such disputes would be transnational issues, it would generally require you
to commit more time and economic cost.
On July 14, 2006, the Supreme People’s Court of China and Hong Kong entered into the
Arrangement on Reciprocal Recognition and Enforcement of Judgements in Civil and Commercial Matters
by the Courts of the Mainland and of the Hong Kong Special Administrative Region Pursuant to Choice
of Court Agreements between Parties Concerned (ʝႩ̙ձੂБ຅ԫɛ
τર) (the “2006 Arrangement”). Pursuant to such arrangement, a party with
a final judgment rendered by a Hong Kong court requiring payment of money in a civil and commercial
case according to a choice of court agreement in writing may apply for recognition and enforcement of
the judgment in China, and vice versa. However, it is subject to the parties in the dispute agreeing to enter
into a choice of court agreement in writing under the 2006 Arrangement.
On January 18, 2019, the Supreme People’s Court of China and Hong Kong entered into the
Arrangement on Reciprocal Recognition and Enforcement of Judgments in Civil and Commercial Matters
by the Courts of the Mainland and of the Hong Kong Special Administrative Region (ಥत
τર) (the “2019 Arrangement”), the commencement
date of which shall be announced after the Supreme People’s Court promulgates judicial interpretations
and relevant procedures are completed in Hong Kong. The 2019 Arrangement will supersede the 2006
Arrangement and afford greater clarity and certainty for reciprocal recognition and enforcement of
judgments in civil and commercial matters. The 2006 Arrangement will remain applicable to a “choice of
court agreement in writing” entered into before the 2019 Arrangement taking effect. However, there
remains uncertainties as to the outcome of any specific applications to recognize and enforce such
judgments and arbitral awards in China.
RISK FACTORS
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The custodians or authorized users of our controlling non-tangible assets, including chops and seals,
may fail to fulfill their responsibilities, or misappropriate or misuse these assets.
Under the PRC law, legal documents for corporate transactions, including agreements and contracts
are executed using the chop or seal of the signing entity or with the signature of a legal representative
whose designation is registered and filed with relevant PRC market regulation administrative authorities.
In order to secure the use of our chops and seals, we have established internal control procedures and rules
for using these chops and seals. In any event that the chops and seals are intended to be used, the
responsible personnel will submit a formal application, which will be verified and approved by authorized
employees in accordance with our internal control procedures and rules. In addition, in order to maintain
the physical security of our chops, we generally have them stored in secured locations accessible only to
authorized employees. Although we monitor such authorized employees, the procedures may not be
sufficient to prevent all instances of abuse or negligence. There is a risk that our employees could abuse
their authority, for example, by entering into a contract not approved by us or seeking to gain control of
one of our subsidiaries or our affiliated entities or their subsidiaries. If any employee obtains, misuses or
misappropriates our chops and seals or other controlling non-tangible assets for whatever reason, we could
experience disruption to our normal business operations. We may have to take corporate or legal action,
which could involve significant time and resources to resolve and divert management from our operations,
and we may not be able to recover our loss due to such misuse or misappropriation if the third party relies
on the apparent authority of such employees and acts in good faith.
RISKS RELATING TO THE GLOBAL OFFERING
There has been no prior public market for our H Shares, and the liquidity and market price of our
H Shares may be volatile.
Prior to the Global Offering, there has been no public market for our H Shares. The Offer Price range
for our H Shares was the result of negotiations between us, the Overall Coordinators and the Joint Global
Coordinators on behalf of the Underwriters, and the Offer Price may differ significantly from the market
price for our H Shares following the Global Offering. We have applied for listing of, and permission to
deal in, our H Shares on the Stock Exchange. A listing on the Stock Exchange, however, does not
guarantee that an active and liquid trading market for our H Shares will develop, or if it does develop, that
it will be sustained following the Global Offering or that the market price of our H Shares will not decline
following the Global Offering. Furthermore, the market price and trading volume of our H Shares may be
volatile. The following factors may affect the trading volume and market price of our H Shares:
 actual or anticipated fluctuations in our operating performance and revenue;
 our failure to execute our strategies;
 an unexpected business interruption resulting from operational breakdowns, natural disasters,
or major changes in our key personnel or senior management;
 adverse market reaction to any indebtedness that we may incur or securities that we may issue
in the future;
 announcements of competitive developments, acquisitions or strategic alliances in our
industry;
 potential litigation or regulatory investigations;
 general market conditions or other developments affecting us or our industry;
RISK FACTORS
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 changes or proposed changes in laws or regulations, or differing interpretations thereof,
affecting our ability to obtain or maintain regulatory approval for our products;
 inadequate protection of our intellectual property rights or legal proceedings brought against
us for infringement of third parties’ intellectual property rights;
 the operating and stock price performance of other companies in our industry, and other events
or factors beyond our control; and
 the release of lock-up or other transfer restrictions on our outstanding H Shares or sales or
perceived sales of H Shares by us or other Shareholders.
Moreover, the capital market has from time to time experienced significant price and trading volume
fluctuations that were unrelated or not directly related to the operating performance of the underlying
companies in the market. These broad market and industry fluctuations may have a material and adverse
effect on the market price and trading volume of our H Shares.
An active and liquid trading market for our H Shares may not develop.
Prior to the Global Offering, our H Shares were not traded on any other market. We cannot assure
you that an active and liquid trading market for our H Shares will be developed or be maintained after the
Global Offering. Liquid and active trading markets usually result in less price volatility and more
efficiency in carrying out investors’ purchase and sale orders. The market price of our H Shares could vary
significantly as a result of a number of factors, some of which are beyond our control. In the event of a
drop in the market price of our H Shares, you could lose a substantial part or all of your investment in our
H Shares.
Since there will be a gap of several days between pricing and trading of our H Shares, holders of our
H Shares are subject to the risk that the price of our H Shares could fall during the period before
trading of our H Shares begins.
The Offer Price of our H Shares is expected to be determined on the Price Determination Date.
However, our H Shares will not commence trading on the Stock Exchange until they are delivered.
Moreover, the application for the Offer Shares will commence on Thursday, November 30, 2023 through
Thursday, December 7, 2023, being longer than normal market practice of three and a half days. Investors
may not be able to sell or otherwise deal in our H Shares until the commencement of trading. Accordingly,
holders of our H Shares are subject to the risk that the price of our H Shares could fall before trading
begins, as a result of unfavorable market conditions or other adverse developments that could occur
between the time of sale and the time trading begins.
Because the Offer Price of our H Shares is substantially higher than the consolidated net tangible
book value per share, purchasers in the Global Offering may experience immediate dilution.
As the Offer Price of our H Shares is higher than the consolidated net tangible assets per share
immediately prior to the Global Offering, purchasers of our H Shares in the Global Offering will
experience an immediate dilution in pro forma adjusted consolidated net tangible assets. Our existing
Shareholders will receive an increase in the pro forma adjusted consolidated net tangible asset value per
share of their shares. Please refer to Appendix II to this prospectus for details. In addition, holders of our
Shares may experience further dilution of their interest if the Underwriters exercise the Over-allotment
Option or if we issue additional shares in the future to raise additional capital.
We have significant discretion as to how we will use the net proceeds of the Global Offering, and you
may not necessarily agree with how we use them.
Our management may spend the net proceeds from the Global Offering in ways you may not agree
with or that do not yield a favorable return. See “Future Plans and Use of Proceeds” for details of our
intended use of proceeds. However, our management will have discretion as to the actual application of
our net proceeds. Y ou are entrusting your funds to our management, upon whose judgment you must
depend, for the specific use we will make of the net proceeds from this Global Offering.
RISK FACTORS
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Future sales or perceived sales or conversion of substantial amounts of our securities in the public
market, such as conversion of our Unlisted Shares into H Shares, could have a material and adverse
effect on the prevailing market price of our H Shares and our ability to raise additional capital in
the future, or may result in dilution of your shareholdings.
Future sales of substantial amounts of our H Shares or other securities relating to our H Shares in
the public market, or the issuance of new H Shares or other securities relating to our H Shares, or the
perception that such sales or issuances may occur could all cause a decline in the market price of our H
Shares. Future sales, or perceived sales, of substantial amounts of our securities or other securities relating
to our H Shares, including part of any future offerings, could also materially and adversely affect the
prevailing market price of our H Shares and our ability to raise capital in the future at a time and at a price
which we deem appropriate.
Although our Controlling Shareholders are subject to restrictions on their sales of H Shares within
12 months from the Listing Date as described in “History, Development and Corporate Structure” in this
prospectus, future sales of a significant number of our H Shares by our Controlling Shareholders or other
existing shareholders in the public market after the Global Offering, or the perception that these sales
could occur, could cause the market price of our H Shares to decline and could materially impair our future
ability to raise capital through offerings of our H Shares. We cannot assure you that our Controlling
Shareholders, or other existing shareholders will not dispose of H Shares held by them or that we will not
issue H Shares upon the expiration of restrictions set out above.
Our Unlisted Shares may be converted into H Shares, and such converted H Shares may be listed or
traded on an overseas stock exchange, provided that prior to the conversion and trading of such converted
shares, any requisite internal approval processes shall have been duly completed and the approval from the
relevant Chinese regulatory authorities, including the CSRC, shall have been obtained (the
“Arrangement”). In addition, such conversion, trading and listing shall in all respects comply with the
regulations prescribed by the State Council’s securities regulatory authorities and the regulations,
requirements and procedures prescribed by the relevant overseas stock exchange. The Arrangement applies
only to Unlisted Shares. All of our Unlisted Shares are subject to the Arrangement and may be converted
into H Shares upon the approval of the relevant regulatory authorities, including the CSRC and the Stock
Exchange.
Our historical dividends may not be indicative of our future dividend policy, and we may not be able
to pay any dividends on our H Shares.
During the Track Record Period, we declared dividends to our then Shareholders of RMB120.0
million, RMB100.0 million, RMB80.0 million and RMB160.0 million in 2020, 2021, 2022 and the five
months ended May 31, 2023, respectively, in light of our cumulative business growth. As of May 31, 2023,
all of such dividends declared during the Track Record Period had been fully settled by bank transfer to
our then Shareholders. See also Note 30(b) to the Accountants’ Report in Appendix I to this prospectus.
However, our historical dividends may not be indicative of our future dividend policy. We cannot
guarantee when and in what form dividends will be paid on our H Shares following the Global Offering.
The declaration of dividends is proposed by the Board and is based on, and limited by, various factors,
including without limitation, our business and financial performance, capital and regulatory requirements,
and general business conditions. We may not have sufficient or any profits to enable us to make dividend
distributions to our Shareholders in the future, even if our financial statements indicate that our operations
have been profitable. See “Financial Information—Dividends” for more details.
RISK FACTORS
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If securities or industry analysts do not publish research reports about us, or if they adversely
change their recommendations regarding our H Shares, the market price and trading volume of our
H Shares may decline.
The trading market of our H Shares may be influenced by research reports that industry or securities
analysts publish about us or our business. If one or more analysts who cover us downgrade our H Shares
or publish negative opinions about us, the market price of our H Shares would likely decline regardless
of the accuracy of the information. If one or more of these analysts cease coverage of us or fail to regularly
publish reports on us, we could lose visibility in the financial markets, which, in turn, could cause the
market price or trading volume of our H Shares to decline.
Forward-looking statements contained in this prospectus are subject to risks and uncertainties.
This prospectus contains forward-looking statements with respect to our business strategies,
operating efficiencies, competitive positions, growth opportunities for existing operations, plans and
objectives of management, certain pro forma information and other matters.
The words “anticipate,” “believe,” “could,” “potential,” “continue,” “expect,” “intend,” “may,”
“plan,” “seek,” “will,” “would,” “should” and the negative of these terms and other similar expressions
identify a number of these forward-looking statements. These forward-looking statements, including,
among others, those relating to our future business prospects, capital expenditure, cash flows, working
capital, liquidity and capital resources are necessary estimates reflecting the best judgment of our
Directors, Supervisors and senior management and involve a number of risks and uncertainties that could
cause actual results to differ materially from those suggested by the forward-looking statements. As a
result, these forward-looking statements should be considered in light of various important factors,
including those set out in “Risk Factors” in this prospectus. Accordingly, such statements are not a
guarantee of future performance, and you should not place undue reliance on any forward-looking
information. All forward-looking statements in this prospectus are qualified by reference to this cautionary
statement.
The industry data and forecasts in this prospectus obtained from various government publications
have not been independently verified.
This prospectus includes industry data and forecasts that we obtained from various government
publications that we believe are reliable. We have no reason to believe that such information is false or
misleading or that any fact has been omitted that would render such information false or misleading.
However, we cannot assure you of the accuracy or completeness of information obtained from these
sources. We have not independently verified any of the data, forecasts and other statistics from such
sources, nor have we ascertained that the underlying economic assumptions relied upon in those sources.
Additionally, the Joint Sponsors, the Overall Coordinators, the Underwriters, any of their respective
directors, officers, affiliates, advisors and representatives, or any other parties involved in the Global
Offering make no representation as to the accuracy or completeness of aforementioned facts, forecasts and
other statistics in this prospectus. Moreover, such facts, forecasts and other statistics may not be prepared
on the same basis or with the same degree of accuracy (as the case may be) in other publications or
jurisdictions. For these reasons, the information from various government publications contained in this
prospectus may not be accurate and should not be given undue reliance as a basis for making your
investment in our H Shares.
RISK FACTORS
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We may need additional capital, and the sale or issue of additional H Shares or other equity
securities could result in additional dilution to our Shareholders.
Notwithstanding our current cash and cash equivalents and the net proceeds from the Global
Offering, we may require additional cash resources to finance our continued growth or other future
developments. We cannot assure you that financing will be available in the amounts or on terms acceptable
to us, if at all. If we fail to raise additional funds, we may need to sell additional equity securities, which
could result in additional dilution to our Shareholders.
Y ou should read the entire prospectus carefully and we strongly caution you not to place any reliance
on any information contained in press articles and other media regarding us and the Global
Offering.
Prior to the publication of this prospectus, there has been and there may also be, subsequent to the
date of this prospectus but prior to the completion of the Global Offering, press and media coverage
regarding us, our business, our industries and the Global Offering, which contained, among other things,
certain financial information, projections, valuations and other forward-looking information about us and
the Global Offering. We have not authorized the disclosure of any such information in the press or media
and do not accept responsibility for the accuracy or completeness of such press articles or other media
coverage. We make no representation as to the appropriateness, accuracy, completeness or reliability of
any of such projections, valuations or other forward-looking information about us. To the extent such
statements are inconsistent with, or conflict with, the information contained in this prospectus, we
disclaim responsibility for them. Accordingly, prospective investors are cautioned to make their
investment decisions on the basis of the information contained in this prospectus only and should not rely
on any other information.
RISK FACTORS
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In preparation for the Global Offering, our Company has sought the following waivers from strict
compliance with the relevant provisions of the Listing Rules:
W AIVER IN RELATION TO PRESENCE OF MANAGEMENT IN HONG KONG
Pursuant to Rule 8.12 of the Listing Rules, we must have sufficient management presence in Hong
Kong. This normally means that at least two of our executive Directors must be ordinarily resident in Hong
Kong. Pursuant to Rule 19A.15 of the Listing Rules, the requirement in Rule 8.12 of the Listing Rules may
be waived by having regard to, among other considerations, our arrangements for maintaining regular
communication with the Stock Exchange.
Since the business operations of our Group are managed and conducted outside of Hong Kong, and
all of the executive Directors of our Company ordinarily reside outside Hong Kong, our Company
considers that it would be practically difficult and commercially unreasonable and undesirable for our
Company to arrange for two executive Directors to be ordinarily resident in Hong Kong, either by means
of relocation of existing executive Directors or appointment of additional executive Directors. Therefore,
our Company does not have, and does not contemplate in the foreseeable future that we will have sufficient
management presence in Hong Kong for the purpose of satisfying the requirements under Rule 8.12 of the
Listing Rules.
Accordingly, pursuant to Rule 19A.15 of the Listing Rules, we have applied for, and the Stock
Exchange has granted, a waiver from strict compliance with the requirements under Rule 8.12 and Rule
19A.15 of the Listing Rules, subject to the following conditions. We will ensure that there is an effective
channel of communication between us and the Stock Exchange by way of the following arrangements:
 Authorized representatives: we have appointed Mr. Huang and XIONG Ting ( ဤణ)
(“Ms. Xiong”) as the authorized representatives (“Authorized Representatives”) for the
purpose of Rule 3.05 of the Listing Rules. The Authorized Representatives will act as our
principal channel of communication with the Stock Exchange and would be readily contactable
by phone, facsimile and email to deal promptly with enquiries from the Stock Exchange.
Accordingly, the Authorized Representatives will be able to meet with the relevant members of
the Stock Exchange to discuss any matters in relation to our Company within a reasonable
period of time. The Company will also inform the Stock Exchange promptly in respect of any
change in the Authorized Representatives. See “Directors, Supervisors and Senior
Management” for more information about our Authorized Representatives;
 Joint company secretaries: in addition to the appointment of the Authorized Representatives,
LEUNG Kwan Wai ( ૑ёᅆ) (“Ms. Leung”), one of our joint company secretaries and a Hong
Kong resident, will, among other things, act as our Company’s additional channel of
communication with the Stock Exchange and be able to answer enquiries from the Stock
Exchange. Ms. Leung will maintain contact with our Directors, Supervisors and senior
management through various means, including regular meetings and telephone discussions
whenever necessary;
 Directors: to facilitate communication with the Stock Exchange, we have provided the
Authorized Representatives and the Stock Exchange with the contact details (such as mobile
phone numbers, office phone numbers, facsimile number and e-mail addresses, to the extent
possible) of each of our Directors such that the Authorized Representatives would have the
means for contacting all our Directors promptly at all times as and when the Stock Exchange
wishes to contact our Directors on any matters. In the event that any Director expects to travel
or otherwise be out of office, he/she will provide the phone number of the place of his/her
accommodation to the Authorized Representatives. To the best of our knowledge and
W AIVERS FROM STRICT COMPLIANCE WITH THE LISTING RULES
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information, each Director who does not ordinarily reside in Hong Kong possesses or can apply
for valid travel documents to visit Hong Kong and can meet with the Stock Exchange within
a reasonable period upon request of the Stock Exchange;
 Compliance advisor: we have appointed Ping An of China Capital (Hong Kong) Company
Limited as our compliance advisor (the “Compliance Advisor”) upon listing pursuant to Rule
3A.19 of the Listing Rules for a period commencing on the Listing Date and ending on the date
on which we comply with Rule 13.46 of the Listing Rules in respect of our financial results for
the first full financial year commencing after the Listing Date. The Compliance Advisor will
have access at all times to our Authorized Representatives, the Directors, the Supervisors and
other senior management and act as the additional channel of communication with the Stock
Exchange and answer enquiries from the Stock Exchange. The contact details of the
Compliance Advisor have been provided to the Stock Exchange. We will also inform the Stock
Exchange promptly in respect of any change in the Compliance Advisor; and
 Hong Kong legal advisor: we will retain a Hong Kong legal advisor to advise us on the
on-going compliance requirements, any amendment or supplement to and other issues arising
under the Listing Rules and other applicable laws and regulations in Hong Kong after the
Listing.
W AIVER IN RELATION TO JOINT COMPANY SECRETARIES
Pursuant to Rule 8.17 of the Listing Rules, we must appoint a company secretary who satisfies the
requirements under Rule 3.28 of the Listing Rules. According to Rule 3.28 of the Listing Rules, we must
appoint as our company secretary an individual, who, by virtue of his or her academic or professional
qualifications or relevant experience, is, in the opinion of the Stock Exchange, capable of discharging the
functions of company secretary.
Pursuant to Note 1 to Rule 3.28 of the Listing Rules, the Stock Exchange considers the following
academic or professional qualifications to be acceptable:
 a Member of The Hong Kong Chartered Governance Institute;
 a solicitor or barrister (as defined in the Legal Practitioners Ordinance); and
 a certified public accountant (as defined in the Professional Accountants Ordinance).
In addition, pursuant to Note 2 to Rule 3.28 of the Listing Rules provides that, in assessing “relevant
experience,” the Stock Exchange will consider the individual’s:
 length of employment with the issuer and other issuers and the roles he/she played;
 familiarity with the Listing Rules and other relevant laws and regulations including the SFO,
the Companies (Winding Up and Miscellaneous Provisions) Ordinance and the Takeovers Code
and Mergers and Share Buy-backs;
 relevant training taken and/or to be taken in addition to be the minimum requirement under
Rule 3.29 of the Listing Rules; and
 professional qualifications in other jurisdictions.
W AIVERS FROM STRICT COMPLIANCE WITH THE LISTING RULES
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Pursuant to the Guidance Letter HKEX-GL108-20, the waiver will be for a fixed period of time and
on the following conditions: (1) the proposed company secretary must be assisted by a person who
possesses the qualifications or experience as required under Rule 3.28 and is appointed as a joint company
secretary throughout the Waiver Period (as defined below); and (2) the waiver can be revoked if there are
material breaches of the Listing Rules by the issuer.
We have appointed Ms. Xiong as our joint company secretary. She has extensive experience in
accounting and finance matters but presently does not possess any of the qualification required under
Rules 3.28 and 8.17 of the Listing Rules, we have appointed Ms. Leung as the other joint company
secretary, working closely with Ms. Xiong. Ms. Leung is a chartered secretary, a chartered governance
professional and an associate of both The Hong Kong Chartered Governance Institute (HKCGI) and The
Chartered Governance Institute (CGI), and therefore meets the qualification requirements under Note 1 to
Rule 3.28 of the Listing Rules and is in compliance with Rule 8.17 of the Listing Rules. For further
information regarding the qualifications of Ms. Xiong and Ms. Leung, see “Directors, Supervisors and
Senior Management.”
The joint company secretaries will be jointly discharging the duties and responsibilities of a
company secretary. Ms. Leung will be assisting Ms. Xiong in gaining the relevant experience required
under Rules 3.28 and 8.17 of the Listing Rules. Also, Ms. Xiong will be assisted by (1) the Compliance
Advisor of our Company for the first full financial year starting from the Listing Date, particularly in
relation to Hong Kong corporate governance practice and compliance matters; and (2) the Hong Kong
legal advisor of our Company, on matters regarding our Company’s ongoing compliance with the Listing
Rules and the applicable Hong Kong laws and regulations. In addition, Ms. Xiong will endeavor to attend
relevant trainings and familiarize herself with the Listing Rules and duties required of a company secretary
of an issuer listed on the Stock Exchange.
We have applied to the Stock Exchange for, and the Stock Exchange has granted, a waiver from strict
compliance with the requirements under Rules 3.28 and 8.17 of the Listing Rules such that Ms. Xiong may
be appointed as a joint company secretary of our Company. The waiver is valid for an initial period of a
three-year period (“Waiver Period”) on the condition that Ms. Leung, as a joint company secretary of our
Company, will work closely with, and provide assistance to, Ms. Xiong in the discharge of her duties as
a joint company secretary and in gaining the relevant experience as required under Rule 3.28 of the Listing
Rules and to become familiar with the requirements of the Listing Rules and other applicable Hong Kong
laws and regulations. The waiver will be revoked immediately if Ms. Leung ceases to provide assistance
to Ms. Xiong as the joint company secretary or if there are material breaches of the Listing Rules by us.
Our Company will further ensure that Ms. Xiong has access to the relevant training and support that
would enhance her understanding of the Listing Rules and the duties of a company secretary of an issuer
listed on the Stock Exchange, and to receive updates on the latest changes to the applicable Hong Kong
laws, regulations and the Listing Rules. Prior to the end of the three-year period, the qualifications and
experience of Ms. Xiong and the need for on-going assistance of Ms. Leung will be further evaluated by
our Company. We will liaise with the Stock Exchange to enable it to assess whether Ms. Xiong, having
benefited from the assistance of Ms. Leung for the preceding three years, will have acquired the skills
necessary to carry out the duties of company secretary and the “relevant experience” within the meaning
of Rule 3.28 Note 2 of the Listing Rules so that a further waiver will not be necessary.
W AIVERS FROM STRICT COMPLIANCE WITH THE LISTING RULES
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CONTINUING CONNECTED TRANSACTIONS
We have entered into, and expect to continue, certain transactions that will constitute non-exempt
and partially-exempt continuing connected transactions of our Company under the Listing Rules upon the
Listing as described in the section headed “Connected Transactions” of this prospectus. Our Directors
consider that strict compliance with the applicable requirement under the Listing Rules would be
impractical, unduly burdensome and would impose unnecessary administrative costs on our Company.
Accordingly, we have applied for, and the Stock Exchange has granted to us, a waiver from strict
compliance with the applicable requirements under Chapter 14A of the Listing Rules in respect of such
non-exempt and partially-exempt continuing connected transactions. For further details, see “Connected
Transactions.”
W AIVERS FROM STRICT COMPLIANCE WITH THE LISTING RULES
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DIRECTORS’ RESPONSIBILITY STATEMENT
This prospectus, for which the Directors collectively and individually accept full responsibility,
includes particulars given in compliance with the Companies (Winding Up and Miscellaneous Provisions)
Ordinance, the Securities and Futures (Stock Market Listing) Rules (Chapter 571V of the Laws of Hong
Kong) and the Listing Rules for the purpose of giving information with regard to us. Our Directors, having
made all reasonable enquiries, confirm that to the best of their knowledge and belief the information
contained in this prospectus 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
prospectus misleading.
UNDERWRITING AND INFORMATION ON THE GLOBAL OFFERING
This prospectus is published solely in connection with the Hong Kong Public Offering, which forms
part of the Global Offering. For applicants under the Hong Kong Public Offering, this prospectus sets out
the terms and conditions of the Hong Kong Public Offering.
The Hong Kong Offer Shares are offered solely on the basis of the information contained and
representations made in this prospectus and on the terms and subject to the conditions set out herein and
therein. No person is authorized to give any information in connection with the Global Offering or to make
any representation not contained in this prospectus, and any information or representation not contained
herein must not be relied upon as having been authorized by us, the Joint Sponsors, the Overall
Coordinators, the Joint Global Coordinators, the Joint Bookrunners, the Joint Lead Managers, the
Underwriters, the Capital Market Intermediaries, any of our or their respective directors, officers, agents,
employees or advisers or any other party involved in the Global Offering.
Neither the delivery of this prospectus nor any offering, sale or delivery made in connection with the
Offer Shares should, under any circumstances, constitute a representation that there has been no change
or development reasonably likely to involve a change in our affairs since the date of this prospectus or
imply that the information contained in this prospectus is correct as at any date subsequent to the date of
this prospectus.
Details of the structure of the Global Offering, including its conditions, are set out in “Structure of
the Global Offering,” and the procedures for applying for the Hong Kong Offer Shares are set out in “How
to Apply for Hong Kong Offer Shares”.
The Listing is sponsored by the Joint Sponsors and the Global Offering is managed by the Overall
Coordinators. The Hong Kong Public Offering is fully underwritten by the Hong Kong Underwriters
pursuant to the Hong Kong Underwriting Agreement and is subject to us and the Overall Coordinators (for
themselves and on behalf of the other Underwriters) agreeing on the Offer Price. The International
Underwriting Agreement relating to the International Offering is expected to be entered into on or about
the Price Determination Date, subject to determination of the Offer Price.
CSRC FILING
The CSRC accepted the Company’s filing application on June 21, 2023 and issued the Notice of
Filing on September 25, 2023 for the Global Offering and the making of the application to list our H
Shares on the Stock Exchange.
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DETERMINATION OF THE OFFER PRICE
The Offer Shares are being offered at the Offer Price which will be determined by us and the Overall
Coordinators (for themselves and on behalf of the Underwriters) on or around Friday, December 8, 2023
(which, at the earliest, could be Thursday, December 7, 2023), and, in any event no later than 12:00 noon
on Friday, December 8, 2023.
If, for any reason, the Offer Price is not agreed among us and the Overall Coordinators (for
themselves and on behalf of the other Underwriters) by 12:00 noon on Friday, December 8, 2023, the
Global Offering (including the Hong Kong Public Offering) will not proceed and will lapse.
RESTRICTIONS ON OFFER AND SALE OF THE H SHARES
Each person acquiring the Hong Kong Offer Shares under the Hong Kong Public Offering will be
required to, or be deemed by his, her or its acquisition of the Offer Shares to, confirm that he, she or it
is aware of the restrictions on offers of the Offer Shares described in this prospectus.
No action has been taken to permit a public offering of the Hong Kong Offer Shares or the general
distribution of this prospectus in any jurisdiction other than in Hong Kong. Accordingly, without limitation
to the following, this prospectus may not be used for the purposes of, and does not constitute, an offer or
invitation in any jurisdiction or in any circumstances in which such an offer or invitation is not authorized
or to any person to whom it is unlawful to make such an offer or invitation. The distribution of this
prospectus and the offering and sale of the Offer Shares in other jurisdictions are subject to restrictions
and may not be made except as permitted under the applicable securities laws of such jurisdictions and
pursuant to registration with or authorization by the relevant securities regulatory authorities or an
exemption therefrom.
APPLICATION FOR LISTING OF THE H SHARES ON THE STOCK EXCHANGE
We have applied to the Listing Committee for the listing of, and permission to deal in, the H Shares
to be issued pursuant to the Global Offering (including any H Shares which may be issued pursuant to the
exercise of the Over-allotment Option) and the Conversion of Unlisted Shares into H Shares.
No part of our share capital is listed on or dealt in on any other stock exchange and no such listing
or permission to list is being or proposed to be sought on the Stock Exchange or any other stock exchange
as of the date of this prospectus. All the Offer Shares will be registered on our H Share register of members
in order to enable them to be traded on the Stock Exchange.
Under section 44B(1) of the Companies (Winding Up and Miscellaneous Provisions) Ordinance, any
allotment made in respect of any application will be invalid if the listing of, and permission to deal in, the
H Shares on the Stock Exchange is refused before the expiration of three weeks from the date of the
closing of the application lists, or such longer period (not exceeding six weeks) as may, within the said
three weeks, be notified to the Company by or on behalf of the Stock Exchange.
COMMENCEMENT OF DEALINGS IN THE H SHARES
Assuming that the Hong Kong Public Offering becomes unconditional in Hong Kong at or before
8:00 a.m. in Hong Kong on Tuesday, December 12, 2023, it is expected that dealings in our H Shares on
the Stock Exchange will commence on 9:00 a.m., Tuesday, December 12, 2023. The H Shares will be
traded in board lots of 400 H Shares each, the stock code of the H Shares will be 1497.
H SHARES WILL BE ELIGIBLE FOR ADMISSION INTO CCASS
Subject to the granting of the listing of, and permission to deal in, the Offer Shares on the Stock
Exchange and our compliance with the stock admission requirements of HKSCC, the H Shares will be
accepted as eligible securities by HKSCC for deposit, clearance and settlement in CCASS with effect from
INFORMATION ABOUT THIS PROSPECTUS AND THE GLOBAL OFFERING
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the date of commencement of dealings in the H Shares on the Stock Exchange or any other date as
determined by HKSCC. Settlement of transactions between participants of the Stock Exchange is required
to take place in CCASS on the second settlement day after any trading day. All activities under CCASS
are subject to the General Rules of HKSCC and HKSCC Operational Procedures in effect from time to
time. All necessary arrangements have been made for the H Shares to be admitted into CCASS.
Investors should seek the advice of their stockbrokers or other professional advisers for details of the
settlement arrangements and how such arrangements will affect your rights and interests as such
arrangements may affect their rights and interests.
PROFESSIONAL TAX ADVICE RECOMMENDED
Potential investors in the Global Offering are recommended to consult their professional advisers if
they are in any doubt as to the taxation implications of subscribing to, purchasing, holding or disposing
of, and/or dealing in the H Shares (or exercising rights attached thereto). None of us, the Joint Sponsors,
the Overall Coordinators, the Joint Global Coordinators, the Joint Bookrunners, the Joint Lead Managers,
the Underwriters, the Capital Market Intermediaries, any of our or their respective directors, agents,
employees or advisers or any other person or party involved in the Global Offering accepts responsibility
for any tax effects on, or liabilities of, any person resulting from the subscription to, purchase, holding or
disposal of, dealing in, or the exercise of any rights in relation to, the H Shares or exercising any rights
attached to them.
H SHARE REGISTER AND STAMP DUTY
All of the H Shares issued pursuant to applications made in the Hong Kong Public Offering will be
registered on our H Share register of members to be maintained in Hong Kong by our H Share Registrar,
Tricor Investor Services Limited at 17/F, Far East Finance Centre, 16 Harcourt Road, Hong Kong. Our
principal register of members will be maintained by us at our head office in the PRC.
Dealings in the H Shares registered in our H Share register of members will be subject to the Hong
Kong stamp duty. See “Statutory and General Information—D. Other Information—10. Taxation of
Holders of H Shares” in Appendix IV to this prospectus. Investors should seek professional tax advice for
further details of Hong Kong stamp duty.
Unless otherwise determined by our Board, dividends will be paid to Shareholders whose names are
listed on our H Share register of members in Hong Kong, by ordinary post, at the Shareholders’ risk in
Hong Kong dollars.
OVER-ALLOTMENT OPTION AND STABILIZATION
Details of the arrangements relating to the Over-allotment Option and stabilization are set out in
“Structure of the Global Offering.”
EXCHANGE RATE CONVERSION
Solely for your convenience, this prospectus contains translations among certain amounts
denominated in Renminbi, Hong Kong dollars and U.S. dollars. No representation is made that the
amounts denominated in one currency could actually be converted into the amounts denominated in
another currency at the rates indicated or at all. Unless indicated otherwise, (1) the translations between
Renminbi and U.S. dollars were made at the rate of RMB7.1612 to US$1, being the PBOC rate prevailing
on November 20, 2023, (2) the translations between Hong Kong dollars and Renminbi were made at the
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rate of RMB0.9185 to HK$1.00, being the PBOC rate prevailing on November 20, 2023, and (3) the
translation between U.S. dollars and Hong Kong dollars were made at a rate of US$1 to HK$7.7968,
calculated based on the PBOC rate prevailing on November 20, 2023.
LANGUAGE
If there is any inconsistency between this prospectus and the Chinese translation of this prospectus,
this prospectus shall prevail. However, the translated English names of the PRC and foreign national,
entities, departments, facilities, certificates, titles, laws, regulations (including certain of our subsidiaries)
and the like included in this prospectus and for which no official English translation exists are unofficial
translations for your reference only. If there is any inconsistency, the names in their original languages
shall prevail.
ROUNDING
Any discrepancies in any table in this prospectus between total and sum of amounts listed therein are
due to rounding. Certain amounts and percentage figures included in this prospectus have been subject to
rounding adjustments or have been rounded to one or two decimal places. Accordingly, figures shown as
totals in certain tables may not be an arithmetic aggregation of the figures preceding them.
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DIRECTORS
Executive Directors and Non-executive Directors
Name Position Address Nationality
HUANG Jian
(ර਄)
Executive Director and chairman
of the Board of Directors
Room 1201
No. 297-1, Jiahe Road
Siming District
Xiamen City, Fujian Province,
the PRC
Chinese
ZHENG Wenbin
(ቍ˖Ᏽ)
Executive Director and vice
chairman of the Board of
Directors
Room 2202
Unit 3, City Jiayuan
No. 13 Huashan Road, Nangang
District
Harbin City, Heilongjiang
Province, the PRC
Chinese
LI Y ouquan
(ݰ)
Executive Director and general
manager
Room 2202
No. 10-6
Xingsheng Road, Tianhe District
Guangzhou City, Guangdong
Province, the PRC
Chinese
LIU Zhen
(ᄎቤ)
Non-executive Director 601, Door 3
4F, No. 47
West 4th Ring Middle Road
Haidian District
Beijing, the PRC
Chinese
W ANG Y along
(ˮԭᎲ)
Non-executive Director No. 1 Lane 1 South, Sanlihe 2
Xicheng District
Beijing, the PRC
Chinese
HUANG Danyan
(රʗᜮ)
Executive Director and deputy
general manager
Room 104
No. 311 Lianqian West Road
Siming District
Xiamen City, Fujian Province,
the PRC
Chinese
DIRECTORS, SUPERVISORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING
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Name Position Address Nationality
Independent
Non-executive
Directors
XIAO Wei
(ӽਃ)
Independent non-executive
Director
Room 102
No. 19, Xiamen University
Waterfront
Siming District
Xiamen City, Fujian Province,
the PRC
Chinese
CHEN Aihua
(௓ฌശ)
Independent non-executive
Director
No. 422-12, Siming South Road
Siming District
Xiamen City, Fujian Province,
the PRC
Chinese
LAM Yiu Por
(ت)
Independent non-executive
Director
Flat D, 8/F, Tower 3,
Ocean Shores
Tseung Kwan O,
New Territories
Hong Kong
Chinese
SUPERVISORS
Name Position Address Nationality
ZHENG Feng
(ࢤ)
Chairman of the board of
Supervisors
Room 302
No. 35, Gulou Beili
Siming District
Xiamen City, Fujian Province,
the PRC
Chinese
WEI Wei ( ᕧ③) Supervisor No. 94, Houpudong Erli
Huli District
Xiamen City, Fujian Province,
the PRC
Chinese
ZHANG Ning
(ੵྐྵ)
Supervisor No. 299 Xiang Xi Road, Ma
Xiang Town
Xiang’an District
Xiamen City, Fujian Province,
the PRC
Chinese
Further information is set out in the section headed “Directors, Supervisors and Senior Management”
in this prospectus.
DIRECTORS, SUPERVISORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING
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PARTIES INVOLVED IN THE GLOBAL OFFERING
Joint Sponsors China International Capital Corporation
Hong Kong Securities Limited
29/F, One International Finance Centre
1 Harbour View Street
Central
Hong Kong
GF Capital (Hong Kong) Limited
29-30/F, Li Po Chun Chambers
189 Des V oeux Road Central
Hong Kong
Overall Coordinators, Sponsor-Overall
Coordinators and Joint Global Coordinators
China International Capital Corporation
Hong Kong Securities Limited
29/F, One International Finance Centre
1 Harbour View Street
Central
Hong Kong
GF Securities (Hong Kong) Brokerage Limited
29-30/F, Li Po Chun Chambers
189 Des V oeux Road Central
Hong Kong
Joint Global Coordinator Citigroup Global Markets Asia Limited
50/F, Champion Tower
Three Garden Road
Central
Hong Kong
DIRECTORS, SUPERVISORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING
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Joint Bookrunners China International Capital Corporation
Hong Kong Securities Limited
29/F, One International Finance Centre
1 Harbour View Street
Central
Hong Kong
GF Securities (Hong Kong) Brokerage Limited
29-30/F, Li Po Chun Chambers
189 Des V oeux Road Central
Hong Kong
Citigroup Global Markets Asia Limited
(in relation to the Hong Kong Public Offering)
50/F, Champion Tower
Three Garden Road
Central
Hong Kong
Citigroup Global Markets Limited
(in relation to the International Offering)
33 Canada Square, Canary Wharf
London E14 5LB
United Kingdom
Valuable Capital Limited
RM 3601-06 & 3617-19, 36/F
China Merchants Tower
Shun Tak Centre
168-200 Connaught Road Central
Hong Kong
DIRECTORS, SUPERVISORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING
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Joint Lead Managers China International Capital Corporation
Hong Kong Securities Limited
29/F, One International Finance Centre
1 Harbour View Street
Central
Hong Kong
GF Securities (Hong Kong) Brokerage Limited
29-30/F, Li Po Chun Chambers
189 Des V oeux Road Central
Hong Kong
Citigroup Global Markets Asia Limited
(in relation to the Hong Kong Public Offering)
50/F, Champion Tower
Three Garden Road
Central
Hong Kong
Citigroup Global Markets Limited
(in relation to the International Offering)
33 Canada Square, Canary Wharf
London E14 5LB
United Kingdom
Valuable Capital Limited
RM 3601-06 & 3617-19, 36/F
China Merchants Tower
Shun Tak Centre
168-200 Connaught Road Central
Hong Kong
Futu Securities International (Hong Kong)
Limited
Unit C1-2, 13/F, United Centre
No. 95 Queensway
Hong Kong
Tiger Brokers (HK) Global Limited
1/F, FWD Financial Centre
308 Des V oeux Road Central
Hong Kong
DIRECTORS, SUPERVISORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING
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Capital Market Intermediaries China International Capital Corporation
Hong Kong Securities Limited
29/F, One International Finance Centre
1 Harbour View Street
Central
Hong Kong
GF Securities (Hong Kong) Brokerage Limited
29-30/F, Li Po Chun Chambers
189 Des V oeux Road Central
Hong Kong
Citigroup Global Markets Asia Limited
(in relation to the Hong Kong Public Offering)
50/F, Champion Tower
Three Garden Road
Central
Hong Kong
Citigroup Global Markets Limited
(in relation to the International Offering)
33 Canada Square, Canary Wharf
London E14 5LB
United Kingdom
Valuable Capital Limited
RM 3601-06 & 3617-19, 36/F
China Merchants Tower
Shun Tak Centre
168-200 Connaught Road Central
Hong Kong
Futu Securities International (Hong Kong)
Limited
Unit C1-2, 13/F, United Centre
No. 95 Queensway
Hong Kong
Tiger Brokers (HK) Global Limited
1/F, FWD Financial Centre
308 Des V oeux Road Central
Hong Kong
Legal Advisors to the Company As to Hong Kong law and U.S. law:
Wilson Sonsini Goodrich & Rosati
Suite 1509, 15/F, Jardine House
1 Connaught Place, Central
Hong Kong
DIRECTORS, SUPERVISORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING
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As to PRC law:
Hylands Law Firm
3/11/12/F, Fortune Financial Center
No. 5 Dongsanhuan Zhong Road
Chaoyang District, Beijing
PRC
Legal Advisors to the Joint Sponsors and the
Underwriters
As to Hong Kong law and U.S. law:
Herbert Smith Freehills
23/F, Gloucester Tower
15 Queen’s Road Central
Hong Kong
As to PRC law:
Jingtian & Gongcheng
34/F, Tower 3
China Central Place
77 Jianguo Road
Beijing, PRC
Auditors and Reporting Accountants KPMG
Certified Public Accountants
8th Floor, Prince’s Building
10 Chater Road
Central, Hong Kong
Industry Consultant Frost & Sullivan (Beijing) Inc.,
Shanghai Branch Co.
2504 Wheelock Square
1717 Nanjing West Road
Shanghai 200040, China
Receiving Bank Bank of China (Hong Kong) Limited
1 Garden Road
Hong Kong
DIRECTORS, SUPERVISORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING
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Registered Office in the PRC Unit 4, Unit 102
No. 3, Xiangming Road
Xiamen Torch High-tech Zone (Xiang’an)
Industrial Zone
Xiamen City, Fujian Province, the PRC
Headquarters and Principal Place of Business
in the PRC
22/F, Caizihui No. 188, Qianpu Road
Siming District
Xiamen City, Fujian Province, the PRC
Principal Place of Business in Hong Kong 5/F, Manulife Place
348 Kwun Tong Road
Kowloon, Hong Kong
Company’s Website http://www.yanzhiwu.com
(the information contained on the website does
not form part of this prospectus)
Joint Company Secretaries XIONG Ting ( ဤణ)
Room 706
No.18, Meiren New Village
Siming District
Xiamen City, Fujian Province, PRC
LEUNG Kwan Wai ( ૑ёᅆ)
5/F, Manulife Place, 348 Kwun Tong Road
Kowloon, Hong Kong
Authorized Representatives HUANG Jian ( ර਄)
Room 1201
No. 297-1, Jiahe Road
Siming District
Xiamen City, Fujian Province, PRC
XIONG Ting ( ဤణ)
Room 706
No.18, Meiren New Village
Siming District
Xiamen City, Fujian Province, PRC
Audit Committee CHEN Aihua ( ௓ฌശ) (Chairman)
XIAO Wei ( ӽਃ)
LAM Yiu Por (ت)
Remuneration and Appraisal Committee XIAO Wei ( ӽਃ) (Chairman)
LI Y ouquan (ݰ)
CHEN Aihua ( ௓ฌശ)
Nomination Committee HUANG Jian ( ර਄) (Chairman)
XIAO Wei ( ӽਃ)
CHEN Aihua ( ௓ฌശ)
CORPORATE INFORMATION
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Strategy Committee HUANG Jian ( ර਄) (Chairman)
ZHENG Wenbin ( ቍ˖Ᏽ)
LAM Yiu Por (ت)
Compliance Advisor Ping An of China Capital (Hong Kong)
Company Limited
Units 3601
07 & 11-13, 36/F
The Center
99 Queen’s Road Central
Hong Kong
H Share Registrar Tricor Investor Services Limited
17/F, Far East Finance Centre
16 Harcourt Road
Hong Kong
Principal Bank Xiamen Bank Co., Ltd. (Lianqian Branch)
No. 687-4, Lianqian West Road, Siming District,
Xiamen City, Fujian Province, PRC
CORPORATE INFORMATION
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The information and statistics set out in this section and other sections of this prospectus were
extracted from the F&S Report, which was commissioned by us, and from various official
government publications and other publicly available publications. We engaged Frost & Sullivan to
prepare the F&S Report, an independent industry report, in connection with the Global Offering.
The information from official government sources has not been independently verified by us, the
Joint Sponsors, the Overall Coordinators, Joint Global Coordinators, Joint Bookrunners, Joint Lead
Managers, Underwriters, any of their respective directors and advisors, or any other persons or
parties involved in the Global Offering, and no representation is given as to its accuracy.
GLOBAL AND CHINA’S EBN MARKET
Overview
Driven by consumers’ pursuit of beauty and wellness, China’s EBN market has become a
fast-growing sector of China’s beauty and wellness market. EBN products are made from raw nests created
by swiftlets with their saliva, which are primarily sourced from Southeast Asian countries. Indonesia is the
largest raw nest production country in the world, as its lowland rainforests are ideal habitats for swiftlets.
EBN is highly valued in Chinese culture as a renowned delicacy in Chinese cuisine for over 400 years.
EBN is known for its nutritional profile, which includes, among others, sialic acid, amino acid, collagen,
glycoprotein, antioxidants, calcium, potassium, iron, magnesium and hormones. Traditional Chinese
medicine attributes various perceived health benefits to EBN, such as promoting overall wellness,
boosting the immune system, enhancing focus, increasing energy and metabolism, and regulating
circulation.
Modern scientific studies published in authoritative sources have further validated the perceived
health benefits of EBN products. For example, A Comprehensive Review of Edible Bird’ s Nest published
in Food Research International indicates that edible bird’s nests have been shown to have a variety of
pharmacological effects that may benefit human health, including improving the skin quality (such as skin
whitening and dermal thickness improvement), regulating the immune system, enhancing cognitive
function and memory, and exhibiting certain anti-aging, anti-viral, and antioxidant properties
(1); Protective
Effect of Edible Bird’s Nest against the Immune-senescence Process of UVB-irradiated Hairless Mice
published in Photochemistry and Photobiology indicates that edible bird’s nests protect skin against aging
and exhibit certain anti-inflammatory effect
(2); Edible Bird’ s Nest, an Asian Health Food Supplement,
Possesses Skin Lightening Activities: Identification of N-Acetylneuraminic Acid as Active Ingredient
published in Journal of Cosmetics, Dermatological Sciences and Applications suggests that consuming
bird’s nest has skin whitening effect
(3); Effect of Maternal Administration of Edible Bird’ s Nest on the
Learning and Memory Abilities of Suckling Offspring in Mice published in Neural Plasticity suggests that
sialic acid can promote brain and intellectual development (4); Edible Bird’ s Nest Extract Inhibits Influenza
Virus Infection published in Antiviral Research shows that consuming edible bird’s nests can prevent
(1) Dai, Y ., Cao, J., Wang, Y ., Chen, Y ., & Jiang, L. (2021). A comprehensive review of edible bird’s nest. Food Research
International, 140, 109875. https://doi.org/10.1016/j.foodres.2020.109875.
(2) Park, S., Kim, I. S., Park, S. Y ., Seo, S. A., Y ang, J. E., & Hwang, E. (2022). The Protective Effect of Edible Bird’s Nest
against the Immune /H5009senescence Process of UVB /H5009irradiated Hairless Mice. Photochemistry and Photobiology, 98(4), pp.
949-957.
(3) Chan, G.K.L., et al. (2015) Edible Bird’s Nest, an Asian Health Food Supplement, Possesses Skin Lightening Activities:
Identification of N-Acetylneuraminic Acid as Active Ingredient. Journal of Cosmetics, Dermatological Sciences and
Applications, 5, pp. 262-274.
(4) Y ong Xie, Hongliang Zeng, Zhiji Huang, Hui Xu, Qunyan Fan, Yi Zhang, Baodong Zheng, “Effect of Maternal Administration
of Edible Bird’s Nest on the Learning and Memory Abilities of Suckling Offspring in Mice”, Neural Plasticity, vol. 2018,
Article ID 7697261, 13 pages, 2018. https://doi.org/10.1155/2018/7697261.
INDUSTRY OVERVIEW
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infection by influenza virus (5); and Complete Digestion of Edible Bird’ s Nest Releases Free
N-acetylneuraminic Acid and Small Peptides: An Efficient Method to Improve Functional Properties
published in Food & Function suggests that EBN peptides have significant effects on improving the skin
tone and can be applied to make healthy foods, beverages and skincare products
(6)(7) .
Raw nests were harvested traditionally from caves, principally large limestone caves. Since the
late-1990s, due to the increasing demand for EBN, these sources have been supplemented by purpose-built
nesting houses by swiftlet farmers. These houses are created by converting human-centric buildings into
structures designed to mimic the cave environments to attract swiftlets to breed and nest within them.
These purpose-built nesting houses protect swiftlets from their predators and enemies and provide them
with a safe living environment to propagate and thrive, ensuring the preservation of their population. As
swiftlets construct new nests for each breeding season, swiftlet farming would not be detrimental to the
growth of swiftlets. During the entire swiftlet farming process, swiftlet farmers do not feed or interfere
with any natural behavior of swiftlets.
Global EBN Market
The global production volume of EBN products has experienced stable growth and is expected to
continue to grow. In particular, the global production volume of EBN products increased from 1,695.5
tonnes in 2017 to 2,468.4 tonnes in 2022, at a CAGR of 7.8%, and is expected to reach 3,299.3 tonnes in
2027, at a CAGR of 6.0% from 2022 to 2027, primarily attributable to the increasing demand for EBN
products in China and favorable government policies in major raw nest production countries. The
following chart sets forth the global EBN market, in terms of production volume, from 2017 to 2027.
Global EBN Market, 2017-2027E
1,695.5 1,788.7 1,862.1
Tonne
2,040.0
2,420.0 2,468.4
2,653.1
2,825.0
2,986.4
3,151.5
3,299.3
2017 20202018 2024E 2021 2027E2019 2022 2023E 2025E 2026E
+7.8%
+6.0%
0
500
1,000
1,500
2,000
2,500
3,000
3,500
Sources: Royal Malaysian Customs Department, Statistics Indonesia, Frost & Sullivan
(5) Guo, C. T., Takahashi, T., Bukawa, W., Takahashi, N., Y agi, H., Kato, K., ... & Suzuki, Y . (2006). Edible bird’s nest extract
inhibits influenza virus infection. Antiviral research, 70(3), pp. 140-146.
(6) Wong, Z. C., Chan, G. K., Wu, K. Q., Poon, K. K., Chen, Y ., Dong, T. T., & Tsim, K. W. (2018). Complete digestion of edible
bird’s nest releases free N-acetylneuraminic acid and small peptides: an efficient method to improve functional properties.
Food & function, 9(10), pp.5139-5149.
(7) The 2022-2023 journal impact factors, which represent the average number of times which the articles from a journal
published in the past two years that have been cited in the current year, of Food Research International, Photochemistry and
Photobiology, Journal of Cosmetic Dermatology, Neural Plasticity, Antiviral Research and Food & Function were 7.425,
3.300, 2.189, 3.144, 10.103 and 6.317, respectively. None of these cited scientific studies or journals received any sponsorship
from us.
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In 2022, China had a market share of 70.0% in terms of EBN consumption volume and ranked No.1
in the world in terms of the same, followed by Indonesia and Malaysia which had a market share of 9.6%
and 6.9%, respectively, in the same year. The following chart sets forth the market share breakdown in
terms of EBN consumption volume by regions in 2022.
Market Share Breakdown by Regions (Consumption Volume), 2022
70.0%
6.9%
7.4%
Mainland China
Hong Kong SAR
Malaysia
US
9.6%
2.8%
3.3%
Others
Indonesia
Sources: Frost & Sullivan
Value Chain of Global EBN Industry
The value chain of the global EBN industry can be divided into three key segments:
 the upstream, which involves swiftlet farmers, swiftlet house management and rough
processing plants. Major upstream participants are located in Southeast Asian countries, such
as Indonesia and Malaysia, and engage in activities, such as building and managing nesting
houses, harvesting raw nests, and carrying out initial processing of raw nests;
 the midstream, which involves EBN product importers and manufacturers. They source the raw
nests from the upstream participants mostly in Southeast Asian countries. The midstream
participants play a crucial role in processing the raw nests into various EBN products. They
may import the raw nests and conduct further refining, cleaning, and manufacturing processes
to create a wide range of EBN-based products; and
 the downstream, which involves various sales channels, including, among others, online
channels, offline stores and supermarkets. While online sales channels have gained popularity
among EBN product companies, traditional offline channels remain the primary sales channels
for EBN products. These channels are responsible for distributing EBN products to consumers.
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Value Chain of Global Edible Bird’s Nest Industry
Upstream DownstreamMidstream
Importers and distributors
Sales channels
Online channels
Offline stores
Supermarkets
Others
Consumers
Regulators, including Edible Bird’s Nest Market Committee of China Agricultural Wholesale Markets Association (Ό
ึ), China Academy of Inspection and Quarantine (Ӻ৫),
and General Administration of Customs of China (ʕ਷ऎᗫᐼ໇)
Refined processing plants
Manufacturers with own
brands
Swiftlet
farming
Swiftlet house
management
Rough
processing
plants
Sources: Frost & Sullivan
Total Addressable Market of China’s EBN Industry
Traditionally, raw nests were primarily utilized for the production of pure EBN products, which
include dried EBN and products made from EBN and water, with or without crystal sugar or sugar
substitutes. Pure EBN products accounted for a market size of RMB39.9 billion in China in 2022.
However, in recent years, there have been significant advancements and transformations in production
techniques and processes, leading to a significant evolution in product variety. As a result, these products
have gained popularity among customers, driving the rapid development of the EBN+ and +EBN markets,
both of which have substantial potential for future growth.
EBN+ products are ready-to-serve EBN products enhanced with other ingredients and/or nutrients
(such as ginseng, sea cucumber and fish maw), with an EBN feed rate of 1% or higher. The market size
of these ingredients in China was RMB80 billion in 2022, indicative of the considerable potential for the
EBN+ market.
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EBN and its extracts may also be applied to other food, beverage, and skincare products, known as
+EBN products. These products have an EBN feed rate of less than 1%. Notable examples include skincare
products, such as facial masks, lotions and essences, as well as food and beverage products, such as dairy
beverages, packaged porridge, and energy drinks. The total market size of these food, beverage and
skincare products exceeded RMB450 billion in 2022.
Total Addressable and Actual Market of China’s EBN Products
TAM of EBN+, 2022
Approximately RMB80
billion
Actual Market Size:
Retail Value of Pure
EBN Products, 2022
RMB39.9 billion
TAM of +EBN, 2022
>RMB450 billion
Pure EBN Products
+EBN: Skincare, Packaged Porridge, Energy Drinks,
Diary Beverages (Products Where EBN
and/or EBN Extracts Can Be Added)
(2)
EBN+: Tonic Products Such As Ginseng,
Sea Cucumber and Fish Maw (Products Which
Can Be Added Into EBN)
(1)
Actual Market Size: Retail Value
of EBN+ and +EBN Products in
2022 - RMB3.1 billion(1) TAM of EBN+: market size of products which can be added into EBN
(2) TAM of +EBN: market size of products where EBN and/or EBN extracts can be added
Sources: Frost & Sullivan
Our EBN+ products are ready-to-serve EBN products (with an EBN feed rate of 1% or above and
up to 5%) enhanced with other ingredients and/or nutrients, and our +EBN products are products that use
EBN (with an EBN feed rate of less than 1%) and other food ingredients as raw materials.
Market Size of China’s EBN Industry
China is a major consumer of EBN as a traditional Chinese delicacy. However, the production of raw
nests is predominantly located in Southeast Asian countries. In 2022, China alone accounted for 70.0% of
the global EBN consumption in terms of consumption volume, making it the largest consumer of EBN
worldwide. With the improvement in living standards and an increased awareness of health, EBN products
have been increasingly perceived as healthy food products with various functional benefits among Chinese
consumers, driving the expansion of China’s EBN market.
In terms of traceability, EBN in China can be categorized into two types: traceable and non-traceable.
Traceable EBN refers to EBN produced by companies that adhere to the traceability standards established
by the CAIQ. For traceable EBN, each unit of EBN product is affixed with a CAIQ product traceability
label containing unique codes and features, similar to a digital security certificate. This label allows
consumers to access information and registration details about the specific EBN product.
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In China, traceable EBN has experienced substantial growth over the past five years, driven by
multiple factors, such as stringent regulatory requirements and increasing recognition among consumers.
Leading players in the EBN industry have actively advocated traceability for transparent supply chains and
verifiable sourcing. As a result, the proportion of traceable EBN within the overall EBN market, in terms
of consumption volume, grew from 10.7% in 2017 to 26.1% in 2022 and it is expected to reach 43.7% in
2027.
Market Size of China’s EBN Market (Consumption Volume),
Breakdown by Traceability, 2017, 2022, 2027E
2017 2022
Traceable
Non-traceable
Traceable
Non-traceable
89.3% 73.9%
26.1%10.7%
2027E
Traceable
Non-traceable
56.3%
43.7%
Sources: CAIQ; Frost & Sullivan
In terms of product type, EBN can also be classified into pure EBN and EBN+/+EBN. Pure EBN
products currently dominate the market. In 2022, China’s EBN market was RMB43.0 billion, in terms of
retail value, with pure EBN accounting for 92.8% of the total EBN market. The contribution of pure EBN
to the market is expected to gradually decrease in the future, primarily attributable to the promotion of
EBN+/+EBN products by leading EBN brands. As these brands raise awareness and introduce the benefits
of EBN combined with other ingredients or nutritional components, the market share of EBN+/+EBN
products is expected to grow.
The market size of EBN industry, in terms of retail value, grew from RMB12.9 billion in 2017 to
RMB43.0 billion in 2022, at a CAGR of 27.2%, and is expected to reach RMB92.1 billion in 2027, at a
CAGR of 16.5% from 2022 to 2027.
Market Size of China EBN Market (Retail Value), Breakdown by
Pure EBN, EBN+/+EBN, 2017-2027E
12.9
EBN+/+EBN
Pure EBN
15.0
30.0
RMB Billion
40.0 41.0 43.0
51.9
61.4
71.1
81.4
92.1
2017 20202018 2024E 2021 2027E2019 2022 2023E 2025E 2026E
CAGR
2022-2027E
2017-2022
16.5%
27.2%
0
20
40
60
80
100
12.6 14.6
29.5
38.7 39.1 39.9 47.3 55.5 63.8
72.8
82.2
0.3
0.5
1.3 1.9 3.1
4.6
7.3
8.6
9.9
Total
15.6%
25.9%
Pure EBN
26.1%
59.5%
EBN+/+EBN
0.4
5.9
Sources: Frost & Sullivan
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The market size of traceable EBN industry in China, in terms of retail value, increased from RMB2.5
billion in 2017 to RMB17.8 billion in 2022, at a CAGR of 48.1%, and is expected to reach RMB53.6
billion in 2027, at a CAGR of 24.7% from 2022 to 2027. The market size of non-traceable EBN industry
in China, in terms of retail value, increased from RMB10.4 billion in 2017 to RMB25.2 billion in 2022,
at a CAGR of 19.4%, and is expected to reach RMB38.5 billion in 2027, at a CAGR of 8.8% from 2022
to 2027.
Market Size of China EBN Market (Retail Value), Breakdown by
Traceability, 2017-2027E
12.9
Traceable
Non-traceable
15.0
30.0
RMB Billion
40.0 41.0 43.0
51.9
61.4
71.1
81.4
92.1
2017 20202018 2024E 2021 2027E2019 2022 2023E 2025E 2026E
CAGR
2022-2027E
2017-2022
16.5%
27.2%
0
20
40
60
80
100
10.4 11.6
23.8 28.0 28.6 25.2 27.6 30.3 32.8 35.5 38.5
2.5
12.0
6.2
12.4 17.8
24.3
38.3
45.9
53.6
Total
24.7%
48.1%
Traceable
8.8%
19.4%
Non-traceable
3.4
31.1
Sources: Frost & Sullivan
The growth of China’s EBN industry was driven, in part, by the increase in the average selling prices
of EBN products. From 2017 to 2022, the price of EBN products increased from RMB16.9 per gram to
RMB24.9 per gram as a result of (1) diversified EBN product offerings and (2) the increase in the
penetration rate of traceable raw nests in the market. The popularity of premium EBN products such as
freshly stewed EBN products among consumers also contributed to the increase in the overall EBN
product prices.
Traditionally, EBN products have been predominantly sold through offline channels, including
specialty EBN stores, supermarkets, and pharmacies. However, with the rapid growth of the e-commerce
industry, online channels have been gaining momentum, especially with the emergence of products that are
well-suited for online sales, such as freshly stewed EBN.
The sales of EBN products through online channels experienced significant growth from RMB2.7
billion in 2017 to RMB13.1 billion in 2022, at a CAGR of 37.1%. Driven by the further advancements in
China’s e-commerce industry and logistics network, the sales of EBN products sold through online
channels is expected to reach RMB33.0 billion in 2027, at a CAGR of 20.3% from 2022 to 2027.
In 2022, the offline channel contributed 69.5% to China’s EBN market. However, the contribution
from offline channel has gradually decreased over time and is expected to reach 64.2% by 2027. In terms
of absolute retail value, the sales of EBN products through offline channels grew from RMB10.2 billion
in 2017 to RMB29.9 billion in 2022, at a CAGR of 24.0%, and is expected to reach RMB59.1 billion in
2027, at a CAGR of 14.6% from 2022 to 2027.
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Market Size of China’s EBN Market (Retail Value), Breakdown by Channel, 2017-2027E
12.9
Online
Offline
15.0
30.0
RMB Billion
40.0 41.0 43.0
51.9
61.4
71.1
92.1
2017 20202018 2024E 2021 2027E2019 2022 2023E 2025E 2026E
CAGR
2022-2027E
2017-2022
16.5%
27.2%
0
20
40
60
80
100
10.2 11.7
23.0 29.0 29.2 29.9 35.3 41.1 46.9 52.9 59.1
2.7
3.3
7.0
11.0 11.8 13.1
16.6
20.3
24.2
28.5
Total
20.3%
37.1%
Online
14.6%
24.0%
Offline
81.4
33.0
Sources: Frost & Sullivan
MARKET DRIVERS OF CHINA’S EBN MARKET
The following factors are considered the major market drivers of China’s EBN market:
 Heightened consumer emphasis on beauty and wellness where EBN products are perceived as
healthy food products. The advancement of science and technology has provided scientific
evidence supporting the perceived functional benefits of EBN. Research studies have
highlighted the perceived health benefits of EBN, such as promoting brain and cognitive
development, enhancing immunity, regulating blood pressure, and having skin whitening
effects. This scientific validation has increased consumer awareness and interest in EBN
products. Additionally, in the post-pandemic era and with the continuous growth of per capita
GDP in China, consumers are placing greater emphasis on health and wellness, leading to
increased demand for natural and nutritious food products like EBN. The target audience for
EBN products has expanded to include pregnant women, the elderly, and young individuals,
among others.
As individuals become more conscious of their appearance and overall well-being, there has
been a surge in demand for products that offer natural benefits. EBN, renowned for its potential
to enhance beauty and promote wellness, has gained popularity as a sought-after product.
Consumers recognize the nutritional value and potential skincare advantages associated with
consuming EBN, leading to increased demand for EBN food and skincare products.
 Regulatory standardization promotes industry development. The EBN industry has gained
importance in China’s consumer goods market, resulting in the promulgation of management
policies by relevant national regulatory authorities. These policies aim to standardize the
industry’s development. Measures include specifying origin, export, inspection, and quarantine
requirements for imported raw materials, as well as promoting compliance with relevant food
production and processing standards. In February 2012, the Ministry of Health of China ( ʕശ
ɛ͏΍ձ਷ሊ͛௅) promulgated the first regulatory requirement on nitrite content in EBN
products, stipulating that nitrite content in EBN products shall be no more than 30 milligrams
per kilogram. The General Administration of Quality Supervision, Inspection and Quarantine
of China (ᐼ҅) also issued two announcements, i.e.,
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Announcement on Inspection and Quarantine Requirements for Imported EBN Products from
Malaysia and Announcement on Inspection and Quarantine Requirements for Imported EBN
Products from Indonesia , in December 2013 and November 2014, respectively. These
announcements mandated that companies which harvest or process EBN shall complete
registration and filing procedures, and that foreign EBN processing companies which export
EBN to China shall establish a traceability system. Moreover, in 2014, China National Institute
of Standardization (Ӻ৫) and other government agencies published China’s first
raw nest industry standard, i.e., GH/T 1092-2014, which sets guidelines for quality grading of
imported dried EBN, including specific testing requirements for nitrite content in dried EBN,
representing the beginning of the standardization development of China’s raw nest industry. In
2020, the China Pharmaceutical Culture Society (Ӻ৫) implemented T/CPCS
001-2020, a group standard for freshly stewed EBN products, which primarily stipulates that
raw materials used in freshly stewed EBN products shall have a legitimate and traceable
source. Stricter management measures regarding product marketing and consumer rights
protection have also been adopted, ensuring higher quality and safety of EBN products. This
regulatory standardization instills confidence in consumers and encourages their willingness to
consume EBN products.
 Evolving business model. The EBN industry has embraced innovative business models that
have driven its growth. The diversification of shopping forms has enriched sales channels. The
emergence and proliferation of online retail platforms and live-streaming e-commerce has
made it more convenient for consumers to purchase EBN products. Moreover, these channels
have facilitated the introduction of new types of EBN products that are better suited for
e-commerce platforms. Additionally, technological advancements and innovation have led to
the development of new products, such as ready-to-serve EBN products, which can reach a
larger consumer base. Improved production methods, such as bowl-shaped canned EBN and
freshly stewed EBN, have made it easier for consumers to consume EBN products, thereby
expanding the consumer base.
COMPETITIVE LANDSCAPE OF GLOBAL AND CHINA’S EBN MARKET
China’s EBN industry is fragmented with over 10,000 players operating in the industry. In 2022, the
market size of China’s EBN market accounted for 70.0% of the global EBN market. We are the largest
EBN product company globally for three consecutive years in terms of retail value from 2020 to 2022,
with a global market share of 4.1% in 2022. We also ranked the first in China’s EBN market with a market
share of 5.8%, in terms of retail value, in 2022, and the top five EBN companies in China accounted for
a combined market share of 11.9%.
The global EBN industry is fragmented with over 30,000 players operating in the industry. Among
the top five EBN companies in both global and China’s EBN markets, we had been growing at the highest
CAGR of over 12.0% from 2020 to 2022. We had also been ranked first for three consecutive years in
terms of retail value in these two markets. We ranked first by the volume of CAIQ imports in the EBN
product market in China in 2022.
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Ranking of Top Five EBN Companies in Terms of Retail Value (China), 2020-2022
CAGR(%)Market Share (%)CompanyRank 2020-2022202220212020
>12.0%5.8%5.6%5.0%The Company1
~8.0%2.6%2.4%2.4%Company A(1)2
~-10.0%2.3%2.7%3.3%Company B(2)3
~9.0%0.9%1.0%0.8%Company C(3)4
~10.0%0.3%0.2%0.3%Company D(4)5
Sources: Company data; Frost & Sullivan
(1) Established in 1997, Company A is a listed company on Shanghai Stock Exchange. Headquartered in Beijing, Company A has
approximately 3,800 employees and primarily focuses on producing traditional Chinese medicine and tonic products including
EBN. Company A ’s operating regions include China, Indonesia and other Southeast Asian countries, and its total revenue in
2022 was approximately RMB15.4 billion.
(2) Established in 2014, Company B is a private company. Headquartered in Beijing, it is specialized in producing and selling
EBN products, and the majority of its products are freshly stewed EBN products sold via online channels. Company B’s total
revenue in 2022 was approximately RMB1.0 billion and it operating region was primarily China.
(3) Established in 2004, Company C is a private company. Headquartered in Xiamen, it mainly engages in producing and selling
EBN products via offline channels. Company C’s operating regions were across China and its total revenue in 2022 was
approximately RMB0.5 billion.
(4) Established in 2010, Company D is a private company. Headquartered in Qingdao, it is an EBN corporation with integrated
EBN production, research and development and sales capabilities. Company D’s operating regions were across China and its
total revenue in 2022 was approximately RMB0.2 billion.
OPPORTUNITIES, TRENDS AND KEY CHALLENGE OF CHINA’S EBN INDUSTRY
The main opportunities and trends of China’s EBN industry include:
 Standardization of products. Leading players in the industry are increasingly focusing on
standardizing EBN products. The introduction of ready-to-serve EBN products presents
customers with a more convenient way to consume EBN as compared to traditional dried EBN
products, which is expected to expand the consumer base of EBN products and achieve steady
growth of the EBN market.
 Innovative products. EBN product manufacturers are continuously adjusting and diversifying
their product portfolios to align with the evolving preferences of consumers, especially among
the younger generations. Innovative EBN products, such as those designed for breakfast and
skincare, are introduced to the market to cater to the evolving consumer demand. Growing
awareness of beauty and wellness also drives up research and development investment in EBN
peptides, paving the way for more EBN peptide skincare products.
 New customers and new consumption scenarios. The consumer base for China’s EBN industry
is expanding, and there is a growing demand for specialized EBN products designed to meet
the specific needs of pregnant women and the elderly. The industry is also venturing into new
consumption scenarios. Products are developed catering to various life scenarios, such as
afternoon tea and business travel. By adapting to the evolving lifestyles and consumer
preferences, the industry is able to reach new segments of consumers and expand its market
presence.
 Increasing demand for products from premium brands. Chinese consumers are placing a greater
emphasis on product quality, resulting in a rising preference for high-quality EBN products
from well-established brands. This shift in consumer behavior has prompted the industry to
concentrate on the production and distribution of premium EBN products that meet stringent
standards for safety, reliability, and quality assurance. To meet these consumer expectations,
industry players are investing in research and development, product design and branding
initiatives and collaborating with regulatory authorities. The demand for traceable EBN
products, which are known for their product safety and quality, is anticipated to drive
accelerated growth in the industry.
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The key challenge of China’s EBN industry primarily includes industry players’ ability to maintain
quality control over raw materials. It is crucial for companies to implement strict quality control measures
throughout the entire production process, from the procurement of raw nests to the sale of products to end
customers. Failure to maintain robust quality control can lead to food safety issues and negatively impact
the industry’s reputation and consumer trust.
ENTRY BARRIERS ANALYSIS OF CHINA’S EBN MARKET
The entry barrier of China’s EBN market mainly include:
 Distribution network. Established companies in China’s EBN industry have already built strong
distribution networks. Their large customer base, fostered through marketing campaigns and
sales promotion activities over the years, poses a challenge for new entrants attempting to
develop a stable distribution network and establish a loyal customer base.
 Brand awareness. Brand recognition and awareness are closely tied to previous experiences
and established client relationships. Established companies with a history of market presence
find it easier to gain a larger market share, while new entrants face challenges in establishing
relationships, brand recognition, and awareness within a short period of time.
 Technical barrier . Technology presents a fundamental barrier for players seeking to enter
China’s EBN industry. Leading players, with their years of experience, have acquired patented
technologies in product development and processing, access to research institutes, and a strong
first-mover advantage in industry know-how. New entrants without these technical capabilities
face significant challenges in developing efficient or competitive products, making it extremely
difficult to enter or compete in the industry.
 Talent shortage. Although the EBN industry in China has experienced steady and robust
growth, there remains an insufficient number of skilled professionals in the market. Players are
engaged in a competitive search for talent with market experience and deep industry
knowledge. The scarcity of talent poses a significant threat to industry players, particularly
smaller ones.
 Supply chain management. Effective supply chain management is crucial in the EBN industry
due to the high-quality raw materials required. With the expectation of stricter supervision in
the future, traceable EBN products are likely to be preferred by more players. Established
companies in China’s EBN industry have already established their own supply chain
management teams or partnered with raw material suppliers to strengthen their position,
enhance competitiveness and ensure product quality. This puts new entrants at a disadvantage
as acquiring efficient supply chain management skills within a short period of time.
COST ANALYSIS OF EBN INDUSTRY
Due to limited domestic production capacity caused by climatic conditions, China primarily relies
on imports from Southeast Asian countries to meet its domestic demand for EBN. The price of raw nests
is mainly influenced by market demand, grades of raw nests, quality of raw nests, climate conditions,
natural habitat preservation, logistics costs and international trade policies. Non-traceable raw nests, in
general, have a lower price compared to traceable raw nests. The unit price of non-traceable raw nests is
typically around 60% to 70% of that of the same-grade traceable raw nests. According to the General
Administration of Customs, the price of imported traceable raw nests generally decreased from RMB12.6
per gram in 2017 to RMB8.6 per gram in 2022. Such decrease was primarily due to the increase in the
market supply of traceable raw nests as a result of (1) the shift in consumer preference over EBN products
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with traceability labels, (2) heightened regulatory oversight in preventing smuggling activities and
promoting the traceability of raw nests, and (3) the increase in the production volume of raw nest geared
for traceability labels. During the Track Record Period, the changes in imported traceable raw nest prices
did not cause material impact on the actual selling price of our EBN products. The following chart sets
forth the prices of imported traceable raw nests in China from 2017 to 2022.
Imported Traceable Raw Nest Price (China), 2017-2022
2017 2018 2019 2020 2021 2022
Imported raw nest price
(RMB/g) .......... 12.6 8.4 10.3 10.8 10.0 8.6
Sources: The General Administration of Customs, Frost & Sullivan
Packaging materials, particularly corrugated cardboard and glass container, also factor, albeit
immaterially, in the overall cost structure of the EBN industry. The prices of major packaging materials
for EBN products experienced fluctuations from 2017 to 2022, primarily due to changes in market supply
and demand. Specifically, the price for corrugated cardboard fluctuated from RMB3,500 per tonne to
RMB4,300 per tonne between 2017 and 2022, and the price for glass container fluctuated from RMB1,600
per tonne to RMB2,600 per tonne between 2017 and 2022. These packaging materials are staple
commodities, which are commonly available from multiple suppliers without the risk of shortage. The
following chart sets forth the prices of major packaging materials for EBN products from 2017 to 2022.
Price of Major Packaging Materials for EBN Products, 2017-2022
2017 2018 2019 2020 2021 2022
Corrugated cardboard
(RMB/tonne) ........ 4,132.7 4,312.3 3,538.3 3,556.8 4,132.0 3,869.7
Glass container
(RMB/tonne) ........ 1,592.0 1,651.7 1,611.1 1,765.3 2,572.2 1,890.5
Sources: National Bureau of Statistics, Frost & Sullivan
CHINA’S BEAUTY AND WELLNESS PRODUCT MARKET
The beauty and wellness product market encompasses a wide range of products designed to enhance
consumers’ appearance, promote their health, and contribute to their overall wellness. These products
include, among others, nutritious foods, skincare products, hair care products and cosmetics. Driven by the
growing awareness of beauty and wellness, the rising per-capita disposable income, and the rapid
development of social media in China, China’s beauty and wellness product market, in terms of retail
value, increased from RMB630.3 billion in 2017 to RMB865.8 billion in 2022, at a CAGR of 6.6%, and
is expected to reach RMB1,173.9 billion in 2027, at a CAGR of 6.3% from 2022 to 2027. The following
chart sets forth China’s beauty and wellness product market, in terms of retail value, from 2017 to 2027.
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Market Size of China’s Beauty and Wellness Product Market (Retail Value), 2017-2027E
Food Products
Cosmetics and Personal
Care Products(1)
RMB Billion
2017 20202018 2024E 2021 2027E2019 2022 2023E 2025E 2026E
CAGR
2022-2027E
2017-2022
6.3%
6.6%
0
400
600
800
1,000
1,200
374.0 422.6 485.0 521.4 568.0 531.8 579.1 618.0 655.4 692.4 728.8
630.3
702.6
777.3
823.2
893.6 865.8
936.6
997.5
1,056.6
1,115.3
1,173.9
301.8292.3
280.0
256.3
325.6 334.0
357.5
401.2
422.9
445.1
Total
5.9%
5.4%
Food Products
6.5%
7.3%
Cosmetics and
Personal Care(1)
200
379.5
Sources: Frost & Sullivan
(1) Cosmetics and personal care products include cosmetics products, skincare products and hair care products.
SOURCE OF INFORMATION
This section includes information from the F&S Report commissioned by us, as we believe
information imparts a better understanding of the EBN product market in China and globally. We believe
that Frost & Sullivan has specialized research capabilities and experience in this industry in China. Frost
& Sullivan is an independent market intelligence provider that provides market research, information and
advice to companies in various industries, including the EBN product market in China and globally. We
have agreed to pay a commission fee of RMB700,000 for the F&S Report. We are of the view that the
payment of such fee does not impair the fairness of the conclusions drawn in the F&S Report. Figures and
statistics provided in this prospectus and attributed to Frost & Sullivan or the F&S Report have been
extracted from the F&S Report and published with the consent of Frost & Sullivan.
In preparing the F&S Report, Frost & Sullivan conducted detailed research which involved primary
research that involved expert interviews and company interviews, and secondary research analyzing
information and statistics published by government departments, industry associations, publications and
studies by industry experts, public company annual and quarterly reports, Frost & Sullivan’s other research
reports, online resources and data from Frost & Sullivan’s research database. Frost & Sullivan also
assumes that (1) the social, economic and political environments of China will remain stable during the
forecast period, (2) the data quoted from authoritative agencies remains unchanged, (3) related market
drivers are expected to continue to drive the growth of the relevant markets in the forecast period, and (4)
there is no extreme force majeure events or new industry regulation which would dramatically or
fundamentally affect the relevant markets.
DIRECTORS’ CONFIRMATION
After making reasonable inquiries, our Directors confirm that, to the best of their knowledge, there
has been no adverse change in the market information presented in the F&S Report since the date of the
report which may qualify, contradict or have an impact on the information in this prospectus.
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We are subject to a variety of PRC laws, rules and regulations affecting many aspects of our business.
This section summarizes the principal PRC laws, rules and regulations that we believe are relevant to our
business and operations.
LA WS AND REGULATIONS RELATING TO CORPORATION
On December 29, 1993, the Standing Committee of the National People’s Congress (the “SCNPC”)
issued the PRC Company Law () (the “Company Law”), which was lasted
amended on October 26, 2018. All companies established in the PRC are subject to the Company Law. The
Company Law regulates the establishment, operation, corporate structure, and management of corporate
entities in China and classifies companies into limited liability companies and limited companies by
shares.
On December 24, 2021, the SCNPC released the PRC Company Law (Revised Draft) ( ʕശɛ͏΍
ج(ࣩto solicit public opinions till January 22, 2022 and on September 1, 2023, the
SCNPC issued the PRC Company Law (Third Revised Draft) (ج(ɧϣᄲᙄ
ᇃ)) to solicit public opinions for 30 days. The main amendments in the PRC Company Law (Revised
Draft) involve improving the company’s establishment and exit system, optimizing the company’s
organizational structure, perfecting the company’s capital system and strengthening the responsibilities of
controlling shareholders and management personnel, etc.
General Meeting
According to the Company Law, a shareholders’ general meeting of a company limited by shares
shall be constituted by all the shareholders; the shareholders’ general meeting shall be the authority of the
company and shall exercise duties and powers in accordance with the provisions the Company Law.
A shareholders’ general meeting shall be convened once every year. An extraordinary shareholders’
general meeting shall be convened within two months in case of the certain events specified in the
Company Law.
The Company Law has no specific provisions on the quorum of shareholders to attend the general
meeting of shareholders.
Under the Company Law, shareholders present at a shareholders’ general meeting have one vote for
each share they hold, save that the company’s shares held by the company are not entitled to any voting
rights.
Under the Company Law, resolutions of the general meeting shall be passed by more than half of the
voting rights held by shareholders (including those represented by the appointed representative), with the
exception of matters relating to merger, division or dissolution of the company, increase or reduction of
registered share capital, change of corporate form or amendments to the Articles of Association, which in
each case shall be passed by at least two-thirds of the voting rights held by the shareholders (including
those represented by the appointed representative).
The shareholders may entrust the entrusted representative to attend the general meeting of
shareholders, and the power of attorney shall specify the scope of exercising the voting right.
The Company Law has no specific provisions on the quorum of shareholders.
Transfer of Shares
Shares may be transferred in accordance with relevant laws and regulations. Registered shares shall
be transferred by means of endorsement or other means prescribed by laws or administrative regulations;
after the transfer, the company shall record the name and domicile of the transferee in the register of
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shareholders of the company. Within 20 days before the general meeting of shareholders or within 5 days
before the record date of dividend distribution determined by the company, the above-mentioned register
of shareholders shall not be changed. The transfer of bearer shares shall take effect when the shareholder
delivers the shares to the transferee.
Restrictions on Shareholding and Transfer of Shares
Generally, the target investors of H shares offering by domestic companies shall be overseas
investors. Where domestic investors subscribe H shares issued by domestic companies, domestic investors
shall be compliant with relevant provisions of the cross-border investment, such as qualified domestic
institutional investors (QDII), or overseas investment filling (ODI), etc.
Under the Company Law, the shares of the company held by the promoters shall not be transferred
within one year from the date of establishment of the company. The directors, supervisors and senior
management personnel of the company shall report to the company the shares held by them and their
changes, and the shares transferred each year during their term of office shall not exceed 25% of the total
shares of the company held by them. The above-mentioned personnel shall not transfer their shares of the
company within half a year after their resignation. The Articles of Association may make other restrictive
provisions on the transfer of shares held by the directors, supervisors, and management personnel of the
company.
Variation of Class Rights
The Company Law has no special provision relating to variation of class rights. However, the
Company Law states that the State Council may formulate separate regulations on companies issuing other
types of shares which are not provided in The Company Law.
LA WS AND REGULATIONS RELATING TO FOOD OPERATION
Food Safety
According to the Food Safety Law of the People’ s Republic of China (ج)
the Food Safety Law”), which was promulgated by the SCNPC on February 28, 2009, and latest
amended on April 29, 2021, and the Regulation on the Implementation of the Food Safety Law of the
People’ s Republic of China (ૢԷ) promulgated by the State Council on
July 20, 2009 and most recently amended on October 11, 2019 and effective from December 1, 2019, food
producers and business operators shall take and conform to the measures specified in the Food Safety Law
and its Implementation Regulations to ensure food safety, violation of these required measures may subject
food producers and business operators to the legal consequences including warnings, orders to rectify,
confiscations of illegal gains, fines, recalls and destructions of food in violation of laws and regulations,
orders to suspend production and/or operation, revocations of production and/or operation license, and
even criminal penalty.
Food Production
According to the Food Safety Law and the Implementing Regulations of the Food Safety Law , anyone
who engages in food production shall obtain the license according to the Food Safety Law. According to
the Administrative Measures of Food Production Licensing (جpromulgated by the
State Administration for Market Regulation (the “SAMR”) on January 2, 2020 and took effect on March
1, 2020, entities involved in food production in China shall obtain the food production license. The food
production license is valid for five years and is subject to the “one entity, one license” principle.
According to the Trail Rules for Reviewing Non-Ready-to-eat Bird’ s Nest Production License in
Fujian Province (ۆ(༊Б)) promulgated by Fujian Provincial
Administration for Market Regulation on August 13, 2021, entities engaged in Non-ready-to-eat bird’s
nest production that involved sorting, softening, impurity removal (hair picking) or not, shaping or not
shaping, drying or not drying and packaging procedures shall acquire food production license.
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Food Sale
According to the Food Safety Law and the Implementing Regulations of the Food Safety Law , the
State implements a licensing system for food sales. However, no license is required for the sale of edible
agricultural product and pre-packaged food. Food operators that only sell pre-packaged food are not
required to obtain the food operation license, and it shall report to the food safety regulatory department
of the local people’s government at or above the county level for the record.
According to the Administrative Measures for Food Operation License (ج)
promulgated by the State Food and Drug Administration on August 31, 2015, and latest amended on
November 17, 2017 and became effective from the same day, the food operation license any entities
involved in food operation and catering service are required to acquire in China has a duration of 5 years
and is subjected to renew. Applications of food operation license shall be filed according to food operators’
types of operation and classification of operation projects.
Food Recall System
According to the Administrative Measures for Food Recall (جpromulgated by the
State Administration of Food and Drug (now merged into the SAMR) on March 11, 2015 and most recently
amended and effective from October 23, 2020, food producers and operators shall, according to law,
assume primary responsibilities for food safety, by establishing a sound management system, collecting
and analyzing food safety information and performing legal duties of the cease of production and
operation as well as recall and disposal of unsafe food. Where food producers or operators find the food
under selling unsafe, they must immediately suspend the operations, inform relevant food producers and
business operators, notify customers, and take necessary measures to mitigate food safety risks. Where any
food operator violates the Administrative Measures for Food Recall and does not suspend the operation
or proactively recall unsafe food in a timely manner, the competent authorities shall issue warnings to it
and impose fines between RMB10,000 and RMB30,000.
Import Bird Nest Product Traceability Management System
According to the Notice on Inspection and Quarantine Requirements for Imported Bird’ s Nest
Products from Malaysia , the Notice on Inspection and Quarantine Requirements for Imported Bird’ s Nest
Products from Indonesia , and the Notice on Inspection and Quarantine Requirements for Imported Bird’ s
Nest Products from Thailand which are separately promulgated and implemented on December 25, 2013,
November 20, 2014, and August 25, 2017 by the General Administration of Quality Supervision,
Inspection and Quarantine of the People’s Republic of China (now merged into the SAMR), the processing
enterprises of bird’s nest products exported to China should establish a bird’s nest traceability system from
the bird’s nest (cave) to export to ensure the traceability of the products and be able to recall the relevant
products in time in case of product quality issue. According to the Notice on Inspection and Quarantine
Requirements for Imported Bird’ s Nest Products from Vietnam promulgated and implemented by the
General Administration of Customs on November 14, 2022, the Vietnamese side shall establish a bird’s
nest traceability system from the bird’s nest house to export to ensure traceability and recall the relevant
products and trace back to the registered bird’s nest house in case of problems.
Food Labeling Management
According to the Food Safety Law , pre-packaged food shall be labeled. The labels shall include the
following items: (1) name, specification, net weight, and production date; (2) content or ingredient table;
(3) name, address, and contact information of the producer; (4) best before date; (5) the standards code
of the product; (6) storage conditions; (7) generic names of food additives used under the national
standards; (8) the number of food production license; and (9) other items that are required by laws,
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regulations and food safety standards. Food operators shall sell food in accordance with the warning
marks, warning specifications or cautions stated on the labels thereof. Accordingly, the health
administrative department under the State Council issued on April 20, 2011, and implemented on April 20,
2012, the General Principles of Pre-packaged Food Labeling of National Food Safety Standard (GB
7718-2011) (ۆGB 7718-2011)).
LA WS AND REGULATIONS RELATING TO COSMETIC AND SKINCARE PRODUCTS
Development and Production of Cosmetic and Skincare Products
According to the Regulations on the Supervision and Administration of Cosmetics (္ຖ၍ଣ
ૢԷ) (the “Supervision Regulation”) promulgated by the State Council on June 16, 2020 and became
effective on January 1, 2021, the State Council implements category-based administration on cosmetics
and cosmetic ingredients according to the degree of risks. Cosmetics are classified into two categories:
special cosmetics and ordinary cosmetics. The State Council exercises the registration administration on
special cosmetics and record-filing administration on ordinary cosmetics. Special cosmetics may be
manufactured and imported only after they are registered with the drug regulatory department under the
State Council. Domestic ordinary cosmetics shall be filed for the record with the drug regulatory
departments of the people’s governments of the provinces, autonomous regions or municipalities directly
under the Central Government where the record-filing parties are located prior to being marketed. The
imported ordinary cosmetics shall be filed for the record with the drug regulatory department under the
State Council prior to import.
According to the Announcement of the National Medical Products Administration on Implementation
of the Regulations on the Supervision and Administration of Cosmetics (݄<ʷѱ
္ຖ၍ଣૢԷ>ʮѓ) which was issued and became effective on December 28, 2020, all
enterprises and organizations which hold registration certificates of special cosmetics (administrative
licensing approval documents for special cosmetics) or have gone through the filing of ordinary cosmetics
shall be responsible, for the quality, safety and efficacy claims regarding their cosmetics according to the
requirements of these regulations on cosmetics registrants and filing applicants.
According to the Supervision Regulation, a cosmetics registrant or record-filing party may produce
cosmetics by itself or entrust other enterprises to produce cosmetics. The Measures for the Supervision and
Administration of Production and Operation of Cosmetics (جwhich was
issued on August 2, 2021 and became effective on January 1, 2022, stipulates that where a cosmetics
registrant or record-filing party entrusts the production of cosmetics, it shall entrust manufacturers that
have obtained the corresponding cosmetics manufacturing licensing to produce cosmetics, supervise the
whole process of their production activities and be responsible for the quality safety of the cosmetics
produced under entrustment. The entrusted manufacturers shall meet the corresponding production
conditions, organize the production in accordance with the laws, regulations, mandatory national
standards, technical specifications and contractual agreements, be responsible for the production activities
and accept the supervision of the entrusting parties.
According to the Measures for the Administration of Cosmetic Labels (جwhich
was issued on May 31, 2021 and became effective on May 1, 2022, the smallest sales unit of cosmetics
shall be labeled. The labels shall comply with the requirements of the relevant laws, administrative
regulations, departmental rules, compulsory national standards and technical specifications. The contents
of the labels shall be lawful, authentic, complete, accurate and consistent with the relevant contents
registered or filed.
Sale of Cosmetic and Skincare Products
According to the Supervision Regulation and the Measures for the Supervision and Administration
of Production and Operation of Cosmetics, cosmetic manufacturers and distributors shall store and
transport cosmetics in accordance with the provisions of relevant laws and regulations and the
requirements indicated on cosmetic labels, and inspect on a regular basis and handle in a timely manner
the deteriorated or expired cosmetics.
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According to the Measures for Supervision and Administration of Online Operation of Cosmetics
(جpromulgated by the National Medical Products Administration of China
on March 31, 2023 and became effective on September 1, 2023, the cosmetics operators on a platform shall
perform the obligations of cosmetics information disclosure and disclose the information such as
cosmetics labels that is consistent with the registration or record-filing materials in a comprehensive,
authentic, accurate, clear and timely manner. Any cosmetics operator on a platform finding that a quality
defect or any other problem in the cosmetics sold by it may endanger human health shall immediately
cease operation of the cosmetics and notify the relevant registrant and record-filing party of the same. The
registrant and record-filing party of the cosmetics shall recall the cosmetics in accordance with the law.
Where the registrant or record-filing party of the cosmetics or any cosmetics operator on the platform fails
to recall the cosmetics or suspend the operation of the cosmetics in accordance with the law, the drug
regulatory authority shall order it to recall the cosmetics or suspend the operation of the cosmetics.
LA WS AND REGULATIONS RELATING TO E-COMMERCE
E-Commerce
According to the E-Commerce Law of the PRC (جwhich was
promulgated by the SCNPC on August 31, 2018 and became effective on January 1, 2019, e-commerce
operators refer to natural persons, legal persons and unincorporated organizations that engage in business
activities of selling commodities or offering services through the internet and other information networks,
including e-commerce platform operators, intra-platform business operators and other e-commerce
operators that sell commodities or offer services through a self-built website or other network services. An
e-commerce operator shall, in business operation, abide by the principles of voluntariness, equality,
fairness and good faith, observe the law and business ethics, fairly participate in market competition,
perform obligations in aspects including protection of consumer rights and interests, environment,
intellectual property rights, cybersecurity and individual information, assume responsibility for quality of
products or services and accept the supervision by the government and the public.
E-commerce operators shall complete the market entity registration (unless no such registration is
required by laws and administrative regulations) and obtain the relevant administrative licenses for
conducting those operational activities which are required by law to obtain administrative licenses.
Commodities sold or services offered by e-commerce operators shall meet the requirements to protect
personal and property safety and the environmental protection requirements, and e-commerce operators
shall not sell or provide any commodity or service prohibited by laws and administrative regulations.
E-commerce operators shall (including without limitation): (i) continuously display its business license
information and administrative license, or relevant information which indicates that it does not need to
complete the market entity registration in a prominent position on its homepage; (ii) disclose information
about commodities or services in a comprehensive, truthful, accurate and timely manner so as to safeguard
the consumers’ right to know and right of choice; (iii) deliver commodities or services according to its
commitment or the ways and time limits as agreed upon with consumers, and bear the risks and
responsibilities when commodities are in transit; and (iv) bring the tie-in sales of commodities or services
to consumers’ attention in significant manner and shall not set tie-in commodities or services as default
options. Where an e-commerce operator ceases to engage in e-commerce business, it shall continuously
announce relevant information in a prominent position on its homepage 30 days in advance.
Online Live-Streaming Marketing
On April 23, 2021, the CAC and other six PRC regulatory authorities jointly issued the
Administrative Measures for Online Live-Streaming Marketing (Trial Implementation) (ᅧᐄቖ၍ଣ
ج(༊Б)), which effective on May 25, 2021. According to these measures, live-streaming studio
operators refer to individuals, legal persons, and other organizations that establish live-streaming studios
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to engage in online marketing activities by registering accounts on a live-streaming marketing platform or
through self-built websites or other network services. Live-streaming marketing personnel refer to
individuals that directly engage in marketing to the public in online live-streaming marketing. Operators
of live studios and live-streaming marketing personnel engaging in online live-streaming marketing
activities shall comply with laws and regulations, follow public order and good customs, and truthfully,
accurately and comprehensively release information on goods or services, and shall not commit acts such
as publicizing false or misleading information, marketing counterfeit or shoddy goods and fabricating or
tampering with data traffic including transactions, attention, number of views, number of comments.
LA WS AND REGULATIONS RELATING TO PRODUCT QUALITY
According to the Product Quality Law of the PRC (جpromulgated by the
SCNPC on February 22, 1993 and most recently amended on December 29, 2018 and effective from the
same date, producers shall be responsible for the quality of their products and sellers shall adopt measures
to maintain the quality of products for sale. Where a defective product causes physical injury or damage
to a third-party’s property, the victim may claim compensation from the manufacturer or the seller of the
product. If the seller pays compensation and it is the manufacturer that should bear the liability, the seller
has a right of recourse against the manufacturer, and vice versa, if the manufacturer pays compensation
and it is the seller that is liable, the manufacturer has a right of recourse.
LA WS AND REGULATIONS RELATING TO CONSUMER PROTECTION
According to the Consumers Rights and Interests Protection Law of the PRC (ʕശɛ͏΍ձ਷ऊ൬
جthe “Consumer Protection Law”), which was promulgated in 1993 by the SCNPC and
latest amended on October 25, 2013 and effective from March 15, 2014, it imposes stringent requirements
and obligations on business operators including, among others, (1) guarantee that the products and services
they provide satisfy the requirements for personal safety or property security, (2) provide consumers with
authentic and complete information about the quality, function, usage and term of validity of the products
or services, (3) ensure the actual quality and functionality of products or services are consistent with
advertising materials, product descriptions or samples, failure of which may subject business operators to
civil liabilities such as repairing, remaking, exchanging or returning of commodities, making up shortage,
refunding purchase prices and service fees, and compensation, and even subject the business operators to
criminal penalties if business operators commit crimes by infringing the legitimate rights and interests of
consumers.
LA WS AND REGULATIONS RELATING TO FOREIGN TRADE
The Foreign Trade Law of the People’ s Republic of China (ج׸the
“Foreign Trade Law”) governs the order of foreign trade. The Foreign Trade Law was promulgated by
SCNPC on May 12, 1994, and amended on April 6, 2004, November 7, 2016, and December 30, 2022,
respectively. In the latest 2022 amendments, the SCNPC deleted the requirements of Filling Records for
foreign trade operators.
According to the Customs Law of the People’ s Republic of China (جthe
“Customs Law”) which was promulgated by SCNPC and became effective on July 1,1987, and amended
on July 8, 2000, June 29, 2013, December 28, 2013, November 7, 2016, November 4, 2017, and April 29,
2021, respectively, where a consignee or consignor of import or export goods or a Customs clearing
enterprise go through Customs declaration procedures, they shall file for record with the Customs in
accordance with law.
According to the Announcement of General Administration of Customs on Matters Related to the
Merger of Enterprise Customs Declaration and Inspection Qualification (ΆุజᗫజᏨ༟ሯ
ʮѓ), the enterprise filed for record with the Customs could acquire the import and export
inspection and quarantine record and consignee or consignor record at the same time.
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LA WS AND REGULATIONS RELATING TO ANTI-UNFAIR COMPETITION
Competition among business operators is generally governed by the Anti-unfair Competition Law of
the PRC (جنthe “Anti-unfair Competition Law”), which was promulgated
by SCNPC on September 2, 1993, and amended on November 4, 2017, and April 23, 2019, respectively.
According to the Anti-unfair Competition Law, when trading on the market, operators must abide by the
principles of voluntariness, equality, fairness, and honesty and observe laws and business ethics. Acts of
operators constitute unfair competition where they contravene the provisions of the Anti-unfair
Competition Law and disturb market competition with a result of damaging the lawful rights and interests
of other operators or consumers. According to the Anti-Unfair Competition Law, improper market
activities including infringing the business secrets of others, conducting false or misleading publicity
through advertising or other means are in violation of the law and may result in imposition of fines,
confiscation of gains derived from such violation, and in severe circumstances, revocation of business
licenses.
LA WS AND REGULATIONS RELATING TO COMMERCIAL ADVERTISEMENT
According to the Advertisement Law of the PRC (جthe “Advertisement
Law”), which was promulgated by the SCNPC on October 27, 1994, latest amended on April 29, 2021,
commercial advertisements should not contain false statements or deceive or mislead consumers. An
advertisement shall be prohibited from using “national,” “highest,” “best,” or other similar words. The
data, statistics, investigation results, excerpts, quotations and other citations used in an advertisement shall
be true and accurate, with the sources indicated. If any citation has a scope of application or a term of
validity, the scope of application or term of validity shall be clearly indicated.
Regarding internet advertising activities, according to the Advertising Law, the use of internet to
publish or distribute advertisements shall not affect the normal use of the internet by users. Advertisements
published on internet pages such as pop-up advertisements shall be indicated with conspicuous mark for
close to ensure the close of such advertisements by one click.
Regarding outdoor advertising activities, according to the Advertising Law, the exhibition and
display of outdoor advertisements may not: (1) utilize traffic safety facilities and traffic signs; (2) impede
the use of public facilities, traffic safety facilities, traffic signs, fire extinguishing facilities or fire control
signs; (3) obstruct production or people’s living, or damage city appearance; and (4) be placed in restricted
areas near government offices, cultural landmarks or historical or scenic sites, or be placed in areas
prohibited by local governments at the county level or above from having outdoor advertisements.
Administrative measures for outdoor advertisements shall be prescribed by local regulations and rules of
local governments.
LA WS AND REGULATIONS RELATING TO SINGLE-PURPOSE COMMERCIAL PREPAID
CARDS
Pursuant to the Administrative Measures on Single-Purpose Commercial Prepaid Cards (Trial
Implementation) (ج(༊Б)) (the “Administrative Measures on Single Purpose
Prepaid Cards”), which was promulgated by MOFCOM in 2012 and was amended in 2016, single-purpose
commercial prepaid cards are prepaid certificates issued by an enterprise engaging in retail industry,
accommodation and catering industry and residential services industry which are limited to be used as
payment for goods or services by the enterprise or within the group to which the enterprise belongs or
within the franchise system of the same brand, including physical cards in various forms such as magnetic
stripe cards, chip cards, and paper coupons as well as virtual cards. Card-issuers shall complete filing
formalities within 30 days from the date of carrying out single purpose card businesses. Violation of the
aforementioned regulations may result in an order of rectification. Where the card issuer fails to rectify
within a stipulated period, a fine ranging from RMB10,000 to RMB30,000 may be imposed.
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LA WS AND REGULATIONS RELATING TO INFORMATION SECURITY AND PRIV ACY
PROTECTION
Privacy Protection
Pursuant to the PRC Civil Code (Պ), personal information of a natural person
shall be protected by the law. Any organization or individual that needs to obtain personal information of
others shall obtain such information legally and ensure the safety of such information, and shall not
illegally collect, use, process or transmit personal information of others, or illegally purchase or sell,
provide, or make public personal information of others.
Further, the Ninth Amendment to the Criminal Law of the PRC (ࣩ(ɘ)),
which issued by the SCNPC on August 29, 2015, and became effective on November 1, 2015, stipulates
that any network service provider that fails to fulfill the obligations related to information network
security management as required by applicable laws and administrative regulations and refuses to take
corrective measures, will be subject to criminal liability for causing (1) any large-scale dissemination of
illegal information; (2) any severe effect due to the leakage of users’ information; (3) any serious loss of
evidence of criminal activities; or (4) other severe situations, and any individual or entity that (i) sells or
provides personal information to others unlawfully or (ii) steals or illegally obtains any personal
information will be subject to criminal liability in severe situations.
On 20 August 2021, the SCNPC promulgated the Law of Personal Information Protection of PRC (ʕ
جthe “Personal Information Protection Law”), which became effective on
November 1, 2021. Pursuant to the Personal Information Protection Law, the processing of personal
information includes the collection, storage, use, processing, transmission, provision, disclosure, deletion,
etc. of personal information, and before processing personal information, personal information processors
should truthfully, accurately and completely inform individuals of the following matters in a conspicuous
manner and in clear and easy-to-understand language: (1) the name and contact information of the personal
information processor; (2) purpose of processing personal information, processing method, type of
personal information processed, and retention period; (3) methods and procedures for individuals to
exercise their rights under the Personal Information Protection Law; and (4) other matters that should be
notified as required by laws and administrative regulations. Personal information processors should also
take the following measures to ensure that personal information processing activities comply with laws
and administrative regulations based on the processing purpose, processing methods, types of personal
information, impact on personal rights and interests, and possible security risks, etc., and to prevent
unauthorized access and personal information leakage, tampering, and loss: (i) formulating internal
management systems and operating procedures; (ii) implementing classified management of personal
information; (iii) adopting corresponding security technical measures such as encryption and de-
identification; (iv) reasonably determining the operating authority for personal information processing,
and regularly conduct safety education and training for practitioners; (v) formulating and organizing the
implementation of emergency plans for personal information security incidents; and (vi) other measures
stipulated by laws and administrative regulations.
Where personal information is processed in violation of the provisions of the Personal Information
Protection Law, or the processing of personal information fails to fulfill the personal information
protection obligations hereunder, the department performing personal information protection duties shall
order corrections, give warnings, confiscate illegal gains, and order to suspend or terminate the provision
of services by the applications that illegally process personal information; if the personal information
processor refuses to make corrections, a fine of not more than RMB1 million shall be imposed; the directly
responsible person in charge and other directly responsible personnel shall be fined not less than
RMB10,000 but not more than RMB100,000. For any aforesaid illegal act with serious circumstances, the
department performing personal information protection duties at or above the provincial level shall order
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the personal information processor to make corrections, confiscate the illegal gains, and impose a fine of
less than 50 million RMB or less than 5% of the previous year’s turnover. It can also order the suspension
of relevant business or suspend business for rectification, notify the relevant competent authority to revoke
the relevant permits or the business licence; impose a fine of RMB100,000 up to RMB1 million on the
directly responsible person in charge and other directly responsible personnel, and may decide to prohibit
them from serving as a director, supervisor, senior manager and person in charge of personal information
protection of related companies within a certain period of time.
Internet Information Security
The Decisions on Protection of Internet Security enacted by the SCNPC (ɽึ੬ਕ։
֛in 2000, as amended on August 27, 2009, provides that, among other
things, the following activities conducted through the internet, if constituted a crime according to PRC
laws, are subject to criminal penalty: (1) intrusion into a strategically significant computer or system; (2)
intentionally inventing and disseminating destructive programs, such as computer viruses, to attack the
computer system and the communications network, thereby damaging the computer system and the
communications networks; (3) violating national regulations, suspending the computer networks or the
communication services without authorization, causing the computer network or communication system to
fail to operate normally; (4) leaking state secrets; (5) spreading false commercial information; or (6)
infringing intellectual property rights through internet.
On November 7, 2016, the SCNPC promulgated the Cybersecurity Law of the PRC (ʕശɛ͏΍ձ
جthe “Cybersecurity Law”), effective as of June 1, 2017, which applies to the construction,
operation, maintenance and use of networks as well as the supervision and administration of cybersecurity
in the PRC. According to the Cybersecurity Law, network operators are broadly defined as owners and
administrators of networks and network service provider and subject to various security protection-related
obligations, including but not limited to (1) complying with security protection obligations under graded
system for cybersecurity protection requirements, which include formulating internal security
management rules and operating instructions, appointing cybersecurity responsible personnel and their
duties, adopting technical measures to prevent computer viruses, cyber-attack, cyber-intrusion and other
activities endangering cybersecurity, adopting technical measures to monitor and record network operation
status and cybersecurity incidents; (2) formulating a emergency plan and promptly responding to and
handling security risks, initiating the emergency plans, taking appropriate remedial measures and reporting
to regulatory authorities in the event comprising cybersecurity threats; and (3) providing technical
assistance and support to public security and national security authorities for protection of national
security and criminal investigations in accordance with the law.
On June 10, 2021, the SCNPC promulgated the Data Security Law of PRC ( ʕശɛ͏΍ձ਷ᅰኽτ
جthe “Data Security Law”), which became effective on September 1, 2021. The Data Security Law
mainly sets forth specific provisions regarding establishing basic systems for data security management,
including hierarchical data classification management system, risk assessment system, monitoring and
early warning system, and emergency disposal system. In addition, it clarifies the data security protection
obligations of organizations and individuals carrying out data activities and implementing data security
protection responsibility.
On December 28, 2021, the CAC and other twelve PRC regulatory authorities jointly revised and
promulgated the Measures for Cybersecurity Review (جthe “Cybersecurity Review
Measures”), which became effective on February 15, 2022. The Cybersecurity Review Measures provides
that, among others, (1) critical information infrastructure operators that the purchase of cyber products and
services or network platform operators that engage in data processing activities that affects or may affect
national security shall be subject to the cybersecurity review by the Cybersecurity Review Office, the
department which is responsible for the implementation of cybersecurity review under the CAC; and (2)
network platform operators with personal information data of more than one million users that seek for
listing in a foreign country are obliged to apply for a cybersecurity review by the Cybersecurity Review
Office.
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On July 7, 2022, the CAC has promulgated the Measures for the Security Assessment of Cross-border
Data Transfer (جwhich takes effect on September 1, 2022, and requires that any
data processor providing important data collected and generated during operations within the territory of
the PRC or personal information that should be subject to security assessment according to the relevant
law to an overseas recipient shall conduct security assessment. The Measures for the Security Assessment
of Cross-border Data Transfer provides four circumstances, under any of which data processors shall,
through the local cyberspace administration at the provincial level, apply to the national cyberspace
administration for security assessment of cross-border data transfer. These circumstances include: (1)
where the important data are transferred to an overseas recipient; (2) where the personal information is
transferred to an overseas recipient by an operator of critical information infrastructure or a data processor
that has processed personal information of more than one million people; (3) where a data processor
provides personal information to an overseas recipient if such data processor has already provided
overseas the personal information of 100,000 people or sensitive personal information of 10,000 people
since January 1 of the preceding year; or (4) other circumstances under which security assessment of
outbound data transfer is required as prescribed by the national cyberspace administration.
LA WS AND REGULATIONS RELATING TO ENVIRONMENTAL PROTECTION
Environmental Protection
The Environmental Protection Law of the PRC (جthe “Environmental
Protection Law”) was promulgated on December 26, 1989 by SCNPC, and most recently amended on April
24, 2014, and took effect on January 1, 2015. The Environmental Protection Law has been formulated for
the purpose of environmental protection and improvement, prevention and treatment of pollution and other
hazards, protection of public health, promoting development of ecological civilization, promoting
sustainable economic and social development. According to the provisions of the Environmental
Protection Law, in addition to other relevant laws and regulations of the PRC, the Ministry of
Environmental Protection and its local counterparts are responsible for administering and supervising
environmental protection matters. Pursuant to the Environmental Protection Law, enterprises, institutions
and other manufacturing operators shall prevent and reduce environmental pollution and ecological
damage, and shall be liable for damages caused by them pursuant to the law.
Environmental Impact Assessment and Completion Acceptance
According to the Environmental Impact Assessment Law of the People’ s Republic of China (ʕശɛ
جpromulgated by the SCNPC on October 28, 2002, and latest amended on
December 29, 2018, and the Regulations on the Administration of Construction Project Environmental
Protection (ᚐ၍ଣૢԷ) promulgated by the State Council on November 29, 1998 and
amended on July 16, 2017 and effective on October 1, 2017, and the Interim Measures for the Acceptance
Examination of Environmental Protection Facilities of Construction Projects (ᚐ᜕ϗ
جpromulgated by the Ministry of Environmental Protection (currently known as the Ministry of
Ecology and Environment) on November 20, 2017, the State implements classified management on the
environmental impact assessment of construction projects in accordance with the degree of impact of
construction projects on the environment. Construction entities shall organize the preparation of
environmental impact report, environmental impact statement, or filling in environmental impact
registration form in accordance with the degree of impact of construction projects on the environment.
According to the Environmental Impact Assessment Law, where a construction entity put the construction
project into production or use while the complementary environmental protection facilities of a
construction project are not constructed or have not undergone acceptance inspection or do not pass
acceptance inspection, the ecological environment authorities at the county level or above shall order it
to make correction within a stipulated period and impose a fine ranging from RMB200,000 to RMB1
million; where correction is not made within the stipulated period, a fine ranging from RMB1 million to
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RMB2 million shall be imposed; for the person-in-charge and other responsible personnel, a fine ranging
from RMB50,000 to RMB200,000 shall be imposed; where the construction project causes significant
environmental pollution or ecological damage, the production or use shall be suspended, or the project
shall be closed down upon approval by the competent government.
Pollutant Discharge Permit
According to the Law on Prevention and Control of Water Pollution of the PRC (ʕശɛ͏΍ձ਷˥
جطpromulgated on May 11, 1984 and most recently amended on June 27, 2017, and the
Environmental Protection Law , and the Administrative Measures for Pollutant Discharge Permit (Trial
Implementation) (ج(༊Б)) promulgated by the Ministry of Environmental Protection
(currently known as the Ministry of Ecology and Environment) and latest amended on August 22, 2019,
the Ministry of Environmental Protection and its local counterparts at or above county level shall take
charge of the administration and supervision on the matters of prevention and control of water pollution.
The State implements a pollutant discharge permit management system and enterprises and other
production operators that are included in the classification management catalog of pollutant discharge
permits for stationary pollution sources shall apply for and obtain a pollutant discharge permit, and the
pollutant discharge entities that are not included in the scope are not required to apply for a pollutant
discharge permit for the time being.
Pursuant to the Law on the Prevention and Control of Environmental Pollution Caused by Solid
Waste of the PRC (جطwhich was promulgated by the SCNPC in
1995 and was latest amended on April 29, 2020, all enterprises and individuals generating or engaging in
the collection, storage, transport, utilization or disposal of solid wastes shall adopt measures to prevent or
reduce environmental pollution by solid wastes and shall bear liability for any resulting environmental
pollution in accordance with the law. In accordance with the Catalog of Classified Management of
Pollutant Discharge Permits for Stationary Pollution Sources (2019 V ersion) (๕રϮ஢̙ʱᗳ
၍ଣΤ፽(2019وpromulgated by the Ministry of Ecology and Environment on December 20, 2019,
the State implements key management, simplified management and registration management of pollutant
discharge permits based on factors such as the amount of pollutants generated and discharged, the degree
of impact on the environment. The pollutant discharge entity that generates or discharges very small
amount of pollutants and has small impact on the environment shall be implemented registration
management, and is not required to apply for a pollutant discharge license, but shall fill in the pollutant
discharge registration form on the national pollutant discharge license management information platform.
LA WS AND REGULATIONS RELATING TO FIRE PREVENTION
According to the Fire Prevention Law of the People’ s Republic of China (ج)
promulgated by the SCNPC on April 29, 1998 and most recently amended on April 29, 2021, and the
Interim Provisions on the Administration of Examination and Acceptance of Fire Prevention Design of
Construction Projects (֛promulgated by the Ministry of
Housing and Urban-Rural Development on April 1, 2020 and latest amended on August 21, 2023, fire
acceptance should be done for special construction projects which meet certain conditions, fire filing
should be done for other types of construction projects. On August 12, 2015, the Ministry of Public
Security promulgated Eight Measures to Deepen Reform and Serve Economic and Social Development (ʮ
݄or the Eight Measures. According to the Eight
Measures, construction projects with an investment of less than RMB300,000 or a construction area of less
than 300 sq.m. is not required to obtain the as-built acceptance check on fire prevention or fire safety
filing, and competent authorities of housing and urban-rural development at the provincial level may
formulate detailed rules of implementation pursuant to these measures.
LA WS AND REGULATIONS RELATING TO REAL ESTATE LEASING
According to the PRC Civil Code which took effect on January 1, 2021, an owner of immovable or
movable property is entitled to possession, use, earnings, and disposal of such property in accordance with
the law. Subject to the consent of the lessor, the lessee may sublease the leased premises to a third party.
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Where a lessee subleases the premises, the lease contract between the lessee and the lessor remains valid.
The lessor is entitled to terminate the lease if the lessee subleases the premises without the consent of the
lessor. In addition, if the ownership of the leased premises changes during the lessee’s possession in
accordance with the terms of the lease contract, the validity of the lease contract shall not be affected.
On December 1, 2010, the Ministry of Housing and Urban-Rural Development promulgated the
Administrative Measures on Leasing of Commodity Housing (جwhich became
effective on February 1, 2011. According to such measures, the lessor and the lessee are required to
complete property leasing registration and filing formalities within 30 days from execution of the property
lease contract with the development authorities or real estate authorities of the municipality or county
where the leased property is located. If a company fails to do as aforesaid, it may be ordered to rectify
within a stipulated period, and if such company fails to rectify, a fine ranging from RMB1,000 to
RMB10,000 may be imposed on each lease agreement.
LA WS AND REGULATIONS RELATING TO INTELLECTUAL PROPERTY
Trademarks
Trademarks are protected by the Trademark Law of the PRC (جthe “PRC
Trademark Law”) which was promulgated by SCNPC on August 23, 1982 and subsequently amended on
February 22, 1993, October 27, 2001, and August 30, 2013, respectively, and was last amended on April
23, 2019, and came into force on November 1, 2019, as well as the Implementation Regulation of the
Trademark Law of the PRC (ૢԷ) adopted by the State Council on August 3,
2002, subsequently amended on April 29, 2014, and became effective on May 1, 2014. In China, registered
trademarks include commodity trademarks, service trademarks, collective marks and certification marks.
The Trademark Office ( ਠᅺ҅) under the National Intellectual Property Administration (ᗆ
ପᛆ҅) handles trademark registrations and grants a term of ten-year from the date of registration to
registered trademarks. Trademarks are renewable every ten years where a registered trademark needs to
be used after the expiration of its validity term. A registration renewal application shall be filed within
twelve months prior to the expiration of the term. A trademark registrant may license its registered
trademark to another party by entering into a trademark license contract. Trademark license agreements
must be filed with the Trademark Office for record. The licensor shall supervise the quality of the
commodities on which the trademark is used and the licensee shall guarantee the quality of such
commodities, the licensee shall display the name of the licensor and the place of origin on the commodities
that bear the licensed registered trademark. As to trademarks, the PRC Trademark Law has adopted a “first
come, first file” principle with respect to trademark registration. Where trademark for which a registration
application has been made is identical or similar to another trademark which has already been registered
or been subject to a preliminary examination and approval for use on the same kind of or similar
commodities or services, the application for registration of such trademark may be rejected. Any person
applying for the registration of a trademark may not prejudice the existing right first obtained by others,
nor may any person register in advance a trademark that has already been used by another party and has
already gained a “sufficient degree of reputation” through such party’s use.
Patents
According to the Patent Law of the PRC (جthe “Patent Law”), promulgated
by the SCNPC on March 12, 1984, and latest revised on October 17, 2020 and came into effect on June
1, 2021, and the Rules for the Implementation of the Patent Law of the PRC (݄
ۆpromulgated by the State Council on June 15, 2001, last amended on January 9, 2010 and became
effective on February 1, 2010, the patent administrative department under the State Council is responsible
for administration of patent-related work nationwide. The patent administration departments of province
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or autonomous regions or municipal governments are responsible for administering patents within their
respective jurisdictions. The PRC Patent Law and its implementation rules divide patents into three types,
“invention,” “utility model” and “design.” Invention patents are valid for twenty years, while design
patents are valid for fifteen years and utility model patents are valid for ten years, from the date of
application. The patentee shall pay an annual fee commencing from the year in which the patent right is
granted. The PRC patent system adopts a “first come, first file” principle, which means that where more
than one person files a patent application for the same invention, a patent will be granted to the person
who files the application first. A third-party player must obtain consent or a proper license from the patent
owner to use the patent. Otherwise, the use constitutes an infringement of the patent rights.
Copyright
China is a signatory to some major international conventions on protection of copyright and became
a member of the Berne Convention for the Protection of Literary and Artistic Works in October, 1992, the
Universal Copyright Convention in October, 1992, and the Agreement on Trade-Related Aspects of
Intellectual Property Rights upon its accession to the World Trade Organization in December 2001. The
Copyright Law of the PRC (جwhich was promulgated by the SCNPC on
September 7, 1990, as amended on October 27, 2001 and latest amended on November 11, 2020, and came
into effective on June 1, 2021, provides that Chinese citizens, legal persons, or other organizations shall,
whether published or not, enjoy copyright in their works, which include, among others, works of literature,
art, natural science, social science, engineering technology and computer software. The purpose of the
PRC Copyright Law is to encourage the creation and dissemination of works which is beneficial to the
construction of socialist spiritual civilization and material civilization and promote the development and
prosperity of Chinese culture. Unless otherwise stipulated in the PRC Copyright Law, anyone that wishes
to use another’s work shall conclude a licensing contract with the copyright owner of the work. A licensing
contract shall include: the type(s) of right(s) being licensed; whether the license is exclusive or
non-exclusive; the geographic scope and term of the license; the amount and method of remuneration;
liability for breach of contract; and other details which the parties consider necessary. Where the right
licensed is an exclusive licensing right, the contracts shall be made in writing, except in cases where works
are to be published by newspapers and periodicals according to the Implementing Regulations of the
Copyright Law of the PRC (ૢԷ), which was promulgated by State Council
on August 2, 2002, last amended on January 30, 2013 and became effective on March 1, 2013. Any person,
who concludes an exclusive licensing contract or assignment contract with a copyright owner, may submit,
for filing, the contractual documents to the copyright administrative department.
According to the Regulation on Computer Software Protection (ᚐૢԷ), which took
effect on October 1, 1991 and was last amended on January 30, 2013 and subsequently enforced on March
1, 2013, the software copyright shall exist from the date on which its development has been completed,
and software copyright owner may register with the software registration institution recognized by the
copyright administration department of the State Council. On February 20, 2002, the National Copyright
Administration of the PRC promulgated the Measures on Computer Software Copyright Registration (ࠇ
جwhich outlines the operational procedures for registration of software
copyright, as well as registration of the license for the software copyright and software copyright transfer
contracts. The Copyright Protection Center of the PRC (ᚐʕː) is mandated as the software
registration agency under the regulations.
Domain Name
The Measures on Administration of Internet Domain Names (جwas promulgated
by the Ministry of Industry and Information Technology of the PRC (the “MIIT”) in 2017, which adopts
“first to file” rule to allocate domain names to applicants, and provide that the MIIT shall supervise the
domain names services nationwide and publicize the PRC domain name system. After completion of the
registration procedures, the applicant will become the holder of the relevant domain name.
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LA WS AND REGULATIONS RELATING TO EMPLOYMENT AND SOCIAL WELFARE
Employment
The major PRC laws and regulations that govern employment relationship are the PRC Labor Law
(ج,)the PRC Labor Contract Law (جthe “Labor
Contract Law”) and its implementation, which impose stringent requirements on the employers in relation
to entering into fixed-term employment contracts, hiring of temporary employees and dismissal of
employees.
The Labor Contract Law, which became effective on January 1, 2008, primarily aims at regulating
rights and obligations of employment relationships, including the establishment, performance, and
termination of labor contracts. Pursuant to the Labor Contract Law, labor contracts must be executed in
writing if labor relationships are to be or have been established between employers and employees.
Employers are prohibited from forcing employees to work above certain time limits and employers must
pay employees for overtime work in accordance with national regulations. In addition, employee wages
must not be lower than local standards on minimum wages and must be paid to employees in a timely
manner.
In December 2012, the Labor Contract Law was amended to impose more stringent requirements on
the use of employees of temp agencies, who are known in China as “dispatched workers”. Dispatched
workers are entitled to equal pay with full-time employees for equal work. Employers are only allowed
to use dispatched workers for temporary, auxiliary or substitutive positions. According to the Interim
Provisions on Labor Dispatch (֛promulgated by the Ministry of Human Resources and
Social Security and came into effect on March 1, 2014, the number of dispatched workers hired by an
employer may not exceed 10% of the total number of its employees. Where rectification is not made within
the stipulated period, the employers may be subject to a penalty ranging from RMB5,000 to RMB10,000
per dispatched worker exceeding the 10% threshold.
Social Insurance
The PRC Social Insurance Law (جthe “Social Insurance Law”) issued
by the SCNPC in 2010 and latest amended on December 29, 2018, has established social insurance systems
of basic pension insurance, basic medical insurance, work-related injury insurance, unemployment
insurance and maternity insurance and has elaborated in detail the legal obligations and liabilities of
employers who fail to comply with relevant laws and regulations on social insurance. According to the
Social Insurance Law and the Provisional Regulations on Collection and Payment of Social Insurance
Premiums (ᎈ൬ᅄᖮᅲБૢԷ) promulgated by the State Council on January 22, 1999 and most
recently amended on March 24, 2019 and effective from the same date, enterprises shall register social
insurance with local social insurance and pay or withhold relevant social insurance for or on behalf of its
employees. Any employer that fails to make social insurance contributions may be ordered to rectify the
non-compliance and pay the required contributions within a prescribed time limit and be subject to a late
fee. If the employer still fails to rectify the failure to make the relevant contributions within the prescribed
time, it may be subject to a fine ranging from one to three times the amount overdue.
Apart from the general provisions about social insurance, specific provisions on various types of
insurance are set out in the Regulation on Work-Related Injury Insurance (ᎈૢԷ) which was
issued by the State Council on April 27, 2003, came into effect on January 1, 2004 and revised on
December 20, 2010, the Regulations on Unemployment Insurance (ᎈૢԷ) which was issued by the
State Council on January 22, 1999 and came into effect on the same day, the Trial Measures on Employee
Maternity Insurance of Enterprises (جwhich was issued by the Ministry of
Labor on December 14, 1994 and came into effect on January 1, 1995. Enterprises subject to these
regulations shall provide their employees with the corresponding insurance.
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Housing Provident Fund
According to the Regulation on the Administration of Housing Provident Fund (၍ଣૢ
Է), which was implemented on April 3, 1999 and latest amended on March 24, 2019, any newly
established entity shall make deposit registration at the housing accumulation fund management center
within 30 days as of its establishment. After that, the entity shall open a housing accumulation fund
account for its employees in an entrusted bank. Within 30 days as of the date an employee is recruited,
the entity shall make deposit registration at the housing accumulation fund management center and seal
up the employee’s housing accumulation fund account in the bank mentioned above within 30 days from
termination of the employment relationship. Any entity that fails to make deposit registration of the
housing accumulation fund or fails to open a housing accumulation fund account for its employees shall
be ordered to complete the relevant procedures within a prescribed time limit. Any entity failing to
complete the relevant procedure within the time limit will be fined RMB10,000 to RMB50,000. Any entity
that fails to make payment of housing provident fund within the time limit or has a shortfall in payment
of housing provident fund will be ordered to make the payment or make up the shortfall within the
prescribed time limit, otherwise, the housing provident management center is entitled to apply for
compulsory enforcement with the People’s Court.
LA WS AND REGULATIONS RELATING TO FOREIGN EXCHANGE
Pursuant to the Regulations on Foreign Exchange Control of the PRC (ʕശɛ͏΍ձ਷̮ි၍ଣૢ
Է) promulgated by the State Council on January 29, 1996 and became effective from April 1, 1996, and
latest amended on August 5, 2008 and became effective from the same date, and relevant regulations, there
is no restriction on the recurring international payment and transfer, and the foreign exchange income and
expenses of recurring items (such as goods trade, income and expenses of service trade and payments of
interest and dividends) should be on true and legal transactions basis, and can be directly undertaken at
the bank with true and valid transaction documents. Foreign exchange income and expenses of capital
items (such as direct equity investment and loans) shall comply with the provisions of relevant laws and
regulations, and where required for approval or registration by relevant regulation from foreign exchange
administration authorities, such approval or registration shall be filed. Foreign exchange and settlement
funds of capital items shall be used for purposes as stipulated in relevant competent departments and
foreign exchange administration authorities.
According to the Notice on Relevant Issue Concerning the Administration of Foreign Exchange for
Overseas Listing (ٝissued by the State Administration of Foreign
Exchange (“SAFE”) on December 26, 2014 and as amended by the SAFE Circular 16 (defined below), the
domestic companies shall register the overseas listing with the foreign exchange control bureau located at
its registered address in 15 working days after completion of the overseas listing and issuance. The funds
raised by the domestic companies through overseas listing may be repatriated to China or deposited
overseas, provided that the intended use of the fund shall be consistent with the contents of the document
and other public disclosure documents.
The SAFE issued the Circular on Reforming of the Management Method of the Settlement of Foreign
Currency Capital of Foreign-Invested Enterprises (ഐ
ٝthe “SAFE Circular 19”), on March 30, 2015, and it became effective on June 1,
2015, which was partially repealed on December 30, 2019, and latest amended on March 23, 2023. The
SAFE Circular 19 expands a pilot reform of the administration of the settlement of the foreign exchange
capitals of foreign-invested enterprises nationwide. In June 2016, SAFE further promulgated the Notice
of the State Administration of Foreign Exchange on Reforming and Standardizing the Foreign Exchange
Settlement Management Policy of Capital Account (݁
ٝthe “SAFE Circular 16”), which, among other things, amends certain provisions of SAFE
Circular 19. Pursuant to SAFE Circular 19 and SAFE Circular 16, the flow and use of the Renminbi capital
converted from foreign currency denominated registered capital of a foreign-invested company is
regulated such that Renminbi capital may not be used for business beyond its business scope or to provide
loans to persons other than affiliates unless otherwise permitted under its business scope.
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In October 2019, SAFE issued the Circular of Further Facilitating Cross-border Trade and
Investment (ٝSAFE Circular 28”), which
cancels the restrictions on domestic equity investments by capital fund of non-investment foreign invested
enterprises and allows non-investment foreign invested enterprises to use their capital funds to lawfully
make equity investments in China, provided that such investments do not violate the Negative List and the
target investment projects are genuine and in compliance with laws. According to the Circular on
Optimizing Administration of Foreign Exchange to Support the Development of Foreign-related Business
(ٝSAFE Circular 8”), issued by SAFE in
April 2020, under the prerequisite of ensuring true and compliant use of funds and compliance with the
prevailing administrative provisions on use of income under the capital account, eligible enterprises are
allowed to make domestic payments by using their capital funds, foreign credits and the income under
capital accounts of overseas listing, without prior provision of the evidentiary materials concerning
authenticity to the bank for each transaction. The handling banks shall conduct spot checks afterwards in
accordance with the relevant requirements. The interpretation and implementation in practice of SAFE
Circular 28 and SAFE Circular 8 are still subject to several uncertainties given they are newly issued
regulations.
LA WS AND REGULATIONS RELATING TO TAXATION
Enterprise Income Tax
According to the Enterprise Income Tax Law of the PRC (جwhich was
promulgated by the SCNPC and was latest amended on December 29, 2018, and the Implementation
Regulations for the Enterprise Income Tax Law of the PRC (ૢԷ),
which was promulgated by the State Council and was latest amended in April 2019, collectively referred
to as the Enterprise Income Tax Law, a uniform 25% enterprise income tax rate (“EIT”) is imposed to both
foreign invested enterprises and domestic enterprises, except where tax incentives are granted to special
industries and projects. The enterprise income tax rate is reduced by 20% for qualifying small low-profit
enterprises. The high-tech enterprises that need full support from the PRC’s government will enjoy a 15%
tax rate reduction for Enterprise Income Tax.
According to the Notice on Issues Concerning Relevant Tax Policies in Deepening the
Implementation of the Western Development Strategy (ٙ
ٝwhich was promulgated by the Ministry of Finance, General Administration of Customs, and State
Administration of Taxation, from January 1, 2011 to December 31, 2020, the EIT imposed upon any
enterprise established in western regions and included among the encouraged industries shall be collected
at the reduced rate of 15%. Furthermore, according to the Announcement on Continuation of EIT Policies
for Large-scale Development in the Western Region (ʮѓ) which
was promulgated by the Ministry of Finance, State Administration of Taxation, and National Development
and Reform Commission, During the period from January 1, 2021 to December 31, 2030, CIT shall be
levied at a reduced tax rate of 15% on enterprises established in the western region in encouraged
industries.
Value-added Tax
Pursuant to the Provisional Regulations of the PRC on V alue-added Tax (೼ᅲ
БૢԷ), which was promulgated by the State Council and was latest amended on November 19, 2017, and
the Implementation Rules for the Provisional Regulations the PRC on V alue-added Tax (ʕശɛ͏΍ձ਷
ۆwhich was promulgated by the Ministry of Finance and was latest amended on
October 28, 2011 and effective from November 1, 2011, entities and individuals engaging in selling goods,
providing processing, repairing or replacement services or importing goods within the territory of the PRC
are taxpayers of the value-added tax.
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According to the Notice of the Ministry of Finance and the State Taxation Administration on the
Adjusting V alue-added Tax Rates (ٝeffective in May 2018,
the value-added tax rates of 17% and 11% on sales, imported goods shall be adjusted to 16% and 10%,
respectively.
According to the Announcement of the Ministry of Finance, the State Taxation Administration and
the General Administration of Customs on Relevant Policies for Deepening the V alue-Added Tax Reform
(ʮѓ) promulgated on March 20, 2019 and
effective from April 1, 2019, the value-added tax rates of 16% and 10% on sales, imported goods shall be
adjusted to 13% and 9%, respectively.
Dividend Distribution and Tax
The principal laws, rules and regulations governing dividend distributions by foreign-invested
enterprises in the PRC are the Company Law , the Foreign Investment Law and its Implementing
Regulations. Under these requirements, foreign-invested enterprises may pay dividends only out of their
accumulated profit, if any, as determined in accordance with PRC accounting standards and regulations.
A PRC company is required to allocate at least 10% of their respective accumulated after-tax profits each
year, if any, to fund certain capital reserve funds until the aggregate amount of these reserve funds have
reached 50% of the registered capital of the enterprises. A PRC company is not permitted to distribute any
profits until any losses from prior fiscal years have been offset. Profits retained from prior fiscal years may
be distributed together with distributable profits from the current fiscal year.
According to the Civil Procedure Law of the People’s Republic of China which was promulgated by
the National People’s Congress on April 9, 1991 and most recently amended on December 24, 2021, the
limitation period for an action to recover a debt (including the recovery of declared dividends) is three
years. The company must not exercise its powers to forfeit any unclaimed dividend in respect of shares
until after the expiry of the applicable limitation period.
Pursuant to the Individual Income Tax Law of the PRC (), which
was most recently amended on August 31, 2018, and the Implementation Provisions of the Individual
Income Tax Law of the PRC (ૢԷ), which was most recently
amended on December 18, 2018, dividends distributed by PRC enterprises are subject to individual income
tax levied at a flat rate of 20%. For a foreign individual who is not a resident of the PRC, the receipt of
dividends from an enterprise in the PRC is normally subject to individual income tax of 20% unless
specifically exempted by the tax authority of the State Council or reduced by relevant tax treaty.
The Enterprise Income Tax Law provides that since January 1, 2008, an enterprise income tax rate
of 10% will normally be applicable to dividends declared to non-PRC resident investors which do not have
an establishment or place of business in the PRC, or which have such establishment or place of business
but the relevant income is not effectively connected with the establishment or place of business, to the
extent such dividends are derived from sources within the PRC, unless any such non-PRC resident
investors’ jurisdiction of incorporation has a tax treaty with China that provides for a preferential
withholding arrangement.
Non-resident investors residing in jurisdictions which have entered into treaties or adjustments for
the avoidance of double taxation with the PRC might be entitled to a reduction of the Chinese EIT imposed
on the dividends received from PRC companies. The PRC currently has entered into avoidance of double
taxation treaties or arrangements with Hong Kong, Macau, and a number of countries and regions
including Australia, Canada, France, Germany, Japan, Malaysia, the Netherlands, Singapore, the United
Kingdom, the United States and etc. Non-PRC resident enterprises entitled to preferential tax rates in
accordance with the relevant taxation treaties or arrangements are required to apply to the Chinese tax
authorities for a refund of the EIT in excess of the agreed tax rate, and the refund application is subject
to approval by the Chinese tax authorities.
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LA WS AND REGULATIONS RELATING TO FOREIGN INVESTMENT IN THE PRC
Foreign Investment
Investment activities in the PRC by foreign investors were principally governed by the Special
Administrative Measures (Negative List) for Access of Foreign Investment (2021 version) (ɝ
݄(૶ఊ)(2021وthe “Negative List”), and the Catalogue of Industries for
Encouraging Foreign Investment (2022 version) (ོᎸ̮ਠҳ༟ପุͦ፽(2022وthe “Encouraging
List”). The Negative List, which came into effect on January 1, 2022, sets out special administrative
measures (restricted or prohibited) in respect of the access of foreign investments in a centralized manner,
and the Encouraging List which came into effect on January 1, 2023, sets out the encouraged industries
for foreign investment.
Foreign-Invested Enterprises
The Company Law regulates the establishment, operation and management of corporate entities in
China and classifies companies into limited liability companies and limited companies by shares.
According to the Foreign Investment Law of the PRC (جpromulgated by the
NPC on March 15, 2019, and came into effect on January 1, 2020, the state shall implement the
management systems of pre-establishment national treatment and negative list for foreign investment, and
shall give national treatment to foreign investment beyond the negative list. Simultaneously, the Law of
the People’ s Republic of China on Sino-foreign Equity Joint V entures (ʕശɛ͏΍ձ਷ʕ̮Υ༟຾ᐄΆุ
ج,)the Wholly Foreign-owned Enterprises Law of the PRC (جand the Law of
the People’ s Republic of China on Sino-foreign Contractual Joint V entures (ʕശɛ͏΍ձ਷ʕ̮ΥЪ຾
جhave been repealed since January 1, 2020.
On December 26, 2019, the State Council promulgated the Regulations on Implementing the Foreign
Investment Law of the PRC (ૢԷ), which came into effect on January 1,
2020. Simultaneously, the Regulations on Implementing the Sino-Foreign Equity Joint V enture of the PRC
(ૢԷ), the Provisional Regulations on the Duration of Sino-
Foreign Equity Joint V enture (֛,)the Regulations on Implementing the
Wholly Foreign-owned Enterprise Law of the PRC (ۆand the
Regulations on Implementing the Sino-foreign Cooperative Joint V enture of the PRC (ʕശɛ͏΍ձ਷ʕ
ۆhave been repealed since January 1, 2020.
According to the Measures for the Reporting of Foreign Investment Information (జѓ
جwhich was promulgated by the Ministry of Commerce of the PRC (“MOFCOM”) and the SAMR
on December 30, 2019 and came into effect on January 1, 2020 and simultaneously replaced the Interim
Measures for the Recordation Administration of the Incorporation and Change of Foreign-Invested
Enterprises (جfor carrying out investment activities directly
or indirectly in PRC, the foreign investors or foreign-invested enterprises shall submit investment
information to the commerce authorities pursuant to these measures.
REGULATORY OVERVIEW
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LA WS AND REGULATIONS RELATING TO SECURITIES AND OVERSEAS LISTINGS
Securities Laws and Regulations
The Securities Law of the People’s Republic of China, which was promulgated by the SCNPC on
December 29, 1998 and was latest amended on December 28, 2019 and took effect on March 1, 2020,
comprehensively regulating activities in the PRC securities market including issuance and trading of
securities, takeovers by listed companies, securities exchanges, securities companies and the duties and
responsibilities of securities regulatory authorities, etc. The Securities Law further regulates that a
domestic enterprise issuing securities overseas directly or indirectly or listing their securities overseas
shall comply with the relevant provisions of the State Council and for subscription and trading of shares
of domestic companies using foreign currencies, detailed measures shall be stipulated by the State Council
separately. The China Securities Regulatory Commission (the “ CSRC” ) is the securities regulatory body
set up by the State Council to supervise and administer the securities market according to law, maintain
order in the market, and ensure the market operates in a lawful manner. Currently, the issue and trading
of H shares are principally governed by the regulations and rules promulgated by the State Council and
the CSRC.
Overseas Listings
On February 17, 2023, the China Securities Regulatory Commission, or the CSRC released several
regulations regarding the management of filings for overseas offerings and listings by domestic
companies, including the Trial Administrative Measures of Overseas Securities Offering and Listing by
Domestic Companies (جTrial Measures”) together with 5
supporting guidelines (together with the Trial Measures, collectively referred to as the “New Regulations
on Filing”). Under New Regulations on Filing, PRC domestic companies that seek to offer and list
securities in overseas markets, either in direct or indirect means, are required to file the required
documents with the CSRC within three working days after its application for overseas listing is submitted
The New Regulations on Filing provides that no overseas offering and listing shall be made under
any of the following circumstances: (1) such securities offering and listing is explicitly prohibited by
provisions in laws, administrative regulations and relevant state rules; (2) the intended securities offering
and listing may endanger national security as reviewed and determined by competent authorities under the
State Council in accordance with law; (3) the domestic company intending to make the securities offering
and listing, or its controlling shareholders and the actual controller, have committed crimes such as
corruption, bribery, embezzlement, misappropriation of property or undermining the order of the socialist
market economy during the latest three years; (4) the domestic company intending to make the securities
offering and listing is suspected of committing crimes or major violations of laws and regulations, and is
under investigation according to law and no conclusion has yet been made thereof; or (5) there are material
ownership disputes over equity held by the domestic company’s controlling shareholder or by other
shareholders that are controlled by the controlling shareholder and/or actual controller. Overseas offering
and listing by domestic companies shall be made in strict compliance with relevant laws, administrative
regulations and rules concerning national security in spheres of foreign investment, cybersecurity, data
security and etc., and duly fulfill their obligations to protect national security.
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Confidentiality and Archives Administration
On February 24, 2023, the CSRC and other three relevant government authorities jointly
promulgated the Provisions on Strengthening the Confidentiality and Archives Administration of Overseas
Securities Issuance and Listing by Domestic Enterprises (ڭ
֛the Provision on Confidentiality”). Pursuant to the Provision on
Confidentiality, where a domestic enterprise provides or publicly discloses any document or material that
involving state secrets and working secrets of state agencies to the relevant securities companies,
securities service institutions, overseas regulatory authorities and other entities and individuals, it shall
report to the competent department with the examination and approval authority for approval in
accordance with the law, and submit to the secrecy administration department of the same level for filing.
The working papers formed within the territory of the PRC by the securities companies and securities
service agencies that provide corresponding services for the overseas issuance and listing of domestic
enterprises shall be kept within the territory of the PRC, and cross-border transfer shall go through the
examination and approval formalities in accordance with the relevant provisions of the State.
Beneficial Owners
According to the Notice of the People’ s Bank of China on Further Improving the Identification of
Beneficial Owners (ٝwhich was
promulgated by the People’s Bank of China on June 27, 2018 and became effective on the same day, for
identification purpose, each non-natural-person shall have at least one beneficial owner. To be identified
as a beneficial owner of a company one should have ultimate control over a company is not limited to
directly or indirectly owning more than 25% of the company’s equity or voting rights, and it includes any
other form that can effectively control or actually affect the company’s decision-making, operation and
management.
LA WS AND REGULATIONS RELATING TO THE H SHARE “FULL CIRCULATION”
Pursuant to the Guidelines for the “Full Circulation” Program for Domestic Unlisted Shares of
H-share Listed Companies (H΅͡ሗ“ஷ”ˏ), promulgated by the CSRC
on November 14, 2019 and revised on August 10, 2023, shareholders of domestic unlisted shares may
determine by themselves through consultation the amount and proportion of shares, for which an
application will be filed for circulation, provided that the requirements laid down in the relevant laws and
regulations and set out in the policies for state-owned asset administration, foreign investment and
industry regulation are met, and the corresponding H-share listed company may be entrusted to file the
said application for “full circulation.” After domestic unlisted shares are listed and circulated on the Stock
Exchange, they may not be transferred back to China.
According to the Measures for Implementation of H-share “Full Circulation” Business (Hٰ“ݴ
ஷ”ۆor the Measures for Implementation, promulgated by the China Securities Depository
and Clearing Corporation Limited, or the CSDC, and Shenzhen Stock Exchange, or the SZSE, on
December 31, 2019, the businesses of cross-border transfer registration, maintenance of deposit and
holding details, transaction entrustment and instruction transmission, settlement, management of
settlement participants, services of nominal holders, etc. in relation to the H-share “full circulation
business,” are subject to the Measures for Implementation. Where there is no provision in the Measures
for Implementation, it shall be handled with reference to other business rules of the CSDC and China
Securities Depository and Clearing (Hong Kong) Company Limited, or the CSDC (Hong Kong), and
SZSE.
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In order to fully promote the reform of H-shares “Full Circulation” and clarify the business
arrangement and procedures for the relevant shares’ registration, custody, settlement and delivery, CSDC
has promulgated the Circular on Issuing the Guide to the Program for Full Circulation of H-shares (ᗫ
೯б<Hٰ“ஷ”یܸ>ٝon February 7, 2020, which specifies the business preparation,
account arrangement, cross-border share transfer registration and overseas centralized custody, etc.
According to the Notes on the Trial Administrative Measures of Overseas Securities Offering and
Listing by Domestic Companies (׵<ج>׼the New
Regulations Filing aims to strengthening institutional inclusiveness and deepening opening-up, and lays
out “full circulation” arrangements. For the overseas offering and listing by a domestic company, holders
of its domestically-based domestic unlisted shares are allowed after filing to convert the shares into
overseas listed shares to be circulated on overseas trading venues.
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OVERVIEW
We are a leading brand in China’s EBN product market, dedicated to the development, production
and marketing of quality modern EBN products. Our history can be traced back to 1997 when Mr. Huang,
our founder, chairman and executive Director, established Xiamen Suntama and started business to sell
EBN products in China.
In October 2014, to optimize our corporate structure and introduce external investors, Mr. Huang
through Xiamen Suntama and together with Mr. Zheng, our vice chairman and executive Director, Mr. Li,
our general manager and executive Director, and certain other shareholders established our Company in
the PRC as a limited liability company and named it as Xiamen Y an Palace Biological Engineering
Development Co., Ltd. (ʮ̡). In December 2020, for the purpose of our
initial A share listing attempt, we were converted from a limited liability company into a joint stock
limited liability company in accordance with applicable PRC laws and regulations under the name of
Xiamen Y an Palace Bioengineering Co., Ltd. (ʮ̡). In November 2023, we
were renamed as Xiamen Y an Palace Bird’s Nest Industry Co., Ltd. (ʮ̡).
During the Track Record Period, our Company was controlled by Mr. Huang, our founder, chairman
and executive Director, Mr. Zheng, our vice chairman and executive Director, and Mr. Li, our general
manager and executive Director, through their respective direct shareholding in the Company and Xiamen
Suntama (together with Mr. Huang, Mr. Zheng and Mr. Li, collectively, the “Concert Parties”), pursuant
to certain acting in concert agreements, and the Concert Parties are our Controlling Shareholders. In
addition, Jinyan Tengfei LP (the employee incentive share platform of our Company and its general partner
is Mr. Huang) and Ms. Xue (the spouse of Mr. Zheng) are also deemed to be Controlling Shareholders by
virtue of their relationship with the Concert Parties pursuant to the Listing Rules. As of the Latest
Practicable Date, pursuant to the Listing Rules, approximately 41.40% of the total issued share capital of
our Company are owned by our group of Controlling Shareholders collectively. See “—Concert Party
Arrangement,” “Relationship with Our Controlling Shareholders” and “Directors, Supervisors and Senior
Management” for more information about their relationship and biographical details.
BUSINESS MILESTONES
The following table sets forth the key business development milestones of our Group:
Y ear Milestones
2014 ........ Our Company was established as a limited liability company in Xiamen.
Our Company took the lead in drafting the “Edible Bird’s Nest Quality Grading,”
which became the standard specification for the EBN industry.
We opened our online stores through e-commerce channels, starting our online
sales.
2015 ........ O u r E B N technology center had officially passed the CNAS laboratory
accreditation (registration number: CNAS L8129). Our Company was the first
EBN enterprise in China to have the CNAS laboratory accreditation.
2018 ........ O u r Company was recognized by the National Urban Agricultural Trade Center
Association’s Bird’s Nest Market Professional Committee (̹༵൱ʕːᑌ
ึ) as the most influential brand of 2018.
2019 ........ O u r Company was recognized as “Fujian Benchmark Company for Edible Bird’s
Nest Products” (ᅺ૖Άุ) by China Food Industry
Association (ʈุ՘ึ).
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Y ear Milestones
2020 ........ Our Company was converted into a joint stock company with limited liability.
The number of the Group’s offline stores exceeded 500.
2021 ........ O u r Company and the Indonesian government signed an agreement of intent to
purchase bird’s nest ( ዲ၊મᒅจΣ՘ᙄ) in 2022.
Our Company was the designated EBN product of the Chinese national fencing
team.
Our Company was selected into the National Brands Project of Xinhua News
Agency.
2022 ........ W e were named as one of “the Xiamen Municipal-level Enterprise Technology
Centers” (̹̹ॴΆุҦஔʕː) and the Xiamen Specialized, Refined,
Unique, and New Small and Medium-sized Enterprises (“ਖ਼ၚतอΆุ”)
Our Xiamen factory became a “Green Factory” in the provincial level as
recognized by Fujian Provincial Department of Industry and Information
Technology (ʷᝂ).
The number of our offline stores exceeded 700.
OUR CORPORATE DEVELOPMENT AND MAJOR SHAREHOLDING MOVEMENT DURING
THE TRACK RECORD PERIOD
The following sets forth the corporate history and major shareholding movements of our Company
during the Track Record Period.
Early History and Establishment of Our Company
Our history can be traced back to 1997 when Mr. Huang, our founder, chairman and executive
Directors, established Xiamen Suntama with its own funds and started business to sell dried EBN products
in China. In 2002, our founder launched the business model of “instant ordering, consuming, stewing and
delivery” for instant stewed bird’s nest soup product in the market in China. In 2012, our founder invented
and launched the bowl-shape-canned EBN soup products series, “One Nest” 	ມዲ), and was one of the
first in the market with the capability of achieving industrial mass production of EBN soup products.
In 2014, to optimize the corporate structure and introduce external investors, Mr. Huang, our
founder, chairman and executive Director, together with Mr. Zheng, our vice chairman and executive
Director, and Mr. Li, our general manager and executive Director, and certain early investors established
our Company as a limited liability company on October 31, 2014 and named it as Xiamen Y an Palace
Biological Engineering Development Co., Ltd. (ʮ̡). Our initial registered
capital was RMB66,666,668 and was collectively owned as to 94.84% by Mr. Huang, Mr. Zheng and Mr.
Li through themselves and Xiamen Suntama, and as to 1.72%, 1.72% and 1.72% by LIU Zhen, our
non-executive Director, ZENG Huanrong, an Independent Third Party, and Beijing Bokai Huarui Trading
Co., Ltd. (ʮ̡), an Independent Third Party, respectively.
To strengthen the control and management over the Group, Mr. Huang, Mr. Zheng, Xiamen Suntama
and Mr. Li have entered into certain acting in concert arrangement since December 2016 and have
remained control of 30% or more of our issued share capital since then. See “—Concert Party
Arrangement” and “Relationship with Our Controlling Shareholders” for more information.
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Xiamen Suntama was established by Mr. Huang in 1997 as the operating entity for his early business
of purchasing and selling dried EBN products. After a long period of production and operation, by the year
2010, to obtain offshore financings to support its business growth and working capital needs, Xiamen
Suntama was restructured into an offshore red chip structure and converted into a foreign invested
company. In 2011, Xiamen Suntama considered pursuing a listing on the Stock Exchange. However, as the
EBN market and related business was negatively affected by the industrial Red EBN Incident in 2011, Mr.
Huang ceased the business of Xiamen Suntama and did not further proceed with the listing attempt on the
Stock Exchange. For details of the Red EBN Incident, please see “Risk Factors—Risks Relating to our
Industry—Government investigations over food safety incidents in China’s EBN industry and the resulting
negative publicity could adversely affect our business and reputation”. In 2014, after the industrial
recovery, Mr. Huang introduced new partners and established our Company with certain of our early
investors to promote and standardize the mass production of ready-to-serve EBN products to explore new
product strategy and ensure product quality. In 2021, the offshore structure of Xiamen Suntama was
unwound due to the Company’s previous A share listing attempts. Xiamen Suntama had historically
borrowed certain loans from our Company for its general working capital and liquidity use, which had
been fully settled in 2020. See “Relationship with Our Controlling Shareholders” and “Financial
Information” for more information. As of the Latest Practicable Date, Xiamen Suntama was a shareholding
platform of Mr. Huang and his family for holding their investments in our Company. Mr. Huang, our
founder, chairman and our executive Director, and HUANG Junhao (Ⴔ), the son of Mr. Huang, held
90% and 10% of the shareholding of Xiamen Suntama, respectively, as of the Latest Practicable Date.
Pre-IPO Investments
Since 2014, several external investors invested in our Company as pre-IPO investors to facilitate the
business development of our Company. See “—Pre-IPO Investments” for more information.
Conversion into Joint Stock Company with Limited Liability
For the purpose of our proposed initial A share listing, on December 23, 2020, all of the then 19
shareholders of our Company resolved at a shareholders’ general meeting to approve the conversion of our
Company into a joint stock company with limited liability. According to the capital verification report
prepared by an Independent Third Party auditor, the total net asset value of our Company as of October
31, 2020 was RMB175.05 million, of which (i) RMB83.33 million was converted to Shares with par value
of RMB1.0 per Share; and (ii) the remaining amount of approximately RMB91.72 million was converted
into capital reserve. The conversion was completed on December 23, 2020. Immediately upon completion
of the said conversion, the registered capital of our Company was RMB83.33 million divided into
83,333,336 Shares with nominal value of RMB1.0 per Share, which were subscribed by all our then
Shareholders in proportion to their respective equity interests in our Company before the conversion,
details of which as follows:
Name of Shareholder
Number of Shares
with nominal value
of RMB1.0 each
held by
shareholders
Shareholding
Percentage
(%)
Concert Parties and Controlling Shareholders
Xiamen Suntama (1) .............................. 18,357,112 22.03
Mr. Zheng .................................... 6,595,731 7.91
M r .L i....................................... 6,590,952 7.91
Other shareholders (2)
Guangyao Tianxiang LP .......................... 12,000,000 14.40
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Name of Shareholder
Number of Shares
with nominal value
of RMB1.0 each
held by
shareholders
Shareholding
Percentage
(%)
Xiamen Jinyanlai LP ............................ 8,333,334 10.00
Hongyan Investment LP .......................... 7,771,492 9.33
FU Y u ( ˹๬).................................. 6,595,731 7.91
Y angming Kangyi LP ............................ 3,333,333 4.00
ZENG Huanrong (࢙3,129,333 3.76
LIU Zhen ( ᄎቤ) ................................ 2,404,095 2.88
HUANG Jincheng ( රආϓ) ........................ 2,250,000 2.70
HUANG Wenxiao ( ර˖ʃ)........................ 1,666,667 2.00
SHI Tao (ᏹ) ................................. 1,041,667 1.25
Torch Investment ............................... 833,333 1.00
Tianyi Tongchuang LP ........................... 833,333 1.00
Jinjun Hongyan LP ............................. 555,556 0.67
ZHANG Qing (ڡ416,667 0.50
WU Junjie (௫) ............................. 416,667 0.50
XIAO Wen ( ӽත) ............................... 208,333 0.25
Total ........................................ 83,333,336 100%
Notes:
(1) Xiamen Suntama is controlled by Mr. Huang.
(2) See notes to the charts in “—Our Corporate Structure Immediately prior to the Global Offering” and “—Our Corporate
Structure Immediately following the Global Offering” sections for details of such shareholders.
Registered Capital Increase in December 2020 and June 2021
In December 2020 and June 2021, our Company issued 1,641,664 new Shares with nominal value
of RMB1.0 each and 1,725,000 new Shares with nominal value of RMB1.0 each to Jinyan Tengfei LP , an
employee incentive platform of our Group, and Ms. XUE Fengying, the spouse of Mr. Zheng, respectively.
The consideration was RMB12 per Share, which was determined after arm’s length negotiations taking
into account the contributions of such employees to our Group and the valuation of our Company. After
the new issuance, the registered capital of our Company was increased to RMB84.98 million and
RMB86.70 million, respectively.
Share Subdivision
As approved by our Shareholders’ general meeting on May 25, 2023, immediately upon the Listing,
one Share of RMB1.0 will each subdivide into five Shares of RMB0.2 each. After the Share Subdivision,
the number of our issued Shares was 433,500,000.
See “—Our Corporate Structure Immediately prior to the Global Offering” for details of the
shareholding structure of our Company immediately prior to the Global Offering.
CONCERT PARTY ARRANGEMENT
On December 29, 2016 and December 23, 2020, to strengthen the control and management over the
Group, Mr. Huang, Mr. Zheng and Mr. Li, who are our executive Directors, through themselves and
Xiamen Suntama, entered into acting in concert agreements (the “Concert Party Agreements”). Pursuant
HISTORY, DEVELOPMENT AND CORPORATE STRUCTURE
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to the Concert Party Agreements, the Concert Parties have agreed to act in concert with each other in
respect of the decision making at the Board meeting level and Shareholders meeting level since December
29, 2016, and agreed further on December 23, 2020 that if the Concert Parties have disagreements, the
Concert Parties will cast vote on such issues and shall act in accordance with the direction of the Concert
Party or Concert Parties with more than two-thirds of the total number of voting rights held by the Concert
Parties. The acting in concert arrangement under the Concert Party Agreements will continue until the
expiry of 36 months after the Listing and will be automatically renewed for five years each time after the
expiry date unless any of the party to such Concert Party Agreements terminates it in writing. The Concert
Parties are our Controlling Shareholders. In addition, Jinyan Tengfei LP (the employee incentive share
platform of our Company and its general partner is Mr. Huang) and Ms. Xue (the spouse of Mr. Zheng)
are also deemed to be our Controlling Shareholders by virtue of their relationship with the Concert Parties
pursuant to the Listing Rules. As of the Latest Practicable Date, pursuant to the Listing Rules, our group
of Controlling Shareholders collectively owned approximately 41.40% of the total issued share capital of
our Company, comprising (1) 37.52% of the equity interest of our Company directly held by the Concert
Parties; (2) 1.89% of the equity interest of our Company held by Jinyan Tengfei LP; and (3) 1.99% of the
equity interest of our Company held by Ms. Xue. See “Relationship with Our Controlling Shareholders”
for more information.
EMPLOYEE INCENTIVE SCHEME
We have adopted an employee incentive scheme on December 26, 2020 (the “Employee Incentive
Scheme”), as amended, to attract and retain talents for our Group, and foster shared interests between
Shareholders and our management team. In connection with the Employee Incentive Scheme, Jinyan
Tengfei LP has been established in the PRC as our employee incentive platform which has subscribed for
1,641,664 Shares at the consideration of RMB12 per Share. The general partner of Jinyan Tengfei LP is
Mr. Huang, our founder, chairman and executive Director, and its limited partners are grantees under the
Employee Incentive Scheme including Directors, Supervisors, senior management and other employees of
our Group who subscribed for the limited partnership interests in Jinyan Tengfei LP . All the Shares are
subject to certain transfer and disposal restrictions. As of the Latest Practicable Date, all Shares subject
to the Employee Incentive Scheme have been granted to, vested and subscribed for by 43 participants, and
no further Shares will be granted under such scheme following the Listing. See “Statutory and General
Information—C. Further Information about Our Directors, Supervisors and Substantial Shareholders—6.
Employee Incentive Scheme” in Appendix IV to this prospectus for details of the Employee Incentive
Scheme.
MAJOR ACQUISITIONS, DISPOSALS AND MERGERS
During the Track Record Period, we completed the following major acquisitions, disposals and
mergers:
Acquisitions of Beijing Tianfeiyan, Changchun Jinyanhui and Harbin Jinyanhui
On June 21, 2021, we entered into the share purchase agreement with Qingdao Paris Shengyan
Enterprise Management Partnership (Limited Partnership) (Άุ၍ଣΥྫΆุ(Υྫ))
(“Paris Shengyan”) and Beijing Tianfeiyan, pursuant to which, we agreed to acquire 55% of the equity
interests in Beijing Tianfeiyan held by Paris Shengyan at a consideration of RMB32.67 million in cash.
The consideration was determined based on arms-length negotiation with reference to the valuation of
such company conducted by an Independent Third Party valuer, which was evaluated based on the income
approach with reference to the business performance and financial status of such company as of April 30,
2021 and its estimated future performance. The acquisition was completed on June 29, 2021, after which,
Beijing Tianfeiyan has become a non-wholly owned subsidiary of our Company and was owned as to 55%
by our Company and 45% by Qingdao Zhenpindao Enterprise Management Partnership (Limited
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Partnership) (༸Άุ၍ଣΥྫΆุ(Υྫ)), which is an employee shareholding platform of
Beijing Tianfeiyan and is controlled by the employees of Beijing Tianfeiyan. The following sets out the
financial information relating to Beijing Tianfeiyan and its subsidiaries prior to and after the acquisition:
Prior to the
acquisition After the acquisition
From January 1,
2021 to the date
of acquisition
From the date
of acquisition to
December 31,
2021
For the
year ended
December 31,
2022
For the
five months
ended May 31,
2023
RMB (million)
Revenue contribution to the Group . . 26.54 48.9 92.1 47.5
Total revenue ................. 37.5 48.9 92.1 47.5
Gross profit .................. 16.5 21.0 41.0 21.1
Net profit .................... 3 . 5 3 . 4 7 . 7 4 . 1
As of
January 1,
2021
As of
December 31,
2021
As of
December 31,
2022
As of
May 31,
2023
Self-operated stores ................. 2 4 2 2 2 6 2 7
On June 21, 2021, we entered into the share purchase agreement with Paris Shengyan and Changchun
Jinyanhui, pursuant to which, we agreed to acquire 55% of the equity interests in Changchun Jinyanhui
held by Paris Shengyan at a consideration of RMB16.06 million in cash. The consideration was determined
based on arms-length negotiation with reference to the valuation of such company conducted by an
Independent Third Party valuer, which was evaluated based on the income approach with reference to the
business performance and financial status of such company as of April 30, 2021 and its estimated future
performance. The acquisition was completed on June 29, 2021, after which, Changchun Jinyanhui has
become a non-wholly owned subsidiary of our Company and is owned as to 55% by our Company and 45%
by Qingdao Pintianxia Enterprise Management Partnership (Limited Partnership) (˂ɨΆุ၍ଣΥ
ྫΆุ(Υྫ)), which is an employee shareholding platform of Changchun Jinyanhui and is controlled
by the employees of Changchun Jinyanhui. The following sets out the financial information relating to
Changchun Jinyanhui and its subsidiaries prior to and after the acquisition:
Prior to the
acquisition After the acquisition
From January 1,
2021 to the date
of acquisition
From the date
of acquisition to
December 31,
2021
For the
year ended
December 31,
2022
For the
five months
ended May 31,
2023
RMB (million)
Revenue contribution to the Group . . 7.13 10.7 23.4 12.7
Total revenue .................. 1 1 . 1 10.7 23.4 12.7
Gross profit ................... 5 . 3 5 . 1 12.2 6.0
Net profit ..................... 1 . 7 1 . 2 3 . 7 1 . 8
As of
January 1,
2021
As of
December 31,
2021
As of
December 31,
2022
As of
May 31,
2023
Self-operated stores ................. 9 1 0 9 9
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On June 21, 2021, we entered into the share purchase agreement with Paris Shengyan and Harbin
Jinyanhui, pursuant to which, we agreed to acquire 55% of the equity interests in Harbin Jinyanhui held
by Paris Shengyan at a consideration of RMB18.37 million in cash. The consideration was determined
based on arms-length negotiation with reference to the valuation of such company conducted by an
Independent Third Party valuer, which was evaluated based on the income approach with reference to the
business performance and financial status of such company as of April 30, 2021 and its estimated future
performance. The acquisition was completed on June 22, 2021, after which, Harbin Jinyanhui has become
a non-wholly owned subsidiary of our Company and is owned as to 55% by our Company and 45% by
Qingdao Tonggelin Enterprise Management Partnership (Limited Partnership) (Άุ၍ଣΥྫ
Άุ(Υྫ)), which is an employee shareholding platform of Harbin Jinyanhui and is controlled by the
employees of Harbin Jinyanhui. The following sets out the financial information relating to Harbin
Jinyanhui and its subsidiaries prior to and after the acquisition:
Prior to the
acquisition After the acquisition
From January 1,
2021 to the date
of acquisition
From the date
of acquisition to
December 31,
2021
For the
year ended
December 31,
2022
For the
five months
ended May 31,
2023
RMB (million)
Revenue contribution to the Group . . 6.75 11.0 23.4 12.4
Total revenue .................. 1 1 . 9 1 1 . 0 23.4 12.4
Gross profit ................... 5 . 8 5 . 2 13.8 6.0
Net profit ..................... 2 . 9 1 . 5 4 . 2 2 . 1
As of
January 1,
2021
As of
December 31,
2021
As of
December 31,
2022
As of
May 31,
2023
Self-operated stores ................. 8777
Prior to such acquisitions, Paris Shengyan was then controlled by Ms. Xue, the spouse of Mr. Zheng,
our vice chairman and executive Director, which held all the selling channels that were controlled by Mr.
Zheng, and the acquired companies were engaged in the business of purchasing and selling EBN products
of our Group. We applied, both prior to and subsequent to the acquisitions, our standard terms and
conditions of distributorship to our transactions with such companies including the pricing and payment
terms and policies. Our transactions with such company and related pricing, credit terms, rebate, return
policies and profit margin were in line with the term and conditions we provided to a similar independent
distributor during the Track Record Period. See “Business—Our Sales network—Major Terms of
Distribution Agreements” for details. In light of the good historical performance of such companies and
to reduce the related parties transactions and consolidating our direct selling channels, we acquired them
as our subsidiaries. To ensure a due process for acquisition of such companies, we engaged an Independent
Third Party valuer to evaluate the relevant target companies for determination on the consideration for
such acquisitions, and Mr. Zheng, as the spouse of Ms. Xue, abstained from voting in the shareholders
meeting of our Company for approving such acquisitions.
HISTORY, DEVELOPMENT AND CORPORATE STRUCTURE
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Acquisition of Taiyuan Jixiangyan
On August 9, 2021, we entered into the share purchase agreement with Qingdao Junyuequan
Enterprise Management Partnership (Limited Partnership) (Άุ၍ଣΥྫΆุ(Υྫ))
(“Qingdao Junyuequan”) and Taiyuan Jixiangyan, pursuant to which, we agreed to acquire 55% of the
equity interests in Taiyuan Jixiangyan at a consideration of RMB12.54 million in cash. The consideration
was determined based on arms-length negotiation with reference to the valuation of such company
conducted by an Independent Third Party valuer, which was evaluated based on the income approach with
reference to the business performance and financial status of such company as of June 30, 2021 and its
estimated future performance. The acquisition was completed on September 10, 2021, after which, Taiyuan
Jixiangyan has become a non-wholly owned subsidiary of our Company and is owned as to 55% by our
Company and 45% by Shanxi Y anwulongcheng Enterprise Management Limited Partnership ( ʆГዲႀᎲ
Άุ၍ଣΥྫΆุ(Υྫ)), which is a shareholding platform of employees and then existing
shareholders of Taiyuan Jixiangyan and is controlled by the employees of and the external investors of
Taiyuan Jixiangyan. The following sets out the financial information relating to Taiyuan Jixiangyan and
its subsidiary prior to and after the acquisition:
Prior to the
acquisition After the acquisition
From January 1,
2021 to the date
of acquisition
From the date
of acquisition to
December 31,
2021
For the
year ended
December 31,
2022
For the
five months
ended May 31,
2023
RMB (million)
Revenue contribution to the Group . . 9.83 11.2 32.5 16.8
Total revenue .................. 16.3 11.2 32.5 16.8
Gross profit ................... 7 . 6 6 . 1 19.0 8.2
Net profit ..................... 0 . 9 1 . 8 3 . 7 2 . 7
As of
January 1,
2021
As of
December 31,
2021
As of
December 31,
2022
As of
May 31,
2023
Self-operated stores ................. 7777
Prior to such acquisition, Qingdao Junyuequan was then controlled by Mr. Li, our general manager
and executive Director, which held all the selling channels that were controlled by Mr. Li, and the acquired
company was engaged in the business of purchasing and selling EBN products of our Group. We applied,
both prior to and subsequent to the acquisitions, our standard terms and conditions of distributorship to
our transactions with such companies including the pricing and payment terms and policies. Our
transactions with such company and related pricing, credit terms, rebate and return policies were in line
with the term and conditions we provided to a similar independent distributor during the Track Record
Period. See “Business—Our Sales network—Major Terms of Distribution Agreements” for details on
terms of distributorship. In light of the good historical performance of such company and to reduce the
related parties transactions and consolidating our direct selling channels, we acquired such company as our
subsidiary. To ensure a due process for acquisition of such company, we engaged an Independent Third
Party valuer to evaluate the relevant target company for determination on the consideration for such
acquisition, and Mr. Li was abstained from voting in the shareholders meeting of our Company for
approving such acquisition.
We acquired 55% of the equity interests in each of Beijing Tianfeiyan, Changchun Jinyanhui, Harbin
Jinyanhui and Taiyuan Jixiangyan while the remaining 45% were continued to be owned by their
respective local employees or existing shareholders. We believe this arrangement would provide incentives
for such person and aligning their interests with those of the Group. Our Company have adopted various
internal policies to protect the interests of the Group and its shareholders taken as a whole in such acquired
entities, including application of uniform, standard arrangement in respect of sales of our products to all
stores and sales channels of wholly-owned and non-wholly owned subsidiaries, and enhanced corporate
governance measures in accordance with applicable laws and regulations. The pricing and payment terms
in respect of sales of products of our Group are uniformly determined by us according to our policy
applicable to all distributors including independent distributors. As such, we believe there are no potential
conflict of interest despite the interests held by the respective employees in the relevant entities.
HISTORY, DEVELOPMENT AND CORPORATE STRUCTURE
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For details of the financial impact of the aforementioned acquisitions and analysis on related
goodwill recognized, see “Financial Information—Discussion of Selected Balance Sheet
Items—Goodwill” and Notes 13 and 14 to the Accountants’ Report in Appendix I for more information.
Our PRC legal adviser has confirmed that as of the Latest Practicable Date, we have obtained all
necessary approvals from relevant authorities for the aforementioned major acquisitions, and all the
aforementioned major acquisitions have been properly and legally completed and settled.
None of the aforementioned acquisitions individually or collectively constitute a major acquisition
under Rule 4.05A of the Listing Rules. During the Track Record Period and until the Latest Practicable
Date, except as otherwise disclosed above and in this section, we did not conduct any other acquisitions,
disposals or mergers that we consider to be material to us.
PRINCIPAL SUBSIDIARIES OF OUR COMPANY
Set forth below is our principal subsidiaries which made material contributions to our financial
results during the Track Record Period:
Name of subsidiary
Place of
incorporation
Date of
incorporation
Shareholding
Percentage
Principal business
activities
(%)
Y an Sinong ............ PRC November 23,
2007
100 Producing EBN
products
Y an E-Commerce ........ P R C M a y6 , 2020 100 Sales of EBN products
PRE-IPO INVESTMENTS
Since 2014, with confidence in our business development and management, many investors invested
in our Company, details of which are set forth below:
Particulars and Principal Terms of the Pre-IPO Investments
Particulars and principal terms of the Pre-IPO investments are set forth below:
Name of Pre-IPO
Investors
Date of initial
share purchase
agreement Settlement Date
Approximate
% of equity
interests of
our Company
subscribed by
the investor
Approximate
amount of
consideration
paid (in RMB
million)
Cost per
Share with
nominal
value of
RMB0.2
each (1)
Discount to
the Offer
Price (2)
2014 Investments
ZENG Huanrong (࢙)
and LIU Zhen
(ᄎቤ)
(3) .........
October 31,
2014 and
November 13,
2014
November 21,
2014
3.44% and
1.72%
2.30 and 1.15 RMB0.20 97.80%
Hu Qiaohong
(ߎ)
4)(13) ......
October 31,
2014 and
November 13,
2014
October 29,
2020
8.29% 5.52 RMB0.20 97.80%
HISTORY, DEVELOPMENT AND CORPORATE STRUCTURE
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Name of Pre-IPO
Investors
Date of initial
share purchase
agreement Settlement Date
Approximate
% of equity
interests of
our Company
subscribed by
the investor
Approximate
amount of
consideration
paid (in RMB
million)
Cost per
Share with
nominal
value of
RMB0.2
each (1)
Discount to
the Offer
Price (2)
Guangyao
Tianxiang LP (5) .....
December 1,
2014
December 1,
2014
10.00% 15.00 RMB0.45 95.05%
HUANG Jincheng
(රආϓ)(6)(13) ......
December 28,
2014
October 27,
2020
3.00% 6.00 RMB0.60 93.40%
Hongyan Investment
LP(7) ...........
December 11,
2014 and
February 25,
2015
May 18, 2015 9.76% 19.51 RMB0.60 93.40%
2015 Investments
Guangyao
Tianxiang LP
(5) .....
April 3, 2015 April 21, 2015 6.00% 13.50 RMB0.676 92.56%
ZENG Huanrong (3) .... June 8, 2015 June 8, 2015 1.72% 4.70 RMB0.818 91.00%
2016 Investments
Xiamen Jinyanlai
LP
(8)(13) .........
March 2, 2016 March 2, 2016 10.00% 30.00 RMB0.806 91.13%
Y angming Kangyi LP (7) . . August 1, 2016 November 21,
2016
7.50% 29.38 RMB1.058 88.36%
HUANG Jincheng (6)(13) . . November 16,
2016
October 27,
2020
0.34% 1.35 RMB1.08 88.12%
Guangyao Tianxiang
LP(5), Hu Qiaohong (4),
Hongyan
Investment LP ,
LIU Zhen, Xiamen
Jinyanlai LP , Y angming
Kangyi LP and Jinjun
Hongyan LP
(8)(9)(13) ...
October 28,
2016
November 1,
2016, October
29, 2020,
November 3,
2016,
December 14,
2016,
December 20,
2016, October
31, 2016 and
October 26,
2018
1.60%, 4.17%,
1.52%, 1.51%,
1.10%, 0.80%
and 0.70%
7.20, 5.80,
6.84, 6.80,
5.00, 3.75 and
3.00
RMB1.08 88.12%
HISTORY, DEVELOPMENT AND CORPORATE STRUCTURE
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--- page 137 ---
Name of Pre-IPO
Investors
Date of initial
share purchase
agreement Settlement Date
Approximate
% of equity
interests of
our Company
subscribed by
the investor
Approximate
amount of
consideration
paid (in RMB
million)
Cost per
Share with
nominal
value of
RMB0.2
each (1)
Discount to
the Offer
Price (2)
2017 Investments
HUANG Wenxiao
(ර˖ʃ)(10)(13) ......
January 18, 2017 October 27,
2020
2.00% 10.00 RMB1.20 86.80%
2020 Investments
Torch Investment (7) .... October 16,
2020
October 16,
2020
1.00% 10.00 RMB2.40 73.60%
ZENG Huanrong,
SHI Tao (ᏹ),
WU Junjie (௫),
ZHANG Qing
(ڡ)
11)(13) .......
October 27,
2020
November 6,
2020,
October 27,
2020,
October 28,
2020 and
October 28,
2020
1.00%, 1.25%,
0.50% and
0.50%
18.00, 22.50,
9.00 and 9.00
RMB4.32 52.48%
Tianyi Runli LP
(12) .... October 21,
2020 and May
12, 2023
October 23,
2020 and May
12, 2023
1.00% 18.00 RMB4.32 52.48%
Notes:
(1) For comparison purposes, the cost per Share is presented with the assumption that the Share Subdivision was completed at
that time.
(2) Calculated on the basis of the Offer Price of HK$9.90 per Share, being the mid-point of the indicative Offer Price range, and
the exchange rate in this prospectus.
(3) In 2014, each of ZENG Huanrong, Beijing Bokai Huarui Trading Co., Ltd. (ʮ̡) and LIU Zhen
subscribed for 1.72% of our new equity interests at the consideration of approximately RMB1.15 million. In 2015, Beijing
Bokai Huarui Trading Co., Ltd. (ʮ̡), a previous Pre-IPO Investor and an Independent Third Party,
sold all its equity interests to ZENG Huanrong and ceased to be our Shareholder after such transfer.
(4) The Shares that are currently held by HU Qiaohong were initially acquired and subscribed for by FU Y u by way of
subscription of new Shares, which was held by Mr. Zheng as his nominee shareholder until September 2020. See “—Our
Corporate Structure Immediately prior to the Global Offering” for details of the nominee shareholding arrangements. In
October 2022, FU Y u transferred all his equity interests to HU Qiaohong, his spouse at the consideration of approximately
RMB21.0 million. Since then, HU Qiaohong has become our Shareholder holding such interests. In respect of the relevant
investment, the settlement date disclosed above is the date when the supplemental capital contribution in respect of relevant
Shares to the Company was fully paid to make up the insufficiency of initial capital contribution due to certain procedure
defects relating to initial capital contribution, which was fully rectified by the Company in October 2020. As advised by our
PRC Legal Advisor, the rectification and settlement fully complied with relevant laws and regulations in the PRC.
(5) In December 2014 and April 2015, Guangyao Tianxiang Co., Ltd (ʮ̡) (“Guangyao Tianxiang
Company”) acquired an aggregate of 16.0% equity interests of our Company from Xiamen Suntama at the consideration of
RMB28.5 million in total. In July 2016, Guangyao Tianxiang Company ceased to be our shareholder and transferred all the
equity interests in our Company to Guangyao Tianxiang LP , its controlled entity, at the consideration of RMB10.667 million.
Since then, Guangyao Tianxiang LP has become our Shareholder holding such interests.
(6) In December 2014 and November 2016, Mr. HUANG Jincheng acquired an aggregate of 3.34% of our equity interests from
Xiamen Suntama at the total consideration of RMB7.35 million, which was held by Xiamen Suntama as his nominee
shareholder until October 2020. See “—Our Corporate Structure Immediately prior to the Global Offering” for details of the
nominee shareholding arrangements. The investment money had been settled on October 2014, January 2015, February 2015
and January 2017, respectively. The settlement date disclosed above is the date when the nominee shareholding arrangement
was terminated and fully settled. As advised by our PRC Legal Advisor, the settlement fully complied with relevant laws and
regulations in the PRC.
HISTORY, DEVELOPMENT AND CORPORATE STRUCTURE
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--- page 138 ---
(7) The investment was made by such investor by way of acquisition of the relevant Shares owned by Xiamen Suntama.
(8) The investment was made by such investor by way of subscription of new Shares.
(9) In 2016, Fujian Jinjun V enture Investment Co., Ltd. (ʮ̡) subscribed for 0.70% of our equity interests
at the consideration of RMB3.0 million, which was the nominee shareholder of eight individual ultimate beneficial owners
of Jinjun Hongyan LP and held such equity interests for their behalf until October 2018. See “—Our Corporate Structure
Immediately prior to the Global Offering” for details of the nominee shareholding arrangements. In October 2018, Fujian
Jinjun V enture Investment Co., Ltd. ceased to be our shareholders and transferred all its equity interests in our Company to
Jinjun Hongyan LP at the consideration of RMB3.0 million. Since then, Jinjun Hongyan LP has become our Shareholder.
(10) In January 2017, HUANG Wenxiao acquired 2% of equity interests of our Company from Xiamen Suntama at the
consideration of RMB10.0 million, which was held by Xiamen Suntama as its nominee shareholder until October 2020. See
“—Our Corporate Structure Immediately prior to the Global Offering” for details of the nominee shareholding arrangements.
In March 2023, Mr. Huang acquired from HUANG Wenxiao 1.0% equity interest of our Company at the consideration of
RMB18.0 million, respectively. The consideration was determined after arm’s length negotiations taking into account the
valuation of our Company at that time.
(11) On October 27, 2020, each of SHI Tao, WU Junjie, ZHANG Qing and XIAO Wen ( ӽත), an Independent Third Party, acquired
our equity interests from Y angming Kangyi LP , a pre-IPO Investor, at the consideration of RMB45 million, among which, an
aggregate of 0.3% of our equity interests was held by ZHANG Qing as nominee shareholders of W ANG Junjie (؏ڲNIU
Lei ( ˬཤ) and SHEN Y anqing (૶), three independent third parties, until June 2021. In June 2021, ZHANG Qing acquired
from such three individuals all such equity interests. See “—Our Corporate Structure Immediately prior to the Global
Offering” for details of the nominee shareholding arrangements. In December 2022, Mr. Zheng, Mr. Li, Mr. CHEN Zhigao
and Ms. XIONG Ting acquired from XIAO Wen 0.0679%, 0.0679%, 0.0522% and 0.0522% equity interests of our Company
at the consideration of RMB1.3 million, RMB1.3 million, RMB1.0 million and RMB1.0 million, respectively. After such
transfers, XIAO Wen ceased to be our Shareholder.
(12) In October 2020, Tianyi Tongchuang LP acquired 1% equity interests of our Company at the consideration of RMB18.0
million. In May 2023, Tianyi Tongchuang LP ceased to be our shareholder and transferred all its equity interest in our
Company to Tianyi Runli LP , its associated entity at the consideration of RMB18.0 million. Since then, Tianyi Runli LP has
become our Shareholder holding such interests.
(13) Shares of the relevant investors were held by their respective nominee shareholders at the time of subscription/acquisition for
convenience, which was fully restored at the date of settlement as disclosed above. See “—Our Corporate Structure
Immediately prior to the Global Offering” for details of the nominee shareholding arrangements.
Basis for Determination of Consideration
The consideration of the pre-IPO investments was determined based on arm’s length negotiation
between our Company or the seller and the Pre-IPO Investors with reference to the business performance
of our Company in the previous year, the previous round of valuation of our Company, market value of
comparable companies and estimated business performance of our Company.
Use of Proceeds from the Pre-IPO Investments
The proceeds from the Pre-IPO Investments received by our Company have been fully utilized for,
among others, the development and operation of our business, including but not limited to recruitment,
new business development, technology development and administrative and marketing expenses.
Special Rights of the Pre-IPO Investors
Our Company, Guangyao Tianxiang LP , Hongyan Investment LP , Y angming Kangyi LP , and Torch
Investment and Tianyi Tongchuang LP have entered into certain shareholders agreements respectively
(collectively, the “Pre-IPO Investments Documents”). Pursuant to the Pre-IPO Investments Documents,
such Pre-IPO Investors were granted certain special rights in relation to our Company, including, among
others, (a) right of participation, (b) share transfer restrictions, (c) right of co-sale, (d) redemption right
of our Company (the “Redemption Right”) and (e) right of first refusal.
In anticipation of the Listing, certain waiver and termination agreements dated as of December 17,
2020, December 21, 2020, September 9, 2022, April 23, 2023 and May 12, 2023 were entered into by
relevant parties respectively, pursuant to which, among others, the relevant Pre-IPO Investors irrevocably
and unconditionally agrees that all the special rights under the Pre-IPO Investments Documents (including
the Redemption Right and any other divestment rights granted to the Pre-IPO Investors) shall be
terminated from the effective date of the respective termination agreements.
HISTORY, DEVELOPMENT AND CORPORATE STRUCTURE
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Lock-up Period
Pursuant to the PRC Company Law, within the 12 months following the Listing Date, Shares issued
by the Company prior to the Global Offering (including those held by the Pre-IPO Investors at the time
of the Global Offering) are restricted from trading.
Information about the existing Pre-IPO Investors
The following sets forth background information of our existing Pre-IPO Investors:
Guangyao Tianxiang LP and LIU Zhen
Guangyao Tianxiang LP is a limited partnership established in the PRC, and is principally engaged
in equity investment. The general partner of Guangyao Tianxiang LP is Guangyao Tianxiang Company,
which is owned as to 80% by LIU Zhen, our non-executive Director, and 20% by ZHENG Feng (ࢤ,)
our Supervisor. The limited partners of Guangyao Tianxiang LP are LIU Zhen and ZHENG Feng, who
holds 80% and 20% of limited partnership interests in Guangyao Tianxiang LP , ultimately and
respectively.
Hongyan Investment LP
Hongyan Investment LP is a limited partnership established in the PRC, and is a private equity
investment fund principally engaged in equity investment. The general partner of Hongyan Investment LP
is Beijing Y anshi Investment Management Center (Limited Partnership) ( ̏ԯೋͩҳ༟၍ଣʕː(Υ
ྫ)) (“Beijing Y anshi”), which holds 2.17% of the limited partnership interest in Hongyan Investment LP .
The general partner of Beijing Y anshi is Y ANG Lei ( เᆾ), the brother-in-law of W ANG Y along ( ˮԭᎲ),
our non-executive Director. Except for W ANG Y along who holds 2.17% direct interest and 0.93% indirect
interest (through Beijing Y anshi Investment Management Center (Limited Partnership)) of the limited
partnership interests in Hongyan Investment LP is our non-executive Director, the remaining limited
partners of Hongyan Investment LP are Independent Third Parties and are set out as follow:
Limited Partners
Ultimate
percentage of
limited partnership
interests in
Hongyan
Investment LP (%)
PENG Xiaohua ( ుወശ) ........................................ 21.74
Y ANG Zhen (ࣈ15.22
ZHOU Shuyun ( մᏣථ) ........................................ 10.87
GAO Shuang ( ৷ଗ)........................................... 6.52
TIAN Aijun (ࠏ6.52
LUO Zhiying (ߵ6.52
ZHAO Bolun (ࡐ6.52
TIAN Li ( ͞ᘆ) .............................................. 4.35
PU Meizi (ɿ)............................................ 4.35
ZHOU Y udong (؇4.35
SONG Shenshan( ҂͡ʆ) ........................................ 4.35
LI Xiaochun (݆2.17
ZHANG Qiang ( ੵ੶) .......................................... 2.17
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Yangming Kangyi LP and Jinjun Hongyan LP
Y angming Kangyi LP is a limited partnership established in the PRC, and is a private equity
investment fund principally engaged in equity investment. Jinjun Hongyan LP is a limited partnership
established in the PRC, and is principally engaged in equity investment.
Fujian Y angming V enture Capital Co., Ltd. (ʮ̡) (“Y angming V enture”) is
the general partner of both of Y angming Kangyi LP and Jinjun Hongyan LP . Y angming V enture holds
23.33% limited partnership interest in Y angming Kangyi LP and 28% limited partnership interest in Jinjun
Hongyan LP . Y angming V enture is owned as to 51% by ZHAO Chaoming (׼an Independent Third
Party, and 49% by GONG Y angfan ( ቩජɭ), an Independent Third Party.
The limited partners of Y angming Kangyi LP and Jinjun Hongyan LP , who are Independent Third
Parties, are as follows:
Yangming Kangyi LP
Limited Partners
Percentage of limited
partnership interests in
Y angming Kangyi LP (%)
Shandong Kangfu Investment Co., Ltd. (ʮ̡) .......... 16.67
SDIC Hi-tech Investment Co., Ltd (ʮ̡) ............ 16.67
Fujian Provincial Investment and Development Group Co., Ltd. (ҳ༟
ப΂ʮ̡) ...................................... 16.67
Zhangzhou Pientzehuang Pharmaceutical Co., Ltd. (ࠢ
ʮ̡) .................................................... 16.67
Fujian Jinjun V enture Capital Co., Ltd. (ʮ̡) ....... 6.67
Fuzhou Haike Micro Information Technology Co., Ltd (ҦϞ
ʮ̡) .................................................. 3.33
Jinjun Hongyan LP
Limited Partners
Percentage of limited
partnership interests in
Jinjun Hongyan LP (%)
Fuzhou Xingshengrui Technology Co., Ltd. (ʮ̡) ..... 26.67
Fuzhou Ruilai Information Consulting Co., Ltd (ʮ̡) . 13.33
ZHOU Fang (ٹ10.67
W ANG Xiaoqing ( ˮʃ૶) ....................................... 8.00
CHEN Y unyun ( ௓ʛʛ) ........................................ 8.00
Fuzhou Xinwanghe Technology Co., Ltd (ʮ̡) ...... 5.33
HISTORY, DEVELOPMENT AND CORPORATE STRUCTURE
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Xiamen Jinyanlai LP
Xiamen Jinyanlai LP is a limited partnership established in the PRC, and is principally engaged in
equity investment. The general partner of Xiamen Jinyanlai LP is W ANG Junjie (؏ڲan Independent
Third Party who holds 11.8% of the limited partnership interest in Xiamen Jinyanlai LP , and its limited
partners are individuals who are Independent Third Parties except for the following: (i) DU Y anjun ( ேᜮ
ё), who holds 10.78% of its limited partnership interests, is the spouse of Mr. Li, (ii) ZHENG Y unfeng
(ࢤwho holds 7.0% of its limited partnership interests, is the nephew of Mr. Zheng; (iii) DU
Xiaoqiao (ڬwho holds 1.8% of its limited partnership interests, is the general manger of a wholly
owned subsidiary of our Company; and (iv) Y ANG Gequn ( เဂ໊), who holds 3.33% of its limited
partnership interests, is the substantial shareholder of a non-wholly subsidiary of our Company. The
remaining limited partners are as follows:
Limited Partners
Percentage of limited
partnership interests in
Xiamen Jinyanlai LP (%)
W ANG Junxin (อ) .................................... 1 0
HUANG Y umin ( ර༃͏) .................................... 1 0
XU Jianbiao (உ)...................................... 1 0
SHAN Y aping ( ʆԭ̻) ..................................... 1 0
GUO Shuang ( ெଗ)....................................... 3.33
ZHOU Jun (ࠏ3.33
SONG Xiaoling (ޛ3.33
LUO Dingwei (ਃ) ..................................... 3 . 0
SHEN Y anqing (૶).................................... 2 . 8
SONG Changhong (҃) .................................. 2.33
W ANG Y u (ˮρ)......................................... 1 . 8
NIU Lei ( ˬཤ) ........................................... 1 . 8
ZHENG Zhiwei ( ቍқਃ) .................................... 1.78
ZHANG Zhenglin (؍1.78
Torch Investment
Torch Investment is a limited company established in the PRC. The principal business of Torch
Investment is equity investment, and mainly focuses on investment in emerging companies such as
companies in the industry of consumer, telecommunication and communications as well as research and
experimental development. Torch Investment is owned as to 75.4% by Xiamen Torch Group Co., Ltd. ( ข
ʮ̡) (“Torch Group”), an Independent Third Party, and 24.6% by CDB Development
Fund Co., Ltd. (ʮ̡) (“CDB Development”), an Independent Third Party. Torch Group
is a wholly owned subsidiary of Xiamen Municipal People’s Government State-owned Assets Supervision
and Administration Commission (ึ) and CDB Development is a
wholly owned subsidiary of China Development Bank (ක೯ვБ).
HISTORY, DEVELOPMENT AND CORPORATE STRUCTURE
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Tianyi Runli LP
Tianyi Runli LP is a limited partnership established in the PRC, and is a private equity investment
fund principally engaged in equity investment. The general partner of Tianyi Runli LP is Tianshi
Chuangxin (Fujian) V enture Investment Co., Ltd. (௴อ(ܔ)ʮ̡), which holds 0.05%
of the limited partnership interest in Tianyi Runli LP and is ultimately controlled by ZHOU Guiliang ( մ
Ԅ), an Independent Third Party. The limited partners of Tianyi Runli LP , who are Independent Third
Parties, are as follows:
Limited Partners
Percentage of limited
partnership interests in
Tianyi Runli LP (%)
LI Lingling (ޛޛ15.62
DENG Changwei (ၪ) ....................................... 15.62
JIANG Hongguo (਷) ........................................ 10.41
SHANG Jianjun (ࠏܔ10.41
FU Tao ( ˹ᏹ) ................................................ 6.25
ZHOU Yipu ( մ⥙ዎ) ........................................... 5.21
WU Chunxia (ᒳ) ........................................... 5.21
ZHANG Kewu (؛5.21
PENG Zhigao ( ుқ৷) .......................................... 5.21
ZHOU Guiyan (ዲ) ......................................... 5.21
HUANG Y umei ( ර͗ૠ) ......................................... 5.21
HE Ruiwen ( О๿˖) ............................................ 5.21
FANG Xiaoyun ( ˙ወථ) ......................................... 5.21
Other Individual Investors
Each of HUANG Jincheng, HUANG Wenxiao, ZENG Huanrong, SHI Tao, WU Junjie, ZHANG Qing
and HU Qiaohong is an individual investor. All the individuals are Independent Third Parties.
Public Float
To the best of the Directors’ knowledge, among all the Pre-IPO Investors and existing Shareholders,
the following shareholders are not core connected persons of our Company: Xiamen Jinyanlai LP ,
Y angming Kangyi LP , ZENG Huanrong, HUANG Jincheng, Torch Investment, Tianyi Runli LP , Jinjun
Hongyan LP , HUANG Wenxiao, ZHANG Qing, WU Junjie, HU Qiaohong, SHI Tao, CHEN Zhigao and
XIONG Ting, which holds 143,146,000 Shares with nominal value of RMB0.2 each in total, representing
30.75% of the total issued Shares of our Company upon the completion of the Global Offering and
assuming no exercise of the Over-allotment Option. Among such Shares, 115,719,170 Shares with nominal
value of RMB0.2 each will be converted into H Shares upon the completion of the Global Offering. See
note 12 to “—our corporate structure immediately following the global offering” for details. As a result,
taking into account of such conversion Shares and the H Shares to be issued for the Global Offering, an
aggregate of 147,719,170 H Shares will count towards the public float of our Company upon the
completion of the Global Offering, representing 31.73% of the total issued Shares of our Company upon
the completion of the Global Offering and assuming no exercise of the Over-allotment Option.
HISTORY, DEVELOPMENT AND CORPORATE STRUCTURE
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Joint Sponsors’ Confirmation
On the basis that (i) the consideration for Pre-IPO investments was settled more than 28 clear days
before the date of first submission of the Listing application to the Stock Exchange or no less than 120
clear days before the Listing Date; and (ii) the special rights granted to the Pre-IPO Investors had been
suspended or terminated prior to the submission of the application for the Listing and/or will be terminated
upon completion of the Listing, in compliance with Guidance Letter HKEX-GL43-12, the Joint Sponsors
confirm that the Pre-IPO Investments are in compliance with Guidance Letter HKEX-GL29-12 issued by
the Stock Exchange in January 2012 and updated in March 2017, Guidance Letter HKEX-GL43-12 issued
by the Stock Exchange in October 2012 and updated in July 2013 and in March 2017 and Guidance Letter
HKEX-GL44-12 issued by the Stock Exchange in October 2012 and updated in March 2017.
PREVIOUS A-SHARE LISTING ATTEMPTS AND REASONS FOR THE LISTING
On December 14, 2021, we filed with the CSRC, and it accepted, our application for A share listing.
In September 2022, in light of the uncertainty of the overall vetting process, we decided to voluntarily
withdraw our A share listing application. On November 29, 2022, after discussing with our Shareholders
and taking into account the then market conditions in light of the steady growth of the Company’s business
performance at that time, as well as the advice from the tutoring agency, we decided to restart our A share
listing application preparation process and filed with the Xiamen Office of the CSRC ( ʕ਷ᗇՎ္ຖ၍ଣ
္၍҅) filing materials for the pre-listing tutoring in preparation for our A share listing
application, which had been accepted. However, considering that the overall A share vetting process
continued to be uncertain, our future business development plan as well as the industry-related factor and
that a listing on the Stock Exchange would provide our Company with an international platform to gain
access to foreign capital and to promote the Group to overseas investors, we decided to seek a listing of
our H Shares on the Stock Exchange to expedite our listing plan in early 2023 and had withdrawn our
pre-listing tutoring filing on June 9, 2023.
Our Company has received certain comments from the CSRC in respect of its previous A share listing
attempts. We have taken into consideration of such comments in preparing for the Listing, and have
resolved matters that are relevant to the Listing, and our Directors confirmed that we have resolved matters
relating to the Company’s eligibility and suitability for the Listing. To the best of our Directors’
knowledge, save as disclosed in the prospectus, our Directors are not aware of (1) any other matters
relating to the previous A Share listing attempts that are relevant to the Listing and should be reasonably
highlighted in this prospectus for investors to form an informed assessment of our Company; (2) any
enquiries from the CSRC relating to the previous A share listing attempts that would affect our Company’s
suitability for listing on the Stock Exchange; (3) any other matters relating to the previous A share listing
attempts that may have implications on our Company’s suitability for listing on the Stock Exchange or on
the truthfulness, accuracy and completeness of information disclosed in this prospectus; and (4) any other
matters that need to be brought to the attention of the Stock Exchange and investors in Hong Kong in
relation to the previous A share listing attempts.
Base on the due diligence work performed by the Joint Sponsors, nothing material has come to the
attention of the Joint Sponsors that contradicts the Directors’ view disclosed above regarding our
Company’s previous A share listing attempts.
HISTORY, DEVELOPMENT AND CORPORATE STRUCTURE
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CAPITALIZATION TABLE
The table below is a summary of the capitalization of our Company immediately prior to the Share
Subdivision, as of the Latest Practicable Date and immediately following the completion of the Global
Offering and Conversion of Unlisted Shares into H Shares:
Shares held immediately
prior to the
Share Subdivision
Shares held as of
the Latest Practicable Date
(assuming the Share
Subdivision is completed)
Shares held immediately following the
completion of the Global Offering and
Conversion of Unlisted Shares into H Shares
(assuming the Over-allotment Option
is not exercised)
Whether the
H shares
will be
counted
towards the
public float
Name of
Shareholder
Description of
Shares
Number of
Shares
Percentage of
shareholding
in our total
issued share
capital
Number of
Shares
Percentage of
shareholding
in our total
issued share
capital
Number of
Shares
Percentage of
shareholding
in our
Unlisted
Shares/H
Shares
Percentage of
shareholding
in our total
issued share
capital
Our Group of Controlling Shareholders and Substantial Shareholders
Xiamen Suntama . . Unlisted
Shares
18,357,112 21.17% 91,785,560 21.17% 45,892,780 33.60% 9.86% No
H Shares – – – – 45,892,780 13.95% 9.86%
Mr. Huang ..... Unlisted
Shares
867,000 1.00% 4,335,000 1.00% – – – No
H Shares – – – – 4,335,000 1.32% 0.93%
Mr. Zheng ..... Unlisted
Shares
6,654,608 7.68% 33,273,040 7.68% 16,636,520 12.18% 3.57% No
H Shares – – – – 16,636,520 5.06% 3.57%
M r . L i ...... Unlisted
Shares
6,649,829 7.67% 33,249,145 7.67% 16,624,570 12.17% 3.57% No
H Shares – – – – 16,624,575 5.05% 3.57%
Jinyan Tengfei
L P .......
Unlisted
Shares
1,641,664 1.89% 8,208,320 1.89% – – – No
H Shares – – – – 8,208,320 2.50% 1.76%
XUE Fengying . . . Unlisted
Shares
1,725,000 1.99% 8,625,000 1.99% – – – No
H Shares – – – – 8,625,000 2.62% 1.85%
Guangyao Tianxiang
L P .......
Unlisted
Shares
12,000,000 13.84% 60,000,000 13.84% 30,000,000 21.97% 6.44% No
H Shares – – – – 30,000,000 9.12% 6.44%
LIU Zhen ..... Unlisted
Shares
2,404,095 2.77% 12,020,475 2.77% – – – No
H Shares – – – – 12,020,475 3.65% 2.58%
Hongyan Investment
L P .......
Unlisted
Shares
7,771,492 8.96% 38,857,460 8.96% – – – No
H Shares – – – – 38,857,460 11.81% 8.35%
Other Shareholders
Xiamen Jinyanlai
L P .......
Unlisted
Shares
8,333,334 9.61% 41,666,670 9.61% – – – Y es
H Shares – – – – 41,666,670 12.67% 8.95%
HU Qiaohong . . . Unlisted
Shares
6,595,731 7.61% 32,978,655 7.61% 16,489,330 12.07% 3.54% Y es
H Shares – – – – 16,489,325 5.01% 3.54%
Y angming Kangyi
L P .......
Unlisted
Shares
3,333,333 3.84% 16,666,665 3.84% 8,333,330 6.10% 1.79% Y es
H Shares – – – – 8,333,335 2.53% 1.79%
HISTORY, DEVELOPMENT AND CORPORATE STRUCTURE
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Shares held immediately
prior to the
Share Subdivision
Shares held as of
the Latest Practicable Date
(assuming the Share
Subdivision is completed)
Shares held immediately following the
completion of the Global Offering and
Conversion of Unlisted Shares into H Shares
(assuming the Over-allotment Option
is not exercised)
Whether the
H shares
will be
counted
towards the
public float
Name of
Shareholder
Description of
Shares
Number of
Shares
Percentage of
shareholding
in our total
issued share
capital
Number of
Shares
Percentage of
shareholding
in our total
issued share
capital
Number of
Shares
Percentage of
shareholding
in our
Unlisted
Shares/H
Shares
Percentage of
shareholding
in our total
issued share
capital
Jinjun Hongyan
L P .......
Unlisted
Shares
555,556 0.64% 2,777,780 0.64% – – – Y es
H Shares – – – – 2,777,780 0.84% 0.60%
ZENG Huanrong . . Unlisted
Shares
3,129,333 3.61% 15,646,665 3.61% – – – Y es
H Shares – – – – 15,646,665 4.76% 3.36%
HUANG
Jincheng ....
Unlisted
Shares
2,250,000 2.60% 11,250,000 2.60% – – – Y es
H Shares – – – – 11,250,000 3.42% 2.42%
HUANG
Wenxiao ....
Unlisted
Shares
799,667 0.92% 3,998,335 0.92% – – – Y es
H Shares – – – – 3,998,335 1.22% 0.86%
S H I T a o ...... Unlisted
Shares
1,041,667 1.20% 5,208,335 1.20% 2,604,170 1.91% 0.56% Y es
H Shares – – – – 2,604,165 0.79% 0.56%
Torch Investment
L P .......
Unlisted
Shares
833,333 0.96% 4,166,665 0.96% – – – Y es
H Shares – – – – 4,166,665 1.27% 0.90%
Tianyi Runli LP . . Unlisted
Shares
833,333 0.96% 4,166,665 0.96% – – – Y es
H Shares – – – – 4,166,665 1.27% 0.90%
WU Junjie ..... Unlisted
Shares
416,667 0.48% 2,083,335 0.48% – – – Y es
H Shares – – – – 2,083,335 0.63% 0.45%
ZHANG Qing . . . Unlisted
Shares
416,667 0.48% 2,083,335 0.48% – – – Y es
H Shares – – – – 2,083,335 0.63% 0.45%
XIONG Ting .... Unlisted
Shares
45,289 0.05% 226,445 0.05% – – – Y es
H Shares – – – – 226,445 0.07% 0.05%
CHEN Zhigao . . . Unlisted
Shares
45,290 0.05% 226,450 0.05% – – – Y es
H Shares – – – – 226,450 0.07% 0.05%
Public
Shareholders . . .
H Shares – – – – 32,000,000 9.73% 6.87% Y es
Total ....... 86,700,000 100% 433,500,000 100% 465,500,000 100% 100%
Note: See “—Our Corporate Structure Immediately prior to the Global Offering” and “—Our Corporate Structure Immediately
following the Global Offering” for details of the Shareholders.
HISTORY, DEVELOPMENT AND CORPORATE STRUCTURE
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OUR CORPORATE STRUCTURE IMMEDIATELY PRIOR TO THE GLOBAL OFFERING
The following diagram illustrates the corporate and shareholding structure of our Company immediately prior to the completion of the Global Offerin g:
Xiamen
Suntama(1)
Mr. Huang
The Company(9)
Guangyao
Tianxiang
LP(2)
Xiamen
Jinyanlai
LP(2)(8)
Hongyan
Investment
LP(2)
Mr. Zheng LI You
Quan
HU
Qiaohong(2)(8)
Yangming
Kangyi
LP(2)
ZENG
Huan Rong(2)
LIU Zhen HUANG
Jin Cheng(2)(8)
HUANG
Wen Xiao(2)(8)
Torch
Investment
LP(2)
SHI Tao(2) Tianyi
Runli LP(2)
Jinjun
Hongyan
LP(2)(8)
WU
Jun Jie(2)
ZHANG
Qing(2)(8)
XIONG
Ting
CHEN
Zhigao
Zhiqiao
Industry
Shanghai
Yan Palace
Shenzhen
Jinyanlai
Guangzhou
Wanyan
Fuzhou Bao
Yanlai
Yan
E-Commerce
Yan
Sinong
Xiamen
Jinyange
Yan Health Guanghe Yan
Palace
Taiyuan
Jixiangyan(3)
Harbin
Jinyanhui(4)
Beijing
Tianfeiyan(5)
Changchun
Jinyanhui
(6)
Yunnan
Zanlong(7)
100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 55% 55% 55% 55% 44%
21.17% 1.00% 7.68% 7.67%
Jinyan
Tengfei
LP(10)
XUE
Fengying(11)
1.89% 1.99% 13.84% 9.61% 8.96% 7.61% 3.84% 3.61%2.77% 2.60% 0.92% 1.20% 0.96% 0.96%0.64% 0.48% 0.48% 0.05% 0.05%
Notes:
(1) As of the Latest Practicable Date, Mr. Huang, our founder, chairman and our executive Director, and HUANG Junhao (Ⴔ), the son of Mr. Huang, held 90% and 10% of the shareholding
of Xiamen Suntama, respectively.
(2) See “—Pre-IPO Investment—Information about the Existing Pre-IPO Investors” for more information.
(3) Shanxi Y anwu Longcheng Enterprise Management Partnership (Limited Partnership) (Άุ၍ଣΥྫΆุ(Υྫ)) held 45% of the shareholding of Taiyuan Jixiangyan. The
sole general partner of Shanxi Y anwu Longcheng Enterprise Management Partnership (Limited Partnership) (Άุ၍ଣΥྫΆุ(Υྫ)) is an Independent Third Party.
(4) Qingdao Tonggelin Enterprise Management Partnership (Limited Partnership) (Άุ၍ଣΥྫΆุ(Υྫ)) held 45% of the shareholding of Harbin Jinyanhui. The sole
general partner of Qingdao Tonggelin Enterprise Management Partnership (Limited Partnership) (Άุ၍ଣΥྫΆุ(Υྫ)) is an Independent Third Party.
(5) Qingdao Zhenpindao Enterprise Management Partnership (Limited Partnership) (༸Άุ၍ଣΥྫΆุ(Υྫ)) held 45% of the shareholding of Beijing Tianfeiyan. The sole
general partner of Qingdao Zhenpindao Enterprise Management Partnership (Limited Partnership) (༸Άุ၍ଣΥྫΆุ(Υྫ)) is an Independent Third Party.
(6) Qingdao Pintianxia Enterprise Management Partnership (Limited Partnership) (˂ɨΆุ၍ଣΥྫΆุ(Υྫ)) held 45% of the shareholding of Beijing Tianfeiyan. The sole
general partner of Qingdao Pintianxia Enterprise Management Partnership (Limited Partnership) (˂ɨΆุ၍ଣΥྫΆุ(Υྫ)) is an Independent Third Party.
(7) Mao Min ( ˣઽ), Song Changhong (҃) and Y ang Gequn ( เဂ໊) held approximately 20.92%, 20.08% and 15.00% of the shareholding of Y unnan Zanlong, respectively. Apart from
the shareholdings relating to Y unnan Zanlong, all of them are Independent Third Parties.
(8) There were historically nominee shareholding arrangements in respect of the relevant shareholdings. As of the Latest Practicable Date, these no minee shareholding arrangements had been
terminated and the restorations have been completed.
HISTORY, DEVELOPMENT AND CORPORATE STRUCTURE
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As advised by the PRC Legal Advisor, there were no disputes regarding the above nominee shareholding arrangements and the above nominee shareholding arrangements did not violate
any relevant compulsory PRC laws and regulations.
Details of the nominee shareholding arrangements as mentioned above are set forth as follows:
(i) Jinjun Hongyan LP: The Shares purchased by Jinjun Hongyan LP was held by Fujian Jinjun V enture Investment Co., Ltd. (ʮ̡), as the nominee shareholder
of the eight individual ultimate beneficial owners of Jinjun Hongyan LP , from December 2016 to October 2018 as these eight individuals preferred to ho ld their investment through
a holding platform and thus tentatively entrusted the nominee shareholder to hold such Shares until the platform was incorporated. The nominee share holding arrangement was
terminated in October 2018 when Jinjun V enture transferred all such Shares to Jinjun Hongyan LP .
(ii) HU Qiaohong: The Shares held by HU Qiaohong was transferred from Mr. FU Y u, her spouse, in October 2022. Prior to that, the Shares subscribed for and acquired by Mr. FU
Y u were held by Mr. Zheng, as Mr. Fu’s nominee shareholder, from October 2014 to September 2020. Given Mr. FU Y u is a resident of Macau, he preferred to sim plify administrative
affairs and not to participate in the relevant administrative procedures regarding foreign investment at early stage in light of their complexity in cluding completing the relevant
business registration and participating in the relevant procedures for each subsequent shareholding changes. The nominee shareholding arrangeme nt was terminated in September
2020 when Mr. Zheng transferred all such Shares to Mr. Fu.
(iii) HUANG Jincheng: The Shares purchased by HUANG Jincheng was held by Xiamen Suntama, as the nominee shareholder of HUANG Jincheng, from December 2014 to October
2020 as HUANG Jincheng preferred not to participate in the administrative procedures at early stage in light of its complexity including the requirem ents on participating in
administrative procedures for each subsequent shareholding changes. To simplify administrative affairs and due to his trust in Mr. Huang, HUANG Jin cheng entrusted Xiamen
Suntama to hold the equity interest on his behalf. The nominee shareholding arrangement was terminated in October 2020 when Xiamen Suntama transferr ed all such Shares to
HUANG Jincheng.
(iv) HUANG Wenxiao : The Shares purchased by HUANG Wenxiao was held by Xiamen Suntama, as the nominee shareholder of HUANG Wenxiao, from January 2017 to October 2020
as HUANG Wenxiao preferred not to participate in the administrative procedures at early stage in light of its complexity including the requirements o n participating in administrative
procedures for each subsequent shareholding changes and that he held a relatively small proportion in the interest of the Company. To simplify admini strative affairs and due to
his trust in Mr. Huang, HUANG Wenxiao entrusted Xiamen Suntama to hold the equity interest on his behalf. The nominee shareholding arrangement was ter minated in October
2020 when Xiamen Suntama transferred all such Shares to HUANG Wenxiao.
(v) ZHANG Qing: Certain of the Shares held by ZHANG Qing was purchased by him from W ANG Junjie (؏ڲNIU Lei ( ˬཤ) and SHEN Y anqing (૶) in June 2021. Prior
to that, such Shares were purchased by the aforementioned three individuals and were held by ZHANG Qing, as the nominee shareholder of such three indiv iduals, from October
2020 to June 2021 as the size of investments of these three individuals were relatively small and they preferred not to participate in the administrati ve procedures at early stage
in light of its complexity including the inconvenience of undergoing each subsequent shareholding change procedures. W ANG Junjie, NIU Lei and SHEN Y anqing therefore
respectively entrusted ZHANG Qing to acquire the contribution amount of the Company held by them. The nominee shareholding arrangement was terminat ed in June 2021 when
these three individuals sold their interests to ZHANG Qing.
(vi) Xiamen Jinyanlai LP: All the interests of ZHANG Zhenglin and ZHENG Zhiwei, who are two limited partners of Xiamen Jinyanlai LP , were held by Mr. Li, as the nominee
shareholder of these two individuals, from October 2016 to June 2021 as the size of investments of these two individuals were relatively small and they preferred not to participate
in the administrative procedures at early stage in light of its complexity including the inconvenience of undergoing each subsequent shareholding c hange procedures. They
respectively entrusted Mr. Li to increase capital in the Company. The nominee shareholding arrangement was terminated in June 2021 when these two ind ividuals transferred their
direct interests in our Company to Mr. Li in exchange for the corresponding limited partnership interests in Xiamen Jinyanlai LP .
(9) As of the Latest Practicable Date, in addition to the subsidiaries listed in the table above, which are the level I subsidiaries directly held by our Company, our Company also has (A) 14
wholly owned subsidiaries, which are our indirectly-held subsidiaries. The shareholding structures of such subsidiaries are as follow: (a) Y an E-C ommerce held 100% of the shareholding
of (i) Xiamen Y an Palace Cultural Gift Co., Ltd. (ʮ̡) and (ii) Xiamen Y an Palace Technology Development Co., Ltd. (ʮ̡) (formerly
known as Xiamen Y an Palace Jizhi E-Commerce Technology Co., Ltd. (ʮ̡)); (b) Beijing Tianfeiyan held 100% of the shareholding of (i) Beijing
Fangyan Food Co., Ltd. (ப΂ʮ̡), (ii) Beijing Y anwu Yipin Trading Co., Ltd. (ப΂ʮ̡), (iii) Beijing Y ushengyan Trading Co., Ltd. ( ̏ԯ੿
HISTORY, DEVELOPMENT AND CORPORATE STRUCTURE
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ʮ̡), (iv) Beijing Shengzhiyan Trading Co., Ltd. (ʮ̡) and (v) Beijing Yixin Trading Co., Ltd. (ʮ̡); (c) Changchun Jinyanhui held
100% of the shareholding of (i) Changchun Jinyange Trading Co., Ltd. (ʮ̡) and (ii) Changchun Y uyanfu Trading Co., Ltd. (ʮ̡); (d)
Harbin Jinyanhui held 100% of the shareholding of (i) Harbin Mingyan Trading Co., Ltd. (ʮ̡) and (ii) Harbin Zunyan Trading Co., Ltd. (ဧᏵ̹యዲਠ൱Ϟ
ʮ̡); (e) Taiyuan Jixiangyan held 100% of the shareholding of (i) Taiyuan Mingyan Trading Co., Ltd. (ʮ̡) and (ii) Taiyuan Shengyan Trading Co., Ltd. (ࡡ
ʮ̡); and (f) Y an Sinong held 100% interest of the shareholding of Xiamen Y an Palace Silon Biotechnology Co., Ltd. (ʮ̡); and (B) one
non-wholly owned level II subsidiary namely, Tonghua Jinwo Trading Co., Ltd. (ʮ̡) in which Changchun Jinyanhui and Zhou Tongyao ( մഁ᪙) held 90% and 10%
of its shareholding respectively.
(10) Mr. Huang, our founder, chairman and executive Director, is the general partner of Jinyan Tengfei LP .
(11) XUE Fengying is the spouse of Mr. Zheng, our vice chairman and executive Director.
HISTORY, DEVELOPMENT AND CORPORATE STRUCTURE
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OUR CORPORATE STRUCTURE IMMEDIATELY FOLLOWING THE GLOBAL OFFERING
The following diagram illustrates the corporate and shareholding structure of our Company immediately following the completion of the Global
Offering and the Conversion of Unlisted Shares into H Shares (assuming the Over-allotment Option is not exercised):
Xiamen
Suntama(1)
Mr. Huang
The Company(9)
Guangyao
Tianxiang
LP(2)
Xiamen
Jinyanlai
LP(2)
Hongyan
Investment
LP(2)
Mr. Zheng LI You
Quan
HU
Qiaohong(2)(8)
Yangming
Kangyi
LP(2)
ZENG
Huan Rong(2)
LIU Zhen HUANG
Jin Cheng(2)(8)
HUANG
Wen Xiao(2)(8)
Torch
Investment(2)
SHI Tao(2) Tianyi
Runli
LP(2)
Jinjun
Hongyan
LP(2)(8)
WU
Jun Jie(2)
ZHANG
Qing(2)(8)
XIONG
Ting
CHEN
Zhigao
Zhiqiao
Industry
Shanghai
Yan Palace
Shenzhen
Jinyanlai
Guangzhou
Wanyan
Fuzhou Bao
Yanlai
Yan
E-Commerce
Yan
Sinong
Xiamen
Jinyange
Yan HealthGuanghe Yan
Palace
Taiyuan
Jixiangyan(3)
Harbin
Jinyanhui(4)
Beijing
Tianfeiyan(5)
Changchun
Jinyanhui
(6)
Yunnan
Zanlong(7)
100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 55% 55% 55% 55% 44%
19.72% 0.93% 7.15% 7.14%
Jinyan
Tengfei
LP(10)
XUE
Fengying(11)
1.76% 1.85% 12.89% 8.95% 8.35% 7.09% 3.58% 3.36%2.58% 2.42% 0.86% 1.12% 0.90% 0.90%0.60% 0.45% 0.45% 0.05% 0.05%
Public
Shareholders
6.87%
Notes:
(1)-(11): See notes to the corporate chart in “—Our Corporate Structure Immediately Prior to the Global Offering”.
(12) Immediately upon the completion of the Global Offering and assuming the Share Subdivision is completed, the following shares held by the relevan t Shareholder will be converted into
H Shares: (i) 45,892,780 Shares held by Xiamen Suntama; (ii) 4,335,000 Shares held by Mr. Huang; (iii) 16,636,520 Shares held by Mr. Zheng; (iv) 16,624 ,575 Shares held by Mr. Li;
(v) 8,208,320 Shares held by Jinyan Tengfei LP; (vi) 8,625,000 Shares held by Ms. Xue; (vii) 16,489,325 Shares held by HU Qiaohong; (viii) 8,333,335 Sh ares held by Y angming Kangyi
LP; (ix) 15,646,665 Shares held by ZENG Huanrong; (x) 12,020,475 Shares held by LIU Zhen; (xi) 11,250,000 Shares held by HUANG Jincheng; (xii) 2,604,1 65 Shares held by SHI
Tao; (xiii) 4,166,665 Shares held by Torch Investment; (xiv) 4,166,665 Shares held by Tianyi Runli LP; (xv) 3,998,335 Shares held by HUANG Wenxiao; (x vi) 2,777,780 Shares held
by Jinjun Hongyan LP; (xvii) 2,083,335 Shares held by ZHANG Qing; (xviii) 30,000,000 Shares held by Guangyao Tianxiang LP; (xix) 41,666,670 Shares he ld by Xiamen Jinyanlai
LP; (xx) 38,857,460 Shares held by Hongyan Investment LP; (xxi) 2,083,335 Shares held by WU Junjie; and (xxii) 226,450 Shares held by CHEN Zhigao; (xxi ii) 226,445 Shares held
by XIONG Ting. Such Shares collectively represent 63.79% of the total issued Shares of our Company upon the completion of the Global Offering and assum ing no exercise of the
Over-allotment Option. The Conversion of Unlisted Shares into H Shares has been approved by the CSRC on September 25, 2023 and is still subject to the ap proval by the Hong Kong
Stock Exchange.
(13) To the best of the Directors’ knowledge, immediately upon the completion of the Global Offering and assuming the Share Subdivision is completed, the following shareholders will not
be core connected persons of our Company: Xiamen Jinyanlai LP , Y angming Kangyi LP , ZENG Huanrong, HUANG Jincheng, SHI Tao, Torch Investment, Tianyi R unli LP , Jinjun
Hongyan LP , HUANG Wenxiao, ZHANG Qing and WU Junjie, HU Qiaohong, CHEN Zhigao and XIONG Ting, which collectively will hold 143,146,000 Shares, repres enting 30.75%
of the total issued Shares of our Company upon the completion of the Global Offering and assuming no exercise of the Over-allotment Option. Among such S hares, 115,719,170 Shares
will be converted into H Shares upon the completion of the Global Offering. See note 10 to “—our corporate structure immediately following the global o ffering” for details. As a result,
taking into account of such conversion Shares and the H Shares to be issued pursuant to the Global Offering, an aggregate of 147,719,170 H Shares will co unt towards the public float
of our Company upon the completion of the Global Offering, representing 31.73% of the total issued Shares of our Company upon the completion of the Glob al Offering and assuming
no exercise of the Over-allotment Option.
HISTORY, DEVELOPMENT AND CORPORATE STRUCTURE
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OUR PHILOSOPHY
We harness the nourishing power of nature to bring people beauty and wellness. (˂್,ᘆ਄
ੰf)
We curate a variety of edible bird’s nest products to foster a valued sense of self-care and hospitality,
catering to consumers’ aspiration for quality lifestyle and social engagement. (ٙ
ۜ,ᝈ,৛Ӌf)
OVERVIEW
We are a leading brand in China’s edible bird’s nest (“EBN”) product market, dedicated to the
development, production and marketing of high-quality modern EBN products. We are the largest EBN
product company in the traceable EBN market in China with a market share of 14.0% in terms of retail
value in 2022, according to the F&S Report. We also ranked No.1 by the number of EBN specialty
storefronts and the volume of CAIQ-certified imports in the EBN product market in China in 2022,
according to the same source. We have developed an advanced and sophisticated product research and
development capability, a diversified product portfolio, a robust quality assurance scheme, and an
established sales network, which has allowed us to prevail in the market competition.
For over 400 years, the Chinese people have considered EBN as a premium natural health delicacy
with various perceived health benefits and nutritional value. Modern scientific studies from domestic and
overseas academic institutions in recent years have also supported the Chinese traditional wisdom on
perceived health benefits of EBN with scientific testing and experimentation. Numerous authoritative
scientific studies have shown from multiple aspects that EBN offers various health benefits in internal and
external use. See “Industry Overview” for details. With the broad and venerable cultural foundations and
history of consumptions, China has been the preeminent market and home to the largest consumer base for
EBN products. Driven by the rising living standard and the growing health awareness among Chinese
consumers, EBN has been perceived as healthy food products with various functional benefits among
many Chinese consumers. As an industry leader, we have outperformed industry average, with a revenue
growth from RMB1,301.2 million in 2020 to RMB1,729.9 million in 2022, at a CAGR of 15.3%. Our total
retail value in the market also increased at a high CAGR of 12.3% from 2020 to 2022, which was 8.6
percentage points higher than the industry average and was the highest among the top five EBN brands
during the same years, according to the F&S Report. According to the same source, China’s EBN market,
in terms of retail value, is expected to grow from RMB43.0 billion in 2022 to RMB92.1 billion in 2027,
at a CAGR of 16.5%. We believe we are well-positioned to capture the substantial market opportunity,
leveraging our market share and revenue growth.
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Consumer experience is our top priority. We leverage modern technology to continually drive
product innovation that elevates consumer experience. Our product portfolio primarily consists of three
product categories, i.e., pure EBN products, “EBN+” products and “+EBN” products, to meet the
differentiated consumer needs for experience in different life scenarios. In 2022, we had 250 SKUs, among
which 194 were pure EBN SKUs under four major product series, including One Nest (ມዲ), Freshly
Stewed Bird’s Nest ( ᒻዮዲ၊), Crystal Sugar Bird’s Nest (ዲ), and dried EBN ( ৻ዲ၊). One Nest ,
launched in 2012, was among the earliest mass-produced, ready-to-serve EBN products in China with a
standardized manufacturing process. This manufacturing process has allowed us to preserve the EBN’s
original taste and, at the same time, ensure consistent product quality. After over a decade of development,
One Nest has expanded in variety and become our signature product series beloved by our customers. In
2020, 2021, 2022 and the five months ended May 31, 2022 and 2023, our revenue generated from One Nest
(pure EBN) was RMB559.3 million, RMB661.4 million, RMB672.6 million, RMB288.0 million and
RMB283.4 million, respectively. In addition, leveraging our extensive research of active ingredients
extraction from EBN, we have expanded the value chain of the EBN industry by developing other EBN
products, including “EBN+” products (which are ready-to-serve EBN products enhanced with other
ingredients and/or nutrients), such as One Nest — Vitality (ມዲ–ʩंಛ) and Crystal Sugar Bird’s Nest
with Ginseng (ዲ), and “+EBN” products (which are products that feature EBN as an
enhancement for elevated nutrition or other benefits), such as EBN porridge and EBN skincare products
which use bird’s nest peptides as an enhancement. The following diagram is a simplified illustration of our
product matrix.
One Nest–
Vitality
One Nest
Crystal Sugar
Bird’s Nest
Crystal Sugar Bird’s
Nest with ginsengs
EBN facial maskEBN cleanser
EBN essence
spray
Drinkable bird’s
nest peptide
essence
Little Blue
Bottle
Drinkable EBN
essence with
ginsengs
EBN with quinoa and
gas bladder
Iced EBN zongzi
EBN
porridge
C
r
y
s
Bi
r
s
t
al
 S
ug
a
r
C
r
y
s
Freshly Stewed
Bird’s Nest
Dried EBN
We have developed a geographically diverse brick-and-mortar sales network, consisting of both
self-operated stores and distributor-operated stores. As of May 31, 2023, we had a nationwide offline sales
network consisting of 91 self-operated stores and 214 offline distributors covering 614 distributor-
operated stores in China. The number of our offline distributors increased from 136 as of January 1, 2020
to 214 as of May 31, 2023. Among the 136 distributors as of January 1, 2020, 111, or 81.6%, of them had
remained with us as of May 31, 2023. To capture the rapid growth of e-commerce in recent years, we have
also expanded our online presence on major e-commerce or social media platforms, such as Tmall,
JD.com, Douyin and Xiaohongshu. In addition, we have launched products specifically designed for online
channels, such as Freshly Stewed Bird’s Nest, which has quickly gained popularity among younger
consumers. Our revenue generated from sales of Freshly Stewed Bird’s Nests increased from RMB321.1
million in 2020 to RMB485.4 million in 2022, at a CAGR of 22.9%, and increased by 14.0% from
RMB188.7 million in the five months ended May 31, 2022 to RMB215.2 million in the five months ended
May 31, 2023.
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We stay close to our customers. Through the Y an Palace (܊membership mini program, our
Golden Y an Club (ዲ⸭) membership program, and other membership programs on major e-commerce
platforms, we have cultivated a loyal membership network of customers with a tiered membership system
to drive customer stickiness and repeated purchase. As of the Latest Practicable Date, we had over 1.8
million customers registered in our membership programs. Through this membership network, we organize
various interactive events to maintain direct engagement with our customers. We have gained considerable
insight from our interaction with customers, which allows us to continually optimize our product offerings
and customer services. In 2020, 2021 and 2022, we had approximately 143,700, 168,200 and 204,800
paying customers registered in our membership programs, respectively, accounting for 25.0%, 22.1% and
23.5% of our total registered customers as of December 31, 2020, 2021 and 2022, respectively. In the five
months ended May 31, 2023, we had approximately 117,600 paying customers registered in our
membership programs, accounting for 7.2% of our total registered customers as of May 31, 2023. In 2020,
2021, 2022 and the five months ended May 31, 2023, purchases from such paying customers registered
in our membership programs was RMB616.0 million, RMB806.4 million, RMB1,057.5 million and
RMB500.0 million, respectively, representing an average purchase amount per registered paying customer
of approximately RMB4,280, RMB4,790, RMB5,150 and RMB4,240, respectively.
Our philosophy and primary focus are bringing people beauty and wellness, quality and heritage of
EBN products. We collaborate with upstream suppliers to ensure strict control over raw material
procurement, implement stringent supplier selection process, and source natural, high-quality and
cruelty-free EBN from Southeast Asia. We relentlessly bring EBN to consumers in their natural and pure
form.
We achieved robust growth and profitability during the Track Record Period. Our revenue increased
from RMB1,301.2 million in 2020 to RMB1,729.9 million in 2022, at a CAGR of 15.3%, and increased
by 12.3% from RMB696.9 million in the five months ended May 31, 2022 to RMB782.6 million in the
five months ended May 31, 2023. Our net profit increased from RMB123.4 million in 2020 to RMB205.9
million in 2022, at a CAGR of 29.2%, and increased by 20.0% from RMB83.8 million in the five months
ended May 31, 2022 to RMB100.5 million in the five months ended May 31, 2023. Our net profit margin
was 9.5%, 11.4%, 11.9%, 12.0% and 12.8% for 2020, 2021, 2022 and the five months ended May 31, 2022
and 2023, respectively. Our adjusted net profit (non-IFRS measure) increased from RMB123.9 million in
2020 to RMB211.1 million in 2022, at a CAGR of 30.5%, and increased by 32.4% from RMB85.9 million
in the five months ended May 31, 2022 to RMB113.7 million in the five months ended May 31, 2023.
According to the F&S Report, our profitability during the Track Record Period was higher than the
industry average, which was estimated to be 5.0% to 9.0% during the same periods. See “Financial
Information” for more information.
We believe that our strong brand reputation, continuous research and innovation in quality EBN
products, established sales network and loyal consumer base will enable us to maintain our industry
leadership. We are committed to advancing the sustainable development of our Company and the industry
and strive to fulfill our economic, social and environmental responsibilities. As such, we believe we are
able to continue to deliver benefits to our Shareholders, employees, suppliers, business partners, customers
and other stakeholders.
COMPETITIVE STRENGTHS
We believe the following competitive strengths have contributed to our success and differentiated us
from our competitors.
A leading brand in China’s EBN product market with sustained growth
We are a leading brand in China’s EBN product market, dedicated to the development, production
and marketing of high-quality modern EBN products. According to the F&S Report, we are the largest
EBN product company in China for three consecutive years in terms of retail value from 2020 to 2022,
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with a market share of 5.8% in China in 2022, and ranked No.1 by the number of EBN specialty storefronts
and the volume of CAIQ-certified imports in the EBN product market in China in 2022. We imported 26.3
tonnes, 57.2 tonnes, 50.4 tonnes and 52.2 tonnes of CAIQ certified EBN from Indonesia in 2019, 2020
2021 and 2022, respectively, accounting for 14.4%, 17.0%, 15.2% and 11.6% of the total volume of
imported traceable EBN to China in respective years, and 20.1%, 21.4%, 22.1% and 17.9% of the total
volume of imported traceable EBN from Indonesia to China in respective years, according to the F&S
Report. Moreover, we also ranked No.1 in the scale of EBN manufacturing bases in China in 2022,
according to the same source.
Benefiting from our industry leadership, our growth has far exceeded the industry average. Our
revenue increased from RMB1,301.2 million in 2020 to RMB1,507.0 million in 2021 and further to
RMB1,729.9 million in 2022, at a CAGR of 15.3% from 2020 to 2022. Our total retail value in the market
also increased at a high CAGR of 12.3% from 2020 to 2022, which was 8.6 percentage points higher than
the industry average and was the highest among the top five EBN brands during the same years, according
to the F&S Report. Our outperformance against the industry average from 2020 to 2022 was primarily due
to the industry-wide lower growth rate in terms of retail value during the same years except for a few
leading market participants. Specifically, according to the F&S Report, while offline sales of EBN
products accounted for over 69% of China’s EBN market in terms of retail value from 2020 to 2022, the
overwhelming majority of EBN companies, not among the industry leaders, were more susceptible to the
negative impact of the pandemic on their offline sales, resulting in a low CAGR of 1.5% for the retail value
of EBN products sold through offline channels in China during the period. However, as a leading brand
in the industry, we had successfully navigated challenges posed by the pandemic by leveraging our
established market position, brand awareness and well-established online sales channels. Moreover, our
imported volume of EBN increased from 0.2 tonnes in 2015 to 52.2 tonnes in 2022 at a CAGR of 128.6%,
as compared to the total imported volume of EBN to China, which increased from 22.5 tonnes in 2015 to
451.6 tonnes in 2022 at a CAGR of 53.5%, according to data published by the CAIQ. Leveraging our
favorable industry position, advantage in scale and growth potential, we believe we are well positioned to
capture the market opportunity in the EBN industry.
We have established ourselves as a widely recognized brand among consumers in the beauty and
wellness industry. Our brand has consistently ranked No.1 by the China Brand Power Index in the EBN
category since 2019 and was elected for Xinhua News Agency’s Ethnic Brand Project in 2021 and a
consumer product brand with national influence by People’s Daily Online in 2022. Moreover, in 2021, we
established an official partnership with the Chinese national fencing team and become their designated
EBN product brand. We believe our advantage in brand awareness will further solidify our industry
leadership and give us a head start in expanding our presence in the beauty and wellness industry.
A track record of continued product innovation and success underpinned by our research and
development capabilities
We have proven our ability to innovate and develop products that re-define the industry and expand
customer reach. Our signature product series, One Nest , was among the earliest mass-produced,
ready-to-serve EBN products in China with a standardized manufacturing process, enabling us to preserve
the original taste of EBN and, at the same time, ensure consistent quality. We launched One Nest in 2012,
which quickly gained popularity among consumers for its original taste and convenience. We have
continued to innovate and introduced new products under One Nest series tailored to different consumer
groups, significantly enriching the variety of this product series and contributing to our growth. In 2020,
2021, 2022 and the five months ended May 31, 2022 and 2023, our revenue generated from One Nest (pure
EBN) was RMB559.3 million, RMB661.4 million, RMB672.6 million, RMB288.0 million and RMB283.4
million, respectively.
Our product development capabilities enable us to timely respond to evolving consumer demands
and continue to strengthen our market leadership by blazing new trails in the industry. For instance, to
capture the rapid growth of e-commerce in recent years, we launched Freshly Stewed Bird’s Nest, which
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was specifically designed for online channels and quickly gained popularity among younger consumers.
In addition, as individual servings of ready-to-serve EBN products can be heavy and inconvenient to carry
around in the soup form, we applied supercritical fluid drying technology and developed EBN for
hand-brewed delicacies, which are more portable, quick to prepare and easier to absorb. Moreover,
leveraging our extensive research of EBN extracts, we have expanded the value chain of the EBN industry
to develop other innovative EBN products, including EBN+ products, such as One Nest — Vitality (ມዲ
–ʩंಛ) and Crystal Sugar Bird’s Nest with Ginseng (ዲ), and +EBN products, such as EBN
porridge and EBN skincare products which use EBN peptides as an enhancement.
In 2022, we had 250 SKUs, among which 194 were pure EBN SKUs under four major product series,
including One Nest , Freshly Stewed Bird’s Nest, Crystal Sugar Bird’s Nest, and dried EBN, to meet the
differentiated consumer needs for experience in different life scenarios. Highly recognized among the
general public for social occasions, our products have become a symbol of high quality, safety and high
brand awareness.
Our success in product innovation is built on our research and development capabilities. We have
established an industry-leading research and development platform, which consists of the EBN Research
Institute, EBN Peptide Research Center, EBN Skincare Research Center, and the Peking University – Y an
Palace Joint Lab. As of the Latest Practicable Date, we had a strong in-house research and development
team of 49 personnel, and more than 30% of them hold a master’s degree or above. We have also
established extensive collaborations with industry leading experts such as academicians from the Chinese
Academy of Sciences and the Chinese Academy of Engineering, as well as various well-known academic
institutions, such as South China University of Technology, Jiangnan University, and Xiamen University.
Benefiting from the research and development platform, our research and development capabilities have
positioned us at the forefront of our industry, evidenced by a total of 133 patents granted to us as of the
Latest Practicable Date, which ranks No.1 in the industry and significantly surpasses the second place,
according to the F&S Report. Many of the patents have tremendously improved customers’ experience
with our products and solidified our industry leadership. For instance, our high-temperature adhesive-free
sealing technology allows for room temperature storage and on-the-go consumption and, at the same time,
avoids the use of potentially toxic adhesive agents. Our sterilization equipment features temperature
control with a controlled precision of within ±0.2 degrees Celsius, ensuring standardized taste.
Leveraging our in-depth research on EBN extracts, we were among the first in the industry to
research EBN peptides and develop products utilizing its skin-whitening, anti-skin-inflammatory,
anti-oxidant and cell repair properties. Through our patented EBN peptide production method, we have
successfully hydrolyzed the high molecular weight protein found in EBN into smaller, more easily
digestible and absorbable peptides, which we have incorporated as a key ingredient in our skincare
products. We were also the first company in China to complete the filing of EBN peptides as new cosmetic
raw materials, according to the F&S Report, which allows us to enjoy a three-year protection period in the
skincare field from 2022. In addition, we were the first enterprise to obtain production qualification for
EBN peptides, according to the same source. We believe that our first-mover advantage will allow us to
maintain a leading position in the development and marketing of EBN skincare products.
High-quality and scientifically validated EBN products in their natural and pure form which have
become a cultural symbol of self-care and hospitality in modern society
Upholding our philosophy of harnessing the nourishing power of nature, we remain committed to
using only fine quality raw materials and providing consumers with quality natural EBN products. To this
end, we have established stringent quality control measures covering raw material procurement, full-chain
traceability program, quality assurance scheme, and advanced manufacturing facilities to ensure the purity,
natural origin and fine quality of our EBN products, which forms the foundation and safeguards of our
success.
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Raw material procurement . We have adopted strict grading criteria for imported EBN, based on
factors such as shape, color, moisture content, and sialic acid content, and select high-quality swiftlet nests
from Indonesia as our raw materials. During the Track Record Period, substantially all of raw nests used
in our production process were sourced from suppliers in Indonesia, the largest raw nest production
country in the world. In 2020 and 2021, we also sourced a total of RMB1.9 million of raw nests from
suppliers in China, which, to the best knowledge of our Directors, imported these raw nests from Malaysia
and Thailand. We have implemented strict supplier admission policies and thoroughly review and assess
the capabilities and background of all supplier candidates through qualification checks, on-site inspections
and sample testing. We only choose the best suppliers who possess complete qualifications, offer the
highest quality raw nests, and have the strongest supply capacity.
Full-chain traceability program . We have established a full-chain traceability program to ensure that
we only import compliant and traceable raw nests for our products. Moreover, our traceability program
extends beyond the raw materials to cover the entire production process and enables transparency and
accountability at every stage of the supply chain. According to the CAIQ, we are the only enterprise that
has integrated CAIQ traceability data to its ERP system and achieved full-chain traceability of raw
materials.
Quality assurance scheme . We have formulated a stringent quality assurance scheme to ensure the
quality of our products. According to the F&S Report, we are the first EBN product company in China that
has been certified by the BRC Global Standard for Food Safety and International Food Standard. We have
also received major quality accreditations, including the certifications of ISO 9001 Quality Management
System, ISO 22000 Food Safety Management System, Hazard Analysis and Critical Control Points,
Integrity Management System, and ISO 14001 Environmental Management System.
Advanced manufacturing facilities . We have built our own production bases with a total floor area
of approximately 39,300 square meters to house our experienced technical specialists, cutting-edge
research and development equipment, and integrated EBN processing production line to focus on the
quality and safety of our products and the sustainability of the production process. We adhere to the
principle of digitalized manufacturing to present EBN to consumers in their natural and pure form. For
ready-to-serve pure EBN products, we strictly follow the principles of “Four Zeros” in manufacturing, i.e.,
zero-additive, zero-preservative, zero-fat and zero-nitrite. In particular, leveraging our standardized
production processes which incorporate low-temperature air energy drying and antibacterial technology,
high-temperature glue-free sealing technology and steam stewing technology, our automatic production
lines in our GMP-compliant facilities could produce EBN products with a shelf life of up to 24 months
without preservatives, presenting our products to consumers in their natural and pure form.
Established sales network with differentiated product offerings
We have established a national sales network covering online and offline channels. We have rapidly
expanded our brick-and-mortar sales network through a combination of self-operated stores and
distributor-operated stores. As of May 31, 2023, we had established a nationwide offline sales network
consisting of 91 self-operated stores and 214 offline distributors covering 614 distributor-operated stores
in China. According to the F&S Report, we ranked No.1 as measured by the number of EBN specialty
storefronts in 2022 and surpasses the runner-up by over 100%. Our offline sales network has covered all
direct-administered municipalities and provincial capitals in China. Our stores are located at prime
locations in these cities, as we recognize the vital role storefronts serve for maintaining our brand image,
engaging our customers, enhancing customer coverage and loyalty, and promoting the concept of beauty
and wellness. We are also expanding into the mass markets to maintain our first-mover advantage in
distribution channels. Our strong brand reputation and exceptional product quality have led distributors to
foster long-term partnerships with us. The number of our offline distributors increased from 136 as of
January 1, 2020 to 214 as of May 31, 2023. Among the 136 distributors as of January 1, 2020, 111, or
81.6%, of them had remained with us as of May 31, 2023.
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In addition to the traditional offline channels, we have also expanded our online presence by
attracting online distributors, engaging e-commerce platform customers, and establishing online stores on
all major e-commerce or social media platforms, such as Tmall, JD.com, Douyin and Xiaohongshu. We
adopt a differentiated product and service offering strategy for different channels. For instance, Freshly
Stewed Bird’s Nest was launched specifically for online channels with a subscription model, catering to
demands from the younger generations.
Capitalizing on our online and offline presence, we have cultivated a robust pool of private domain
traffic through the Y an Palace membership mini program, our Golden Y an Club membership program, and
other membership programs on major e-commerce platforms, enabling us to maintain direct contact with
our consumers and strengthen our engagement with them. As of the Latest Practicable Date, there were
over 1.8 million customers registered in our membership programs. We frequently organize various
interactive events for our valued members. For instance, we regularly invite selected members to join a
tour in Xiamen, where members not only visit popular tourist sites and enjoy local food, but also have an
immersive factory tour, which allows them to further understand our products and connect to our brand.
We have also established the Y an Palace Golf Club and organized the National Women’s Golf Tour around
the country to promote the sport of golf among women as well as the concept of beauty and wellness. Our
membership program and interactive events have resulted in elevated customer loyalty.
A leader in formulating industry standards and an active contributor to public welfare
We have continually spearheaded the formulation of nationwide industry standards. In 2014, we
joined forces with China National Institute of Standardization in drafting the first industry standard for
dried EBN in China, GH/T 1092-2014, which was a milestone in the industry’s development as it ended
the long standing lack of industry standards for dried EBN in China, set guidelines for the quality grading
of imported dried EBN and related professional terminology, and provided quantitative and qualitative
specifications for sensory and physicochemical quality inspection methods of dried EBN, including
specific requirements for nitrite content testing. In 2019, we were invited as an industry leader to
participate in the formulation of the national food safety standard for EBN and its products, led by the
Xiamen Customs Technology Center and entrusted by National Health Commission, which stipulates the
sensory requirements, physicochemical indicators, and pollutant limits for EBN and its products, marking
the beginning of the highest level of inspection and testing standard for the EBN industry. In 2019, we
participated in the formulation of the first nationwide industry standard for EBN products, Bird’s Nest
Products for Light Industry, working alongside with the China National Research Institute of Food
Fermentation Industry. This standard classifies EBN products based on their production process and EBN
feed ratios and stipulates the sensory and physicochemical quality indicators for the corresponding
products, marking the future industry regulation of EBN products produced by different processes. We
believe our extensive experience and long-term dedicated research, distilled into these industry standards,
will benefit and promote the industry development in the long run, as we are committed to using our
expertise to promote the growth and sustainability of the industry.
We work closely with our suppliers in Indonesia to ensure that we only use harvested bird’s nests
abandoned by swiftlets. The artificial birdhouses protect swiftlets from their enemies and predators and
create a safe breeding environment for them, thereby promoting the healthy growth of the swiftlet
population and enabling a sustainable and environmentally friendly manufacturing process. In addition,
we continuously invest in the application of green technology to our manufacturing processes to reduce
energy consumption and emissions. Taking the example of our Freshly Stewed Bird’s Nest (Eco-Friendly
Packaging) in 45g×7 size, it produces approximately 54.1% less carbon emissions compared to the same
size of refrigerated delivery packaging. In other words, the carbon emission reduction from 1000 boxes
of this EBN product is equivalent to the carbon sequestration of approximately 166 trees in one year. We
believe that it is our responsibility to protect the environment and promote sustainable practices in the
industry, and we are committed to doing our part to achieve this goal.
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We honor our social responsibility and are committed to giving back to the society. We have been
recognized for our commitment to social responsibility, and we were named the Pioneer Group in Poverty
Alleviation ( ୭மҸ਺΋ආණ᜗) in Fujian Province in 2021 and the Annual Role Model for Social
Responsibility in the 2021 Beautiful Charity Conference (2021ப΂Պᇍ). Mr. Huang,
founder and chairman of our Company, was awarded the Pioneer Individual in Poverty Alleviation ( ୭ம
ɛ) in Gansu Province in 2021.
Dedicated, visionary and experienced management team leading a group of elite talents in the
industry
Our dedicated, visionary and experienced management team has been essential in driving the growth
of our business. In particular, Mr. Huang, founder and chairman of our Company, has been engaged in the
EBN industry since 1997, amassing extensive industrial experience. Mr. Huang has been recognized with
various awards and honors, including, to name a few, the Outstanding Private Sector Entrepreneur in
Fujian Province (࢕the New Consumer Annual Focus Figure in 2020 (2020 อऊ൬
يand the Outstanding Contribution Award at the 2020 Global Bird’s Nest Golden Swallow
Awards (2020ᆤ). In addition, Mr. Wenbin Zheng, our vice chairman,
and Mr. Y ouquan Li, our general manager, both of whom are our Controlling Shareholders, have brought
in a wealth of resources and experience in marketing and distribution to our Company since their founding
of our Company along with Mr. Huang in 2014, and have significantly contributed to our rapid growth.
Our management place great emphasis on talent. We attract new talents in the industry and maintain
our existing employees with fair compensation for their contributions. Additionally, we are committed to
continuously nurturing our employees’ growth by establishing the Y an Palace Academy, which is
supported by a team of professional trainers and a comprehensive training system. Through these
initiatives, we aim to foster an environment that encourages our employees to learn and grow along with
our Company, building a strong and dedicated team that is capable of achieving our goals.
GROWTH STRATEGIES
We intend to pursue the following strategies to further grow our business.
Continue to solidify our industry leadership by expanding our product portfolio and strengthening
our research and development capabilities
We believe that a high-quality and diversified product portfolio is key to sustaining our competitive
edge, enabling sustainable long-term growth and success. We plan to further enrich our product matrix to
meet differentiated consumer needs. More specifically, we plan to further improve and upgrade our
existing product series by (1) enhancing their taste and introducing new flavors, (2) improving production
and sealing processes to ensure product safety and quality, and (3) upgrade our product packaging to target
different consumer groups and promotional seasons, while adhering to our low-carbon and
environmentally friendly packaging principles. We also plan to explore and develop new EBN products
that cater to different consumer groups and life scenarios. For instance, we plan to expand the application
of EBN peptides in skincare products to diversify the product portfolio of our sub-brand, Yan Palace —
Yan Bao Shi (ዲᘒ་). Leveraging our research into the medicinal properties of EBN and its extracts, we
also plan to launch more EBN+ products that meet the specific functional needs of different consumer
groups. Moreover, we plan to explore new application scenarios for EBN products through collaborations
with leaders from other industries.
To support the expansion of our product portfolio, we plan to increase investment in our research and
development capabilities to consolidate our leadership in industry innovation. More specifically, we plan
to set up new research and testing laboratories, establish fully-equipped pilot workshops for all product
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categories, purchase advanced research and development equipment, and recruit professional research and
development talents to provide technical support for product development and upgrades. In addition, we
plan to establish research institutions devoted to the research and development of EBN products, including
(1) Y an Palace Indonesia Joint Laboratory, in collaboration with the National Research and Innovation
Agency of Indonesia (Ӻ௴อ໇), to conduct research into various aspects of raw nests,
such as raw nest characteristics, EBN product processing techniques and ecological environment
protection for swiftlets; (2) Y an Palace Japan Joint Laboratory, in collaboration with Kyoto University and
Japan Kyushu University, to conduct research and development of EBN and EBN peptides for use in
skincare and health food products; and (3) Edible Bird’s Nest Special Food Research Center, dedicated to
exploring the application of EBN in specialized foods for medical purposes and targeted diets. As of the
Latest Practicable Date, we had launched a joint study program on the absorption and action mechanism
of bird’s nest peptides with Kyoto University, and we were at a preliminary stage for the establishment
of these research institutions. Furthermore, we will continue to strengthen our collaborations with
renowned domestic and international universities and research institutions to conduct specialized research
in areas, such as EBN pharmacology, product development, manufacturing automation and intelligent
upgrading, to promote the overall development of the EBN industry in China.
Further fortify our sales network to deepen our consumer reach
We will continue to expand and deepen our sales network to increase market penetration and enhance
consumer stickiness.
We plan to further penetrate our existing markets by (1) establishing integrated experience stores
primarily in tier-1 cities; (2) opening more flagship stores primarily in tier-2 and tier-3 cities; (3) setting
up signature stores at major airport hubs and railway stations in Beijing, Shanghai, Xiamen and Shenzhen,
among others; (4) introducing various types of stores customized to each storefront location, such as EBN
dessert stores and EBN afternoon tea stores, in busy areas such as central business districts and high-end
shopping malls, to cover more consumption scenarios; and (5) upgrading the design of existing stores in
Beijing, Harbin, Hangzhou and Xiamen, among others, and expanding their area to establish more flagship
stores to enhance our premium brand image. With respect to customized stores to cover more consumption
scenarios, we plan to fund such strategy with funds generated from our operations.
We plan to further diversify our sales channels. We recognize the high-frequency consumption
pattern and the strong market potential of channels such as supermarkets and convenience stores, which
are ideal for modern consumers’ fast-paced lifestyles. As such, we plan to enter boutique supermarkets,
membership supermarkets and convenience stores to reach a wider range of consumers and introduce both
existing and new products tailored to the characteristics of these channels.
We also plan to further expand our online presence. We will continuously analyze online sales data
and develop targeted promotion strategies and product combinations that differentiate us from our
competitors. We will also focus on growing our membership base and increasing member loyalty and
repurchase rates by refining our member community operations and providing personalized services that
enhance consumer experience. In addition, we plan to strengthen our presence on emerging e-commerce
platforms, such as Douyin and Kuaishou, and collaborate with influencers to enhance brand awareness and
increase sales through word-of-mouth marketing activities.
Moreover, we plan to tap into new markets for growth opportunities. We plan to expand our coverage
of domestic cities by replicating successful offline sales models in new markets with high population
density and growth potential. We also see great potential in markets such as Hong Kong and Macau, where
there is already a well-established culture of EBN consumption. Additionally, we plan to gradually
establish our distribution network overseas in developed countries with an existing market for EBN
consumption and use as well as countries with a large Chinese expatriates.
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Continue to invest in branding building and foster strong and lasting customer relationships
As a well-known brand in China’s beauty and wellness industry, we will continue to invest in brand
building to increase our brand recognition and foster strong and lasting customer relationships to increase
their loyalty.
We plan to continue to leverage marketing channels proven to be effective, including traditional
media channels like television, radio and e-commerce platforms to enhance our brand awareness. In
addition, we will reinforce the premium and high-quality brand image of Y an Palace through selected
event sponsorships.
We plan to further refine our member community operations to strengthen our relationships with our
members, foster a greater sense of trust and loyalty, and build up our own private domain traffic. We will
organize offline member events with different themes and formats to create diverse and engaging
experiences for our members.
Furthermore, we will increase our marketing and promotion activities in new media and social
platforms to enhance our brand exposure in emerging channels and increase engagement with our
customers on these platforms.
Strengthening operational capacities in supply chain, expanding production capacities and investing
in intelligent manufacturing
We will continue to strengthen our supply chain management capabilities to ensure a robust and
efficient supply chain. We plan to establish another production base in Xiamen to house our new
production lines. We also plan to increase our warehousing space to meet the increasing demand from a
growing sales network by upgrading our existing warehouses and establishing an intelligent logistics
warehousing center within our second production base in Xiamen. We will introduce advanced equipment
and intelligent management systems to enhance the automation and intelligence of our operations, leading
to increased production and supply efficiency, reduced costs and the ability to quickly adapt to changes
in market demand.
Moreover, we plan to selectively establish strategic partnerships or seek strategic investment
opportunities along the EBN industry value chain, particularly suppliers of high quality raw nests to ensure
sufficient and stable supply of key raw materials and maintain control over the quality of our raw material
supply. When assessing the investment or acquisition opportunities, we will primarily consider targets that
are complementary to our business and are in line with our corporate philosophy and growth strategies.
As of the Latest Practicable Date, we had not identified any specific investment or acquisition targets, nor
had we negotiated with any specific investment or acquisition targets.
Investing in corporate digitalization to improve operational efficiency
To further enhance our digital capabilities, we are committed to strengthening the digitalization of
our business processes through various measures.
We plan to continue to develop our business collaboration platform to achieve cross-functional
digital integration of our business, finance, supply chain management, and customer management systems.
This will improve our management and operational efficiency and enable us to respond quickly to changes
in the market. We will also invest in the construction of a full-channel data platform that supports the
digitalization of our business processes. This platform will enable us to integrate our online and offline
sales data, analyze consumer preferences and market trend, and optimize our product portfolio and sales
strategies using data analytics technology.
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In addition, we will enhance our digital capabilities over membership management by integrating our
online and offline member pools and constructing member profiles through data analysis, which we
believe will enable us to better understand consumer behavior and provide precise marketing to our
members. We will also continue to optimize the system and mini program for membership management
by (1) improving online order management system functions to improve system response efficiency and
enhance the online customer shopping experience; (2) upgrading our Golden Y an Club membership system
and optimizing features in the mini program, such as payment, member center and reward points; and (3)
adding new features such as periodic delivery and shopping guide components, provide members with a
better service experience.
Moreover, we will continue to invest in our information technology infrastructure to support the
digital operation of our business processes. We plan to consolidate the reliability, stability and security of
our systems by purchasing advanced software and hardware and strengthening cooperation with cloud
service and data service providers.
Continue to invest in our employees
We believe experienced and well-trained employees at all levels are instrumental to our success and
future development. Following our tradition of valuing, respecting, inspiring, and cultivating talents, we
will continue to make investment to attract, retain and motivate outstanding employees. We will continue
to provide our employees with competitive compensation packages and develop a healthy promotion
mechanism within our Company to attract and retain talents.
We will also continue to provide employees with guidance and training tailored to their career
development paths to improve their professional skills and overall capabilities. More specifically, we will
further upgrade the training courses under the Y an Palace Academy to provide more in-depth training in
various aspects. We will continue to provide employees with opportunities to achieve their career
aspirations, such as job rotation opportunities, to develop comprehensive skills in the edible bird’s nest
industry and support our sustainable development and long-term success.
OUR PRODUCTS
We currently have primarily three major product categories, i.e., pure EBN products, EBN+ products
and +EBN products. During the Track Record Period, our pure EBN products (with an EBN feed rate of
over 1% and up to 6% for ready-to-serve products) consisted primarily of (1) One Nest (ມዲ), our
bowl-shape-canned EBN product series which promotes the lifestyle of beauty and wellness, (2) Freshly
Stewed Bird’s Nest ( ᒻዮዲ၊), our bottle-canned EBN product series primarily targeting e-commerce
consumers, (3) Crystal Sugar Bird’s Nest (ዲ), our primary bottle-canned crystal sugar flavored
EBN product series, and (4) dried EBN, our traditional EBN product series for customers to prepare their
own serving of delicacy. In addition to pure EBN products, we have also developed (i) EBN+ products,
primarily including EBN-based products with additional ingredients added to create enhanced flavors and
cater to different consumption scenarios, and (ii) +EBN products, primarily including food products using
EBN or EBN extracts to enhance flavors and functions such as EBN porridge, and EBN skincare products
that use bird’s nest peptides as an enhancement. We will continue to iterate and diversify our product
portfolio in response to the evolving consumer demand.
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The following table sets forth a breakdown of our revenue by product category for the periods
indicated.
Y ear ended December 31, Five months ended May 31,
2020 2021 2022 2022 2023
RMB
Percentage
of total
revenue RMB
Percentage
of total
revenue RMB
Percentage
of total
revenue RMB
Percentage
of total
revenue RMB
Percentage
of total
revenue
(Unaudited)
(RMB in thousands except for percentages)
Pure EBN products .... 1,253,900 96.4 1,442,951 95.8 1,638,127 94.7 665,161 95.4 738,613 94.3
— One Nest ....... 559,288 43.0 661,412 44.0 672,640 38.9 287,958 41.3 283,406 36.2
— Freshly Stewed Bird’s
Nest ......... 321,144 24.7 423,264 28.1 485,372 28.1 188,664 27.1 215,168 27.5
— Other bottle-canned
bird’s nest (1) ..... 201,298 15.5 193,318 12.8 305,105 17.6 122,816 17.6 169,259 21.6
— Dried EBN ...... 172,170 13.2 164,957 10.9 175,010 10.1 65,723 9.4 70,780 9.0
EBN+ and +EBN
products ....... 43,051 3.3 56,115 3.7 73,103 4.2 28,619 4.1 37,237 4.8
Others (2) ........ 4,206 0.3 7,931 0.5 18,715 1.1 3,096 0.5 6,726 0.9
Total revenue ...... 1,301,157 100.0 1,506,997 100.0 1,729,945 100.0 696,876 100.0 782,576 100.0
Notes:
(1) Includes primarily Crystal Sugar Bird’s Nest.
(2) Includes non-EBN products, promotional gifts to customers, and products for internal sales.
Pure EBN Products
One Nest ( ມዲ)
One Nest features ready-to-serve EBN contained in bowl-shaped cans. Launched in 2012, One Nest
is our signature product series that revolutionarily standardized the manufacturing process of EBN.
According to the F&S Report, One Nest was one of the earliest mass-produced, ready-to-serve EBN
products in China.
By standardizing the manufacturing process of ready-to-serve EBN products, we believe One Nest
allows consumers to avoid the intricate and time-consuming process of cooking, which frustrates many
consumers and deters them from purchasing EBN products. Our standardized manufacturing process
enables us to preserve EBN’s original taste in One Nest , and at the same time, ensures consistent quality
and safety of the products. Through One Nest , we have established ourselves as a leading EBN product
brand, according to the F&S Report.
In 2022, we had 54 pure EBN SKUs sold under One Nest product series. The standard prices of our
pure EBN products under One Nest in 2022 ranged from RMB198 to RMB598 per bowl. Such prices
depend on various factors including EBN contents per bowl and the number of bowls included in each
product box, among others. One Nest products typically contain more EBN in each bowl as compared to
that in each bottle of Freshly Stewed Bird’s Nest and Crystal Sugar Bird’s Nest. In 2020, 2021, 2022 and
the five months ended May 31, 2022 and 2023, the revenue generated from our pure EBN products under
One Nest was RMB559.3 million, RMB661.4 million, RMB672.6 million, RMB288.0 million and
RMB283.4 million, respectively, accounting for 43.0%, 44.0%, 38.9%, 41.3% and 36.2% of our total
revenue in the same periods, respectively. The following table sets forth certain key information about our
current pure EBN products under One Nest .
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Product (1) Illustration Description (2)
Launch
year Shelf life
Percentage of
EBN content (3)
Standard
price (4)
in 2022
(RMB/bowl-
shaped can)
Product
positioning
Premium Edition
(యԮಛ)
Each box contains
six, 12 or 30
bowls. Each
bowl weighs
180 grams net.
2014 18 months Over 3.6% 458 Premium products
primarily for
gifting
Classic Edition
(຾Պಛ)
Each box contains
three, five, 10
or 30 bowls.
Each bowl
weighs 180
grams net.
2018 18 months Over 3.1% 398 Premium to
middle-end
products
primarily for
gifting
Honorable Edition
(࿲ᘴಛ)
Each box contains
six bowls.
Each bowl
weighs 108
grams net.
2018 18 months Over 2.9% 258 Premium to
middle-end
products
primarily for
gifting
True Love Edition
(ေฌಛ)
Each box contains
30 bowls.
Each bowl
weighs 108
grams net.
2019 18 months Over 3.4% 298 Premium to
middle-end
products
primarily for
self-
consumption
Little Red Bowl
Edition
(ມಛ)
Each box contains
one, three or
10 bowls.
Each bowl
weighs 138
grams net.
2019 18 months Over 2.7% 298 Premium to
middle-end
products
primarily for
self-
consumption
Deep Love
Edition
(ዢઋಛ)
Each box contains
one bowl
along with a
porcelain
bowl. Each
bowl weighs
180 grams net.
2016 18 months Over 3.6% 520 Affordable
products
primarily for
gifting as each
box contains
only one bowl
Sky Flying
Edition
(˂ಛ)
Each box contains
six bowls.
Each bowl
weighs 180
grams net.
2021 18 months Over 4.7% 598 Premium products
primarily for
gifting
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Product (1) Illustration Description (2)
Launch
year Shelf life
Percentage of
EBN content (3)
Standard
price (4)
in 2022
(RMB/bowl-
shaped can)
Product
positioning
Blessed Pregnancy
(ᐤ̳)
Each box contains
10 bowls.
Each bowl
weighs 80
grams net.
2022 12 months Over 3.7% 238 Specifically
designed for
pregnant
female
consumers
Star Diamond
(᝝)
Each box contains
10 bowls.
Each bowl
weighs 100
grams net.
2022 12 months Over 4.5% 359.9 Premium products
primarily for
gifting
Notes:
(1) Exclusively available for offline channels, except for Star Diamond which is exclusively available for online channels.
(2) Made from long-length raw nest strips.
(3) Calculated by dividing the weight of EBN in a given bowl by the net weight of that bowl.
(4) Applies to the indicated sales channels.
Freshly Stewed Bird’s Nest ( ᒻዮዲ၊)
We believe e-commerce consumers have the demand for higher freshness requirements and launched
our Freshly Stewed Bird’s Nest, which is available primarily for online channels. Our fresh stewed EBN
products are bottle-canned and stewed at 115 degrees Celsius, which led to a relatively short shelf life but
ensures the freshness. Consumers could order our weekly, monthly or annual packages for such products
at different prices. Depending on the consumption frequency specified in a particular package, we deliver
three or seven bottles in different volumes to consumers every six or seven days. We believe this package
ordering program has enhanced customer stickiness. In addition to our cooperation with industry-leading
express courier companies, we have also established a production base that primarily manufactures
Freshly Stewed Bird’s Nest in Songjiang District, Shanghai to ensure faster delivery. See
“—Production—Production Bases.”
In 2022, there were 75 SKUs sold under Freshly Stewed Bird’s Nest product series. The standard
prices of these products in 2022 ranged from RMB86 to RMB249.5 per bottle. Such prices primarily
depend on EBN content per bottle, the bottle volume as well as the length and consumption frequency of
ordered packages. In 2020, 2021, 2022 and the five months ended May 31, 2022 and 2023, our revenue
generated from Freshly Stewed Bird’s Nest was RMB321.1 million, RMB423.3 million, RMB485.4
million, RMB188.7 million and RMB215.2 million, respectively, accounting for 24.7%, 28.1%, 28.1%,
27.1% and 27.5% of our total revenue in the same periods, respectively. The following table sets forth
certain key information about our current Freshly Stewed Bird’s Nest products.
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Product (1) Illustration Description (2)
Launch
year
Shelf
life
Percentage of
EBN content (3)
Standard
price (4)
in 2022
(RMB/bottle)
Product
positioning
Environmental-
friendly Edition
(ಛ)
Each bottle weighs 45 grams
or 70 grams net.
Customers could order
boxes that contain
different number of
bottles with different net
content, i.e., 45 grams x
seven bottles, 70 grams
x three bottles and 70
grams x seven bottles,
depending on their
consumption frequency.
2022 15 days Over 4.4%
(bottles
weighted 45
grams net)
Over 5.0%
(bottles
weighted 70
grams net)
133 (bottles
weighted 45
grams net)
228 (bottles
weighted 70
grams net)
Middle-end
products
primarily for
self-
consumption
Refrigerated
Edition
(иᔛಛ)
Each bottle weighs either 45
grams or 70 grams net.
Customers could order
boxes that contain
different number of
bottles with different net
content, i.e., 45 grams x
seven bottles, 70 grams
x three bottles and 70
grams x seven bottles,
depending on their
consumption frequency.
2021 15 days Over 4.4%
(bottles
weighted 45
grams net)
Over 5.0%
(bottles
weighted 70
grams net)
133 (bottles
weighted 45
grams net)
228 (bottles
weighted 70
grams net)
Middle-end
products
primarily for
self-
consumption
Fresh Enjoyment
Edition
(ᒻԮༀ)
Each box contains three or
seven bottles. Each
bottle weighs 45 grams
net.
2020 15 days Over 3.3% 86 Affordable
products
primarily for
self-consumption
Notes:
(1) Exclusively available for online channels.
(2) Made from medium-length raw nest strips.
(3) Calculated by dividing the weight of EBN in a given bottle by the net weight of that bottle.
(4) Applies to online channels.
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Other Bottle-canned Bird’s Nest
Other bottle-canned bird’s nest is our traditional EBN product series, primarily including Crystal
Sugar Bird’s Nest. We produce product series in accordance with traditional Chinese recipes that preserve
the original taste of EBN as a delicious dish in traditional Chinese cuisine. Compared to Freshly Stewed
Bird’s Nest, Crystal Sugar Bird’s Nest products generally have a longer shelf life of 24 months. In 2022,
we had 35 pure EBN SKUs sold under other bottle-canned bird’s nest. The standard prices of these
products in 2022 ranged from RMB66.3 to RMB169.9 per bottle. Such prices primarily depend on EBN
content per bottle, the bottle volume and the number of bottles included in each product box. In 2020,
2021, 2022 and the five months ended May 31, 2022 and 2023, the revenue generated from our pure EBN
products under other bottle-canned bird’s nest was RMB201.3 million, RMB193.3 million, RMB305.1
million, RMB122.8 million and RMB169.3 million, respectively, accounting for 15.5%, 12.8%, 17.6%,
17.6% and 21.6% of our total revenue in the same periods, respectively. The following table sets forth
certain key information about our current pure EBN products under other bottle-canned bird’s nest.
Product (1) Illustration Description (2)
Launch
year Shelf life
Percentage of
EBN content (3)
Standard
price (4)
in 2022
(RMB/bottle)
Product
positioning
Crystal Sugar
Bird’s Nest for
offline channels
(ዲᇞɨ
ಛ)
Each box contains six or
12 bottles. Each
bottle weighs 75
grams net.
2022 24 months Over 1.6% 80 Affordable
products for
both gifting
and self-
consumption
Blooming Castle
Edition
(ఝӻΐ)
Each box contains five,
eight, 15 or 30
bottles. Each bottle
weighs 70 grams net.
2021 24 months Over 2.1% 95 Affordable
products
primarily for
gifting
Sugar Free
Edition
(ࣀ·Ԯཧጟዲ၊)
Each box contains 10
bottles. Each bottle
weighs 60 grams net.
2022 100 days Over 3.3% 169.9 Middle-end
products
primarily for
gifting
Notes:
(1) Exclusively available for online channels, except for Crystal Sugar Bird’s Nest for offline channels.
(2) Made from short-length raw nest strips.
(3) Calculated by dividing the weight of EBN in a given bottle by the net weight of that bottle.
(4) Applies to the indicated sales channels.
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Dried EBN
We rigorously select high-quality raw nests in the intact shape of a shallow cup for customers to
prepare their own serving of delicacy. We grade such intact raw nests depending on their length, height
and weight. For example, we grade intact raw nests with a length not less than 12.5 cm, a height not less
than 4.0 cm, and a weight not less than 6.5 grams as 6A nests. Consumers could turn these intact raw nests
into various dishes of their choosing through their own preparation process, which at least includes
soaking and feather picking. In addition, we also provide consumers with dried EBN that have gone
through certain processes, such as soaking, feather picking, cleaning and drying, so that these products are
available for instant stewing, avoiding hours of preparation by our customers.
In 2022, we had 30 SKUs sold under our classic dried EBN product series. The standard prices of
intact raw nests in 2022 ranged from RMB28 to RMB88 per gram. Such prices primarily depend on the
grades of raw nests and the weight per intact nest. The standard prices of dried EBN for instant stewing
(уዮ৻ዲ၊) in 2022 was RMB440 per serving. Each serving weights approximately five grams. In 2020,
2021, 2022 and the five months ended May 31, 2022 and 2023, the revenue generated from our classic
dried EBN product series was RMB172.2 million, RMB165.0 million, RMB175.0 million, RMB65.7
million and RMB70.8 million, respectively, accounting for 13.2%, 10.9%, 10.1%, 9.4% and 9.0% of our
total revenue in the same periods, respectively. The following table sets forth certain key information
about our current classic dried EBN products.
Product (1) Illustration Description (2)
Launch
year Shelf life
Weight
(gram/box, unless
otherwise
indicated)
Standard
price (3)
in 2022
(RMB/box)
Product
positioning
4A Intact Nests
 Made from grade 4A
intact raw nests
with a length
ranged from 8.0 to
12.0 cm, a height
not less than 3.3
cm, and a weight
not less than 4.0
grams.
2020 36 months 100 grams 5,200 Middle-end
products
primarily for
gifting
6A Intact Nests
Made from grade 6A
intact raw nests
with a length not
less than 12.5 cm, a
height not less than
4.0 cm, and a
weight not less than
6.5 grams.
2018 36 months 100 grams 8,800 Premium to
middle-end
products
primarily for
gifting
Dried EBN for
Instant
Stewing
Made from raw nests
that have gone
through certain
processes, such as
soaking, feather
picking, cleaning
and drying.
2015 36 months 12 servings per
box, each weighs
five grams
5,280 Premium products
primarily for
gifting
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Product (1) Illustration Description (2)
Launch
year Shelf life
Weight
(gram/box, unless
otherwise
indicated)
Standard
price (3)
in 2022
(RMB/box)
Product
positioning
China Red
(ߎ)
Made from five-star
intact raw nests
with a length not
less than 12.0 cm, a
height not less than
4.0 cm, and a
weight not less than
5.5 grams.
2021 36 months 50 grams 3,400 Premium products
primarily for
gifting
Notes:
(1) Exclusively available for offline channels, except for China Red which is exclusively available for online channels.
(2) To avoid competition between our online and offline sales channels, we grade dried EBN products exclusively available for
online channels from three stars to five stars. For dried EBN products targeting offline consumers, we grade them from grade
4A to 6A.
(3) Applies to the indicated sales channels.
The following table sets forth a breakdown of our sales volume and average selling price per
minimum unit or gram by product series for the periods indicated.
Y ear ended December 31, Five months ended May 31,
2020 2021 2022 2022 2023
Sales
volume
Average
selling
price (1)
Sales
volume
Average
selling
price (1)
Sales
volume
Average
selling
price (1)
Sales
volume
Average
selling
price (1)
Sales
volume
Average
selling
price (1)
One Nest (pure EBN) .... 3,430,930
bowls
RMB163
per bowl
3,855,506
bowls
RMB172
per bowl
3,868,281
bowls
RMB174
per bowl
1,648,520
bowls
RMB175
per bowl
1,596,938
bowls
RMB177
per bowl
Freshly Stewed Bird’s Nest . . 5,943,315
bottles
RMB54
per bottle
8,116,586
bottles
RMB52
per bottle
8,941,642
bottles
RMB54
per bottle
3,564,531
bottles
RMB53
per bottle
4,066,314
bottles
RMB53
per bottle
Other bottle-canned bird’s nest
(pure EBN) (2) ......
5,162,726
bottles
RMB39
per bottle
4,366,735
bottles
RMB44
per bottle
7,162,425
bottles
RMB43
per bottle
2,719,766
bottles
RMB45
per bottle
4,056,142
bottles
RMB42
per bottle
Dried EBN ........ 6,064
kilograms
RMB28
per gram
5,949
kilograms
RMB28
per gram
6,497
kilograms
RMB27
per gram
2,319
kilograms
RMB28
per gram
2,658
kilograms
RMB27
per gram
Notes:
(1) Calculated by dividing the total revenue from a given product series in the indicated period with the total sales volume
of such product series sold in same period.
(2) Includes primarily Crystal Sugar Bird’s Nest.
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EBN+ Products
We have also developed EBN+ products, primarily including EBN-based products (with an EBN feed
rate of 1% or above and up to 5%) with additional tonic ingredients to create enhanced flavors and cater
to different consumption scenarios, such as One Nest — Vitality (ມዲ–ʩंಛ) and Crystal Sugar Bird’s
Nest with Ginseng (ዲ). In addition, we have also launched Little Blue Bottle (ૉτʃᔝଧ)
product series under EBN+ product category, which add gamma-aminobutyric acid to produce a calming
effect and improve sleep quality. In 2022, we had 22 SKUs for EBN+ products. The following table sets
forth certain key information about our current EBN+ products.
Product (1) Illustration Description
Launch
year Shelf life
Percentage of
EBN content (2)
Standard
price (3) in
2022
(RMB/bottle
or bowl-
shaped can)
One Nest —
Vitality
 EBN-based products made
from long-length raw
nest strips with
additional tonic
ingredients including
matsutake, ginseng,
white fungus and
wolfberry. Each box
contains two or 10
bowls. Each bowl weighs
138 grams net.
2020 12 months Over 1.3% 198
Crystal Sugar
Bird’s Nest with
Ginseng
Made from short-length raw
nest strips. Each box
contains eight bottles.
Each bottle weighs 70
grams net.
2019 18 months Over 2.1% 98.5
Little Blue Bottle
EBN-based products with
gamma-aminobutyric
acid to produce a
calming effect and
improve sleep quality.
Each box contains two or
six bottles. Each bottle
weighs 50 grams net.
2022 12 months Over 2.0% 99.5
Notes:
(1) Exclusively available for online channels, except for One Nest—Vitality, which is exclusively available for offline channels.
(2) Calculated by dividing the weight of EBN in a given bowl/bottle by the net weight of that bowl/bottle.
(3) Applies to the indicated sales channels.
+EBN Products
Leveraging our in-depth understanding of EBN extract accumulated over decades of product
research and development, we have expanded the value chain of the EBN industry by developing
innovative +EBN products, including food products, such as EBN porridge, EBN zongzi, various EBN
beverages, and introduced a line of EBN skincare products that use bird’s nest peptides as an enhancement.
Our +EBN products contain EBN or EBN extracts as an enhancement for elevated nutrition or other
benefits. +EBN food products are products that use EBN (with an EBN feed rate of less than 1%) and other
food ingredients as raw materials. +EBN skincare products are products that contain EBN or EBN extracts.
In 2022, we had 34 SKUs for +EBN products.
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In March 2023, we commercially launched our skincare product series featuring small molecule
bird’s nest peptide as an enhancement under our sub-brand of “ Yan Palace — Yan Bao Shi ”( ዲᘒ་). With
our proprietary modern enzymatic hydrolysis technology, we are able to convert functional
macromolecular protein of EBN extracts into active small molecules peptide, which has the functions of
repairing skin damage, anti-aging and anti-oxidation, among others. We are one of the first movers in the
industry that launched skincare products featuring bird’s nest peptide, according to the same source. As
of the Latest Practicable Date, our skincare product series included facial masks, essence, essence mist,
facial cleanser and hand cream.
The following table sets forth certain key information about our current +EBN products.
Product (1) Illustration Description
Launch
year Shelf life
Percentage of
EBN content (2)
(unless otherwise
indicated)
Standard
price (3) in
2022
EBN porridge
 Each box contains six
bowls. Each bowl weighs
252 grams net.
2023 12 months Over 0.26% RMB36.5/bowl
Iced EBN zongzi
Each box contains eight
zongzis with different
flavors. Each zongzi
weighs 60 grams net.
2023 Three
months
Over 0.58% RMB46/zongzi
Drinkable EBN
essence with
ginsengs
Each box contains 10
bottles, the volume of
each is 25 milliliters.
2022 12 months 100 milligrams/
bottle
RMB98.8/bottle
EBN facial masks
Each box contains two
masks.
2023 Three years Not applicable
(EBN as
non-food
additive)
RMB199/box
Notes:
(1) Available for both online and offline channels, except for iced EBN zongzi and drinkable EBN essence with ginsengs which
are exclusively for offline channels.
(2) Calculated by dividing the weight of EBN in a given bowl/zongzi by the net weight of that bowl/zongzi.
(3) Applies to the indicated sales channels.
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OUR SALES NETWORK
We have a broad sales network for our products, covering both online and offline channels. We not
only engage distributors to distribute our products through their online and offline stores but also sell
directly to customers through self-operated online and offline stores. In addition, we have engaged
e-commerce platforms as our customers to further expand our online channels. The following table sets
forth a breakdown of our revenue by sales channel for the periods indicated.
Y ear ended December 31, Five months ended May 31,
2020 2021 2022 2022 2023
RMB
Percentage
of total
revenue RMB
Percentage
of total
revenue RMB
Percentage
of total
revenue RMB
Percentage
of total
revenue RMB
Percentage
of total
revenue
(Unaudited)
(RMB in thousands except for percentages)
Offline channels ........ 578,506 44.5 738,711 49.0 791,991 45.8 333,941 47.9 353,209 45.2
— Sales to offline distributors . . . 409,777 31.5 509,917 33.8 477,525 27.6 198,716 28.5 208,563 26.7
— Direct sales to offline customers . 168,729 13.0 228,794 15.2 314,466 18.2 135,225 19.4 144,646 18.5
Online channels ........ 722,651 55.5 768,286 51.0 937,954 54.2 362,935 52.1 429,367 54.8
— Direct sales to online customers . 575,220 44.1 564,587 37.4 695,265 40.2 264,361 38.0 327,802 41.8
— Direct sales to e-commerce
platforms
(1) ......... 137,545 10.6 189,196 12.6 227,071 13.1 92,228 13.2 93,700 12.0
— Sales to online distributors . . . 9,886 0.8 14,503 1.0 15,618 0.9 6,346 0.9 7,865 1.0
Total ............ 1,301,157 100.0 1,506,997 100.0 1,729,945 100.0 696,876 100.0 782,576 100.0
Note:
(1) Include sales to platform-operated online stores by JD.com, Vipshop and Tmall Supermarket, among others.
Our Offline Channels
We have established a nationwide offline sales network covering substantially all provincial
administrative divisions across China. We engage distributors to distribute our products. In addition, we
also sell directly to consumers through our self-operated stores. As of May 31, 2023, we had 91
self-operated stores in 14 cities and 614 stores operated by 214 distributors in 202 cities. The following
table sets forth a breakdown of the number of our distributors by city tier as of the dates indicated.
As of December 31, As of May 31,
20232020 2021 2022
Offline distributors .............. 1 5 5 1 9 5 2 2 5 2 1 4
— Tier 1 cities ................. 8 3 0 3 7 3 1
— New tier 1 cities ............. 1 7 2 1 2 4 2 0
— Tier 2 cities ................. 2 8 3 0 2 9 3 0
— Other cities ................. 1 0 2 1 1 4 1 3 5 1 3 3
Online distributors .............. 6 8 1 3 1 3
Total ........................ 161 203 238 227
Our distributorship and direct-sale network complement each other in geographic coverage and
consumer reach. We leverage our distributors’ understanding of and resources in local markets to quickly
expand our presence in various regions in an asset-light manner. Meanwhile, we establish our own
self-operated stores to strengthen our brand image and engage with customers directly. We designate
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pre-determined distribution areas for distributor-operated stores as defined in their respective distribution
agreements to avoid unnecessary competition among stores. Moreover, for certain greenfield markets that
require substantial upfront investment, we may tap into those markets by establishing our self-operated
stores, cultivating customer relationships and leading marketing initiatives in such market. We operate all
self-operated stores through their respective local operation team under the supervision of our
headquarters-level operating staff. We require both self-operated stores and distributor-operated stores to
reflect our unique decoration style in a consistent manner and offer our products and services with
consistent quality. The following images illustrate the typical decoration style of our storefronts.
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The following map is an illustration of the geographic coverage and the number of our stores as of
May 31, 2023.
74
The following table sets forth the total number of our offline stores and their movements (including
addition and termination) for the periods indicated.
Y ear ended December 31,
Five months
ended
May 31,
20232020 2021 2022
Number of offline stores at thebeginning of the period ........... 455 523 633 704
— Self-operated offline stores ........ 4 3 4 0 8 9 8 9
— Distributor-operated offline stores . . . 412 483 544 615
Number of new offline stores ........ 108 218 143 79
— Self-operated offline stores ........ 5 5 6 1 3 3
— Distributor-operated offline stores . . . 103 162 130 76
Number of terminated offline stores ... 40 108 72 78
— Self-operated offline stores ........ 8 7 1 3 1
— Distributor-operated offline stores . . . 32 101 59 77
Number of offline stores at the end of
the period ..................... 523 633 704 705
— Self-operated offline stores
(1)(2) ..... 4 0 8 9 8 9 9 1
— Distributor-operated offline stores (2) . . 483 544 615 614
Notes:
(1) Our self-operated offline stores as of May 31, 2023 were located in 14 cities, including Beijing, Fuzhou, Guangzhou,
Harbin, Jilin, Kunming, Xiamen, Shenzhen, Songyuan, Taiyuan, Tonghua, Changchun, Suihua and Mudanjiang.
(2) As of May 31, 2023, certain of our self-operated offline stores and distributor-operated offline stores were located in
the same cities, including Beijing, Harbin, Changchun, Taiyuan, Guangzhou and Shenzhen. We engaged distributors
in these cities to leverage their resources in untapped areas within such cities. We manage the cannibalization risk
among our self-operated offline stores and distributor-operated offline stores within the same cities through clear
delineation of geographic distribution scope.
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During the Track Record Period, the numbers of our self-operated offline stores and distributor-
operated stores both experienced increases. The increase in the number of stores during the Track Record
Period was attributable to our business growth in general. According to the F&S Report, we ranked No.1
as measured by the number of EBN specialty storefronts in 2022, surpassing the runner-up by over 100%.
As of May 31, 2023, our stores had a nationwide presence covering over 200 cities in China, with a strong
foothold in all tier-1 cities and the majority of new tier-1 cities. Our stores are located at prime locations
in these cities, as we recognize the vital role storefronts serve for maintaining our brand image, engaging
our customers, enhancing customer coverage and loyalty, and promoting the concept of beauty and
wellness. In recent years, we have been expanding our reach into tier-2 and tier-3 cities to allow more
customers to have access to our products.
During the Track Record Period, we terminated certain self-operated offline stores, primarily due to
either their unsatisfactory operating results or the increased leasing expenses. The termination of
distributor-operated offline stores during the Track Record Period was mostly voluntary by the relevant
distributors themselves due to their underperformance. In 2021, we recorded 101 terminated distributor-
operated offline stores, primarily because we terminated certain small-scale distributors with infrequent
orders, in part motivated by a shift in our strategic focus to promote direct sales in certain cities. These
terminated distributor-operated offline stores contributed an insignificant portion of our revenue in the
previous year prior to the termination. In the five months ended May 31, 2023, we recorded 77 terminated
distributor-operated offline stores, primarily as a result of our efforts to optimize our distribution network.
In particular, we ceased to collaborate with certain distributors that failed to meet our performance target.
The termination of those distributor-operated offline stores during the Track Record Period did not have
any material adverse effect on our operations or financial condition.
Our Offline Distributors
As of December 31, 2020, 2021 and 2022 and May 31, 2023, there were 155, 195, 225 and 214
distributors in our offline distribution network, respectively. In 2020, 2021, 2022 and the five months
ended May 31, 2022 and 2023, the revenue generated from our sales to offline distributors was RMB409.8
million, RMB509.9 million, RMB477.5 million, RMB198.7 million and RMB208.6 million, respectively,
representing 70.8%, 69.0%, 60.3%, 59.5% and 59.0% of our revenue generated from offline channels,
respectively.
We allow our offline distributors to engage sub-distributors. Our offline distributors occasionally
develop sub-distributors to leverage their coverage of the underserved areas within the same city or the
peripheral regions. As of December 31, 2020, 2021 and 2022 and May 31, 2023, we had 17, 14, 18 and
18 sub-distributors, respectively. As of May 31, 2023, the sub-distributors were all Independent Third
Parties with relevant experience and resources in local EBN or consumer goods markets. During the Track
Record Period, there was no revenue directly generated from the sub-distributors, as we did not have any
purchase, payment or other direct transaction with the sub-distributors and they purchased our products
from our distributors. Although we do not enter into a distribution agreement with the sub-distributors, we
require our distributors to notify us of their engagement with sub-distributors and we pay visits to the
sub-distributors.
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Our relationship with offline distributors is a buyer and seller relationship, as offline distributors
acquire ownership of the products we deliver to them. We do not accept returns and only allow exchanges
for limited circumstances such as quality defects or damages during transportation. According to the F&S
Report, our product return and exchange policy for offline distributors is common in the industry. We
recognize sales revenues from offline distributors when control over our products is transferred to them.
We generally designate one distributor within a specific city. Our offline distributors are responsible
for the daily operations of their own offline stores. However, we exert strong control over material aspects
of distributor-operated offline stores, covering the decoration, marketing and promotional materials to be
used by such stores, as well as the display of our products.
We require all distributors to adhere to our pricing guidelines, which establishes the standard prices
at which our products shall be sold to retail customers.
In 2020, 2021, 2022 and the five months ended May 31, 2023, the revenue attributed to our returned
products from offline channels as a percentage of our revenue generated from offline channels was 0.19%,
0.16%, 0.07% and 0.07%, respectively.
Our Online Channels
Our online sales network consists of self-operated online stores, distributor-operated online stores
and e-commerce platforms. As of May 31, 2023, we had 23 self-operated online stores and 13
distributor-operated online stores on mainstream e-commerce or social media platforms such as JD.com,
Tmall and Douyin. In addition, we began to engage e-commerce platforms to distribute our products
through platform-operated online stores in 2018 to further expand our online presence. As of May 31,
2023, we had 15 e-commerce platforms as our customers, including JD.com, Vipshop and Tmall
Supermarket, among others.
The following table sets forth the number of our online stores by type as of the dates indicated.
As of December 31, As of May 31,
20232020 2021 2022
Online stores
Self-operated stores ............. 1 2 1 8 2 3 2 3
Distributor-operated stores ........ 6 8 1 3 1 3
Total ........................ 18 26 36 36
Online Channel Management
Store management . All self-operated online stores are managed and operated by our e-commerce
operation team. Online distributor-operated stores are managed and operated by online distributors, while
the marketing materials used by and promotional events held by such stores are subject to our supervision.
For e-commerce platform customers, online stores are owned and managed by e-commerce platforms, and
we generally provide operational assistance by designating operational staff to such stores and providing
online marketing materials. In particular, the designated operational staff to each of our e-commerce
platform customers regularly communicate with them regarding the sales of our products, assist them in
designing promotional activities and produce marketing materials such as promotion images for our
products. We also assign our customer service staff to these e-commerce platform customers to more
efficiently resolve questions concerning our products from their end customers.
Order and delivery . For all self-operated online stores, we handle customer orders and payments and
deliver products to customers directly. For distributor-operated online stores, we receive orders from
distributors and ship products in the manner mandated by the order, usually to retail customers directly.
For e-commerce platform customers, we take orders from such customers; per their instructions, our
products may be shipped either to such customers’ warehouses or to retail customers directly.
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Payment . We generally receive payments from retail customers upon order. For online distributors,
we generally receive payments from them before a fixed date each month. For e-commerce platform
customers, we settle payment with them according to respective cooperation agreements with such
customers and typically on a monthly basis.
Product return and exchange . All the e-commerce platforms we work with impose a seven-day
return/exchange policy, which allows consumers to return or exchange our products within seven days
after the delivery for no cause if the product is unopened in their original packaging. For all products sold
online (other than Freshly Stewed Bird’s Nest), we abide by the return/exchange policies imposed by
e-commerce platforms. Returned products are shipped directly to our warehouses. We typically do not
re-sell these returned products even if they are not defective in quality and still within the shelf life. In
limited circumstances such as quality defects or late deliveries that exceed two-thirds of the shelf life of
our products, online distributors are allowed to request for return or exchange within seven days. In 2020,
2021, 2022 and the five months ended May 31, 2023, the revenue attributed to our returned products from
online channels as a percentage of our revenue generated from online channels was 2.1%, 1.1%, 2.5% and
1.6%, respectively.
We manage the cannibalization risk among offline stores through clear delineation of geographic
distribution scope. Additionally, we have differentiated product offerings for online channels and offline
channels to avoid unnecessary competition between online and offline channels. For example, Freshly
Stewed Bird’s Nest was specifically designed for online channels and quickly gained traction after its
launch. Given that online distribution of EBN products is highly fragmented and each e-commerce
platform has its own target user base with varied user profiles according to the F&S Report, we believe
cannibalization risk among online distributors is relatively low and therefore have not installed measures
that particularly address the cannibalization risk among online distributors.
Selection of New Distributors
As part of our commitment to maintaining high standards, we select new distributors throughout the
year and conduct annual assessment of existing distributors. We have implemented rigorous selection
criteria for new distributors to ensure that they are well equipped to represent our brand and promote our
products.
Major considerations of our offline distributor selection criteria include:
 Business qualification . We require offline distributor candidates to obtain all requisite business
licenses and permits to carry out businesses covering at least sales of EBN products.
 Business premises . Successful candidates shall be able to establish stable business premises
within agreeable locations pursuant to our standards.
 Financial resources . Successful candidates must demonstrate their ability to access adequate
financial resources to establish and operate new stores effectively.
 Management ability . We assess candidates’ operational and management capabilities through
previous or current business experience.
 Sales force. Distributors must have the ability to establish a sales force to effectively distribute
our products.
 Marketing experience or resources . Candidates with relevant marketing experience or
resources that can help promote the sales of our products are strongly preferred.
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Major considerations of our online distributor selection criteria include:
 E-commerce team . Candidates must be able to establish an e-commerce team that is capable of
online store management and operation, online marketing and promotion, art design and
customer service.
 Successful e-commerce operation experience . Candidates must demonstrate their e-commerce
operational and management capabilities through successful e-commerce operation experience.
 Detailed e-commerce operation plan . Candidates must submit an operation plan for the
upcoming year, which includes certain details such as sales target and budget.
 Resourcefulness . Candidates with demonstrated resources that could promote online store
development, such as resources in the e-commerce live streaming industry, are strongly
preferred.
 Minimum sales target. Online distributor candidates shall have the ability to satisfy our
minimum sales target for each procurement cycle.
We conduct a stringent annual assessment to review our business relationships with existing
distributors. Our primary evaluation criteria, among others, are the actual annual purchase amount, store
establishment as well as advertising and marketing activities. In cases where dishonest or illegal
operations, intellectual property infringement, or other improper behaviors that could damage our brand
are discovered, we may terminate our business relationship with such distributors and take any other
prompt and appropriate action to safeguard our brand.
The following table sets forth the total number of our distributors and their movements (including
addition and termination) for the periods indicated.
Y ear ended December 31,
Five months
ended
May 31,
20232020 2021 2022
Number of distributors at the
beginning of the period ........ 136 161 203 238
— Offline .................... 1 3 6 1 5 5 1 9 5 2 2 5
— Online ..................... 0 6 8 1 3
Number of new distributors ...... 28 57 53 24
— Offline .................... 2 2 5 4 4 5 2 0
— Online ..................... 6384
Number of terminated distributors . 31 51 83 5
— Offline (1) ................... 3 1 4 1 5 3 1
— Online ..................... 0134
Number of distributors at the end
of the period ................ 161 203 238 227
— Offline .................... 1 5 5 1 9 5 2 2 5 2 1 4
— Online ..................... 6 8 1 3 1 3
Note:
(1) We acquired four distributors in 2021, which have become our subsidiaries since then. Such distributors were counted
as terminated distributors in 2021. See “History, Development and Corporate Structure—Major Acquisitions, Disposals
and Mergers.”
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The addition of new distributors during the Track Record Period was primarily attributable to our
business growth in general. In 2021, due to our acquisitions of four distributors, we engaged the
sub-distributors of these distributors directly, who were previously not in privity with us. The termination
of distributors during the Track Record Period was mostly voluntary by themselves due to
underperformance of these distributors. In the five months ended May 31, 2023, we terminated 31 offline
distributors. The termination was primarily driven by our efforts to optimize our distribution network. In
particular, we ceased to collaborate with certain distributors that failed to meet our performance target.
Additionally, we terminated certain small-scale distributors with infrequent orders during our
collaboration term in Beijing, in part motivated by a shift in our strategic focus to promote direct sales in
Beijing following the acquisition of the then local distributor in 2021. These terminated 31 offline
distributors contributed an insignificant portion of our revenue in the previous year prior to the
termination. The termination of these distributors did not have any material adverse effect on our
operations or financial condition.
During the Track Record Period and up to the Latest Practicable Date, we had an unsettled litigation
with a terminated online distributor (and its absolute controlling shareholder) which defaulted on several
payments for our products, where we demanded compensation of approximately RMB1.3 million
including interests accrued. As of the Latest Practicable Date, we had not received final judgment from
the court for this unsettled litigation. Save for this unsettled litigation, during the Track Record Period and
up to the Latest Practicable Date, there were no material unsettled disputes or litigations between
terminated distributors and us.
We value our distributors’ business operation capabilities and their cooperative relationships with us.
The number of our offline distributors increased from 136 as of January 1, 2020 to 214 as of May 31, 2023.
Among the 136 distributors as of January 1, 2020, 111, or 81.6%, of them had remained with us as of May
31, 2023. We do not rely on any single distributor or a few distributors. Our revenue from any single
distributor accounted for no more than 5% of our total revenue during the Track Record Period.
During the Track Record Period and up to the Latest Practicable Date, we had not provided any
financial assistance to any of our distributors for any purpose. During the Track Record Period, in addition
to Beijing Tianfeiyan, Changchun Jinyanhui, Harbin Jinyanhui, Taiyuan Jixiangyan and the distributorship
businesses controlled by Mr. Zheng, Ms. Xue and Mr. Li and his spouse that had been consolidated into
these four subsidiaries prior to our acquisitions, we had (1) two distributors each controlled by a former
employee of ours; (2) one distributor, namely Tianjin Union Y utai Trading Co., Ltd. (̹Υᑌ༃इਠ
ʮ̡) (“Union Y utai”), which is held as to 38.5% by Mr. Zheng and will continue to conduct
business with us after Listing (see “Connected Transactions” for further details); (3) one distributor,
namely Fuding Yixing Trading Co. (ਠБ), which is controlled by an associate of Mr.
Huang and no longer had business relationship with us; and (4) one distributor, namely Beijing Sanhe
Tianrun Trading Co., Ltd. (ʮ̡), which is controlled by Mr. Liu and no longer had
business relationship with us. See “History, Development and Corporate Structure—Major Acquisitions,
Disposals and Mergers” for details of our acquisitions of Beijing Tianfeiyan, Changchun Jinyanhui, Harbin
Jinyanhui and Taiyuan Jixiangyan. See also “—Our Customers” for details of Union Y utai. Save as
disclosed above, to the best of our knowledge after reasonable inquiry, all of our distributors during the
Track Record Period were Independent Third Parties.
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Major Terms of Distribution Agreements
We typically enter into standard distribution agreements with our distributors. Major terms of our
standard distribution agreements with offline distributors include:
 Duration . The duration of distribution agreements is typically three year. We may renew the
distribution agreements in the event that offline distributors pass our assessment.
 Exclusivity . We require our distributors to sell only our products unless with our permission.
 Right to use our trademark . We authorize offline distributors to use our trademarks within the
duration and scope of distribution agreements.
 Offline store operations. Offline distributors shall establish offline stores according to our
unified decoration standards. Supplies and promotional materials required for display in offline
stores shall all be provided by us.
 Management on prices . We provide offline distributors with standard prices of our products
according to our price system. Offline distributors shall abide by our price system. Except for
our brand-wide promotional events, any adjustment made to standard prices requires a written
application from distributors for our approval. We generally allow a deviation from our
standard pricing of less than 20% in the forms of gifts and price discounts.
 Sales rebates. We provide sales rebates to offline distributors upon their satisfaction of
performance requirements. We primarily look at their procurement volume and their
contribution to distribution network expansion and marketing events. Such sales rebates can be
applied to their future purchase of our products.
 Scope of distribution . Offline distributors are only permitted to sell our products in a
predetermined geographic area. They are prohibited from distributing our products through any
online channels without our approval. They are also prohibited from distributing any products
that are similar to our products.
 Sub-distribution . We authorize our offline distributors to set up and sell products to offline
sub-distributors. We generally do not require sub-distributors to enter into direct agreements
with us.
 Payment . We require offline distributors to make payment before the delivery of our products.
We may provide short-term payment period for certain offline distributors with excellent
qualifications and stable business relationships with us.
 Logistics . After offline distributors make the payment, we deliver our products according to the
time and method specified in the purchase order.
 Limitations on return or exchange . We typically do not accept return or exchange of products
from offline distributors. We only allow product exchanges under limited circumstances such
as quality defects or damages during transportation.
 Termination . Grounds for termination under the distribution agreements include, among others,
unauthorized usages of our trademark, selling products of our competitors or any counterfeits
of our products and other actions that are harmful to our interests. We are entitled to terminate
the distribution agreements if offline distributors breach the distribution agreements.
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Major terms of our standard distribution agreements with online distributors include:
 Duration . The duration of distribution agreements is typically one year. The distribution
agreements can be renewed upon mutual agreement.
 Exclusivity . We require our distributors to sell our products exclusively on the designated
e-commerce platform unless with our permission.
 Right to use our trademark . We authorize online distributors to use our trademarks within the
duration and scope of distribution agreements.
 Management on prices . Online distributors shall abide by our price system that included in the
purchase agreement. Except for our brand-wide promotional events, any adjustment made to
the standard price by online distributors requires an additional price adjustment agreement with
us. We generally allow a deviation from our standard pricing of less than 20% in the forms of
gifts and price discounts.
 Scope of distribution . Online distributors are only authorized to distribute our products through
their online stores. They are prohibited from distributing or promoting our products through
any other sales channels.
 Sub-distribution . Our online distributors are not allowed to engage sub-distributors, or assign
their rights or obligations to any third party.
 Payment and delivery . We generally deliver our products after receiving the orders from
e-commerce consumers who have made the payments online and settle full payments with
online distributors on a monthly basis for such orders.
 Limitations on return or exchange . In the event that a customer refuses to accept the delivery
of our products or requests to return our products unopened and in their original packaging
within seven days after the delivery, online distributors could instruct such customer to return
relevant products to our warehouses. In limited circumstances such as quality defects or late
deliveries that exceed two-thirds of the shelf life of our products, online distributors could also
request for return or exchange within seven days.
 Termination . Grounds for termination under the distribution agreements include, among others,
unauthorized grant, assignment or transfer of our trademark, selling products of our
competitors or any counterfeits of our products and other actions that are harmful to our
interests. We are entitled to terminate the distribution agreements if online distributors breach
the distribution agreements.
During the Track Record Period, we did not experience material breach of distribution agreements
that had a significant impact on our business. During the same period, we did not have any material
disputes with our distributors that had a significant impact on our business.
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Distributor Management
We believe that effective management of our distribution network is crucial to our success. We have
adopted a detailed distributor management policy that is agreed to by our distributors. We regularly pay
visits to our offline distributors and collect information on their sales results, inventories, operations and
market development. The inventory information collected from our offline distributors was made on
sampling or cycling basis. We also inspect distributor-operated online stores from time to time for the
same purposes, although our online distributors generally do not maintain an inventory. In each year
during the Track Record Period, we generally inspected and paid visits to each of our distributor-operated
stores at least once, unless it was unfeasible to do so due to the COVID-19 pandemic related restrictions.
In 2022, we inspected and paid visits to over 73% of our distributor-operated stores. If we discover any
irregularity in their sales practice, we may take relevant punishment measures according to the distribution
agreement. In addition, we require our distributors to provide sales targets and sales results reports on a
monthly basis. Their operating results are used by us to control and monitor their inventories and to assess
whether they are qualified to be part of our distribution network for the next year.
We believe that the risk of channel stuffing on our distributors is low, based on the following facts
and observations: (1) our relationship with offline distributors is a buyer and seller relationship and we
generally require payments before delivery; (2) we do not accept returns of our products and only allow
exchanges of our products under limited circumstances such as quality defects or damages during
transportation; (3) our online distributors generally do not maintain an inventory as we typically receive
orders from such distributors and ship products in the manner mandated by the order (i.e., usually to retail
customers directly); and (4) our offline distributors generally maintain a relatively low level of inventory
and frequently make procurement from us to replenish their inventory. In 2020, 2021, 2022 and the five
months ended May 31, 2023, each of our offline distributors made purchases from us for a monthly
average of 3.6, 4.5, 4.5 and 5.3 times, respectively. During the Track Record Period, to the best knowledge
of our Directors, the offline distributors maintained their inventory as a percentage to their monthly
turnover within a range of approximately 3.7% to 6.2%.
We strive to provide our distributors with operational supports to boost their development. In
particular, we provide them with promotional materials, management support and employee training from
time to time. We also provide them with product procurement guidance based on their respective
circumstances as part of our efforts to control and monitor our distributors’ inventories. We assist our
distributors in formulating promotional plans and provide certain supports in organizing promotional
events. We also provide certain supports for online distributors, such as online store page design and
marketing material editing services.
We impose a minimum sales target on our distributors, which is the result of negotiation between us
and each distributor. Such minimum sales target is not mandatory in nature, and failure to meet the target
does not constitute a ground for automatic termination of distributorship. Instead, only distributors who
meet their respective sales target are eligible for sales rebate. However, if a distributor repeatedly fails to
hit its target, we reserve the right to terminate our cooperation with such distributor, and we would take
such underperformance into consideration when it comes to distributorship renewal.
We provide sales rebates to our distributors as performance-based incentives. Distributors meeting
their respective minimum sales target are eligible for sales rebates, which are calculated by multiplying
their actual purchase amount with an agreed-upon percentage. Distributors may apply such sales rebates
for future purchase of our products of their own choice. According to the F&S Report, our terms for such
performance-based sales rebates conform with the industry norm. In 2020, 2021, 2022 and the five months
ended May 31, 2023, our sales rebates to offline distributors was RMB47.6 million, RMB46.8 million,
RMB50.3 million and RMB19.3 million, respectively, accounting for 11.6%, 9.2%, 10.5% and 9.3% of our
revenue generated from offline distributorship in the same periods, respectively. In the same periods, our
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sales rebates to online distributors was RMB0.7 million, RMB0.6 million, RMB0.02 million and RMB0.05
million, respectively, accounting for 7.1%, 4.1%, 0.1% and 0.6% of our revenue generated from online
distributors in the same periods, respectively. Our sales rebates to online distributors experienced
decreases during the Track Record Period, primarily because we reduced the agreed-upon rebate
percentage for online distributors in 2021, and further adjusted our sales rebate policies for online
distributors primarily by limiting eligible period for sales rebates to certain months in 2022.
OUR CUSTOMERS
Our customers primarily include distributors, e-commerce platform customers and retail customers
of our self-operated stores. For details of our distributors and e-commerce platform customers, see “—Our
Sales Network.” We believe that our engagement with retail customers is beneficial to strengthening our
market leadership and enable us to better serve both large and small customers. For example, we can
directly receive customers’ feedbacks on our products, which help us adjust our marketing strategies in
a timely manner and control the direction of research and development of our products. Generally, we
accept returns or exchanges from our direct sale customers only for quality defects or damage during
transportation. During the Track Record Period, the value of returned products from direct sale customers
was insignificant.
Our Membership Programs
We stay close to our customers. Through the Y an Palace (܊membership mini program, our
Golden Y an Club (ዲ⸭) membership program, and other membership programs on major e-commerce
platforms, we have cultivated a loyal membership network of customers with a tiered membership system
to drive customer stickiness and repeated purchase. As of the Latest Practicable Date, there were over 1.8
million customers registered in our membership programs. Through this membership network, we organize
various interactive events to maintain direct engagement with our customers.
Members could earn points on their purchases with us and their membership level goes up with
aggregated purchase amount within a period of time, which allows them to enjoy various benefits, such
as points redemption for our EBN products, birthday gifts and invitations for events designed for our
valued customers. We primarily promote and recommend our membership program to retail customers
through publicities in our stores and in-person recommendation by sales staff. We have gained
considerable insight from our interaction with customers, which allows us to continually optimize our
product offerings and customer services.
In 2020, 2021 and 2022, we had approximately 143,700, 168,200 and 204,800 paying customers
registered in our membership programs, respectively, accounting for 25.0%, 22.1% and 23.5% of our total
registered customers as of December 31, 2020, 2021 and 2022, respectively. In the five months ended May
31, 2023, we had approximately 117,600 paying customers registered in our membership programs,
accounting for 7.2% of our total registered customers as of May 31, 2023. In 2020, 2021, 2022 and the
five months ended May 31, 2023, purchases from such paying customers registered in our membership
programs was RMB616.0 million, RMB806.4 million, RMB1,057.5 million and RMB500.0 million,
respectively, representing an average purchase amount per registered paying customer of approximately
RMB4,280, RMB4,790, RMB5,150 and RMB4,240, respectively.
Major Customers
In 2020, 2021, 2022 and the five months ended May 31, 2023, our revenue from the five largest
customers in each year/period during the Track Record Period in total amounted to RMB219.3 million,
RMB245.6 million, RMB274.2 million and RMB110.9 million, accounting for 16.9%, 16.3%, 15.8% and
14.2% of our total revenue, respectively. In the same periods, our revenue from the single largest customer
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in each year/period during the Track Record Period amounted to RMB100.8 million, RMB141.1 million,
RMB189.0 million and RMB71.0 million, accounting for 7.7%, 9.4%, 10.9% and 9.1% of our total
revenue, respectively. We typically require our customers to make payment before the delivery of our
products. However, we may grant credit periods of no more than 60 days to certain customers such as
e-commerce platforms.
Save for Beijing Zhongda Baichengtang Biotechnology Co., Ltd. (“Zhongda Baichengtang”) and
Tianjin Union Y utai Trading Co., Ltd. (“Union Y utai”) as disclosed below, to the best of our knowledge
after reasonable inquiry, none of our Directors, their respective associates or Shareholders who owned five
percent or more of the total issued share capital of our Company had any interest in any of our Group’s
five largest customers in each year/period during the Track Record Period, and all of our five largest
customers in each year/period during the Track Record Period were Independent Third Parties. Zhongda
Baichengtang, which is controlled by one of our Controlling Shareholders, has ceased its EBN product
distribution business since 2022, as its business operations were transferred to Beijing Tianfeiyan in 2021,
after which we acquired Beijing Tianfeiyan. The acquisition was completed on June 29, 2021 and Beijing
Tianfeiyan was then owned as to 55% by our Company and 45% by Qingdao Zhenpindao Enterprise
Management Partnership (Limited Partnership) (༸Άุ၍ଣΥྫΆุ(Υྫ)), which is an
employee shareholding platform of Beijing Tianfeiyan and is controlled by the employees of Beijing
Tianfeiyan. See “Connected Transactions” for details about continuing connected transactions relating to
Union Y utai.
The following table sets forth the details of our top five customers during the Track Record Period.
Customers
Revenue
amount
(RMB in
thousands)
Percentage
of total
revenue
(%)
Type of
services
provided
Type of
customer
Payment
method
Y ear of
commencement
of business
relationship Background
For the year ended
December 31, 2020
Customer A and its
related parties ....
100,831 7.7 Sales of EBN
products
E-commerce
platform
customer
Bank
transfer
2018 Customer A is a leading provider
of medical and health
products, services and
solutions in China. Customer
A was established on June 6,
2019, and its registered office
is located in Beijing, with
registered capital of
RMB100.0 million as of the
Latest Practicable Date. On
December 8, 2020, Customer
A was listed on the Stock
Exchange of Hong Kong
Zhongda Baichengtang
and its related parties .
63,164 4.9 Sales of EBN
products
Distributor Bank
transfer
2015 Zhongda Baichengtang and its
related parties are companies
that primarily distribute EBN
products in Beijing. Zhongda
Baichengtang is a private
company established on
January 13, 2004, and its
registered office is located in
Beijing, with registered
capital of RMB0.5 million as
of the Latest Practicable Date
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Customers
Revenue
amount
(RMB in
thousands)
Percentage
of total
revenue
(%)
Type of
services
provided
Type of
customer
Payment
method
Y ear of
commencement
of business
relationship Background
Customer B ...... 21,853 1.7 Sales of EBN
products
Corporate
customer
Bank
transfer
2020 Customer B is a company
primarily engaged in sales of
healthy food. Customer B is a
private company established
on August 19, 2015, and its
registered office is located in
Guangzhou, with registered
capital of RMB50.0 million as
of the Latest Practicable Date
Customer C and its
related parties ....
16,719 1.3 Sales of EBN
products
E-commerce
platform
customer
Bank
transfer
2018 Headquartered in Guangzhou,
Customer C operates an
e-commerce platform.
Customer C was established
on January 20, 2011, and its
registered office is located in
Guangzhou, with registered
capital of US$180.0 million as
of the Latest Practicable Date.
On March 23, 2012, Customer
C was listed on the New Y ork
Stock Exchange
Customer D and its
related parties ....
16,689 1.3 Sales of EBN
products
Distributor Bank
transfer
2016 Established in Hefei, Customer D
primarily distributes EBN
products. Customer D is a
private company established
on December 12, 2016, and
its registered office is located
in Hefei, with registered
capital of RMB5.0 million as
of the Latest Practicable Date
Total ........ 219,256 16.9
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Customers
Revenue
amount
(RMB in
thousands)
Percentage
of total
revenue
(%)
Type of
services
provided
Type of
customer
Payment
method
Y ear of
commencement
of business
relationship Background
For the year ended
December 31, 2021
Customer A and its
related parties ....
141,137 9.4 Sales of EBN
products
E-commerce
platform
customer
Bank
transfer
2018 Customer A is a leading provider
of medical and health
products, services and
solutions in China. Customer
A was established on June 6,
2019, and its registered office
is located in Beijing, with
registered capital of
RMB100.0 million as of the
Latest Practicable Date. On
December 8, 2020, Customer
A was listed on the Stock
Exchange of Hong Kong
Zhongda Baichengtang
and its related parties .
40,969 2.7 Sales of EBN
products
Distributor Bank
transfer
2015 Zhongda Baichengtang and its
related parties are companies
that primarily distribute EBN
products in Beijing. Zhongda
Baichengtang is a private
company established on
January 13, 2004, and its
registered office is located in
Beijing, with registered
capital of RMB0.5 million as
of the Latest Practicable Date
Customer C and its
related parties ....
23,596 1.6 Sales of EBN
products
E-commerce
platform
customer
Bank
transfer
2018 Headquartered in Guangzhou,
Customer C operates an
e-commerce platform.
Customer C was established
on January 20, 2011, and its
registered office is located in
Guangzhou, with registered
capital of US$180.0 million as
of the Latest Practicable Date.
On March 23, 2012, Customer
C was listed on the New Y ork
Stock Exchange
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Customers
Revenue
amount
(RMB in
thousands)
Percentage
of total
revenue
(%)
Type of
services
provided
Type of
customer
Payment
method
Y ear of
commencement
of business
relationship Background
Union Y utai ..... 19,989 1.3 Sales of EBN
products
Distributor Bank
transfer
2015 Established in Tianjin, Union
Y utai primarily distributes
EBN products. Union Y utai is
a private company established
on November 4, 2011, and its
registered office is located in
Tianjin, with registered capital
of RMB1.0 million as of the
Latest Practicable Date
Customer E ...... 19,881 1.3 Sales of EBN
products
Distributor Bank
transfer
2017 Established in Zhengzhou,
Customer E primarily
distributes EBN products in
Henan. Customer E is a
private company established
on November 20, 2015, and
its registered office is located
in Zhengzhou, with registered
capital of RMB1.0 million as
of the Latest Practicable Date
Total ........ 245,572 16.3
Customers
Revenue
amount
(RMB in
thousands)
Percentage
of total
revenue
(%)
Type of
services
provided
Type of
customer
Payment
method
Y ear of
commencement
of business
relationship Background
For the year ended
December 31, 2022
Customer A and its
related parties ....
189,036 10.9 Sales of EBN
products
E-commerce
platform
customer
Bank
transfer
2018 Customer A is a leading provider
of medical and health
products, services and
solutions in China. Customer
A was established on June 6,
2019, and its registered office
is located in Beijing, with
registered capital of
RMB100.0 million as of the
Latest Practicable Date. On
December 8, 2020, Customer
A was listed on the Stock
Exchange of Hong Kong
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Customers
Revenue
amount
(RMB in
thousands)
Percentage
of total
revenue
(%)
Type of
services
provided
Type of
customer
Payment
method
Y ear of
commencement
of business
relationship Background
Customer C and its
related parties ....
23,870 1.4 Sales of EBN
products
E-commerce
platform
customer
Bank
transfer
2018 Headquartered in Guangzhou,
Customer C operates an
e-commerce platform.
Customer C was established
on January 20, 2011, and its
registered office is located in
Guangzhou, with registered
capital of US$180.0 million as
of the Latest Practicable Date.
On March 23, 2012, Customer
C was listed on the New Y ork
Stock Exchange
Customer D and its
related parties ....
21,113 1.2 Sales of EBN
products
Distributor Bank
transfer
2016 Established in Hefei, Customer D
primarily distributes EBN
products. Customer D is a
private company established
on December 12, 2016, and
its registered office is located
in Hefei, with registered
capital of RMB5.0 million as
of the Latest Practicable Date
Union Y utai ..... 20,447 1.2 Sales of EBN
products
Distributor Bank
transfer
2015 Established in Tianjin, Union
Y utai primarily distributes
EBN products. Union Y utai is
a private company established
on November 4, 2011, and its
registered office is located in
Tianjin, with registered capital
of RMB1.0 million as of the
Latest Practicable Date
Customer F ...... 19,763 1.1 Sales of EBN
products
Distributor Bank
transfer
2017 Customer F primarily distributes
EBN products in Wuhan.
Customer F is a private
company established on
November 20, 2015, and its
registered office is located in
Wuhan, with registered capital
of RMB0.5 million as of the
Latest Practicable Date
Total ........ 274,229 15.8
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Customers
Revenue
amount
(RMB in
thousands)
Percentage
of total
revenue
(%)
Type of
services
provided
Type of
customer
Payment
method
Y ear of
commencement
of business
relationship Background
For the five months
ended May 31, 2023
Customer A and its
related parties ....
70,953 9.1 Sales of EBN
products
E-commerce
platform
customer
Bank
transfer
2018 Customer A is a leading provider
of medical and health
products, services and
solutions in China. Customer
A was established on June 6,
2019, and its registered office
is located in Beijing, with
registered capital of
RMB100.0 million as of the
Latest Practicable Date. On
December 8, 2020, Customer
A was listed on the Stock
Exchange of Hong Kong
Customer C and its
related parties ....
13,130 1.7 Sales of EBN
products
E-commerce
platform
customer
Bank
transfer
2018 Headquartered in Guangzhou,
Customer C operates an
e-commerce platform.
Customer C was established
on January 20, 2011, and its
registered office is located in
Guangzhou, with registered
capital of US$180.0 million as
of the Latest Practicable Date.
On March 23, 2012, Customer
C was listed on the New Y ork
Stock Exchange
Customer D and its
related parties ....
10,864 1.4 Sales of EBN
products
Distributor Bank
transfer
2016 Established in Hefei, Customer D
primarily distributes EBN
products. Customer D is a
private company established
on December 12, 2016, and
its registered office is located
in Hefei, with registered
capital of RMB5.0 million as
of the Latest Practicable Date
Customer F ...... 8,081 1.0 Sales of EBN
products
Distributor Bank
transfer
2017 Customer F primarily distributes
EBN products in Wuhan.
Customer F is a private
company established on
November 20, 2015, and its
registered office is located in
Wuhan, with registered capital
of RMB0.5 million as of the
Latest Practicable Date
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Customers
Revenue
amount
(RMB in
thousands)
Percentage
of total
revenue
(%)
Type of
services
provided
Type of
customer
Payment
method
Y ear of
commencement
of business
relationship Background
Customer G ...... 7,903 1.0 Sales of EBN
products
Distributor Bank
transfer
2015 Customer G primarily distributes
EBN products in Chengdu.
Customer G is a private
company established on
November 7, 2018, and its
registered office is located in
Chengdu, with registered
capital of RMB5.0 million as
of the Latest Practicable Date
110,931 14.2
Zhongda Baichengtang, one of our five largest customers in 2020 and 2021, is controlled by Ms.
Xue, one of our Controlling Shareholders and the spouse of Mr. Zheng. Ms. Xue also serves as the
executive director and general manager of Zhongda Baichengtang. During the Track Record Period and
prior to the acquisitions as described in “History, Development and Corporate Structure—Major
Acquisitions, Disposals and Mergers,” certain then related parties of Zhongda Baichengtang were also our
customers, including Beijing Tianfeiyan, Changchun Jinyanhui, Harbin Jinyanhui, Beijing Huixin Trading
Co., Ltd. (ʮ̡) (“Beijing Huixin”), Harbin Y anzhiwu Trading Co., Ltd. (ဧᏵ̹ዲʘ
ʮ̡) (“Harbin Y anzhiwu”) and Changchun Changshengrong Trade Co., Ltd. (ସ࿲ਠ
ʮ̡) (“Changchun Changshengrong”). After the acquisitions, as of the Latest Practicable Date, (1)
Beijing Tianfeiyan is a non-wholly owned subsidiary of our Company and is owned as to 55% by our
Company and 45% by Qingdao Zhenpindao Enterprise Management Partnership (Limited Partnership) (ڡ
༸Άุ၍ଣΥྫΆุ(Υྫ)), which is an employee shareholding platform of Beijing
Tianfeiyan and is controlled by the employees of Beijing Tianfeiyan; (2) Changchun Jinyanhui is a
non-wholly owned subsidiary of our Company and is owned as to 55% by our Company and 45% by
Qingdao Pintianxia Enterprise Management Partnership (Limited Partnership) (˂ɨΆุ၍ଣΥྫ
Άุ(Υྫ)), which is an employee shareholding platform of Changchun Jinyanhui and is controlled
by the employees of Changchun Jinyanhui; (3) Harbin Jinyanhui is a non-wholly owned subsidiary of our
Company and is owned as to 55% by our Company and 45% by Qingdao Tonggelin Enterprise
Management Partnership (Limited Partnership) (Άุ၍ଣΥྫΆุ(Υྫ)), which is an
employee shareholding platform of Harbin Jinyanhui and is controlled by the employees of Harbin
Jinyanhui; and (4) Beijing Huixin, Harbin Y anzhiwu and Changchun Changshengrong, which were
deregistered on July 21, 2022, February 15, 2022 and November 15, 2022, respectively, were previously
controlled by Mr. Zheng.
Customer D, one of our five largest customers in 2020, 2022 and the five months ended May 31,
2023, is controlled by one of our indirect minority Shareholders, who also serves as the executive director
and general manager of Customer D. During the Track Record Period, one related party of Customer D
was also our customer, which is indirectly controlled by the same indirect minority Shareholder. Union
Y utai, one of our five largest customers in 2021 and 2022, is held as to 38.5 % by Mr. Zheng and 50.0%
by the spouse of one of our indirect minority Shareholders, who also serves as the executive director of
Union Y utai. Customer E, one of our five largest customers in 2021, is held as to 40.0% by a family
member of one of our indirect minority Shareholders. Customer F, one of our five largest customers in
2022 and the five months ended May 31, 2023, is controlled by the spouse of one of our minority
Shareholders.
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Save as disclosed above, our Directors confirm that, to their best knowledge having made reasonable
enquiries, they are not aware of any other past or present relationships (including business, shareholding,
employment, family, trust, financing and fund flows) between our Group and each of our five largest
customers in each year/period during the Track Record Period, their respective substantial shareholders,
directors or senior management, or any of their respective close associates during the Track Record Period
and up to the Latest Practicable Date.
We applied standard terms and conditions of distributorship to transactions with our distributors,
including both related distributors and independent distributors. Our transactions with related distributors
and the pricing, credit terms, rebate and return policies of such transactions were in line with the terms
and conditions we provided to a similar independent distributor during the Track Record Period.
MARKETING AND BRANDING
Branding
We have long-term plans for the development of our brand and strong brand communication
capabilities. According to the F&S Report, we have established ourselves as a leading EBN product brand.
We have a dedicated sales and marketing team with rich industry experience, who are responsible for the
implementation of our branding and marketing strategies. As of the Latest Practicable Date, our sales and
marketing team had a total of 685 members. Our executive director and general manager, Mr. Y ouquan Li,
who is also our sales and marketing team leader, has over nine years of extensive marketing experience
in China’s EBN market.
Marketing Campaigns
We adopt a multi-channel marketing approach that allows us to reach and influence a broad target
customer base. Our focus is on maintaining and enhancing brand awareness through professional
marketing and branding strategies. We conduct advertising campaigns via traditional channels such as
television, radio and billboards. Additionally, we leverage e-commerce and social media platforms to
promote our brand and products, collaborating with influencers and implementing targeted marketing
campaigns on emerging e-commerce platforms, such as Douyin and Xiaohongshu. Our marketing efforts
also include sponsorship and celebrity endorsements. For instance, we partnered with the China national
fencing team as their official EBN product supplier and enlisted Ms. Liying Zhao ( Ⴛᘆ጑), a highly
influential celebrity in China, as our brand ambassador. We actively organize and sponsor various
interactive events, such as immersive Xiamen factory tours, golf tournaments, the Zhigang Think Tank
Forum (ሞእ) led by Mr. Zhigang Wang ( ˮқၤ), a strategic consulting expert, and sharing
sessions with renowned host Ms. Lan Y ang ( เᘜ). These initiatives help consolidate our distribution
system, attract more consumers, and promote the beauty and wellness lifestyle. We strive to enhance our
marketing efficiency to maximize brand visibility and expand our consumer reach in a cost-effective
manner.
We adopted certain measures to comply with relevant advertisement laws and regulations. We
designated our legal department as the one in charge of advertising compliance review, and require that
all proposed advertisements shall be reviewed and approved by our legal department before public release.
We also require our production and quality control departments to further review and approve
advertisement content in connection with production techniques, product features, and our research and
development results, among others. While our advertising materials could also be produced by relevant
third-party service providers, we adopted relevant internal control policies which stipulate that only
service providers with relevant qualifications can be engaged for our outsourced advertising activities. Our
advertising materials relating to the perceived health benefits of EBN products are generally supported by
relevant published journals and scientific studies. As advised by our PRC Legal Advisor, during the Track
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Record Period and up to the Latest Practicable Date, we were not subject to any material legal proceedings
or administrative penalties in connection with our advertising activities, according to relevant public
searches conducted by our PRC Legal Advisor and relevant certificates issued by local market supervision
and administration authorities. Furthermore, we have implemented certain measures to ensure that our
distributors and influencers who we engaged for marketing and live streaming activities as well as relevant
marketing materials used by them (including representations made during live streaming sessions) do not
(1) contain any misleading information relating to us or our products or (2) contravene any applicable PRC
laws and regulations. In particular, (1) our legal department shall screen all such marketing materials to
ensure that all information relating to us and/or our products is accurate and complies with relevant laws
and regulations in China, and we require in agreements with influencers or their agencies that all
influencers should use the marketing materials and follow the marketing scripts provided by us (2) we
typically engage influencers from multi-channel network companies (“MCNs”) and pursuant to our
agreement with MCNs we engaged during the Track Record Period, such MCNs shall ensure that
influencers who streamed online or marketed our products for us comply with relevant laws and
regulations in China, and (3) we regularly monitor the marketing and live streaming activities by these
influencers and pay visits to and inspect stores operated by our distributors. As advised by our PRC Legal
Advisor, during the Track Record Period and up to the Latest Practicable Date, based on the public search
conducted by our PRC Legal Advisor, there was no public record of government investigations or fines
relating to marketing activities in connection with our products against these influencers by the relevant
authorities when they were promoting our products on social media platforms.
PRODUCTION
Production Process
We have accumulated rich experience in the production of EBN products. According to the F&S
Report, the preparation of EBN products from raw nests takes approximately 3.8 to 5.2 hours. By
standardizing EBN production processes including, among others, soaking, feather picking, ingredient
adding and stewing, we eliminated various obstacles caused by the traditional processing methods, so that
our customers could enjoy such delicacy with consistent quality in a convenient manner.
The following diagram summarizes the key steps of our production processes for canned EBN
products.
Soaking Feather picking Drying Secondary feather picking
Quality control and labeling Stewing Filling raw materials and sealing Weighing
Waterpurification
Three to five days per 0.5 to
two tonnes  of raw nests
1.5 to eight hours per 0.4 to
4 kilograms  of raw nests
0.8 to three hours per 50 to
120 grams of raw nests
One to two days per 20 to
30 kilograms of raw nests
0.7 to 1.5 hours per 800 to
3,000 bottles/bowls
One to 1.33 hours per 800 to
3,000 bottles/bowls
0.5 to 1.5 hours per 800 to 3,000
bottles/bowls
Three to four hours per 2.8 to
5.6 kilograms
0.5 to one hour per tonne
Raw material examination
Two to three hours per 2.8 to
5.6 kilograms
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Our standardized production processes for canned EBN products consist of 49 core steps. The
following table sets forth the most critical steps of our production processes for canned EBN products.
Step Description
Raw material examination We strictly examine raw materials including raw nests and other ingredients
for our canned EBN products, and evaluate their qualitative index from
sensory, physical and chemical perspectives.
Soaking and feather
picking
We use traditional, purely manual process to remove impurities such as
feathers from raw nests.
Drying We evenly spread wet raw nests on the steaming tray after feather picking,
and dry them in a cold air-drying room.
Secondary feather picking We conduct secondary feather picking process for dried raw nests, further
reducing the impurity contents in our products.
Weighing We manually weigh dried raw nests required for each bottle or bowl-shaped
can of our EBN products, and pack each serving separately in sorting bags
made of food-grade materials.
Water purification We pass tap water through quartz sand, active carbon filters and reverse
osmosis to remove impurities and odors in the water, and obtain purified
water that meets industry standards.
Filling raw materials We precisely prepare the sugar solution according to our product formula
to ensure consistent taste, and use automatic filling equipment to fill EBN
and sugar solution into the bottles or bowl-shaped cans.
Sealing and stewing We use high-temperature glue-free sealing technology to seal bowl-shaped
cans and use four-turn stainless iron caps or aluminium cover rolling caps
to seal bottles for our products. We then stew all ingredients in the bottles
or bowl-shaped cans at high temperature, in which way for nutriments from
EBN to stay in longer.
Quality control and
labeling
We conduct a final inspection for our finished products, mainly for the
product appearance and impurities in the content. For finished products that
pass our quality control process, we label each bottle or bowl-shaped can
with a QR code, which could be used by our customers to retrieve
particulars of our products such as production factory, importer, raw nest
origin and registration number and production date.
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Production Bases
As of the Latest Practicable Date, we had three production bases in China, located in Xiamen City,
Fujian Province, Songjiang District, Shanghai and Guanghe County, Gansu Province, respectively, with an
aggregate gross floor area of approximately 39,300 square meters. As of December 31, 2022, we had the
largest production bases for EBN products in China in terms of aggregate gross floor areas, according to
the F&S Report. The following table sets forth the details of our production bases for the periods indicated.
Production base Production capacity (tonnes) (1) Production volume (tonnes) Utilization rate (%) (2)
2020 2021 2022
First
five
months
in 2023 2020 2021 2022
First
five
months
in 2023 2020 2021 2022
First
five
months
in 2023
Xiamen, Fujian ...... 1,563.0 1,518.4 1,825.0 778.1 1,281.8 1,348.3 1,627.0 582.3 82.0 88.8 89.2 74.8
Songjiang, Shanghai . . . — 31.8 135.0 66.5 — 6.4 66.4 49.3 — 20.1 49.2 74.1
Guanghe, Gansu
(3) . . . 9 . 2 9 . 0 3 . 5 1 . 5 ——— — ————
Notes:
(1) Production capacity is calculated based on the assumption that our production facilities operate 3,020 hours per year.
(2) Utilization rate is calculated by dividing the production volume of a given period by the production capacity of the same
period.
(3) During the Track Record Period, our Guanghe production base was utilized for the feather picking process. The volume of
raw nests that had gone through such process was not reflected in the production volume of such base as these raw nests were
not counted as finished goods. In 2020, 2021, 2022 and the five months ended May 31, 2023, our Guanghe production base
processed 4.0 tonnes, 6.9 tonnes, 1.9 tonnes and 0.9 tonnes of raw nests, respectively.
Our production base in Xiamen, with a gross floor area of approximately 31,100 square meters, is
our first and primary production base, where we focus on the production of substantially all series of our
products. Our production base in Shanghai, with a gross floor area of approximately 6,200 square meters,
is our secondary production base, which is mostly designed for the production of Freshly Stewed Bird’s
Nest. We established our Shanghai production base in 2021 to shorten the delivery distance in light of the
short shelf life of our Freshly Stewed Bird’s Nest. In 2019, we established our Guanghe production base
with a gross floor area of approximately 2,000 square meters, primarily for the lowered labor costs and
the availability of production facilities. Our Guanghe production base is designed primarily for the feather
picking process, through which we manually remove impurities such as feathers from raw nests.
Equipment and Machinery
We purchase our production lines from relevant companies in China. We regularly inspect and
maintain our production equipment. To ensure production safety and efficiency, we have employed
maintenance personnel to regularly inspect and maintain our key production equipment and machinery.
Our major production equipment and machinery have an estimated average useful life of 10 years. We use
straight-line basis to make provision and depreciation, with an annual rate of 9.5%. The remaining useful
life of such equipment and machinery was approximately 6.8 years on average as of May 31, 2023.
QUALITY CONTROL
We have established an enterprise quality management system, covering the raw material and
packaging material supply chain, product manufacturing, storage and sales, to ensure our products comply
with relevant quality standards. We implement stringent policies to manage raw material and packaging
material suppliers regarding their admission and elimination, to strictly control the quality of our material
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supplies. We strictly implement product safety and quality control standards and take corresponding
control measures throughout our entire product manufacturing process to ensure that all of our products
meet the relevant national safety standards and our strict internal quality standards. We have also set up
a dedicated quality assurance team consisting of 33 employees as of the Latest Practicable Date. As of the
same date, members of our quality assurance team had an average of approximately four years of relevant
experience. Our members of quality assurance team possessed relevant certificates, including ISO internal
auditor certificate, internal auditor certificate for the BRC Global Standard for Food Safety, and advanced
skills certificate for food safety inspection, among others. During the Track Record Period and up to the
Latest Practicable Date, we (1) did not receive any fines, product recall orders or other penalties from the
relevant competent authorities regarding material product quality issues, (2) did not receive any material
product returns from our customers, and (3) did not receive any material complaints from the customers.
During the same period, we were not involved in any claims, non-compliance or material complaints
incidents relating to food safety or quality.
We are often involved in the formulation of industry standards. In 2014, we cooperated with China
National Institute of Standardization and other government agencies to take the lead in formulating
China’s first raw nest industry standard, i.e., GH/T 1092-2014, representing the beginning of the
standardization development of China’s raw nest industry. In 2018, the China National Health Commission
entrusted Xiamen Entry-Exit Inspection and Quarantine Bureau to take the lead in formulating the
National Food Safety Standard for Edible Bird’s Nest Products. As an industry leader, we were invited to
participate in the formulation of such standard. In 2020, we cooperated with the China National Research
Institute of Food and Fermentation Industries to lead the formulation of the China Light Industry Standard
for Edible Bird’s Nest Products. In 2020, we participated in the drafting of the group standard for fresh
stewed EBN products, which has been implemented by the China Pharmaceutical Culture Society.
Our Quality Accreditations
We have implemented a stringent quality assurance system to ensure the quality of our products.
According to the F&S Report, we are the first EBN product company in China that has been certified by
the BRC Global Standard for Food Safety and International Food Standard. In addition, we have also
obtained other major quality accreditations, including the certifications of ISO 9001 Quality Management
System, ISO 22000 Food Safety Management System, Hazard Analysis and Critical Control Points,
Integrity Management System, and ISO 14001 Environmental Management System.
In addition to the quality accreditations and certifications mentioned above, we have adopted various
measures to ensure our continuous compliance with relevant food safety laws and regulations. In
particular, we have obtained necessary qualifications, including food production licenses and food
distribution licenses, made necessary filings required by relevant food safety laws and regulations for our
production bases and self-operated stores, and continue to monitor the status of such qualifications.
Moreover, we require all distributors to obtain food distribution licenses from and make relevant filings
with competent government agencies for the sales of our products. As advised by our PRC Legal Advisor,
we complied with all material aspects of relevant food safety laws and regulations during the Track Record
Period and up to the Latest Practicable Date.
Our Quality Assurance Program
We ensure the continuous supply of quality products from different production bases through the
effective implementation and continuous improvement of our stringent quality assurance system.
Raw Material Quality Control
We procure imported raw nests that passed inspection by China Inspection and Quarantine primarily
from Indonesia as our principal raw materials. All these nests are affixed with the CAIQ traceability labels.
Such labels record particulars of each imported raw nest such as its source of origin and importation date.
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We have integrated CAIQ traceability data to our ERP system, which enables us to achieve full-chain
traceability of raw materials and the production process, allowing our own labeling system to record
information about each critical step from the very beginning of the production processes to the sales to
end customers. In addition, we are the first EBN product company in China that established a testing
laboratory certified by China National Accreditation Service for Conformity Assessment, according to the
F&S Report. All of our raw materials must be evaluated in this laboratory before being used in production.
We have implemented the supplier admission and assessment system and created a qualified supplier
catalogue in which we record suppliers’ names, products and services provided and their quality
accreditations. Through evaluation on the suppliers in various aspects such as their prices, delivery cycle,
after-sale service, product quality and on-site inspection results, the suppliers which fail to pass the
evaluation may be removed from the supplier catalogue. For instance, we obtain raw material samples for
evaluation by our Edible Bird’s Nest Research Institute, ensuring that the quality of purchased raw
materials meet our standards. See “—Research and Development” for details about Edible Bird’s Nest
Research Institute (Ӻ৫).
In order to prevent unqualified raw materials from being used in production, we have established a
procurement acceptance system to inspect raw materials that arrive at our production bases, and only raw
materials that meet our standards can be accepted. We have adopted a raw nest acceptance standard, which
specifies the sensory criteria, such as shape, color, smell and impurities, as well as physical and chemical
criteria. It also lays out the standard sampling and testing methods for each criterion. According to the
F&S Report, our raw nest acceptance standard conforms with relevant industry standards.
Production Process Quality Control
We follow relevant standards for the production of our products, including the national mandatory
standards and our strict internal standards. We have established comprehensive operating procedures to
conduct quality control throughout the entire production process in order to ensure that the quality of our
products meets the requirements.
We require our personnel involved in production activities to follow strict hygiene standards. Our
production personnel are required to change clean work clothes, including hats and shoes, and thoroughly
clean themselves before entering into the production area. Equipment and machinery for the production
process are subject to their respective detailed cleaning and sterilization requirements depending on
functions and usages, in order to ensure product safety.
We conduct comprehensive supervision and inspections on the entire production process to ensure
that all of our production equipment, machinery and personnel satisfy the national mandatory standards
and our stricter internal standards.
Finished Products Quality Control
Our quality management extends to the storage, delivery and sales processes of our products. In
particular, by leveraging on the sales personnel located in different parts of China, we are able to closely
keep track of the quality status of our products during their life cycles, to identify potential quality
exposures and to ensure the stable quality of our products. We have implemented various quality control
measures over the delivery process of our products. Prior to entrusting our products to our logistics and
transportation service providers, we conduct stringent inspection procedures to ensure that our products
meet the national quality standards. Additionally, we carefully package our products to suit the specific
transportation mode and prevent damage or moisture during the delivery process. We collaborate with
reputable express courier companies only and impose strict requirements to prevent the mixing of our
products with non-food items, flammable or explosive goods, or items with strong odors.
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All of our finished products are affixed with traceability labels or QR codes that could be used by
end customers to retrieve particulars of our products, including information about raw nests’ source of
origin and registration number, storage condition, shelf life, and production date of finished products.
Each of these traceability labels and QR codes is accompanied by unique anti-counterfeiting verification
codes, which are covered by concealment layers that can be scratched off by end customers. When the end
customer scans the traceability label or QR code and enters the verification code, the information retrieved
would also indicate whether it is the first-time scan on this particular label or code. In the event that the
information retrieved indicates otherwise, the end customer could easily determine that there may be any
re-use or misuse of the traceability labels or QR codes. During the Track Record Period and up to the
Latest Practicable Date, we did not encounter any incidents or receive any reports from end customers in
connection with the re-use or misuse of the traceability labels or QR codes.
We have also set up procedures to handle consumer complaints, including consumer service hotlines
and other feedback mechanism. In addressing the consumers’ complaints, we undertake to communicate
and liaise with the consumers in a timely manner and to commence the quality investigation procedures.
Our dedicated customer complaint team promptly reaches out to customers who have lodged complaints
to gain a thorough understanding of the circumstances. They carefully document all the details of the
complaint to create a comprehensive written record. Based on the specific nature of each complaint, the
customer complaint team escalates the matter to the relevant managers at different levels within our
organization to explore potential solutions. Dedicated to addressing all consumer complaints to their
satisfaction, we come up with appropriate solutions tailored to the unique circumstances of each
complaint. If deemed necessary following quality investigation procedures, we readily and promptly
accept return or exchange requests from complaining customers. During the Track Record Period and up
to the Latest Practicable Date, we had consistently resolved all consumer complaints in a timely manner
to their satisfaction.
RA W MATERIALS, PACKAGING MATERIALS AND SUPPLIERS
Raw Materials and Packaging Materials
The principal raw materials we use in the production of our EBN products are raw nests. During the
Track Record Period, substantially all of raw nests used in our production process were sourced from
suppliers in Indonesia, the largest raw nest production country in the world. According to the same source,
Indonesia’s lowland rainforests are ideal habitats for swiftlets, which create raw nests by their solidified
saliva. We have built strong and stable relationships with various suppliers for raw nests in Indonesia. In
2020 and 2021, we also sourced a total of RMB1.9 million of raw nests from suppliers in China, which,
to the best knowledge of our Directors, imported these raw nests from Malaysia and Thailand. We
currently do not intend to further diversify our raw nest supplier base by engaging relevant suppliers in
Malaysia and Thailand, primarily because we intend to focus on procuring raw nests from Indonesia, as
such raw nests are of a higher and more consistent quality and Indonesia is the largest raw nest production
country. In the event we are to source raw nests from suppliers in these countries, the supplier candidates
shall be subject to our comprehensive supplier selection and management policy.
We began to procure imported raw nests with CAIQ traceability labels in 2015, when China started
to import CAIQ-certified raw nests from Indonesia, and all raw nests procured by us during the Track
Record Period and up to the Latest Practicable Date were CAIQ-certified. In 2020, 2021, 2022 and the five
months ended May 31, 2022 and 2023, our purchase for raw nests was RMB770.1 million, RMB603.5
million, RMB617.0 million, RMB195.0 million and RMB284.3 million, respectively. In the same periods,
the procurement volume of raw nests was 57.2 tonnes, 50.4 tonnes, 52.2 tonnes, 16.2 tonnes and 25.2
tonnes, respectively. According to the F&S Report, we ranked first for four consecutive years from 2019
to 2022 in terms of procurement volume of imported raw nests with the CAIQ traceability labels.
In 2021, through the recommendation of the Indonesian Bird’s Nest Association (̵Гԭዲ၊՘
ึ) and the Edible Bird’s Nest Market Committee of China Agricultural Wholesale Markets Association
(ึ), we entered into a non-binding letter of intent for raw
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nest procurement with the then Indonesian Ambassador to China to further strengthen the win-win
cooperation between China and Indonesia and promote the long-term economic development of both
countries. We believe that entering into such letter of intent could further promote and improve our brand
image. Pursuant to this letter of intent, we indicated our intention to import a certain amount of raw nests
from Indonesia in 2022, and this letter of intent did not designate any specific raw nest suppliers. As
advised by our PRC Legal Advisor, this letter of intent is not a binding contract and therefore we are not
obliged to purchase the raw nests as described in the letter of intent. Entering into this letter of intent will
not affect how we procure raw nest from suppliers in Indonesia or other countries.
We also source packaging materials, which primarily consist of polypropylene bowls (an FDA-
approved food contact plastic), glass bottles, cardboard, and metal packaging materials, to produce our
products. In 2020, 2021, 2022 and the five months ended May 31, 2022 and 2023, our purchase for
packaging materials was RMB86.7 million, RMB85.3 million, RMB110.9 million, RMB38.3 million and
RMB36.4 million, respectively.
The procurement price of raw nests and packaging materials could be volatile due to a variety of
factors beyond our control, and any increase in the prices of raw nests and packaging materials may cause
us to adjust our product prices upward. See “Risk Factors—Risks Relating to Our Business—Fluctuations
in prices and changes in the quality of raw materials and packaging materials could materially and
adversely affect our profitability and results of operations.” Nonetheless, we have implemented certain
measures to manage the price fluctuations of raw materials and packaging materials. We strengthen our
bargaining power through direct and centralized procurement for raw materials and packaging materials.
We also continually monitor market conditions and purchase such materials to the extent possible at
market low. In addition, we continue to optimize our production process to reduce production costs, so that
we could mitigate the negative impact caused by the increase in the purchase price of raw materials or
packaging materials, avoiding adjusting the prices of our products upward. During the Track Record
Period, we did not experience any significant shortage of raw material and packaging material supplies,
and the raw materials and packaging materials provided by our suppliers did not have any significant
quality issues. See “Risk Factors—Risks Relating to Our Business—We do not conduct any swiftlet
farming and primarily depend on suppliers in Indonesia for raw nests. If we are not able to source adequate
raw nests from suppliers in Indonesia or fail to maintain good relationships with such suppliers, our
business, financial condition and results of operations could be materially and adversely affected.”
Our Suppliers
We purchase raw materials, packaging materials, and logistics and transportation services from
suppliers for our business operations. During the Track Record Period, substantially all of our suppliers
for raw nests were located in Indonesia. Our suppliers for packaging materials are primarily located in
Zhejiang, Fujian and Jiangxi provinces, China. The following table sets forth the number of our suppliers
by type for the periods indicated.
Y ear ended December 31, Five months
ended May 31,
20232020 2021 2022
Suppliers
Raw nests ................ 1 0 1 0 9 7
Packaging materials ......... 9 3 7 9 8 3 6 2
Others (1) .................. 1 3 8 1 3 9 1 7 5 1 1 0
Total .................... 241 228 267 179
Note:
(1) Including primarily suppliers for logistics and transportation services, advertisement services and other food
ingredients.
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During the Track Record Period, the number of our raw nest suppliers decreased from 10 in 2020 to
seven in the five months ended May 31, 2023, primarily due to our efforts in optimizing our supplier
network for raw nests. In particular, we ceased to procure raw nests from certain suppliers that failed to
meet our price and/or quality expectations.
Supplier Selection and Management
We consider several factors in the evaluation and selection of suppliers, including, among others,
their background, reputation, and industry experience, and most importantly, the quality and price of their
supplies. As advised by our PRC Legal Advisor, all of our raw nest and other major food suppliers in China
as of the Latest Practicable Date had obtained all necessary licenses and/or registrations in connection with
food safety and quality to conduct business in China. To ensure food safety, we only consider foreign
supplier candidates for raw nests on the registered list of overseas manufacturers of imported food
published by the General Administration of Customs of China, the sole government authority in charge of
supervising the food safety qualifications of such suppliers. As advised by our PRC Legal Advisor, foreign
suppliers for raw nests are only eligible for being registered on such list through recommendation by
competent authorities in their respective countries, and the General Administration of Customs of China
requires various registration materials, including inspection report and recommendation letter issued by
such competent local authorities of the exporting countries as well as corporate certificates, among others.
The General Administration of Customs of China also requires foreign suppliers for raw nests to establish
an effective food safety management system, produce and export raw nests legally from their exporting
countries, and ensure that raw nests exported to China conform with relevant PRC laws and regulations
and national food safety standards. As further advised by our PRC Legal Advisor, all of our raw nest
suppliers outside China as of the Latest Practicable Date were on the registered list of overseas
manufacturers of imported food published by the General Administration of Customs of China.
All new suppliers must undergo our internal supplier admission process before entering into supply
agreements with us. Some of them are subject to an onsite inspection we conducted on their facilities on
an as-needed basis to evaluate their quality control and test the raw material and packaging material
samples. Furthermore, we require all of the raw materials purchased from suppliers to undergo evaluation
by our testing laboratory certified by the China National Accreditation Service for Conformity Assessment
before being used in production. Suppliers whose raw materials fail to pass the evaluation may be
prohibited from conducting business with us.
Pursuant to purchase agreements between us and raw nest suppliers, the quality of raw nests procured
from them shall satisfy the national standards for imported raw nests in China as well as our corporate
standards as stipulated in the respective purchase agreements. In the event that the quality of raw nests
fails to satisfy any of these standards, we are entitled to return such raw nests. During the Track Record
Period and up to the Latest Practicable Date, three batches of raw nests failed to pass the evaluation by
our testing laboratory, among which two batches of raw nests with a total value of RMB0.8 million were
returned in 2021 and the five months ended May 31, 2023 due to excessive impurities and one batch of
raw nests with a value of RMB0.2 million was exchanged in 2022 due to excessive nitrite content. As
advised by our PRC Legal Advisor, we had complied with the relevant PRC laws and regulations in
connection with raw nest importation in all material aspects during the Track Record Period and up to the
Latest Practicable Date.
We have established a comprehensive supplier selection and management policy with the following
significant procedures:
 Suppliers must have proper certifications, licenses, and must comply with relevant regulations.
Prior to being admitted to our qualified supplier list, supplier candidates shall provide us with
business license, production license, third-party test report on safety audits, quality checks and
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compliances, HACCP reviews and other relevant permits, and pass our internal sampling tests.
For raw material suppliers, including raw nest suppliers, we require production permits,
veterinary health certificate, export permit and traceability report, to the extent applicable. In
addition, we typically require suppliers to represent and warrant their qualification to engage
in the business and compliance with relevant laws and regulations in China.
 The quality management process for our suppliers must be objective and adhere to relevant
quality standards. We pay close attention to the supplier’s allergen management, microbial
control in the production process, and handling of non-conforming products.
 For certain raw materials including raw nest, we focus on the suppliers’ internal control
systems in place for product traceability and accountability.
 The supplier’s production scale, on-site management, production capabilities, and
technological expertise are assessed.
 The supplier’s ability to meet delivery timelines and provide quality service are expected.
 We, from time to time, update our existing suppliers’ information in our records, including their
names, address, primary contact person and contact information.
 We regularly monitor the validity of suppliers’ business licenses and permits. If any licenses
or permits are found to be expired, the relevant suppliers are required to provide us with the
renewed licenses and permits promptly, and we would suspend our cooperation with such
suppliers should they fail to provide such documents within the required timeframe. We also
reevaluate each supplier in our qualified supplier list every three years absent any material
changes, and the suppliers are obligated to notify us of any material change immediately.
 We require proper documentation of the supplier evaluation and admission process. We conduct
semi-annual and annual assessments for existing suppliers in our qualified supplier list.
Key Contractual Terms of Supply Agreements for Raw Nests
We generally formulate procurement plans based on our monthly production requirements and
purchase raw nests on an order-by-order basis. Set forth below is a summary of our standard supply
agreement for raw nests.
 Subject matter . The agreement specifies the quantity, the price per kilogram and the total
purchase price of raw nests.
 Quality. The quality of raw nests shall not only conform to the admission standards of China
customs but also satisfy an agreed-upon quality standard, which describes the appearance,
impurity and aroma requirements for raw nests, among others.
 Insurance. The supplier shall be responsible for purchasing relevant insurance that cover the
invoice value of raw nests.
 Payment. We shall settle the payment by bank transfer within 30 days after completing the
inspection and obtaining the inspection and quarantine certificates from China customs.
 Anti-commercial bribery. Both parties shall abide by relevant laws and regulations as well as
business and professional ethics. Any commercial bribery is prohibited under our agreement.
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 Arbitration. All disputes in connection with our agreement shall be settled through amicable
negotiation. In the event that no mutual agreement could be reached through such negotiation,
disputes shall be submitted to and resolved before the China International Economic and Trade
Arbitration Commission.
We have maintained long-term and stable business relationships with major raw nest suppliers in
Indonesia and expect to maintain amicable relationships with them. In particular, we have built strong
relationships with various suppliers for raw nests in Indonesia. As of May 31, 2023, we had maintained
an average of four years of business relationships with our raw nest suppliers. In the five months ended
May 31, 2023, more than 46% of our purchase amount of raw nests were attributable to suppliers with over
five years’ business relationship with us. We believe our long-term stable business relationships with these
suppliers enable us to minimize the risks of unexpected fluctuation in the price of raw nests. Despite the
absence of executed long-term agreements in place, we have established long-standing and stable business
relationships with our raw nest suppliers. This demonstrates our ability to secure a reliable and consistent
supply of raw nests, which is further strengthened by our strong market position.
Our agreements with suppliers, which vary depending on the type of supplier, typically include
specific criteria for allocating product liabilities between the supplier and us. If a product quality issue
arises and the supplier is found to be at fault according to the agreed-upon criteria, the supplier will be
responsible for the issue and indemnify us against associated loss, if any. During the Track Record Period
and up to the Latest Practicable Date, we did not experience any material breach of supply agreements that
had a significant impact on our production and did not have any material disputes with our suppliers.
Our Directors confirm that, to their best knowledge having made reasonable enquiries, they are not
aware of any other relationships (including business, shareholding, employment, family, trust, financing
and fund flows) between our Group’s raw nest suppliers, their shareholders, directors or senior
management and our Company, its subsidiaries, their shareholders, directors or senior management, and
their respective close associates during the Track Record Period and up to the Latest Practicable Date.
Major Suppliers
During the Track Record Period, our major suppliers primarily consisted of suppliers for raw nests.
In 2020, 2021, 2022 and the five months ended May 31, 2023, purchases from our five largest suppliers
in each year/period during the Track Record Period accounted for 59.7%, 51.7%, 52.2% and 54.2% of our
total purchases, respectively. In the same periods, purchases from our largest supplier in each year/period
during the Track Record Period accounted for 23.7%, 15.4%, 16.4% and 20.7% of our total purchases,
respectively. Our suppliers typically grant credit periods of no more than 30 days to us.
Save for Beijing Zhongshi Hongyun Advertising Co., Ltd. (“Zhongshi Hongyun”) as disclosed
below, to the best of our knowledge after reasonable inquiry, none of our Directors, their respective
associates or Shareholders who owned five percent or more of the total issued share capital of our
Company had any interest in any of our Group’s five largest suppliers in each year/period during the Track
Record Period, and all of our five largest suppliers in each year/period during the Track Record Period
were Independent Third Parties. See “Connected Transactions” for details about continuing connected
transactions relating to Zhongshi Hongyun.
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The following table sets forth certain information of our major suppliers during the Track Record
Period.
Suppliers
Purchase
amount
Percentage
of total
purchase
Y ear of
commencement
of business
relationship
Payment
method
Type of
services
supplied Background
(RMB in
thousands) (%)
For the year ended
December 31, 2020
Supplier A and its
related parties ....
241,023 23.7 2018 Bank transfer Raw nests Established before a notary in
Bogor Regency, Indonesia
on October 26, 2016,
Supplier A is an Indonesian
private limited liability
company primarily
engaging in the sales of
raw nests. Supplier A has
authorized capital, issued
capital and paid up capital
of IDR8.0 billion, IDR2.0
billion and IDR2.0 billion,
respectively
Supplier B ...... 150,603 14.8 2015 Bank transfer Raw nests Established before a notary in
Semarang Regency,
Indonesia on March 31,
2000, Supplier B is an
Indonesian private limited
liability company primarily
engaging in the sales of
raw nests. Supplier B has
authorized capital, issued
capital and paid up capital
of IDR3.0 billion, IDR3.0
billion and IDR3.0 billion,
respectively
Supplier C ...... 81,605 8.0 2018 Bank transfer Raw nests Established before a notary in
Surabaya City, Indonesia
on October 13, 2003,
Supplier C is an Indonesian
private limited partnership
primarily engaging in the
sales of raw nests. Supplier
C has issued capital and
paid up capital of
IDR145.5 billion and
IDR145.5 billion,
respectively
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Suppliers
Purchase
amount
Percentage
of total
purchase
Y ear of
commencement
of business
relationship
Payment
method
Type of
services
supplied Background
(RMB in
thousands) (%)
Supplier D ...... 73,236 7.2 2017 Bank transfer Raw nests Established before a notary in
Medan City, Indonesia on
July 22, 2014, Supplier D
is an Indonesian private
limited liability company
primarily engaging in the
sales of raw nests. Supplier
D has authorized capital,
issued capital and paid up
capital of IDR25.0 billion,
IDR25.0 billion and
IDR25.0 billion,
respectively
Zhongshi Hongyun and
its related parties . .
61,475 6.0 2018 Bank transfer Advertisement Zhongshi Hongyun is an
advertisement company
located in Beijing and
Fujian, China. Zhongshi
Hongyun is a private
company established on
January 18, 2006, and its
registered office is located
in Beijing, with registered
capital of RMB1.0 million
as of the Latest Practicable
Date
Total......... 607,942 59.7
Suppliers
Purchase
amount
Percentage
of total
purchase
Y ear of
commencement
of business
relationship
Payment
method
Type of
services
supplied Background
(RMB in
thousands) (%)
For the year ended
December 31, 2021
Supplier A and its
related parties ....
136,825 15.4 2018 Bank transfer Raw nests Established before a notary in
Bogor Regency, Indonesia
on October 26, 2016,
Supplier A is an Indonesian
private limited liability
company primarily
engaging in the sales of
raw nests. Supplier A has
authorized capital, issued
capital and paid up capital
of IDR8.0 billion, IDR2.0
billion and IDR2.0 billion,
respectively
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Suppliers
Purchase
amount
Percentage
of total
purchase
Y ear of
commencement
of business
relationship
Payment
method
Type of
services
supplied Background
(RMB in
thousands) (%)
Supplier B ...... 111,508 12.5 2015 Bank transfer Raw nests Established before a notary in
Semarang Regency,
Indonesia on March 31,
2000, Supplier B is an
Indonesian private limited
liability company primarily
engaging in the sales of
raw nests. Supplier B has
authorized capital, issued
capital and paid up capital
of IDR3.0 billion, IDR3.0
billion and IDR3.0 billion,
respectively
Supplier C ...... 98,014 11.0 2018 Bank transfer Raw nests Established before a notary in
Surabaya City, Indonesia
on October 13, 2003,
Supplier C is an Indonesian
private limited partnership
primarily engaging in the
sales of raw nests. Supplier
C has issued capital and
paid up capital of
IDR145.5 billion and
IDR145.5 billion,
respectively
Supplier D ...... 60,741 6.8 2017 Bank transfer Raw nests Established before a notary in
Medan City, Indonesia on
July 22, 2014, Supplier D
is an Indonesian private
limited liability company
primarily engaging in the
sales of raw nests. Supplier
D has authorized capital,
issued capital and paid up
capital of IDR25.0 billion,
IDR25.0 billion and
IDR25.0 billion,
respectively
Zhongshi Hongyun and
its related parties . .
53,514 6.0 2018 Bank transfer Advertisement Zhongshi Hongyun is an
advertisement company
located in Beijing and
Fujian, China. Zhongshi
Hongyun is a private
company established on
January 18, 2006, and its
registered office is located
in Beijing, with registered
capital of RMB1.0 million
as of the Latest Practicable
Date
Total......... 460,602 51.7
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Suppliers
Purchase
amount
Percentage
of total
purchase
Y ear of
commencement
of business
relationship
Payment
method
Type of
services
supplied Background
(RMB in
thousands) (%)
For the year ended
December 31, 2022
Supplier A and its
related parties ....
162,840 16.4 2018 Bank transfer Raw nests Established before a notary in
Bogor Regency, Indonesia
on October 26, 2016,
Supplier A is an Indonesian
private limited liability
company primarily
engaging in the sales of
raw nests. Supplier A has
authorized capital, issued
capital and paid up capital
of IDR8.0 billion, IDR2.0
billion and IDR2.0 billion,
respectively
Supplier B ...... 1 19,824 12.1 2015 Bank transfer Raw nests Established before a notary in
Semarang Regency,
Indonesia on March 31,
2000, Supplier B is an
Indonesian private limited
liability company primarily
engaging in the sales of
raw nests. Supplier B has
authorized capital, issued
capital and paid up capital
of IDR3.0 billion, IDR3.0
billion and IDR3.0 billion,
respectively
Supplier C ...... 1 19,481 12.0 2018 Bank transfer Raw nests Established before a notary in
Surabaya City, Indonesia
on October 13, 2003,
Supplier C is an Indonesian
private limited partnership
primarily engaging in the
sales of raw nests. Supplier
C has issued capital and
paid up capital of
IDR145.5 billion and
IDR145.5 billion,
respectively
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Suppliers
Purchase
amount
Percentage
of total
purchase
Y ear of
commencement
of business
relationship
Payment
method
Type of
services
supplied Background
(RMB in
thousands) (%)
Zhongshi Hongyun and
its related parties . .
60,298 6.1 2018 Bank transfer Advertisement Zhongshi Hongyun is an
advertisement company
located in Beijing and
Fujian, China. Zhongshi
Hongyun is a private
company established on
January 18, 2006, and its
registered office is located
in Beijing, with registered
capital of RMB1.0 million
as of the Latest Practicable
Date
Supplier D ...... 56,168 5.6 2017 Bank transfer Raw nests Established before a notary in
Medan City, Indonesia on
July 22, 2014, Supplier D
is an Indonesian private
limited liability company
primarily engaging in the
sales of raw nests. Supplier
D has authorized capital,
issued capital and paid up
capital of IDR25.0 billion,
IDR25.0 billion and
IDR25.0 billion,
respectively
Total......... 518,611 52.2
Suppliers
Purchase
amount
Percentage
of total
purchase
Y ear of
commencement
of business
relationship
Payment
method
Type of
services
supplied Background
(RMB in
thousands) (%)
For the five months
ended May 31, 2023
Supplier A and its
related parties ....
93,411 20.7 2018 Bank transfer Raw nests Established before a notary in
Bogor Regency, Indonesia
on October 26, 2016,
Supplier A is an Indonesian
private limited liability
company primarily
engaging in the sales of
raw nests. Supplier A has
authorized capital, issued
capital and paid up capital
of IDR8.0 billion, IDR2.0
billion and IDR2.0 billion,
respectively
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Suppliers
Purchase
amount
Percentage
of total
purchase
Y ear of
commencement
of business
relationship
Payment
method
Type of
services
supplied Background
(RMB in
thousands) (%)
Supplier B ...... 55,938 12.4 2015 Bank transfer Raw nests Established before a notary in
Semarang Regency,
Indonesia on March 31,
2000, Supplier B is an
Indonesian private limited
liability company primarily
engaging in the sales of
raw nests. Supplier B has
authorized capital, issued
capital and paid up capital
of IDR3.0 billion, IDR3.0
billion and IDR3.0 billion,
respectively
Supplier C ...... 39,924 8.8 2018 Bank transfer Raw nests Established before a notary in
Surabaya City, Indonesia
on October 13, 2003,
Supplier C is an Indonesian
private limited partnership
primarily engaging in the
sales of raw nests. Supplier
C has issued capital and
paid up capital of
IDR145.5 billion and
IDR145.5 billion,
respectively
Supplier E ...... 35,728 7.9 2020 Bank transfer Raw nests Supplier E is a raw nest
company located in China.
Supplier E is a private
company established on
August 24, 2017, and its
registered office is located
in Quanzhou, with
registered capital of
RMB10.0 million as of the
Latest Practicable Date
Supplier D ...... 19,682 4.4 2017 Bank transfer Raw nests Established before a notary in
Medan City, Indonesia on
July 22, 2014, Supplier D
is an Indonesian private
limited liability company
primarily engaging in the
sales of raw nests. Supplier
D has authorized capital,
issued capital and paid up
capital of IDR25.0 billion,
IDR25.0 billion and
IDR25.0 billion,
respectively
244,683 54.2
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We have maintained long-term and stable relationships with our suppliers. For our five largest
suppliers in each year/period during the Track Record Period, we had maintained business relationships
with these suppliers on average for approximately six years.
During the Track Record Period, an affiliate within the group of one e-commerce platform customer
also provided marketing services to us. Negotiations of the terms of our sales to such customers and
purchase from such marketing service supplier were conducted on an individual basis and the sales and
purchases were neither connected with nor conditional upon each other. All of our sales to such
e-commerce platform customer and purchases from such marketing service suppliers were conducted in
the ordinary course of business under normal commercial terms and in arm’s length transactions.
None of our five largest suppliers in each year/period during the Track Record Period was previously
involved in any food safety incidents which led to penalties or litigations during the Track Record Period
and up to the Latest Practicable Date.
Zhongshi Hongyun, one of our five largest suppliers in 2020, 2021 and 2022, and one of its related
parties, Guangyao Tianrun, were indirectly controlled by LIU Zhen, our non-executive Director, during the
Track Record Period. See also “Connected Transactions—Purchase of Advertising Services—Zhongshi
Hongyun Advertisement Service Framework Agreement and Guangyao Tianrun Advertisement Service
Framework Agreement.” Save as disclosed above, our Directors confirm that, to their best knowledge
having made reasonable inquiries, they are not aware of any other past or present relationships (including
business, shareholding, employment, family, trust, financing and fund flows) between our Group and each
of our five largest suppliers in each year/period during the Track Record Period, their respective
substantial shareholders, directors or senior management, or any of their respective close associates during
the Track Record Period and up to the Latest Practicable Date.
INVENTORY
During the Track Record Period, majority of our inventory were raw materials, i.e., imported raw
nests that we sourced from suppliers in Indonesia. For better storage, our warehouse is equipped with
refrigerator compartments, and we conduct testing of temperature and humidity degrees from time to time
through our temperature and humidity monitoring system. Our inventories of work in progress primarily
included raw nests that have gone through feather picking process. See “—Production—Production
Process.” Such raw nests can be completed as finished products, which primarily consist of canned EBN
products, in a relatively short period. We generally manufacture our products based on anticipated demand
and do not stock considerable amount of finished products.
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The following table sets forth our inventory breakdown as of the dates indicated. See also “Financial
Information—Discussion of Certain Items from the Consolidated Statements of Financial Position—
Inventories.”
As of December 31, As of May 31,
20232020 2021 2022
(RMB in thousands)
Raw materials ................. 174,103 163,851 125,926 187,748
— Raw nests .................. 173,917 163,386 124,722 186,776
— Other raw materials ........... 1 8 6 4 6 5 1,204 972
Work in progress ............... 41,092 33,360 36,467 17,608
Finished goods ................. 42,071 65,189 81,504 34,881
Goods in transit ................ 6,739 4,743 13,295 9,183
Packaging .................... 12,981 12,498 14,370 10,832
Right to recover returned goods ..... 5 9 1 0 1 2 3 3 1 0 2
Total ........................ 277,045 279,742 271,795 260,354
Inventory Control
We have an inventory control policy in place to monitor our inventory. We perform the following
inventory management procedures to keep track of incoming and outgoing inventories and monitor our
inventory levels.
 We designate the storage location and area for our inventory according to the attributes of
specific inventory to better utilize our warehousing facilities.
 We take necessary measures to protect our inventory from theft and damage.
 Unauthorized persons are prohibited from entering into our warehouses, which shall remain
closed when there are no warehouse personnel on duty.
 Responsible departments shall examine each batch of inventory before admitting such
inventory into warehousing facilities.
 The warehouse personnel shall regularly check the inventory level, the inspection results for
which shall be recorded in writing.
 The inventory level shall be reported to the finance department for valuation.
In 2020, 2021, 2022 and the five months ended May 31, 2023, our inventory turnover days, which
are calculated based on average inventories divided by cost of sales times number of days, were 91.2 days,
130.2 days, 118.2 days and 106.7 days, respectively. According to the F&S Report, our inventory turnover
days during the Track Record Period were generally in line with the industry norm. As of December 31,
2020, 2021 and 2022 and May 31, 2023, finished products, which primarily include canned EBN products,
accounted for 15.2%, 23.3%, 30.0% and 13.4% of our total inventories, respectively.
In 2020, 2021, 2022 and the five months ended May 31, 2023, we recorded raw material write-off
of RMB40,300, RMB23,900, RMB266,100 and RMB4,200, respectively. Such write-off was typically due
to food expiry of ingredients. In 2022, we wrote off raw nests in the amount of RMB254,200, as those raw
nests were primarily fragmented materials designated to be used for a research and development project
which did not initiate as anticipated.
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PRICING
We price our products based on various factors, including the product type, the EBN content per unit,
and the purchase cost of raw nests. We provide our distributors with standard prices of our products, as
stipulated by our price system. Our distributors shall abide by our price system. See “—Our Products” for
details of the standard prices of our products.
RESEARCH AND DEVELOPMENT
We explore and launch new products through continual product research and development. We have
established an experienced research and development team, captained by Mr. Zhang Y ukui (۲an
academician of the Chinese Academy of Sciences, and Ms. Zhu Beiwei ( ϡႍᑢ), an academician of the
Chinese Academy of Engineering. As of the Latest Practicable Date, we had 49 research and development
staff for product development with an average of over seven years’ relevant experience. As of the same
date, over 30% of our research and development staff for product development held a master’s degree or
above.
We value investment in scientific research and standard research. We established the Edible Bird’s
Nest Research Institute, which collaborates with academic institutions such as Nanchang University and
Fujian Agriculture and Forestry University. As of the Latest Practicable Date, Edible Bird’s Nest Research
Institute had 49 members. Edible Bird’s Nest Research Institute is primarily involved in formulating
relevant standards for China’s EBN industry, conducting research on the production of EBN products, and
empowering the development of our products. Through Edible Bird’s Nest Research Institute, we have
participated in the formulation of multiple standards of EBN products, including one international
standard, one national standard, two industry standards, 16 group standards and 25 enterprise standards.
In addition, we are the first EBN product company in China that established a testing laboratory certified
by China National Accreditation Service for Conformity Assessment, according to the F&S Report.
Located in Xiamen, this testing laboratory is equipped with various testing equipment, including triple
quadrupole mass spectrometer, atomic absorption spectrometer, ion chromatograph, colorimeter,
automatic Kjeldahl nitrogen analyzer, commercial rapid sterility testing system, and rapid microbial
detection system, among others. The laboratory can perform tests on various ingredients and packaging
materials for our EBN products to ensure that they conform with relevant food safety standards and do not
contain nitrite or other harmful substances above the permitted thresholds. Moreover, we strive to promote
industry-university-research cooperation in China’s EBN industry. In 2022, we and Peking University
Health Science Center established a collaborative innovation laboratory for researching EBN nutrition. We
believe that such collaboration could further improve our innovation capabilities.
During the Track Record Period and up to the Latest Practicable Date, we had initiated 94 research
and development projects, primarily focusing on research into EBN and EBN extracts, processing and
packaging techniques and development of novel products. Among these 94 projects, 31 were in
collaboration with third-party research partners mainly consisting of reputable academic institutions in
China. As of the Latest Practicable Date, we had completed 56 of the 94 projects and acquired nine patents
from these research and development projects.
During the Track Record Period, we collaborated with several third parties for the development and
production of certain products, primarily including EBN pastries, drinkable EBN essence with ginsengs
and EBN skincare products. To the best of our knowledge after reasonable inquiry, all of these third parties
were Independent Third Parties. In 2020, 2021, 2022 and the five months ended May 31, 2023, our
transaction amount with these parties was RMB1.7 million, RMB2.3 million, RMB2.5 million and
RMB2.4 million, respectively.
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OUR EMPLOYEES
We believe that our long-term growth depends on the expertise, experience and development of our
employees. Our human resources center is responsible for recruiting, managing and training our
employees. We have a labor union that is able to protect our employees’ rights, assist us in attaining our
economic objectives and encourages employees to participate in management decisions.
We recruit employees primarily through recruitment websites, on-campus recruitment and internal
referrals. We provide induction training to every new employee. In addition, we formulate and implement
training plans for our employees on a regular basis. In particular, we established the Academy of Y an
Palace (߹which empowers the skill development of our employees.
As of the Latest Practicable Date, we had 1,949 full-time employees. We generally enter into labor
contracts with our employees. As of the same date, all of our employees were based in China and most
of them were in Xiamen City, Fujian Province, Beijing and Songjiang District, Shanghai. The following
table sets forth the number of our employees by function as of the Latest Practicable Date.
Number of
employees
Production and operation ........................................ 9 4 7
Administrative and management .................................. 2 6 8
Sales and marketing ........................................... 6 8 5
Research and development ...................................... 4 9
Total ...................................................... 1,949
We are required by PRC social insurance and housing provident fund laws and regulations to make
contributions for mandatory social insurance and housing provident funds for our employees. During the
Track Record Period, we did not make adequate contributions to the social insurance and housing
provident funds with respect to certain of our employees, most of whom are production line workers,
as required by the relevant PRC laws and regulations. See “—Legal Proceedings and
Compliance—Compliance—Social Insurance and Housing Provident Funds” and “Risk Factors—Risks
Relating to Our Business—We may be required to make additional contributions of social insurance fund
and/or housing provident fund and late payments and fines under PRC laws and regulations.”
We have maintained a good relationship and expect to maintain an amicable relationship in the future
with our employees. During the Track Record Period and up to the Latest Practicable Date, there were no
material strikes which had an adverse impact on our operation and no material disputes between the Group
and our employees.
DATA PRIV ACY AND PROTECTION
With the prior consent of our customers, we collect and maintain their personal information to the
extent necessary for the sales and delivery of our products through e-commerce platforms or our
membership program and in accordance with the relevant laws and regulations on data privacy and
security in China. We have taken measures to maintain the confidentiality of such information to ensure
regulatory compliance. Specifically, we perform de-identification on raw data stored, during which we
redact personal identifiable data, such as name and phone number of a specific customer. Since the
collection, storage, usage, retention and transmission of information that can be identified as specific
individuals or reflect the relevant activities of specific individuals are all subject to relevant data
protection laws and regulations, the de-identification of raw data is necessary for us to efficiently protect
personal data of our customers. We also set up an access control system for personal information in our
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internal system so that it cannot be viewed without proper authorization. We set up firewalls to prevent
information loss or leakage caused by cyber-attacks. In addition, we from time to time examine the
security of our data storage system. We strictly restrict the range of data that our employees are authorized
to access based on their seniority and function.
In addition, we continue to pay close attention to the legislative and regulatory developments in
cybersecurity and data protection and conduct routine cybersecurity and data protection compliance check
and rectification to keep pace with regulatory development. In particular, we have established a
comprehensive set of internal cybersecurity and data protection rules and policies. We have also
formulated the overarching data security management policy, user personal information protection
management policy and network security management policy, which provide the principal management
rules on cybersecurity and data protection.
During the Track Record Period and up to the Latest Practicable Date, we did not experience any
material data leakage or data loss or any material unauthorized use of customers’ personal information. As
advised by our PRC Legal Advisor, we had complied with the applicable laws and regulations with respect
to data privacy and personal data protection during the Track Record Period and up to the Latest
Practicable Date in all material aspects on the following basis.
(1) As of the Latest Practicable Date, we had not been subject to any material administrative
penalties, mandatory rectifications or other sanctions imposed by any competent regulatory
authorities in relation to cybersecurity, data and personal information protection, nor had we
been subject to or involved in any investigations, or received any inquiry, examination,
material warning or interview in such respect;
(2) As of the Latest Practicable Date, there were no material cybersecurity or data protection
incidents, or any infringement upon any third parties, or other legal, administrative or
governmental proceedings pending or, to the best of our knowledge, threatened against or
relating to us; and
(3) We have implemented stringent internal control systems for data security and personal
information protection.
Regulatory Authority-initiated Security Review
Regulatory authority may initiate cybersecurity reviews if it is of the opinion that the network
product or service, data processing activities or listing in a foreign country affects or is likely to affect
national security. To avoid such concerns, we are taking a more prudent approach in business operation
and can prepare measures to reduce its risk of exposure to the implementation of the Cybersecurity Review
Measures:
 Pay close attention to the latest trends in the critical information infrastructure (the “CII”)
identification by industry authorities and maintain continuous communication with competent
and regulatory authorities and local government departments;
 Adopt relevant security measures and internal control system to reduce the risks of data
leakage, theft and destruction and illegal control, preferably, as encouraged by the
Cybersecurity Law, voluntarily participate in the CII protection system and perform relevant
obligations to make advance preparations for possible future CII protection efforts;
 Be more conservative in network products or services procurement process; and
 Conduct personal information security impact assessment and relevant internal assessment to
address security issues/concerns that may raise national security concerns in data processing
activities.
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Our Directors and our PRC Legal Advisor are of the view that the Cybersecurity Review Measures
and the Draft Regulations on Cyber Data Security Management, if implemented in current form, will not
have material adverse effects on our business operations or the proposed Listing on the following basis:
(1) We have implemented comprehensive measures to ensure user privacy and data security and to
comply with applicable cybersecurity and data privacy laws and regulations;
(2) During the Track Record Period and up to the Latest Practicable Date, we had not been subject
to any material investigation, inquiry or sanction in relation to cybersecurity, data privacy or
cybersecurity review from the CAC, the CSRC or any other relevant government authorities;
(3) During the Track Record Period and up to the Latest Practicable Date, we had not been subject
to any material fines or other material penalties due to non-compliance with cybersecurity or
data privacy laws or regulations;
(4) As advised by our PRC Legal Advisor, we had not been involved in any activities that might
give rise to national security risks based on the factors set out in Article 10 of the Cybersecurity
Review Measures during the Track Record Period and up to the Latest Practicable Date; and
(5) As advised by our PRC Legal Advisor and subject to any further official guidance and
implementation rules relating to the Cybersecurity Review Measures, Article 7 of the
Cybersecurity Review Measures requires a cybersecurity review for internet platform operators
possessing personal information of over one million users and pursuing a foreign listing ( ਷̮
ɪ̹).
With the continuous expansion of our business and growth of our customer and distributor base, there
can be no assurance that the constantly evolving regulations on the collection and use of personal
information in China will have no material adverse effect on us. See “Risk Factors—Risks Relating to Our
Business—We are in possession of certain information regarding our customers, and the improper
collection, storage, use or disclosure of such information could materially and adversely affect our
business and reputation.” We will closely monitor the rule-making process of the relevant regulatory
requirement and adjust our data practices in a timely manner to comply with the relevant laws and
regulations, if necessary.
A W ARDS AND RECOGNITION
During the Track Record Period and up to the Latest Practicable Date, we received a number of
awards and recognitions in connection with our business. Some of the significant awards and recognitions
we have received are set forth below.
Awards and Recognition Awarding Parties Y ear of Award
Well-known Trademark ( ཱུΤਠᅺ) State Administration for Industry and
Commerce of China (၍
ଣᐼ҅)
2011
Enterprises with Outstanding
Contribution in the Food Industry
during the 40 Y ears of Reform and
Opening Up in Fujian Province
(׳40্̈
ᘠΆุ)
Fujian Food Industry Association (ܔ
ʈุ՘ึ)
2019
Executive Vice Chairman
(ڗ)
Edible Bird’s Nest Market Committee of
China Agricultural Wholesale Markets
Association (̹༵൱ʕːᑌΥึ
ึ)
2020
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Awards and Recognition Awarding Parties Y ear of Award
The Fifth Group of Provincial Green
Factories (ॴၠЍʈᅀ)
Fujian Provincial Department of
Industry and Information Technology
(ʷᝂ)
2022
Fujian Benchmark Company for Edible
Bird’s Nest Products (ዲ၊ʿዲ
ᅺ૖Άุ)
Fujian Food Industry Association
(ʈุ՘ึ)
2015
Leading Private Enterprise in Xiamen
(̹Ꮂ᎘৶฀͏ᐄΆุ)
Xiamen Municipal Government 2022
Advanced Company for Poverty
Alleviation in Fujian Province (ܔ
୭மҸ਺΋ආණ᜗)
The People’s Government of Fujian
Province
2021
INTELLECTUAL PROPERTY
Our intellectual property portfolio consists of trademarks, patents, copyrights and domain names.
Our intellectual property is important to our business. See “Appendix IV—Statutory and General
Information—B. Further Information about Our Business—2. Intellectual Property Rights of Our Group.”
We protect our intellectual property rights in accordance with the relevant laws and regulations and
contractual agreements. We have established an intellectual property management system and improve and
update our intellectual property management system in line with the business development.
When dealing with the infringement of our intellectual property rights, we found incidents about
counterfeit products and other infringements against our products through internal and external channels,
including: (1) our sales personnel across the country; (2) our staff from legal department when they visit
the markets; and (3) complaints and reports by consumers through customer service hotline. After
discovering incidents of infringements, we will collect supporting information, make an assessment on
whether an infringement actually takes place, and analyze the feasibility of to defend our rights and the
approaches we may take. Based on different product infringements and specific circumstances, with the
support of intellectual property experts or legal consultants, we defend our rights through targeted
approaches, including but not limited to filing industrial and commercial complaints and litigations.
During the Track Record Period and up to the Latest Practicable Date, we did not experience any
threatened or pending disputes relating to infringement of intellectual property rights which would have
a material adverse effect on our business. During the same period, a third-party individual submitted an
application to the National Intellectual Property Administration seeking to invalidate two of our registered
trademarks, with a registration number of 58276334 and 38107129, respectively. The National Intellectual
Property Administration has rejected the invalidation application for our registered trademark with a
registration number of 58276334, and the third-party individual did not initiate an administrative
proceeding against such rejection within statutory limitation period. Therefore, based on the confirmations
from the intellectual property agent we engaged to defend us in this dispute (the /H11033Intellectual Property
Agent /H11033), this third-party individual no longer has the right to bring an administrative proceeding in this
regard. For the trademark with a registration number of 38107129, the National Intellectual Property
Administration supported the invalidation application from the same individual, and the Intellectual
Property Agent has engaged a PRC intellectual property legal advisor on our behalf to initiate an
administrative proceeding against such unfavorable result. As of the Latest Practicable Date, we had filed
all necessary materials with the relevant intellectual property court and had not received the notice of the
trial date. Our Directors are of the view that the final result of this administrative proceeding would not
have a material adverse effect on our business, as (1) the trademark with a registration number of
38107129 was rarely used on a discrete basis to market our products, (2) no revenue was derived
independently from this trademark, and (3) we have many other similar and alternative registered
BUSINESS
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trademarks which can be used for the same purposes. See “Risk Factors—Risks Relating to Our
Business—We may face intellectual property infringement claims by third parties, which could disrupt our
business, cause substantial legal costs, and damage our reputation.”
Our know-hows in production are invaluable assets to us, as we pride ourselves of the unique
production techniques we possess. We have entered into confidentiality agreements with our core research
and development employees to prevent such employees from disclosing our know-how secrets to others
without our proper authorization. Our employment contracts also stipulate that any intellectual property
created by such employees in the course of and after a specific period of their employment shall belong
to us, in the event that such intellectual property is created as a result of performance of duties within the
scope of their employment with us.
LICENSES, PERMITS AND APPROV ALS
We are required to maintain various licenses, permits and approvals in order to operate our business.
We are not required to obtain any additional licenses for our online sales to customers. We continually
monitor our compliance with the requirements related to licenses, permits and approvals in order to ensure
that we have all such licenses, permits and approvals which are necessary to operate our business. As
advised by our PRC Legal Advisor, during the Track Record Period and up to the Latest Practicable Date,
we had obtained all requisite licenses, approvals and permits from relevant authorities that are material to
the operation of our existing business.
The following table sets out a list of material licenses, permits and approval held by us as of the
Latest Practicable Date.
License/permit (1)
Entity holding the
license/permit Grant date Expiration date
Food production license (2) ..... Y a n Sinong January 21, 2022 January 20, 2027
Food production license (3) .....
Shanghai Y an
Palace October 29, 2021 October 28, 2026
Food production license (2) ..... Zhiqiao Industry April 1, 2022 March 31, 2027
Notes:
(1) Our Guanghe production base is designed primarily for the feather picking process, through which we manually remove
impurities such as feathers from raw nests. As advised by our PRC Legal Advisor, based on the confirmation from
Guanghe County Market Supervision Administration, we are not required to obtain a food production license for the
feather picking process conducted by our Guanghe production base.
(2) Applies to our Xiamen production base.
(3) Applies to our Shanghai production base.
INSURANCE
We maintain certain insurance policies, including car insurance and property-all-risks insurance,
which are consistent with the customary practice in China. We currently do not maintain product liability
insurance for our products or litigation insurance. Our Directors consider that our existing insurance
coverage is consistent with industry practice in China and sufficient for our present operations.
SEASONALITY
Our financial condition and results of operations are subject to seasonal fluctuations. We typically
carry out more sales and marketing activities before and during holiday seasons and other traditional
festivities, such as the mid-autumn festival and the dragon boat festival. We also actively participate in
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shopping events and promotional activities organized by third-party e-commerce platforms, such as
Singles’ Day Shopping Carnival (Ӯᛇື), to capture more sales opportunities. We typically
have increased sales before and during the holiday seasons, festivals and events, most of which happen
during the second half of the year. As a result, we generally record higher revenue in the second half of
the year.
PROPERTIES
As of the Latest Practicable Date, all of our production bases were located in China.
According to section 6(2) of the Companies Ordinance (Exemption of Companies and Prospectuses
from Compliance with Provisions) Notice, this prospectus is exempted from compliance with the
requirements of section 342(1)(b) of the Companies (Winding Up and Miscellaneous Provisions)
Ordinance in relation to paragraph 34(2) of the Third Schedule to the Companies (Winding Up and
Miscellaneous Provisions) Ordinance, which require a valuation report with respect to all the Group’s
interests in land or buildings, for the reason that, as of May 31, 2023, we had no single property with a
carrying amount of 15% or more of our total assets.
Owned Properties
As of the Latest Practicable Date, we owned five properties with an aggregate gross floor area of
approximately 5,573.9 square meters in China. We have obtained title certificates for such five properties.
Leased Properties
As of the Latest Practicable Date, we leased 121 properties relating to our business operations in
total with an aggregate gross floor area of approximately 128,508.2 square meters, which have been used
primarily as stores, offices, production bases or warehouses. As of the same date, there were defects in
some of our leased properties. See “—Legal Proceedings and Compliance—Compliance—Leased
Properties.”
LEGAL PROCEEDINGS AND COMPLIANCE
Legal Proceedings
We may from time to time become a party to various legal, arbitration or administrative proceedings
arising in the ordinary course of our business. During the Track Record and up to the Latest Practicable
Date, there were no litigation, arbitration or administrative proceedings pending or threatened against our
Company or any of our Directors which had caused or could cause a material and adverse effect on our
financial condition or results of operations.
Compliance
We are subject to various regulatory requirements and guidelines issued by regulatory authorities in
China. During the Track Record Period and as of the Latest Practicable Date, we did not commit any
material non-compliance of the laws and regulations, and we did not experience any material
non-compliance incident, which taken as a whole, in the opinion of our Directors, is likely to have a
material and adverse effect on our business, financial condition or results of operations. As advised by our
PRC legal advisor, during the Track Record Period and up to the Latest Practicable Date, we had complied
with the relevant laws and regulations in all material respects in China. During the Track Record Period
and up to the Latest Practicable Date, we were from time to time subject to government inspections in
connection with our production equipment and facilities, food safety and importation of raw nests.
However, relevant government agencies did not have any adverse findings against us.
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Third-Party Payment Arrangements
During the Track Record Period, we had 21 customers (the “Relevant Customers”) that settled their
payments with us through third-party payors (the “Third-party Payment Arrangements”). Many small-
sized EBN product distributors operated their business in the form of sole proprietorship (᜗ʈਠ˒),
which is a type of organization that typically prefers not to open a separate business bank account but to
settle payments through personal bank accounts due to the complexity of using corporate bank accounts.
To the best of our knowledge after reasonable inquiry, third-party payors involved in the Third-party
Payment Arrangements consisted of owner/co-owners, legal representatives and affiliated companies of
the Relevant Customers. Our Directors confirm that all these third-party payors are Independent Third
Parties. Since January 1, 2022, we have ceased all Third-party Payment Arrangements.
In 2020, 2021, 2022 and the five months ended May 31, 2023, the aggregate amount of third-party
payments was RMB23.5 million, RMB15.3 million, nil and nil, respectively, accounting for 1.8%, 1.0%,
nil and nil of our total revenue in the same periods, respectively. No individual Relevant Customer had
made material contribution to our revenue during the Track Record Period. In 2020 and 2021, other than
simply accepting the third-party payments paid by the third-party payors for the Relevant Customers, we
had not proactively initiated any of the Third-party Payment Arrangements, nor had we participated in any
separate arrangement between the Relevant Customers and their respective third-party payors for the
settlement of the payments owed by the Relevant Customers to the third-party payors. Furthermore, in the
same years, we had not provided any discount, commission, rebate or other benefit to any of the Relevant
Customers or the third-party payors to facilitate or incentivize the Third-party Payment Arrangements.
As advised by our PRC Legal Advisor, the Third-party Payment Arrangements do not constitute a
non-compliance as these arrangements do not contravene or circumvent applicable laws or regulations in
China. Nonetheless, we are subject to various risks relating to the Third-party Payment Arrangements,
including possible claims from third-party payors for return of funds as they were not contractually
indebted to us and possible claims from liquidators of third-party payors. In the event of any claims from
third-party payors or their liquidators, or legal proceedings (whether civil or criminal) instituted or
brought against us in respect of third-party payments, we will have to spend financial and managerial
resources to defend against such claims and legal proceedings, and our financial condition and results of
operations may as a result be adversely affected. As advised by our PRC Legal Advisor, our Directors
believe that any possible claims arising from such Third-party Payment Arrangements will not have any
material adverse effect upon our business and results of operation, on the basis that (1) the aggregate
amount of third-party payments during the Track Record Period was immaterial and (2) we have ceased
all Third-party Payment Arrangements since January 1, 2022. In addition, the Third-party Payment
Arrangements also exposed us to the risk of money laundering, as such arrangements may not be based
on genuine business transactions. In the event that any of funds received by us under the Third-party
Payment Arrangements were illegal proceeds, we may be subject to criminal liability, the funds we receive
as well as the revenue we generate from such arrangements may be confiscated, and further fines may be
imposed on us. Additionally, persons directly involved in these arrangements may face imprisonment,
detention and fines. As further advised by our PRC Legal Advisor, the risk is remote that the Third-party
Payment Arrangements involved money laundering, primarily because (1) the majority of the Relevant
Customers and their respective third-party payors confirmed that the Third-party Payment Arrangements
were based on genuine business transactions and (2) we are not subject to any investigation or prosecution
by any law enforcement agency for violating any laws or regulations relevant to money laundering. See
“Risk Factors—Risks Relating to Our Business—We are subject to various risks relating to third-party
payments.”
Based on the due diligence work performed by the Joint Sponsors, including (i) the review of the full
list of all transactions during the Track Record Period that involved the Third-party Payment
Arrangements and the sales and cash in bank ledgers of the relevant subsidiaries of the Company which
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received payment pursuant to the Third-party Payment Arrangements; (ii) the discussion with the
Company in relation to the reasons for adopting the Third-party Payment Arrangements, its internal
control measures in respect of the Third-party Payment Arrangements and understand that the Company
had not proactively initiated any of the Third-party Payment Arrangements and that such arrangements
have ceased since January 1, 2022; (iii) the interviews with or written confirmations obtained from the
Relevant Customers (except for four Relevant Customers) and their respective third-party payors
confirming that, amongst other matters, (a) the Third-party Payment Arrangements were based on genuine
business transactions, (b) no discount, commission, rebate or other benefit was provided by the Company
to facilitate or incentivize the Third-party Payment Arrangements, (c) there have been no disputes arising
from the Third-party Payment Arrangements, (d) the Relevant Customers and their respective third-party
payors are Independent Third Parties, (e) the source of funding for the Third-party Payment Arrangements
was legitimate and independent from the Company, (f) the Third-party Payment Arrangements do not
involve any illegal activities, (g) they will not make any claims for return of funds from the Company and
(h) such Third-party Payment Arrangements have ceased; (iv) with respect to the four Relevant Customers
that the Joint Sponsors were not able to interview or obtain a written confirmation from, obtaining and
reviewing the walkthrough documents for selected transactions of the Third-party Payment Arrangements
involving those four Relevant Customers, and obtaining and reviewing the relevant third-party payment
authorisations and sample walkthrough documents for the other Relevant Customers; (v) the discussion
with the Industry Consultant and understand that it is not uncommon for such third-party payment
arrangements to be adopted in China’s EBN or food sale industry; (vi) the review of the Company’s
internal control report and noted that the Company has implemented enhanced internal control measures
since April 28, 2023 to prevent the reoccurrence of the Third-party Payment Arrangements in the future
by prohibiting customers from settling payments through third-party payors; (vii) the background search
and litigation search conducted on the Company and its subsidiaries, which did not reveal any litigation,
claim or dispute with any Relevant Customers, third-party payors or their creditors/liquidators with
respect to the Third-party Payment Arrangements nor any prosecution or penalty for violation of any laws
or regulations relevant to money laundering; and (viii) the review of the memorandum of the PRC Legal
Advisor regarding the basis of their view as set out above, particularly their view that the Third-party
Payment arrangements do not constitute a non-compliance in China and the risk that the Third-party
Payment Arrangements involved money laundering is remote, nothing material has come to the attention
of the Joint Sponsors in respect of the genuineness, source of funding and legal implications of the
transactions underlying the Third-party Payment Arrangements that needs to be brought to the attention
of the Stock Exchange.
Leased Properties
As of the Latest Practicable Date, we leased 121 properties relating to our business operations in
total with an aggregate gross floor area of approximately 128,508.2 square meters, which have been used
primarily as stores, offices, production bases or warehouses.
Among the 121 leased properties, for 87 leased properties with an aggregate gross floor area of
approximately 127,038.7 square meters (accounting for 98.9% of the aggregate gross floor area of our
leased properties relating to our business), we had obtained valid title certificates or real estate purchase
agreements from the lessors. In respect of the remaining 34 of our leased properties with an aggregate
gross floor area of approximately 1,469.5 square meters (accounting for 1.1% of the aggregate gross floor
area of our leased properties relating to our business operations), the lessors had not provided us with the
relevant title certificates, real estate purchase agreements or permits from the landowner for sublease.
Among these 34 leased properties, 32 were used as stores, one was used as staff dormitory and one was
used as warehouse. If the lessors of the 34 leased properties are not the legal owners or have not obtained
the proper authorization from the legal owners of such premises, the legal owners of such premises or
third-party tenants that have leased from the legal owners will have ground to challenge the validity of our
leasehold interest in the affected premises. Additionally, the intended purposes contained in the title
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certificates or relevant authorization documents are inconsistent with the actual use of four leased
properties (accounting for 0.3% of the aggregate gross floor area of our leased properties relating to our
business operations). Among these four leased properties, the intended purpose contained in the title
certificates or relevant authorization documents of three leased properties is residence and that for the
remaining one is garage. However, as of the Latest Practicable Date, one was occupied as office space and
three were occupied as warehouses. As of the Latest Practicable Date, we were not aware of any title or
usage challenge being made by any third party or government agency with respect to these leased
properties. Should disputes or government actions arise due to title or usage challenges to such properties,
we may encounter difficulties in continuing to lease such properties and may be required to relocate. We
are confident that we will identify comparable properties in proximity in a timely manner and secure a
lease on comparable terms without substantial reinstatement, relocation or renovation costs. As advised by
our PRC Legal Advisor, among the 32 leased stores for which the lessors had not provided us with the
relevant title certificates or real estate purchase agreements, the risk is low that 31 leased stores will be
required to relocate, primarily because these 31 leased stores were located within large shopping malls,
which generally would not provide lessees including us with relevant title certificates or real estate
purchase agreements. In respect of the remaining one leased stores for which we did not obtain relevant
title certificate or real estate purchase agreement, the owner has applied for the title certificate with local
government, which may become available in March 2024.
Furthermore, we did not register 119 out of the 121 lease agreements with the competent authorities
as of the Latest Practicable Date. Under the relevant PRC laws and regulations, the parties to a lease
agreement have the obligation to register and file the executed lease agreement. As advised by our PRC
Legal Advisor, the validity and enforceability of the lease agreements are not affected by the failure to
register or file the lease agreements with the relevant government authorities. According to the relevant
PRC regulations, we may be ordered by the relevant government authorities to register the relevant lease
agreements within a prescribed period, failing which we may be subject to a fine ranging from RMB1,000
to RMB10,000 for each non-registered lease. As of the Latest Practicable Date, we had not received any
such request from the relevant government authorities. We undertake to cooperate fully to facilitate the
registration of lease agreements once we receive any requirements from relevant government authorities.
Social Insurance and Housing Provident Funds
We are required by PRC social insurance and housing provident fund laws and regulations to make
contributions for mandatory social insurance and housing provident funds for our employees. During the
Track Record Period, we did not make adequate contributions to the social insurance and housing
provident funds with respect to certain of our employees, most of whom are production line workers, as
required by the relevant PRC laws and regulations. We did not make full contributions to the social
insurance and housing provident fund for the relevant employees primarily because, among other reasons,
(1) consistent with the industry norm, our labor force was mobile, which made it impracticable for us to
make such contributions in time for the relevant employees who were only with us on a temporary basis,
(2) the applicable PRC laws and regulations governing social insurance and housing provident funds are
intricate and vary by region, which added complexity to our compliance efforts, and (3) many of our
employees were not willing to bear the costs associated with social insurance and housing provident funds.
If the competent PRC government authority determines that the social insurance contributions we
made for our employees violate the requirements under the relevant PRC laws and regulations, we may
be required to pay all outstanding social insurance contributions within a prescribed period, with late fees
at a daily rate of 0.05% of the outstanding amount, accruing from the date when the social insurance
contributions were due. If this payment is not made within the stipulated period, the competent authority
may further impose a fine of one to three times of the overdue amount on us. In addition, pursuant to
relevant PRC laws and regulations, in case of a failure to pay the full amount of housing provident fund,
the housing provident fund management center may require us to pay the outstanding amount within a
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prescribed period. If the payment is not made within such time limit, an application may be made to the
PRC courts for compulsory enforcement. In 2020, 2021, 2022 and the five months ended May 31, 2023,
the estimated shortfall amounts of the social insurance and housing provident fund contributions,
calculated based on the prevailing regulatory requirements, were RMB3.5 million, RMB16.5 million,
RMB17.1 million and RMB13.0 million, respectively. The maximum amount of penalties in relation to
such shortfalls was RMB5.0 million as of September 30, 2023. We made provisions of RMB3.9 million,
RMB5.6 million, RMB7.9 million and RMB9.9 million as of December 31, 2020, 2021 and 2022 and May
31, 2023, respectively, in accordance with the relevant accounting standards.
Our Directors believe that the incident described above would not have a material adverse effect on
our business and results of operations, considering that: (1) we have obtained written confirmations issued
by certain relevant local social insurance and housing provident funds authorities that no administrative
penalty was imposed on us during the Track Record Period; (2) as of the Latest Practicable Date, we had
not received any notification from the relevant PRC regulatory authorities requiring us to pay material
shortfalls with respect to social insurance and housing provident funds; (3) we were not aware of any
employee complaints nor were involved in any labor disputes with our employees with respect to social
insurance and housing provident funds; (4) we undertake to make full contributions or to pay the shortfall
within a prescribed time period if and when requested by the competent government authorities; and (5)
Mr. Huang, Mr. Zheng and Mr. Li have undertaken to, pursuant to the terms and condition of their
confirmation, indemnify us against any losses and penalties which we may suffer as a result of the failure
of our Group to comply with relevant laws, rules and regulations concerning social insurance and housing
provident fund contributions. In addition, pursuant to the Urgent Notice on Enforcing the Requirement of
the General Meeting of the State Council and Stabilizing the Levy of Social Insurance Payment (஫
ٝpromulgated on September 21,
2018 by the Ministry of Human Resources and Social Security, administrative enforcement authorities are
prohibited from organizing and conducting centralized collection of enterprises’ historical social insurance
arrears. Our PRC legal advisor is of the view that the risk we would be subject to administrative penalties
by the competent authorities regarding our contribution to the mandatory social insurance and housing
provident fund during the Track Record Period is low. Based on the foregoing, our Directors are also of
the view that such incident would not have a material adverse effect on our business and results of
operations. See “Risk Factors—Risks Relating to Our Business—We may be required to make additional
contributions of social insurance fund and/or housing provident fund and late payments and fines under
PRC laws and regulations.”
To monitor our compliance with relevant laws and regulations in respect of social insurance and
housing provident fund contributions, we have taken the following internal control measures:
 we have designated our human resources department to review and monitor the reporting and
contributions of social insurance and housing provident funds on a monthly basis;
 we are in the process of communicating and will continue to communicate with our employees
with a view to seeking their understanding and cooperation in complying with the applicable
payment base for the social insurance and housing provident funds, which also requires
additional contributions from our employees; and
 we will consult our PRC legal advisors on a regular basis for advice on relevant PRC laws and
regulations to keep us abreast of relevant PRC laws and regulatory developments, including but
not limited to PRC laws and regulations in relation to social insurance and housing provident
funds, and will provide relevant employees with legal compliance trainings relating to the
same.
RISK MANAGEMENT AND INTERNAL CONTROL
We are exposed to various risks during our operations. We have established risk management systems
with relevant policies and procedures that we believe are appropriate for our business operations. Our
policies and procedures relate to managing our procurement, production, as well as monitoring our sales
performance and product quality.
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To monitor the ongoing implementation of our risk management policies and corporate governance
measures after the Listing, we have adopted or will continue to adopt, among other things, the following
risk management measures:
 establish an Audit Committee to review and supervise our financial reporting process and
internal control system. See “Directors, Supervisors and Senior Management” for the
qualifications and experience of the committee members;
 adopt various policies to ensure compliance with the Listing Rules, including but not limited
to aspects related to risk management, connected transactions and information disclosure;
 execute anti-money laundering management and anti-bribery compliance management on our
senior management and employees to enhance their knowledge and compliance with applicable
laws and regulations, and include relevant policies against non-compliance in employee
handbooks;
 organize training session for our Directors and senior management in respect of the relevant
requirements of the Listing Rules and duties of directors of companies listed in Hong Kong;
 enhance our reporting and records system for production bases, including centralizing their
quality control and safety management systems and conducting regular inspections; and
 provide enhanced training programs on quality assurance and product safety procedures.
Sales and delivery of products through e-commerce platforms involve certain customer privacy
information, such as personal information, contact information and user address. We sell our products on
e-commerce platforms primarily through self-operated online stores on e-commerce platforms, under
which circumstances we have access to customers’ network identity information, address and contact
information, among others, all of which will be used for product delivery. See “Risk Factors—Risks
Relating to Our Business—Our information technology and software systems may encounter malfunction,
unexpected system failure, interruption, insufficiency or security breaches.” We highly value the
protection of the privacy and personal information of our customers, and also treat and process customers’
personal information with high prudence. We have technical support for data protection and various
safeguards to ensure information security. In addition, with database audits, high-strength firewalls and
security reinforcement provided by established security vendors, we regularly organize tests and perform
security scans on our systems. We have also formulated the data security management policy, which
requires our employees to abide by information security regulations, in order to ensure safety of the
relevant information involved in the business operations.
Anti-bribery and Anti-corruption Policy
In order to maintain our reputation and integrity, we have implemented anti-bribery and anti-
corruption policies which require our employees and business partners such as distributors and suppliers
to conduct business legally and ethically. We require our employees and business partners to undertake in
writing not to conduct non-compliances, suspicious transactions, fraud, corruption or bribery by signing
a letter of commitment. Our letter of commitment prohibits our employees and business partners from
offering unauthorized payment, such as bribes, kickbacks or benefit with each other. In addition, our
anti-bribery and anti-corruption policy provides whistle blowing contact details including hotline and
email address for reporting suspicious conducts. Information of the whistleblowers are strictly
confidential. Our anti-bribery and anti-corruption supervision team, which consists of the general
manager, human resources director, financial director, head of the audit department and head of the legal
department, are responsible for receiving internal reports and conducting investigation against suspicious
conducts.
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Fraud Prevention and Anti-money Laundering Measures
Keeping defrauders and money launderers out of our business has long been a priority of ours. We
prohibit and actively prevent fraudulent activities and money laundering and any activity that facilitates
money laundering or the funding of terrorist or criminal activities. We have installed “know your
customer” policies in place to help prevent fraudulent and money laundering activities, which involves
monitoring the activity of our distributors and understanding the types of transactions that should raise red
flags through training sessions for our employees. We also keep records of all account transactions with
our distributors. In addition, we have established an anti-fraud and anti-money laundering supervision
team consisting of the general manager, human resources director, financial director, head of the audit
department and head of the legal department, all of whom are responsible for receiving internal reports
for suspicious activities and conducting appropriate investigation against such activities. Furthermore, we
are under obligations to report suspicious activities to relevant law enforcement agencies. During the
Track Record Period and up to the Latest Practicable Date, we had not identified any incident related to
fraudulent or money laundering activities.
ENVIRONMENTAL, SOCIAL AND CORPORATE GOVERNANCE POLICY
We are subject to various PRC environmental laws and regulations, the implementation of which
involves regular inspections by local environmental protection authorities. See “Regulatory Overview—
Laws and Regulations Relating to Environmental Protection.” We have adopted environmental protection
measures to ensure compliance with applicable PRC environmental laws and regulations. Our wastewater
discharge procedures comply with national standards, and we treat solid waste and liquid waste in
cooperation with qualified third parties.
We work closely with our suppliers in Southeast Asia to ensure that we only use harvested bird’s
nests abandoned by swiftlets. The artificial birdhouses protect swiftlets from enemies and predators and
create a safe breeding environment for them, thereby promoting the healthy growth of the swiftlet
population and enabling a sustainable and environmentally friendly manufacturing process. In addition,
we continuously invest in the application of green technology to our manufacturing processes to reduce
energy consumption and emissions. For instance, our Freshly Stewed Bird’s Nest (Eco-Friendly
Packaging) in 45g×7 size, it produces approximately 54.1% less carbon emissions compared to the same
size of refrigerated delivery packaging. In other words, the carbon emission reduction from 1,000 boxes
of this EBN product is equivalent to the carbon sequestration of approximately 166 trees in one year. We
believe that it is our responsibility to protect the environment and promote sustainable practices in the
industry, and we are committed to doing our part to achieve this goal.
We also adhere to the principles of waste and pollutant emission reduction, energy saving and an
overall environmentally friendly approach in the way we operate. During the Track Record Period, all of
our production bases met the national compulsory standards for wastewater and exhaust gas emission.
As advised by our PRC Legal Advisor, during the Track Record Period and up to the Latest
Practicable Date, we were in compliance with applicable PRC environmental laws and regulations in all
material aspects, and not subject to any material administrative penalties for violations of applicable PRC
environmental laws or regulations which would have a material adverse effect on our business.
Governance Structure
Solid corporate governance forms the foundation of our operations. The Board has the overall
responsibility for our sustainability strategy and reporting and oversees sustainability issues related to our
operations.
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To ensure a better implementation system is in place, the Board has established a committee that is
focused on environmental, social, and governance matters (the “ESG Committee”) on July 21, 2022. The
structure of the committee is as follows:Committee Vice Chair
Committee Chair
Secretariat Office
Executive Committee
Members
Our general manager and executive Director, Mr. Li, was appointed as Chairperson of the ESG
Committee, who represents the Board of Directors to oversee the whole operation and implementation of
ESG matters. Our executive Director and vice general manager, Ms. HUANG Danyan, and our vice
general manager, Mr. FAN Qunyan were appointed as Committee Vice Chairperson of the ESG Committee,
who will bridge the work of the Board and the management team. The committee members have included
representatives from different departments and roles across the organization to ensure that all aspects of
our Group are represented. The ESG Committee reports up to the executive leadership level through the
chairperson and vice chairperson.
The Board will adopt the following approaches to identify, manage and review material ESG issues:
Identify : The Board will engage key stakeholders, including our major suppliers, management team,
employees, and clients to identify material ESG issues and risks inherent in our business operations. The
Board believes that open dialogue with stakeholders plays a crucial role in maintaining our business
sustainability.
Assess : Apart from assessing the performance of our ESG measures through discussion with our
stakeholders, the Board will engage an independent third party to identify and assess our performance in
respect of environmental protection and climate change.
Review : The Board will review the metrics and progress made against ESG-related goals yearly to
guide us to achieve better ESG performance. Via our ESG policy, a set of systematic risk management
practices have been put in place to ensure financial and operational functions, compliance control systems,
material control, asset management and risk management all operate effectively.
Our independent non-executive Director candidate, Mr. LAM Yiu Por (تwill conduct a
thorough analysis of potential risks that may affect the Group’s operations and management. This analysis
considers three key dimensions: environmental protection, social responsibility, and corporate governance.
After identifying these risks, the Group evaluates their significance in terms of their potential impact
on sustainable operations and social values. The risks are then sorted based on their level of impact, with
those having the most significant impact given priority status.
In essence, Mr. LAM Yiu Por’s professional knowledge and expertise are utilized to help the Group
identify and prioritize ESG risks, in order to ensure the sustainable operation of the Group while also
considering its impact on society as a whole.
Potential Climate Risk on Our Business Operation and Financial Performance
Climate change is a critical issue that has become increasingly relevant to the bird’s nest industry
in recent years. The industry is vulnerable to climate-related risks as extreme weather events, such as
hurricanes, thunderstorms, and heatwaves, can disrupt natural resources, and impact supply chains.
Climate change will undoubtedly be of increasing concern to the Group and industry as a whole for the
foreseeable future. The Group has identified the following risks that climate change poses.
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Climate risk, including physical risks and transition risks
We have identified relevant climate-related risks and assessed their potential financial impacts. The
climate risks identified, their time horizon, trend and the potential financial impacts affecting the Group
are shown below.
Physical Risks
Climate Risks Time horizon Trend Potential financial impact
Acute Short term Increase Climate change affects all regions around the
world. South Asia Pacific is particularly
vulnerable to extreme weather events which
these risks can destroy the birdhouses built by
the farmers to accommodate the wild birds,
damaging the bird’s nest farm that may disrupt
the supply chain of EBN products and ultimately
impacting revenue.
Market Medium term Increase The Group’s industry relies on a product of
nature, bird’s nest, as a key input for our
processed food production. If natural product
shortages, supply disruptions and price volatility
are not well managed, the risk of not being able
to supply stably would increase and will lead
to an inability to access necessary natural products,
reduced margins, constrained revenue growth and/or
    high costs or capital
Reputation Long term Increase For centuries, bird’s nests were harvested
from lime caves in Indonesia. Bird’s nest
products were widely attacked by
environmentalists for the destruction of natural
habitats. Some animal rights groups may also
emphasize animal cruelty issues with
exaggerated stories and videos. As climate
change becomes an increasingly pressing issue,
consumers and investors are paying more
attention to the environmental impact of
companies. Misunderstanding of the EBN
industry may lead to fierce attacks from
environmental groups and animal rights groups.
Chronic Long term Longer-term shifts in climate patterns can
increase capital costs, operating costs, costs of
human resources and increased insurance
premiums and potential for reduced availability
of insurance on assets for production. Long-term
climate change may also cause changes in
habitats and animal behaviors. Warmer
temperatures and shifts in precipitation
are increasing drought risk in many tropical
forests. This environmental stress makes trees
more vulnerable to disease and death. As climate
conditions change, many tropical tree and plant
species are experiencing population declines or
range shifts. Species that cannot adapt fast enough
face higher extinction risks. There is a chance that
swiftlets may change their migration routes and
patterns due to climate change.
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Suppliers’ risk
Raw nest farmers construct farming structures to provide habitat for swiftlets to build nests.
However, without universal construction standards, some farms become overcrowded and stressed
habitats. High-density farmhouses and intensive practices violating regulations can put environmental
pressure on surrounding forests. Additionally, overpopulation within areas raises risks of avian flu and
other diseases spreading among bird populations. As substantially all of our raw nest suppliers are located
in Indonesia, concentrating production carries short-term supply chain risks. Disease outbreaks or
environmental impacts threatening swiftlets’ health could disrupt our incoming product supply and
negatively affect our financial condition.
How to mitigate physical risk and suppliers’ risk
To mitigate the risk derived from the disruption of the upstream supply chain, the Group engages
suppliers from various geographical regions in Indonesia to diversify the sources of suppliers. Given that
substantially all of our suppliers are based in Indonesia, in the event that they are facing the risks of habitat
changes affecting swiftlet populations, we will proactively seek to diversify our supplier network across
multiple countries as a mitigation strategy. The Group continues to enhance internal awareness and
training for the Group’s professionals regarding climate risk so that the ability of the Group to cope with
the negative impacts of extreme weather can be strengthened. The Group enhances supply chain
management continuously to mitigate risks arising from the supply chain. This helps to ensure the smooth
and effective acquisition of edible bird’s nest products from different locations, even during extreme
weather conditions in the long term.
How to mitigate transition risks
We have a stringent code of conduct for all of our raw nest suppliers to comply with the local
conservation law. All of the nests are farmed rather than collected from caves. Farmers build wooden huts
to attract and accommodate wild swiftlets and harvest their nests on a seasonal basis. No swiftlets were
cruelly treated nor were wild habitats destroyed. As an industry leader, the Group has the responsibility
to vindicate the misunderstanding.
We are prioritizing sustainability and will actively engage with our stakeholders, including
customers, investors and employees, to understand their expectations and concerns around sustainability.
In addition, we will establish environmental targets for reducing our carbon footprint and regularly review
and report their progress. By doing so, we demonstrate our commitment to sustainability and provide
transparency to stakeholders.
Additionally, to further increase transparency and provide accurate disclosure of sustainability-
related information, we will publish ESG reports annually. This report can provide stakeholders with a
comprehensive overview of our sustainability initiatives, progress, and future plans, which assures our
customers that we operate in a sustainable and responsible manner.
Climate Opportunities
Climate change interacts with and exacerbates existing health risks, while it also presents new
challenges. Impacts involve increased respiratory and cardiovascular issues as well as injuries and
fatalities resulting from extreme weather. Changing climate conditions can influence the spread and
incidence of food-borne, water-borne and infectious diseases globally. Mental health faces threats as well
from climate-driven disruptions.
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Traditional Chinese medicine ascribes various remedial properties to EBN, citing benefits for
conditions such as tuberculosis, asthma, stomach ailments, libido improvement, immune function
enhancement, energy metabolism and circulatory system stimulation. As interest in and reliance upon
traditional remedies grows, it could generate expanding demand for our EBN products. A wider embrace
of oriental medicinal philosophies and deepening consumer belief in the restorative powers attributed to
EBN present viable commercial opportunities for us. Adaptive farming and manufacturing practices will
ensure supply chain reliability in meeting rising market needs.
ESG Policies
The Group is committed to working on the environmental, health and safety, employment, and
supply chain issues that its operations affect, and to working with its stakeholders to promote sustainable
development in the industry in which it operates. The Group undertakes all reasonable efforts to ensure
compliance with all applicable national and local safety, health, labour, and environmental obligations.
The Group has implemented an ESG policy, which provides guidelines to manage our environmental,
social, and climate-related issues, and the Board will constantly update the policy in response to the
environmental, social, and climate-related changes.
Environmental Policy
Use of resources
 Responsibly manage energy and water resources for the benefit of the business and society
 Design and implement effective energy and water management measures
 Minimize the production of all kinds of waste where applicable
 Handle waste in accordance with national and local laws and regulations
 Source edible bird’s nest responsibly and sustainably, including prioritizing suppliers with
environmentally sound practices and management
 Reuse and recycle as much as our used material
Emissions management and energy efficiency
 Encourage the adoption of energy-efficient machinery, system and equipment in the
procurement process
 Avoid unnecessary vehicle use and encourage its employees to use public transport
 Turn off the unnecessary electrical equipment and lights
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Social policy
Human resources
The following table sets forth our workforce by gender, age and expertise diversity.
December 31,
2021 2022
Expertise diversity
Sales ........................................ 5 5 8 5 9 2
Management and administration ..................... 2 0 9 2 2 3
Research and development ........................ 4 7 5 1
Production .................................... 8 9 8 1039
Total ........................................ 1712 1905
Age
18-25 ........................................ 1 1 7 1 6 9
26-35 ........................................ 8 8 7 1028
36-45 ........................................ 5 7 5 5 8 9
46-55 ........................................ 1 2 0 1 0 8
56 or above ................................... 1 3 1 1
Total ........................................ 1712 1905
Gender
Male ........................................ 3 9 3 4 4 6
Female ....................................... 1319 1459
Total ........................................ 1712 1905
 Equal Opportunity applies to all aspects of employment. The Group is committed to the
principle of equal opportunities for all employees and candidates regardless of their gender,
age, race, nationality, marital status, disability, religious belief, sexual orientation or any other
characteristic protected under the law.
 All employees are recruited based on a merit basis. No discrimination in recruitment and
remuneration is involved. In fact, the Group has been working on increasing the ratio of male
employees within a female-dominated industry. As indicated above, the number of females
outweighs that of males in the Group. This situation is a result of our product nature. The Group
strives to recruit more males to contribute to deconstructing gender norms, stereotypes and
expectations.
 For the Group’s formal staff, remuneration packages, which includes salary and bonuses, are
offered. They also receive various welfare benefits, such as medical care, retirement benefits,
occupational injury insurance and other miscellaneous items. Public holidays, marital leaves,
maternity leaves, compassionate leaves and annual leave are also granted by the Group
according to labor laws and regulations. Paternity leave and special breastfeeding arrangements
are also provided.
 The Group has employee handbooks in place which stipulated procedures regarding
employment, compensation and dismissal, performance review and promotion, working hours,
rest periods, other benefits and welfare, development and training, and employees’ code of
conduct. Such employee handbooks aim to provide employees with guidance on daily operation
practices, establish a standard for employees to be treated on a fair basis, and establish a sound
management system to manage the Group’s internal social issues.
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 The Training Policy encourages the Group’s employees to constantly improve their skills and
abilities and develop competencies through the taking up of both internal and external training
programmes. Training needs for improvement on existing skills will be regularly identified
through performance appraisals. The Group will provide appropriate training and development
opportunities to assist employees in meeting their training objectives and achieving business
goals.
 Promotional and job opportunities are offered to existing employees and suitable candidates,
and selection is based on the assessment of the work performance of all individuals on merit,
qualifications, and abilities, and suitability for the position.
Occupational safety and health
We are subject to the PRC laws and regulations in respect of employee health and safety. We have
in place safety guidelines with which our employees are required to strictly comply and equip our
production personnel with adequate safety equipment.
Our occupational safety and health policy includes the following:
 A management system that imposes full compliance with laws and regulations
 To provide and maintain a safe and healthy working environment and work systems for all the
staff
 To strive for continual improvement in safety and health management and performance,
including identifying and developing best practices in safety and health
 To provide adequate resources for implementing the safety and health policy and safety plan,
and to provide the necessary information, staff training, and supervision
 To foster a proactive risk-based accident prevention culture, the attitude that every level of the
organization bears responsibility for work safety
 Regularly evaluate our equipment and production facility to ensure their safety for our
operations
 Conduct training for employees to strengthen their awareness and knowledge of safety
procedures and accident prevention from time to time
Number of workplace accidents and lost working days due to injury:
Y ear ended December 31,
2021 2022
Work-related fatality ............................. 0 0
Work injury cases ............................... 2 2
Lost days due to work injury ....................... 4 2 8 5
Given the inherent characteristics of our production process, the risk associated with our production
is low. The four incidents mentioned above occurred due to violations of working procedures and
mishandling of equipment. The Group has provided comprehensive working insurance coverage for our
staff, ensuring that any harm or injury they sustain can be claimed through the Administration Department
of Labor. Additionally, the Group has bought additional insurance coverage for commercial damages.
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Anti-corruption
 Policy sets out the responsibilities of those who work for the Group regarding observing and
upholding a zero-tolerance position on issues related to bribery and corruption
 Any act of corruption is to be condemned strongly
 The policy is applicable to all stakeholders, including but not limited to, all employees,
consultants, contractors, and trainees, associated with the Group
 All employees are committed to acting professionally, fairly, and with integrity in all business
dealings and relationships, anywhere the Group operates
 A whistle-blowing system that allows employees to make a report if they are aware of any
malpractice
Food safety and product recall mechanism
The food safety and product recall mechanism works on three levels:
 The Group established a food procurement procedure and supplier management system on
January 17, 2023. We have categorized our products into different types. Edible products are
under special monitoring regarding their licensing, certificate of approval, health certificate,
supplier’s credibility, traceability, and third-party approval certificate.
 The Group established a handling procedure on December 15, 2020 for all the purchased food
including:
1. Entrance approval for qualified workers
2. Provide sufficient lighting for all working process
3. Prevention of mishandling of storage
4. Prevention of harmful material from food additive
5. Prevention of mishandling during the transportation process
6. Prevention of hostile action on water supply
7. Prevention of hostile action during our treatment process
 The Group established a product recall system and procedure on January 19, 2022, which
includes the criteria and procedure for recalling our products. Furthermore, our research and
development department will implement appropriate testing and analysing processes to
determine further actions. Whenever any incident of product recall occurs, related departments
should notify the accreditation agency within 3 days and provide sufficient evidence within 21
days.
Supply chain management
The Group is responsible for evaluating the price, the standard of product quality, business condition
and environmental and social corporate responsibility of the new suppliers regularly in order to ensure the
product and service quality of the suppliers.
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Indonesian farmers construct buildings for swiftlets and harvest their nests. EBN farming does not
directly degrade forest resources and is therefore considered a sustainable means of production. Swiftlets
only use their nests for one mating season, after which they have no use for the nests after their babies
fly away. Sustainable harvesting refers to the process whereby the farms only harvest these nests when the
swiftlets have no use for the nest. This practice protects the swiftlets’ population and poses no harm to
the environment.
Our suppliers are required to sign a code of conduct declaration to make sure that they adhere to the
ethical and legal standard required by us. We also conduct on-site inspections annually to ensure that our
suppliers have not materially deviated from the code of conduct. In the event that we discover suspicious
practice of a supplier that violates the code of conduct, we will require the relevant supplier to submit
evidence or documents to demonstrate that it complies with the code of conduct in all material aspects.
We may reassess and possibly discontinue our business relationship with suppliers who fail to comply with
our code of conduct.
Key elements of our code of conduct include the following.
1. Environmental commitment . Our raw nest suppliers shall pledge to uphold ecological and
environmental protection standards.
2. Ethical harvesting . Our raw nest suppliers shall refrain from over-harvesting swiftlet nests.
3. Legal compliance . Our raw nest suppliers shall adhere to all relevant laws and regulations
pertaining to swiftlet nest harvesting.
4. Preservation of swiftlet health . Our raw nest suppliers shall commit to safeguarding the
overall health and well-being of swiftlet populations.
5. Fair labor practices . Our raw nest suppliers are prohibited from engaging in illegal child labor
and are committed to fair labor practices.
6. Prohibition of forced labor . Our raw nest suppliers shall have zero tolerance for forced labor
and prioritize the rights and dignity of all workers.
Major, well-known, and sizeable suppliers with good governance, relevant licenses, and registrations
are chosen in order to ensure all suppliers are committed to good ESG performance and high-quality
products. Priority is given to green procurement. Products from cave harvest are strictly prohibited. Scores
will be given to the related supplier and unauthorized suppliers will be penalized and taken out from our
supplier list.
The Group will monitor the environmental and social performance of all existing suppliers
continuously in order to ensure the quality of suppliers and their compliance with all environmental and
social related laws and regulations.
Packaging Material Consumption
The following table sets forth the details of our packing material consumption.
December 31,
2021 2022
Materials (tonnes)
Plastic ....................................... 604.2 602.5
Stainless steel .................................. 1 . 4 6 . 8
Iron ......................................... 1 18.1 197.3
Aluminium .................................... 26.3 33.1
Glass ........................................ 1475.6 2045.0
Paperboard .................................... 2738.6 3457.9
Ceramic ...................................... 2 . 0 2 . 2
Others ....................................... 905.0 386.9
Total ........................................ 5871.2 6731.7
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The Group acknowledges that packaging waste accounts for 40% of all solid waste in municipal
waste streams. Environmentally friendly packaging is more important than ever. The ESG committee
closely analyses different packaging materials and evaluates possible uses. Our agenda for the continuous
development of sustainable packaging includes the following:
 Invest in custom size packaging to reduce material use
 Use tailored packaging to improve space efficiency and reduce material usage
 Minimize void fill and secondary packaging materials
 Utilize packaging design that eliminates or reduces use of tapes and wraps
 Integrated fittings to minimize material use
 Substitute materials to reduce volume/weight
 Eliminate unnecessary packaging such as outer sleeves
 Use recyclable and reuse material
 Train staff to be aware of packaging costs
Metrics and Targets
Electricity and water consumption
The following table presents our total consumption of water and electricity for the year ended
December 31, 2022 and December 31, 2021:
Unit 2022 2021
Water .................. T o n s 147,126 127,568
Intensity ............... ( T ons/million RMB revenue) 85 85
Electricity .............. k W h 4,329,635 3,553,119
Intensity ............... (kWh/million RMB revenue) 2,503 2,358
GHG emissions
The following table presents our greenhouse gas emissions for the year ended December 31, 2022
and December 31, 2021:
Scope of Greenhouse gas
emissions Emission Sources Unit 2022 2021
Scope 1 emission (1) .... Combustion of natural
Gas, diesel and petrol
tCO2e 1,268 913
Scope 2 emission (2) .... Purchased electricity tCO 2e 2,642 2,168
Total ............... t C O 2e 3,910 3,081
Intensity ............ t C O 2e/million
RMB
revenue
2.26 2.05
Notes:
(1) As pursuant to Appendix 2 of “How to Prepare an ESG Report” set out by Hong Kong Exchanges and Clearing Limited,
Scope 1 greenhouse gas emissions refer to direct emissions from equipment and operations that are owned or controlled
by our Group including natural gas used by manufacturing process, and petrol and diesel used by our vehicles.
(2) As pursuant to Appendix 2 of “How to Prepare an ESG Report” set out by Hong Kong Exchanges and Clearing Limited,
Scope 2 greenhouse gas emissions refer to energy indirect emissions resulting from the generation of purchased or
acquired electricity, heating, cooling, and steam consumed within our Group.
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Targets
The Group recognizes the importance of environmental protection and sustainability. To promote
environmental responsibility and reduce our environmental footprint, the Group has established
environmental targets that are aligned with its overall business strategy and objectives. These targets are
regularly reviewed and updated to ensure continuous improvement in sustainability practices. By setting
these targets, the Group believes that they can demonstrate its commitment to environmental protection
by taking proactive measures to minimize its impact on the environment.
Category Targets for the next 10 years
GHG emissions Reduce total GHG emission intensity by 10% within 10 years, with 2022
as the base year.
Energy efficiency Reduce total electricity consumption intensity by 10% within 10 years,
with 2022 as the base year.
Water efficiency Reduce total water consumption intensity by 10% within 10 years, with
2022 as the base year.
The above target setting is mainly based on the following two reference factors:
1. At least 30% of our fossil fuel cars will be replaced by EV cars in the coming 10 years.
2. The portion of renewable energy provided to the main grid will be at least 5% higher in 2028,
and our internal energy conservation policy will contribute the other 5%.
Approaches to achieving environmental targets
Measures Financial impact
Reducing GHG emission  Actively improve energy
efficiency to reduce GHG
emissions from gas
consumption and electricity
consumption
 Gradually replace our aging
fossil car with EV car
 Actively upgrade our
manufacturing machinery and
equipment when appropriate
 Maintain an appropriate
temperature and humidity for
the inventories at warehouses
to avoid overuse of
electricity
 In case we are unable to
achieve the GHG reduction
target, we will purchase
voluntary carbon certificates
to offset our remaining target
 Upgrading manufacturing
machinery and equipment
whenever appropriate is a
permanent policy of our
Group, no extra cost will be
incurred on this aspect
 As we set the target to
reduce the intensity by 10%
of total consumption within
10 years, our worst-case
scenario will be that we
cannot achieve our target by
10%, which is approximately
400 tonnes of carbon dioxide
emission. As the China
Certified Emission
Reductions (the “CCERs”)
were priced at approximately
RMB80 per tonne, the total
extra cost will not exceed
RMB40,000 per year starting
from 2032
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Measures Financial impact
Energy efficiency  Purchase energy-efficient
equipment throughout the
whole Group
 Constantly monitor the
energy consumption in the
manufacturing process and
the warehouses
 Purchase energy from
renewable sources when
possible and available
 Educate employees to turn
off unnecessary electronic
machines when they are away
from their post
 We estimate the cost of
electricity from renewable
sources will be slightly
higher than conventional
electricity in the coming five
years but will be on par after
2028. The total extra cost per
year will be around
RMB300,000 per year for
five years
Water efficiency  Actively reuse and recycle
our water usage
 Install water efficiency
equipment to reduce water
usage
 No extra cost needed
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OVERVIEW
During the Track Record Period, our Company was controlled by (i) Mr. Huang, our founder,
chairman and executive Director, by himself and through Xiamen Suntama and Jinyan Tengfei LP , (ii) Mr.
Zheng, our vice chairman and executive Director, by himself and through his spouse, and (iii) Mr. Li, our
general manager and executive Director, by himself (together with Mr. Huang, Mr. Zheng and Xiamen
Suntama, collectively, the “Concert Parties”), pursuant to certain acting in concert agreements dated
December 29, 2016 and December 23, 2020 entered into between themselves (the “Concert Party
Agreements”). Pursuant to the Concert Party Agreements, the Concert Parties have agreed to act in concert
with each other in respect of the decision making at the Board meeting level and Shareholders meeting
level relating to the business operation and major issues of the Company since December 29, 2016, and
agreed further that if the Concert Parties have disagreements on the major issues of the Company, the
Concert Parties will cast vote on such major issues and shall act in accordance with the direction of the
Concert Party or Concert Parties with more than two-thirds of the total number of voting rights held by
the Concert Parties. The acting in concert arrangement under the Concert Party Agreements will continue
until the expiry of 36 months after the Listing and will be automatically renewed for five years each time
after the expiry date unless any of the party to such Concert Party Agreements terminates it in writing.
In addition, Jinyan Tengfei LP (the employee incentive share platform of our Company and its
general partner is Mr. Huang) and Ms. Xue (the spouse of Mr. Zheng) are also deemed to be our
Controlling Shareholders by virtue of their relationship with the Concert Parties pursuant to the Listing
Rules. For further details, See “History, Development and Corporate Structure—Concert Party
Arrangement” for more information.
Xiamen Suntama has been controlled by Mr. Huang during the Track Record Period and as of the
Latest Practicable Date. In April 2023, Xiamen Suntama repurchased all the 14.43% minority interests in
Xiamen Suntama held by Torch Investment, a Pre-IPO Investor and a state-owned entity, at the
consideration of RMB42 million. Torch Investment is principally engaged in equity investment in
technology and emerging companies includes companies in the industry of manufacturing computer,
communications and other electronic equipment as well as research and experimental development. As
confirmed by such investor, it did not have any right to nominate directors to the Board and the board of
directors of Xiamen Suntama, participate in any management or board meetings of, hold any board seat
or have any board representation in Xiamen Suntama or the Company, nor had any veto right to any board
resolutions or shareholders resolutions of Xiamen Suntama or the Company. Accordingly, Torch
Investment is only a passive investor of the Company and Xiamen Suntama, but not a member of the group
of Controlling Shareholders. See “History, Development and Corporate Structure” for more information
of Torch Investment. As such, although there had been a change in ownership in Xiamen Suntama, the
Company satisfied the requirements of ownership continuity and control for at least the most recent
audited financial year under the Listing Rules
As of the Latest Practicable Date, our group of Controlling Shareholders collectively owned
approximately 41.40% of the total issued share capital of the Company, comprising (1) 37.52% of the
equity interest directly held by the Concert Parties; (2) 1.89% of the equity interests of the Company held
by Jinyan Tengfei LP; and (3) 1.99% of the equity interest of the Company held by Ms. Xue.
Accordingly, pursuant to the Listing Rules, Mr. Huang, Mr. Zheng, Mr. Li, Xiamen Suntama, Jinyan
Tengfei LP and Ms. Xue are members of the group of controlling shareholders (the “Controlling
Shareholders”).
Immediately following the completion of the Global Offering and Conversion of Unlisted Shares into
H Shares (assuming that the Over-allotment Option is not exercised), our group of Controlling
Shareholders collectively owned approximately 38.56% of the total issued share capital of the Company,
RELATIONSHIP WITH OUR CONTROLLING SHAREHOLDERS
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comprising (1) 34.94% of the equity interest directly held by the Concert Parties; (2) 1.76% of the equity
interests of the Company held by Jinyan Tengfei LP; and (3) 1.85% of the equity interest of the Company
held by Ms. Xue. Accordingly, our group of Controlling Shareholders will remain as our Controlling
Shareholders upon completion of the Global Offering and assuming no exercise of the Over-allotment
Option. For details of the shareholding of our Controlling Shareholders, see “Substantial Shareholders.”
COMPETITION
The core business of our Group is producing and sales of edible bird’s nest related products. We
mainly produce EBN products and sell our products through online and offline channels, while our offline
distributors only distribute and sell our EBN products offline in a specifically designated district. In light
the different user portraits for online and offline customers, we have differentiated our products sold
through online channels with those through offline channels in various aspects including branding,
packaging and product specifications. Union Y utai, which was held as to 38.5 % by Mr. Zheng, our
Controlling Shareholder, is the exclusive offline distributor of our EBN products in Tianjin City and it
does not sell our products through online channels. Union Y utai only sells EBN products under brands
owned by the Group. In addition to EBN products, Union Y utai also sells other retail food products such
as Lunar New Y ear’s Eve dinner gift box from a brand not owned by the Group. During the year ended
December 31, 2020, 2021 and 2022 and the five months ended May 31, 2023, the unaudited total revenue
of Union Y utai was approximately RMB29.8 million, RMB29.4 million, RMB30.6 million and RMB15.1
million, respectively, accounted for 2.29%, 1.95%, 1.77% and 1.93% of our total revenue in the same
periods, respectively. During the year ended December 31, 2020, 2021 and 2022 and the five months ended
May 31, 2023, sales of our products to Union Y utai accounted for 1.19%, 1.33%, 1.18% and 0.96% of our
total revenue in the same periods, respectively. See “Connected Transactions” for more information. Union
Y utai has no present or future intention to expand its EBN distribution business beyond Tianjin City.
Although Union Y utai may potentially compete with our core business, our Company believes that such
potential competition does not materially and adversely affect the Group because we have differentiated
our products sold through online channels with those through offline channels, including those distributed
by Union Y utai in Tianjin City, and there are differences in the business model and scale of business
between the Group and Union Y utai, and that the business of Union Y utai, as a distributor of the Company
is with aligning interests in sales of EBN products with our Company.
Save as disclosed above, each of the Controlling Shareholders and Directors confirm that as of the
Latest Practicable Date, he/she/it did not have any interest in a business, apart from the business of our
Group, which competes or is likely to compete, directly or indirectly, with our business, and requires
disclosure under Rule 8.10 of the Listing Rules.
INDEPENDENCE FROM OUR CONTROLLING SHAREHOLDERS
Management Independence
Our business is primarily managed and conducted by our Board and senior management. Upon the
Listing, our Board will consist of nine Directors, comprising four executive Directors, two non-executive
Directors and three independent non-executive Directors. For more information, see “Directors,
Supervisors and Senior Management.” Mr. Huang, Mr. Zheng and Mr. Li are our executive Directors and
our Controlling Shareholders.
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Except for the Concert Parties and HUANG Danyan (sister of Mr. Huang, and our executive Director
and deputy general manager), our other Directors and senior management are independent from our group
of Controlling Shareholders. Notwithstanding such relationships, our Directors believe that our Board and
senior management are able to manage our business and function independently from our group of
Controlling Shareholders based on the following reasons:
(i) except for the Concert Parties and HUANG Danyan (sister of Mr. Huang), the other five
Directors are independent of our group of Controlling Shareholders, comprising two non-
executive Directors and three independent non-executive Directors, all of whom possess
sufficient knowledge, experience and competence in respect of management and corporate
governance affairs. Accordingly, they are able to discharge their duties independently from our
Controlling Shareholder. Each Director is aware of his fiduciary duties as a Director of our
Company which requires, among other things, that he acts for the benefit and in the best
interests of our Company and does not allow any conflict between his duties as a Director and
his personal interest;
(ii) in the event that there is a potential conflict of interest arising out of any transaction to be
entered into between our Company and our group of Controlling Shareholders or their
respective close associates, the interested Director(s) shall abstain from voting at the relevant
board meetings of our Company in respect of such transactions, and shall not be counted in the
quorum;
(iii) our Board will comprise nine Directors upon Listing, and three of them will be independent
non-executive Directors, which represent one-third of the members of the Board. Our
independent non-executive Directors have extensive experience in different areas and have
been appointed in accordance with the requirements of the Listing Rules to ensure that the
decisions of the Board are made after due consideration of independent and impartial opinions;
and
(iv) our Company has established internal control mechanisms to manage conflict of interests,
including, among others, the policies and procedures to identify connected transactions and
material interests of our Directors, Supervisors, senior management and Shareholders to ensure
that our Shareholders, Directors, Supervisors or senior management with conflicting interests
in a proposed transaction will abstain from voting on the relevant resolutions. See
“—Corporate Governance Measures” in this section for further details.
Operational Independence
Our Group is operationally independent of our group of Controlling Shareholders. We have
established our own organizational structure, and each department is assigned to specific areas of
responsibilities. Our Group holds or enjoys the benefits of material relevant licenses and intellectual
properties necessary to carry on our business. We have our own facilities, equipment and employees to
operate our business independent from our group of Controlling Shareholders. We also have independent
access to our customers and suppliers.
During the Track Record Period, our Company conducted certain transactions with our group of
Controlling Shareholders and their respective close associates, certain of which are expected to continue
after the Listing and will constitute continuing connected transactions of our Company under the Listing
Rules. See “Connected Transactions” for more details. Such transactions are entered into in the ordinary
and usual course of business of our Company and our Directors confirm that the terms of such transactions
are determined at arm’s length negotiations and are no less favourable to our Company than terms offered
by or to independent third parties. Our Directors believe that the continuing connected transactions
between our Company and our group of Controlling Shareholders and their close associates do not indicate
any undue reliance by our Company on our group of Controlling Shareholders and are beneficial to our
Company and our Shareholders as a whole.
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Based on the above, our Directors are of the view that we are able to operate independently of our
group of Controlling Shareholders and their respective close associates.
Financial Independence
We have a financial department which is independent of our group of Controlling Shareholders and
such financial department is responsible for the Group’s finance, accounting, reporting, credit and internal
control. We can make financial decisions independently without interference from our group of
Controlling Shareholders and their associates. We maintain bank accounts with banks independently and
do not share any bank accounts with our group of Controlling Shareholders and their associates. We
believe that we are capable of obtaining financing from third parties without relying on any guarantee or
security provided by our group of Controlling Shareholders or their associates.
During the Track Record Period, our group of Controlling Shareholders had provided guarantees for
certain of our bank borrowing. All such guarantees have been released as of the Latest Practicable Date.
Save as disclosed above, there was no loan, advance or guarantee provided by our group of Controlling
Shareholders or his/its close associates during the Track Record Period and as of the Latest Practicable
Date.
Xiamen Suntama, an entity controlled by Mr. Huang and one of the group of our Controlling
Shareholders, entered into three separate entrusted loan agreements in 2019 with us and Xiamen Bank,
acting as our agent bank, for its general working capital and liquidity use. Pursuant to these agreements,
we lent Xiamen Suntama a total of RMB54.0 million for terms of one to two years at an annual interest
rate of 9.6%, and the agent bank was responsible for the collection of the principal and any interest without
assumptions of the loan risks. All of these three entrusted loans have been fully repaid in 2020. We adopted
such entrusted loan arrangements to ensure compliance with PRC laws and regulations. As advised by our
PRC Legal Advisor, such entrusted loan arrangements were in compliance with applicable PRC laws and
regulations including General Rule of Loan (ۆOur Directors believe that each of these entrusted
loan agreements was entered in the ordinary course of business on an arm’s length basis, and their terms
(including the interest rate) are on normal commercial terms or better to the Group. See “Financial
Information” for more details.
Based on the above, our Directors are of the view that we are able to maintain financial independence
from our group of Controlling Shareholders and their respective close associates.
NON-COMPETITION AGREEMENTS
On November 20, 2023, Mr. Huang, Mr. Zheng, Xiamen Suntama and Mr. Li (collectively, the
“Covenantors”) entered into letter of non-competition undertakings in favor of us (collectively,
“Non-Competition Agreements”), respectively, pursuant to which, each of them has undertaken that:
(i) as of the date of the Non-competition Agreements, each of the Covenantors or any of their
respective immediate family members and their controlled or invested entities (other than
members of our Group) has not engaged in or participated in, through any form, any business
which, directly or indirectly, competes or is likely to compete with our principal business of
developing, producing and/or selling EBN, EBN+ and/or +EBN products (except for Union
Y utai) (the “Restricted Business”);
(ii) each of the Covenantors will not, at any time during the period he/it is a controlling shareholder
or controlled person of our Group, engage in or participate in, by way of investment,
cooperation, technology transfer or through any other form, any business which, directly or
indirectly, competes or is likely to compete with the Restricted Business;
RELATIONSHIP WITH OUR CONTROLLING SHAREHOLDERS
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(iii) if there is any entity directly or indirectly held by the Covenantors that engages in business
which is deemed to be competing with the Restricted Business, such Covenantors will dispose
the relevant business to Independent Third Parties or to our Group and each of the Covenantors
will notify our Group of any business opportunities he/it is aware of that may competes with
the Restricted Business and will provide our Group the right of first refusal to engage in such
business opportunities;
(iv) each of the Covenantors will not take advantage of its position as a Controlling Shareholder to
participate in or be engaged in any activities which may be detrimental to the interests of our
Group; and
(v) the Non-competition Agreements will continue to be valid as long as our Company is listed on
a stock exchange and each of the Covenantors remains as a Controlling Shareholder.
CORPORATE GOVERNANCE MEASURES
In order to further safeguard the interests of our minority Shareholders, we will adopt the following
corporate governance measures to manage potential conflicts of interest:
(i) as part of our preparation for the Global Offering, we have adopted our Articles of Association
in compliance with the Listing Rules. In particular, our Articles of Association provided that,
unless otherwise stipulated;
(a) a Director shall not vote on any resolution approving any contract or arrangement or any
other proposal in which such Director or any of his/her associates have a material interest
nor shall such Director be counted in the quorum present at the meeting; and
(b) when the Shareholders’ general meeting deliberates on connected transactions, connected
Shareholders who hold significant interests in the relevant connected transactions or
arrangements shall not participate in voting, and the number of voting shares they
represent shall not be counted in the effective voting; the announcement of the
Shareholders’ general meeting resolution shall fully disclose the voting status of the
non-connected Shareholders condition;
(ii) we are committed to ensure that our Board shall have a sufficiently balanced composition of
executive Directors, non-executive Director and independent non- executive Directors that can
facilitate the exercise of independent judgment. We believe that the independent non-executive
Directors have the necessary expertise to form and exercise independent judgment in the event
of any conflict of interest between our Company and our group of Controlling Shareholders.
Further, the independent non-executive Directors will be able to seek independent professional
advice from external parties in appropriate circumstances at our Company’s cost;
(iii) we have appointed Ping An of China Capital (Hong Kong) Company Limited as our compliance
advisor, which will provide advice and guidance to us in respect of compliance with the
applicable laws and the Listing Rules, including but not limited to various requirements
relating to Directors’ duties and corporate governance; and
(iv) as required by the Listing Rules, our independent non-executive Directors shall review all
connected transactions annually and confirm in our annual report that such transactions have
been entered into in our ordinary and usual course of business, are either on normal commercial
terms or on terms no less favorable to us that those available to or from independent third
parties and on terms that are fair and reasonable and in the interest of our Shareholders as a
whole.
RELATIONSHIP WITH OUR CONTROLLING SHAREHOLDERS
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CONTINUING CONNECTED TRANSACTIONS OVERVIEW
The following table sets forth the continuing connected transactions with our Group following the
Listing:
Transaction
Applicable Listing
Rules Waiver sought
Proposed annual cap for the year
ending December 31,
2023 2024 2025
(in RMB’000)
Fully-exempt continuing connected transactions
1. Purchase of EBN Products and
Services
14A.97 Fully Exempt N/A N/A N/A
2. Sailboat Management and
Services Framework Agreement
14A.76(1)(a) Fully Exempt 284 312 343
Partially-exempt continuing connected transactions (subject to reporting, annual review and
announcement requirements)
3. Union Y utai EBN Products
Purchase and Sales Framework
Agreement
14A.76(2) and
14A.105
Requirements as
to announcement
under Chapter
14A of the
Listing Rules
23,412 26,923 30,962
Non-exempt continuing connected transactions (subject to reporting, announcement, circular ,
independent shareholders’ approval and annual review requirements)
4. Purchase of Advertising Services
— Zhongshi Hongyun
Advertisement Service
Framework Agreement
14A.105 Requirements as
to announcement,
circular and
independent
shareholders’
approval under
Chapter 14A of
the Listing Rules
32,604 43,879 52,655
— Guangyao Tianrun
Advertisement Service
Framework Agreement
14A.105 Requirements as
to announcement,
circular and
independent
shareholders’
approval under
Chapter 14A of
the Listing Rules
3,962 N/A
(1) N/A(1)
Sub-total N/A N/A 36,566 43,879 52,655
Note:
(1) The relevant advertising services will be terminated after the year of 2023. See “—Purchase of Advertising Services—
Zhongshi Hongyun Advertisement Service Framework Agreement and Guangyao Tianrun Advertisement Service Framework
Agreement” for more information.
CONNECTED TRANSACTIONS
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FULLY-EXEMPT CONTINUING CONNECTED TRANSACTIONS
We set out below a summary of the continuing connected transactions of our Group which are fully
exempt from the reporting, annual review, announcement, circular and independent shareholders’ approval
requirements under Rules 14A.97 and 14A.76(1) in Chapter 14A of the Listing Rules.
Purchase of EBN Products and Services by our Connected Persons
Our connected persons have purchased and may, from time to time, purchase EBN products and
services from us for their respective private use or consumption. During the year ended December 31,
2020, 2021 and 2022 and the five months ended May 31, 2023, the total transaction amount on the
purchase of EBN products and services by our connected persons was RMB0.2 million, RMB4.7 million,
RMB4.3 million and RMB1.1 million, which accounted for 0.02%, 0.31%, 0.25% and 0.15% of our total
revenue in the same periods, respectively. The purchase was and will continue to be for our connected
persons’ own private use or consumption in the same condition as when they were or will be bought, and
was and will continue to be made on no more favorable terms to the connected person than those available
to independent third parties. Our Directors believe that our direct sales to such connected persons who
have personal demands for our ordinarily supplied products and services will provide convenience to
them, and is in the best interest of our Group and the Shareholders as a whole.
On the basis of the foregoing, these transactions will, upon the Listing, be fully-exempt from the
reporting, annual review, announcement, circular and independent shareholders’ approval requirements in
accordance with Rule 14A.97 of the Listing Rules.
Sailboat Management and Services Framework Agreement
On November 20, 2023, the Company and Xiamen Leading Boating Co., Ltd. (Λୂᝄ༷໚၍ଣ
ʮ̡) (“Xiamen Leading Boating”) entered into a sailboat management and services framework
agreement (the “Sailboat Management and Services Framework Agreement”), pursuant to which, Xiamen
Leading Boating agree that it and its associates will provide yacht hosting and sailboat berth management
and other related services to us. The purpose of the yacht hosting and sailboat berth management is to cater
to the needs of maintenance of the yacht that is owned by the Company. In our commitment to maintaining
client relationships and conducting strategic marketing initiatives, the yacht serves as a venue for hosting
seasonal and promotional client gatherings and functions. The term of the Sailboat Management and
Services Framework Agreement will commence on the date of such agreement and end on December 31,
2025. The Sailboat Management and Services Framework Agreement shall terminate upon the end of term
on December 31, 2025, which can be renewed through mutual agreement between both parties.
As of the Latest Practicable Date, Xiamen Leading Boating was controlled by LIU Zhen (“Mr. Liu”),
our non-executive Director and the controller of one of our substantial Shareholders, Guangyao Tianxiang
LP . Therefore, Xiamen Leading Boating will be our connected persons upon the Listing.
During the year ended December 31, 2020, 2021 and 2022 and the five months ended May 31, 2023,
the total fee paid by us to Xiamen Leading Boating for purchase of yacht hosting and sailboat berth
management services was RMB0.29 million, RMB0.18 million, RMB0.22 million and RMB0.10 million,
which accounted for 0.07%, 0.03%, 0.03% and 0.04% of our total expenses (including the selling and
distribution expenses, administrative expenses and research and development expenses) in the same
periods, respectively. The transactions between Xiamen Leading Boating and us are in the ordinary and
usual course and on normal commercial terms or better than those available from independent third parties.
Xiamen Leading Boating and its respective associates are professional service providers of yacht
hosting and sailboat berth management services. Given the established cooperation with Xiamen Leading
Boating, we believe that it is more efficient and convenient for our Group to engage them to continue to
provide to us comprehensive and professional management services for the Company’s yacht, ensuring the
yacht is well-maintained and serviced.
CONNECTED TRANSACTIONS
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The Directors currently expect that the estimated amount of fees relating to transactions under the
Sailboat Management and Services Framework Agreement for the year ending December 31, 2023, 2024
and 2025 calculated pursuant to Chapter 14A of the Listing Rules will be less than HK$3.0 million.
Accordingly, pursuant to Rule 14A.76(1), the aforesaid continuing connected transactions will, upon the
Listing, be fully exempt from compliance with the requirements of reporting, annual review,
announcement, circular and approval by independent shareholders under Chapter 14A of the Listing Rules.
NON-EXEMPT CONTINUING CONNECTED TRANSACTIONS
We set out below a summary of the continuing connected transactions of our Group which are subject
to reporting, annual review, announcement, circular and/or independent shareholders’ approval
requirements under Chapter 14A of the Listing Rules.
Partially exempt continuing connected transactions (subject to reporting, annual review and
announcement requirements)
Union Yutai EBN Products Purchase and Sales Framework Agreement
Principal Terms
On November 20, 2023, our Company and Tianjin Union Y utai Trading Co., Ltd. (̹Υᑌ༃इ
ʮ̡) (“Union Y utai”) entered into an EBN products purchase and sales framework agreement
(the “Union Y utai EBN Products Purchase and Sales Framework Agreement”), pursuant to which, we agree
to grant Union Y utai and its associates exclusive right to sell our EBN products and related services in
Tianjin City, the PRC, and Union Y utai agrees to purchase and procure its associates to purchase from us
and sell to third parties EBN product and related services in Tianjin City, the PRC. Each party also agrees
that they may enter into separate underlying agreements pursuant to such framework agreement to set out
details of specific transactions thereunder. The terms of transactions with Union Y utai are based on the
standard terms and conditions of our distributors, which is in line with those we provide to a similar
independent distributor, including pricing, credit terms, sales rebate and return policies. See
“Business—Our Sales Network—Major Terms of Distribution Agreements” for more information on terms
of distributorship. The term of the Union Y utai EBN Products Purchase and Sales Framework Agreement
will commence on the date of such agreement and will terminate on December 31, 2025 or through mutual
negotiation between both parties.
Connected Persons and Reason for the Transactions
As of the Latest Practicable Date, Union Y utai was held as to 38.5 % by Mr. Zheng, 50.0% by Fu
Hongbo (تݳ6.5% by Zheng Wei ( ቍਃ) and 5.0% by Ni Jun (ᒺ). Mr. Zheng is our vice chairman,
executive Director and Controlling Shareholder, and Zheng Wei is the niece of Mr. Zheng. Therefore,
Union Y utai will be an associate of Mr. Zheng and our connected person upon the Listing. Fu Hongbo and
Ni Jun are Independent Third Parties.
Given the large sales network of Union Y utai in Tianjin City, the PRC, we benefit from the business
cooperation between us and Union Y utai in sales of our products and expansion and promotion of our
products and brand among the retail stores in Tianjin City, the PRC, enabling us to enhance our
competitiveness.
Historical Amount
During the year ended December 31, 2020, 2021 and 2022 and the five months ended May 31, 2023,
the total sales from Union Y utai for purchases of our products was RMB15.5 million, RMB20.0 million,
RMB20.4 million and RMB6.7 million, which accounted for 1.19%, 1.33%, 1.18% and 0.96% of our total
revenue in the same periods, respectively.
CONNECTED TRANSACTIONS
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Annual Cap and Basis for Annual Cap
Our Directors estimate that the total sales to be generated from Union Y utai’s purchases of the
Company’s product will not exceed RMB23.4 million, RMB26.9 million and RMB31.0 million for the
year ending December 31, 2023, 2024 and 2025, respectively.
In determining such annual caps, our Directors have considered (i) the historical transaction amount
of our products; (ii) the historical growth rate of sales of our products; and (iii) the estimated demands and
future growth of the EBN product sales in Tianjin City, the PRC.
Pricing Policies
We determine the sales price charged by us from Union Y utai and sales rebate enjoyed by Union
Y utai for purchases and sales of our product based on the same general guide on sales price and rebate
policies of such goods as provided by us to all the distributors (including independent distributors). The
rebates policy are determined on an arm’s length basis with reference to the sales volume and historical
performance in accordance with the rebate policies to all distributors (including independent distributors).
Specific price and payment will be made according to the respective product purchase and sales contracts
as further entered into between Union Y utai and us under the Union Y utai EBN Products Purchase and
Sales Framework Agreement, which shall generally be in line with the term and conditions we provide to
a similar independent distributor. See “Business—Our Sales Network—Major Terms of Distribution
Agreements” for more information.
Listing Rule Implications
The Union Y utai EBN Products Purchase and Sales Framework Agreement and the transactions
contemplated thereunder are in the ordinary and usual course of our business and on normal commercial
terms or better, and our Directors currently expect that one or more of the applicable percentage ratios
(other than the profit ratio) under the Listing Rules in respect of such transactions will exceed 0.1% but
will all be lower than 5%. Pursuant to Rule 14A.76(2) of the Listing Rules, the transactions will be exempt
from circular and the independent shareholders’ approval requirement under Chapter 14A of the Listing
Rules, but will be subject to reporting, annual review and announcement requirements.
Waiver Application
Our Directors (including our independent non-executive Directors) are of the view that the Union
Y utai EBN Products Purchase and Sales Framework Agreement benefits our business operations, given the
importance of stable sales and expansion of our product sales coverage. In addition, given the transactions
under the Union Y utai EBN Products Purchase and Sales Framework Agreement will be carried out from
time to time after the Listing and are disclosed in this prospectus, our Directors consider that strict
compliance with the announcement requirement in respect thereof would be impractical and unduly
burdensome, and would add unnecessary administrative cost to us. Accordingly, we have applied to the
Stock Exchange for, and the Stock Exchange has granted, a waiver to us under Rule 14A.105 of the Listing
Rules from strict compliance with the announcement requirement under Chapter 14A of the Listing Rules
in respect of the Union Y utai EBN Products Purchase and Sales Framework Agreement. The waiver will
expire on December 31, 2025. In case of any future amendment to the Listing Rules which is stricter than
the requirements applicable to continuing connected transactions disclosed in this prospectus, we will take
appropriate measures to ensure the compliance by us of relevant requirements within a reasonable time
period.
CONNECTED TRANSACTIONS
– 230 –


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Non-exempt continuing connected transactions (subject to reporting, annual review, announcement,
circular and independent Shareholders’ approval requirements)
We set out below a summary of the continuing connected transactions of our Group which are subject
to reporting, annual review, announcement, circular and/or independent shareholders’ approval
requirements under Chapter 14A of the Listing Rules.
Purchase of Advertising Services — Zhongshi Hongyun Advertisement Service Framework Agreement
and Guangyao Tianrun Advertisement Service Framework Agreement
Principal Terms
On November 20, 2023, the Company and Beijing Zhongshi Hongyun Advertising Co., Ltd. ( ̏ԯ
ʮ̡) (“Zhongshi Hongyun”) entered into an advertisement service framework
agreement (the “Zhongshi Hongyun Advertisement Service Framework Agreement”), pursuant to which,
Zhongshi Hongyun agree that it and its associates (collectively, “Zhongshi Hongyun Entities”) will
provide advertising services to us, including placing advertisements of our products and brands on relevant
television and media platform. The term of the Zhongshi Hongyun Advertisement Service Framework
Agreement will commence on the date of such agreement and end on December 31, 2025. The Zhongshi
Hongyun Advertisement Service Framework Agreement shall terminate upon the end of term on December
31, 2025, which can be renewed through mutual agreement between both parties.
On November 20, 2023, the Company and Beijing Guangyao Tianrun Advertising Co., Ltd. ( ̏ԯΈ
ʮ̡) (“Guangyao Tianrun”) entered into an advertisement service framework agreement
(the “Guangyao Tianrun Advertisement Service Framework Agreement”), pursuant to which, Guangyao
Tianrun agree that it and its associates (collectively, “Guangyao Tianrun Entities”) will provide advertising
services to us, including placing advertisements of our products and brands on relevant television and
media platform. The term of the Guangyao Tianrun Advertisement Service Framework Agreement will
commence on the date of such agreement and end on December 31, 2023. The Guangyao Tianrun
Advertisement Service Framework Agreement shall terminate upon the end of term on December 31, 2023,
which can be renewed through mutual agreement between both parties.
During the Track Record Period, the advertising fees were prepaid by the Company and settled based
on the actual placement of advertisement. The terms of advertising services (including prepayment
arrangement) were based on terms and conditions with reference to the guide provided by the target
channel and advertising platform to its advertising agents, which is on normal commercial terms or better
than those offered by independent advertising agents that could supply similar advertising services at
similar time in the same channel and platform. According to the F&S Report, it is market practice in the
advertising industry that television stations usually do not directly engage with advertisers looking to
place advertisements with them; such advertisers are typically required to place their advertisements
through advertising agencies, which manage and coordinate the process and operations. Television stations
have uneven distribution of advertising resources, resulting in significant differences in advertising prices
across different channels, time slots, and durations. As advised by Frost & Sullivan, the overall unit prices
of the CCTV and CNR advertising service contracts signed between the Group with Zhongshi Hongyun
and Guangyao Tianrun are within a reasonable range of market rates for advertisements on CCTV and
CNR. Additionally, the Company has established measures to prevent harm to the Company’s interests
from related-party transactions and has defined decision-making processes and procedures for such
transactions. Therefore, the prices at which the Company procures advertising services from Zhongshi
Hongyun and Guangyao Tianrun are fair and reasonable, with no evidence of undue benefits, compared
to those provided by independent advertising agents.
Connected Persons and Reason for the Transactions
Mr. Liu is our non-executive Director and the controller of one of our substantial Shareholders. As
of the Latest Practicable Date, Zhongshi Hongyun was wholly-owned by ZHANG Y ongfu, and Guangyao
Tianrun was owned as to 95% by ZHANG Jing and 5% by W ANG Chao, each an Individual Third Party.
CONNECTED TRANSACTIONS
– 231 –


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To the best knowledge of the Company having made reasonable enquiries, such shareholders are business
partners of Mr. Liu who are ultimately taking instructions from Mr. Liu and thus both of Zhongshi
Hongyun and Guangyao Tianrun were controlled by Mr. Liu. Therefore, Zhongshi Hongyun and Guangyao
Tianrun will be our connected persons upon the Listing.
Zhongshi Hongyun and Guangyao Tianrun are professional service providers of advertising services
and are qualified suppliers of our target advertising placement platform. The Company’s main business is
the development, production and sale of high-quality modern EBN products. In order to further increase
brand recognition and expand our customer base, we believe that advertisements would facilitate the
promotion of our Company’s brand in the market and increase its visibility. National televisions and media
platform are generally considered as among the most important platforms for promoting consumer goods
and related brands. We believe that placing advertisements of our products in authoritative media could
further enhance brand visibility, establish brand image, shape brand value, and achieve greater market
coverage and brand awareness. According to the F&S Report and the common practices in advertising
operations, television stations typically do not directly engage with advertisers for placements, instead,
advertisers generally need to engage related advertising agencies for advertising matters, which handle
coordination and operations for targeted television and media platform. During the Track Record Period,
Zhongshi Hongyun and Guangyao Tianrun provided advertising services for advertisements of the
Company’s products on various national media platforms, including but not limited to China National
Radio (“CNR”) ( ʕ̯ᄿᅧཥൖᐼ̨) and China Central Television (“CCTV”) ( ʕ̯ཥൖ̨). Our
cooperation with Zhongshi Hongyun and Guangyao Tianrun has been smooth, with a reasonable business
background and favorable price. Considering that (1) the Group’s procurement of advertising services
from Zhongshi Hongyun and Guangyao Tianrun are no less favorable than other advertising partners, (2)
Zhongshi Hongyun and Guangyao Tianrun are both long-standing advertising partners of CCTV , the
national flagship terrestrial television network of the PRC, (3) Zhongshi Hongyun has been granted agency
rights for advertisements in several program by China Media Group Company Limited ( ̯ᄿෂదණྠϞ
ʮ̡) and Guangyao Tianrun was once selected as an AAAA-level advertising agency by China Media
Group ( ʕ̯ᄿᅧཥൖᐼ̨), and (4) our stable business relationship with Zhongshi Hongyun and
Guangyao Tianrun, we believe that it is in the best interests of our Group to continue to collaborating with
Zhongshi Hongyun and Guangyao Tianrun, rather than other independent advertising agents, and that it
is more efficient and effective for the Group to engage them to provide relevant services to the Group for
publicizing and promoting the brand image of “Y an Palace” and the products of the Group, building up
and maintaining of the overall image of “Y an Palace” as well as satisfying the needs for advertising
services among the members of our Group.
Historical Amount
During the year ended December 31, 2020, 2021 and 2022 and the five months ended May 31, 2023,
the total fees paid by us to Zhongshi Hongyun for purchase of advertising services was RMB61.5 million,
RMB50.2 million, RMB50.3 million and RMB12.2 million, which accounted for 14.94%, 9.54%, 7.86%
and 4.76% of our total expenses (including the selling and distribution expenses, administrative expenses
and research and development expenses) in the same periods, respectively.
During the year ended December 31, 2020, 2021 and 2022 and the five months ended May 31, 2023,
the total fees paid by us to Guangyao Tianrun for purchase of advertising services was nil, RMB3.3
million, RMB10.0 million and RMB2.8 million, which accounted for nil, 0.63%, 1.56% and 1.09% of our
total expenses (including the selling and distribution expenses, administrative expenses and research and
development expenses) in the same periods, respectively.
Annual Cap and Basis for Annual Cap
Our Directors estimate that the total fees to be paid by our Group to Zhongshi Hongyun for
purchasing advertising services will not exceed RMB32.6 million, RMB43.9 million and RMB52.7 million
for the year ending December 31, 2023, 2024 and 2025, respectively.
CONNECTED TRANSACTIONS
– 232 –


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Our Directors estimate that the total fees to be paid by our Group to Guangyao Tianrun for
purchasing advertising services will not exceed RMB4.0 million for the year ending December 31, 2023.
To simplify the process and improve efficiency, the relevant advertising services provided by Guangyao
Tianrun will be terminated thereunder and will be uniformly provided by Zhongshi Hongyun.
In determining such annual caps, our Directors have considered primarily (i) the expect growth in
our sales, as well as higher customer exposure and continual needs on promoting our products on the
media platform; and (ii) the estimated increase in the amount of fees to conform with the overall growth
of our business. The historical amount from 2020 to 2022 was decreased due to the reasons that there was
a short-term increase in advertising expenditure to stimulate the market in 2020 as a result of the first year
of the COVID-19 pandemic. In 2021 and 2022, the historical amount of advertising expenditure reduced
as the COVID-19 pandemic situation stabilized. In order to improve business performance, the Directors
expect that there will be an increased advertising expenditure, which is in line with the Company’s
business strategies and estimated business performance from 2023 to 2025 as well as the recovery of
consumer market in China.
Pricing Policies
Before entering into any advertising services agreement pursuant to the Zhongshi Hongyun
Advertisement Service Framework Agreement or Guangyao Tianrun Advertisement Service Framework
Agreement, we will assess our business needs and compare the advertising services fees proposed by the
Zhongshi Hongyun Entities or Guangyao Tianrun Entities with fees offered by at least two other
comparable independent service providers. The service fee will be agreed by the parties through arm’s
length negotiations based on the markets rates and quality of services. We will only enter into an
advertising services agreement with the Zhongshi Hongyun Entities or Guangyao Tianrun Entities if the
terms and conditions are fair and reasonable and based on normal or better terms than those offered by
other independent third party service providers.
Listing Rule Implications
The transactions pursuant to the Zhongshi Hongyun Advertisement Service Framework Agreement
and Guangyao Tianrun Advertisement Service Framework Agreement (collectively “Advertising Service
Framework Agreements”) are considered connected under Rule 14A.81 of the Listing Rules and should be
aggregated for the purposes of classification because (i) the services provided under the Advertising
Service Framework Agreements are of similar nature and (ii) Zhongshi Hongyun Entities and Guangyao
Tianrun Entities are connected with one another.
The Zhongshi Hongyun Advertisement Service Framework Agreement and Guangyao Tianrun
Advertisement Service Framework Agreement and the transactions contemplated thereunder are in the
ordinary and usual course of our business and on normal commercial terms or better, and our Directors
currently expect that one or more of the applicable percentage ratios (other than the profit ratio) under the
Listing Rules in respect of such transactions for the year ending December 31, 2023, 2024 and 2025 will
be more than 5% in aggregate. Pursuant to the Listing Rules, such transactions will, upon the Listing, be
subject to the reporting, annual review, announcement, circular and independent shareholders’ approval
requirements under Chapter 14A of the Listing Rules.
Waiver Application
Our Directors (including our independent non-executive Directors) are of the view that the Zhongshi
Hongyun Advertisement Service Framework Agreement and Guangyao Tianrun Advertisement Service
Framework Agreement benefit our business operations, given the importance of increasing brand
awareness to improve sales performance. In addition, given the transactions under any of the Zhongshi
Hongyun Advertisement Service Framework Agreement and Guangyao Tianrun Advertisement Service
Framework Agreement will be carried out from time to time after the Listing and are disclosed in this
prospectus, our Directors consider that strict compliance with the announcement, circular and independent
shareholders’ approval requirement in respect thereof would be impractical and unduly burdensome, and
would add unnecessary administrative cost to us. Accordingly, we have applied to the Stock Exchange for,
CONNECTED TRANSACTIONS
– 233 –


--- page 244 ---
and the Stock Exchange has granted, a waiver to us under Rule 14A.105 of the Listing Rules from strict
compliance with the announcement, circular and independent shareholders’ approval requirement under
Chapter 14A of the Listing Rules in respect of transactions under the Zhongshi Hongyun Advertisement
Service Framework Agreement and Guangyao Tianrun Advertisement Service Framework Agreement. The
waiver will expire on December 31, 2025. In case of any future amendment to the Listing Rules which is
stricter than the requirements applicable to continuing connected transactions disclosed in this prospectus,
we will take appropriate measures to ensure the compliance by us of relevant requirements within a
reasonable time period.
DIRECTORS’ VIEWS
Our Directors (including our independent non-executive Directors) consider that (i) fully-exempt
continuing connected transactions, (ii) partially-exempt continuing connected transactions and (iii)
non-exempt continuing connected transactions set out above, including but not limited to terms and annual
caps thereof, have been entered into and will be entered into (i) in the ordinary and usual course of our
business; (ii) on normal commercial terms or better; and (iii) are fair and reasonable and in the interests
of our Company and our Shareholders as a whole.
JOINT SPONSORS’ VIEWS
Based on (i) the relevant documents and information provided by the Company in relation to the
foregoing non-exempt continuing connected transactions and partially exempt continuing connected
transactions; (ii) their participation in due diligence and discussions with the Company; and (iii) the
confirmation from the Directors disclosed above, the Joint Sponsors are of the view that the proposed
annual caps of each of the above non-exempt continuing connected transactions and partially-exempt
continuing connected transactions are fair and reasonable and in the interest of the Shareholders as a
whole, and that such transactions have been and will be, as applicable, entered into in the ordinary and
usual course of the Company’s business, on normal commercial terms or better, are fair and reasonable and
in the interest of the Shareholders as a whole.
INTERNAL CONTROL MEASURES
We will adopt the following internal control and corporate governance measures to closely monitor
connected transactions and ensure future compliance with the Listing Rules:
(1) we will adopt and implement a management system on connected transactions and our Board
and various internal departments of our Company will be responsible for the control and daily
management in respect of the continuing connected transactions;
(2) our Board and various internal departments of our Company will be jointly responsible for
evaluating the terms of the connected transactions, in particular, the fairness of the pricing
policies and annual caps (if applicable) under each transaction;
(3) our Board and the finance department of our Group will regularly monitor the connected
transactions and our management will regularly review the pricing policies to ensure connected
transactions to be performed in accordance with the relevant agreements;
(4) we shall engage our auditors to, and our independent non-executive Directors will, conduct
annual review on the connected transactions to ensure that the transactions contemplated
thereunder have been conducted pursuant to the requirements of the Listing Rules and have
fulfilled the relevant disclosure requirements; and
(5) we will comply with the relevant requirements under Chapter 14A of the Listing Rules for the
continuing connected transactions, and comply with the conditions prescribed under the wavier
submitted to the Stock Exchange in connection with the continuing connected transactions in
this regard.
CONNECTED TRANSACTIONS
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OVERVIEW
Upon the Listing, the Board of Directors will consist of nine Directors, including four executive
Directors, two non-executive Directors and three independent non-executive Directors. The Board is
responsible, and has general authority for, the management and operation of our Company.
Our supervisory committee (the “Supervisory Committee”) consists of three Supervisors, including
two shareholder Supervisors and one employee representative Supervisor. The supervisory committee is
responsible for supervising the Directors and senior management in performing their corporate duties.
Our senior management consists of seven members who are responsible for the day-to-day operations
of our Company. All of the Directors, Supervisors and senior management have met the qualification
requirements under the relevant PRC laws and regulations and the Listing Rules for their respective
positions.
Directors, Supervisors and Senior Management
The following table sets forth certain information regarding the Directors.
Name Age Position
The earliest
date of joining
our Group
Date of
appointment as
a Director Responsibility
Relationship
with other
Directors,
Supervisors and
senior
management
Directors
HUANG Jian
(ර਄) (“Mr.
Huang”)
57 Executive
Director and
chairman of
the Board of
Directors
October 31,
2014
October 31,
2014
Formulate the
Group’s overall
corporate strategy
and make key
business and
operational
decisions of
the Group
Mr. Huang is
the brother of
HUANG
Danyan.
ZHENG Wenbin
(ቍ˖Ᏽ) (“Mr.
Zheng”)
53 Executive
Director and
vice chairman
of the Board
of Directors
October 31,
2014
July 5, 2016 Formulate the
Group’s overall
corporate strategy
and make key
business and
operational
decisions of
the Group
N/A
LI Y ouquan (ݰ)
Mr. Li”)
49 Executive
Director and
general
manager
October 31,
2014
July 5, 2016 Responsible for
overall daily
operation and
management of
the Group
N/A
DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT
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Name Age Position
The earliest
date of joining
our Group
Date of
appointment as
a Director Responsibility
Relationship
with other
Directors,
Supervisors and
senior
management
LIU Zhen
(ᄎቤ)
46 Non-executive
Director
July 5, 2016 July 5, 2016 Responsible for
providing advice
and reviewing
overall policies
and operations
N/A
W ANG Y along (ˮԭ
Ꮂ)
40 Non-executive
Director
January 15,
2018
January 15,
2018
Responsible for
providing advice
and reviewing
overall policies
and operations
N/A
HUANG Danyan
(රʗᜮ)
61 Executive
Director and
deputy general
manager
October 31,
2014
July 5, 2016 Responsible for
the Company’s
supply chain
sector, production
and procurement
business
Huang Danyan
is a sister of
Mr. Huang.
XIAO Wei
(ӽਃ)
58 Independent
non-executive
Director
December 10,
2020
December 10,
2020
Supervising and
providing
independent
advice on the
operation and
management of
our Group
N/A
CHEN Aihua ( ௓ฌ
ശ)
37 Independent
non-executive
Director
December 10,
2020
December 10,
2020
Supervising and
providing
independent
advice on the
operation and
management of
our Group
N/A
LAM Yiu Por
(ت)
46 Independent
non-executive
Director
November 20,
2023
November 20,
2023
Supervising and
providing
independent
advice on the
operation and
management of
our Group
N/A
DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT
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Name Age Position
Date of joining
our Group
Date of
appointment as
a Supervisor Responsibility
Relationship
with other
Directors,
Supervisors and
senior
management
Supervisors
ZHENG Feng (ࢤ52 Chairman of
the board of
Supervisors
October 31,
2014
October 31,
2014
Supervising the
performance of
duties by our
Directors and
members of the
senior
management of
our Group
N/A
WEI Wei
(ᕧ③)
39 Supervisor October 31,
2014
July 5, 2016 Supervising the
performance of
duties by our
Directors and
members of the
senior
management of
our Group
N/A
ZHANG Ning ( ੵྐྵ) 34 Supervisor October 31,
2014
September 26,
2022
Supervising the
performance of
duties by our
Directors and
members of the
senior
management of
our Group
N/A
Name Age Position
The earliest
date of joining
our Group
Date of
appointment as
a member of
senior
management Responsibility
Relationship
with other
Directors,
Supervisors and
senior
management
Senior Management
LI Y ouquan (ݰ49 Executive
Director and
general
manager
October 31,
2014
October 31,
2014
Responsible for
overall general
operation and
management of
our Group
N/A
HUANG Danyan
(රʗᜮ)
61 Executive
Director and
deputy general
manager
October 31,
2014
July 5, 2016 Responsible for
supply chain
business
See above
DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT
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--- page 248 ---
Name Age Position
The earliest
date of joining
our Group
Date of
appointment as
a member of
senior
management Responsibility
Relationship
with other
Directors,
Supervisors and
senior
management
WENG Huizhen
(ࠊ)
50 Deputy general
manager
October 31,
2014
October 31,
2014
Responsible for
chain business
department
N/A
LI Liangjie (؏44 Deputy general
manager
October 31,
2014
October 31,
2014
Responsible for
online business
department
N/A
FAN Qunyan (໊
ᜮ)
42 Deputy general
manager
October 31,
2014
December 10,
2020
Responsible for
R&D and product
department
business
N/A
CHEN Zhigao ( ௓қ
৷)
46 Chief financial
officer
March 1, 2018 December 10,
2020
Responsible for
financial and
accounting affairs
N/A
XIONG Ting ( ဤణ) 43 Board
secretary and
joint company
secretary
July 6, 2020 December 10,
2020
Responsible for
information
disclosure and
investor relations
management
N/A
DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT
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--- page 249 ---
BOARD OF DIRECTORS
Executive Directors and Non-executive Directors
HUANG Jian ( ර਄), aged 57, is our founder, an executive Director and chairman of the Board. He
has been a Director and the chairman of the Board since October 2014 and was re-designated as an
executive Director on May 25, 2023. Mr. Huang is primarily responsible for formulating the Group’s
overall corporate strategy and make key business and operational decisions of the Group. Prior to joining
our Group, Mr. Huang has been serving as the general manager and executive director of Xiamen Suntama
since November 1997.
Mr. Huang graduated from Fujian Normal University (ᇍɽኪ) in July 1986 with a bachelor’s
degree in Mathematics.
ZHENG Wenbin ( ቍ˖Ᏽ), aged 53, is an executive Director and vice chairman of the Board. He has
been a Director and vice chairman of the Board since July 2016, and was re-designated as an executive
Director on May 25, 2023. Mr. Zheng is primarily responsible for formulating the Group’s overall
corporate strategy and make key business and operational decisions of the Group. Prior to joining our
Group, he has been serving as a director of Harbin Dazhong Pharmaceutical Co., Ltd. (ဧᏵɽʕႡᖹ
ʮ̡) from January 2004 to July 2022. He served as an executive director and general manager of
Heilongjiang Y anglifang Pharmaceutical Co., Ltd. (ʮ̡) (formerly known as
Heilongjiang Zhongce Deguang Pharmaceutical Sales Co., Ltd. (ʮ̡)
from June 2008 to January 2020.
LI Y ouquan (ݰ)aged 49, is an executive Director and general manager of the Company. He
has been a Director and general manager since July 2016, and was re-designated as an executive Director
on May 25, 2023. Mr. Li is primarily responsible for the overall operation and management of the Group.
Prior to joining our Group, he worked in Guangdong Runsheng Pharmaceutical Co., Ltd (ᆗ͛ᖹุ
ʮ̡) from November 2007 to October 2014, where he was mainly responsible for supervising the
overall strategy and operation management.
Mr. Li graduated from the School of Economics and Management in Shanxi University ( ʆГɽኪ)
in 1998 with a bachelor’s degree in Economics.
LIU Zhen ( ᄎቤ), aged 46, is a non-executive Director. He joined our Group as a Director since July
2016 and was re-designated as a non-executive Director on May 25, 2023. He is primarily responsible for
providing professional opinion and judgment to the Board of Directors. He served as the president of
Glory Manna Media Group ( Έᘴ˂ᆗෂదණྠ) from January 2013 to August 2014. He is the partner of
Guangyao Tianxiang, since September 2015.
Mr. Liu graduated from Beijing University of Technology ( ̏ԯʈุɽኪ) in June 2000 with a
bachelor’s degree in computer science, and from Chinese Academy of Sciences (ኪ৫) (formerly
known as University of Chinese Academy of Sciences (Ӻ͛৫)) in June 2008 with a
master’s degree in business administration.
W ANG Y along (ˮԭᎲ), aged 40, is a non-executive Director. He has been appointed as a Director
since January 2018, and was re-designated as a non-executive Director on May 25, 2023. Mr. Wang is
primarily responsible for providing advice and reviewing overall policies and operations. He has been
serving as the general manager of Beijing Y anshi Investment Management Center LP ( ̏ԯೋͩҳ༟၍ଣ
ʕː(Υྫ)) since February 2017. He served as vice president of investment and financing department
of Everbright Financial Holdings (Tianjin) Industrial Investment Fund Management Co., Ltd. (છ
(ݵ)ʮ̡) and vice president of equity investment business of investment and
financing department of Everbright Financial Holdings Asset Management Co., Ltd. (છ༟ପ၍ଣ
ʮ̡) from June 2012 to February 2017.
DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT
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Mr. Wang graduated from Tianjin University of Commerce (ਠุɽኪ) in June 2004 with a
bachelor’s degree in marketing, and from Peking University ( ̏ԯɽኪ) in November 2011 with a master’s
degree in business administration.
HUANG Danyan ( රʗᜮ), aged 61, is an executive Director and deputy general manager of the
Company. She has been a director and deputy general manager of the Company since October 2014 and
July 2016, and was re-designated as an executive Director on May 25, 2023. Ms. Huang is primarily
responsible for the company’s supply chain sector, production and procurement business. Prior to joining
our Group, she served as the deputy general manager of Xiamen Suntama from November 1997 to October
2014.
Independent Non-executive Directors
XIAO Wei ( ӽਃ), aged 58, is an independent non-executive Director. He joined our Group as an
independent Director since December 2020 and was re-designated as an independent non-executive
Director on May 25, 2023. He is primarily responsible for supervising and providing independent advice
on the operation and management of our Group.
Mr. Xiao has been serving as a teacher, associate professor and professor of Xiamen University Law
School (ኪ৫) since August 2001. He served as director, secretary of the board of directors, and
general counsel of Xiamen International Trade Group Co., Ltd. (ʮ̡) (a company
listed on the Shanghai Stock Exchange, stock code: 600755) from July 1991 to July 2001. He also served
as an independent director of Suzhou Jinhongshun Automotive Parts Co., Ltd. (΅
ʮ̡) (a company listed on Shanghai Stock Exchange, stock code: 603922) from July 2018 to May
2020, an independent director of Fujian Longma Environmental Sanitation Equipment Co., Ltd. (Ꮂ
ʮ̡) (a company listed on Shanghai Stock Exchange, stock code: 603686) from
September 2019 to September 2022, an independent director of Ruida Futures Co., Ltd. (΅Ϟ
ʮ̡) (a company listed on the Shenzhen Stock Exchange, stock code: 002961) from January 2019 to
January 2022, and an independent director of Fujian Longjing Environmental Protection Co., Ltd. (ܔ
ʮ̡) (a company listed on Shanghai Stock Exchange, stock code: 600388) from
November 2014 to November 2020, and rejoined in June 2022 as an independent director who is primarily
responsible for providing independent advice to the Board. He is currently a director of Xiamen
International Trade Group Co., Ltd., an independent director of Motic (Xiamen) Electric Group Co., Ltd.
(ࠔ(ژ)ʮ̡) (a company listed on the Shenzhen Stock Exchange, stock code:
300341), an independent director of Xiamen Faratronic Co., Ltd., (ʮ̡)( a
company listed on the Shanghai Stock Exchange, stock code: 600563), and an independent director of
Dabo Medical Technology Co., Ltd. (ʮ̡) (a company listed on the Shenzhen
Stock Exchange, stock code: 002901). Mr. Xiao is also a supervisor of Xiamen University Chen An
International Law Development Foundation (ึ), a law professor of
Xizang Minzu University ( Гᔛ͏ૄኪ৫), an executive council member of PRC Securities Law Research
Association (Ӻึ), an arbitrator of Xiamen Arbitration Commission (ึ), a
vice president of Fujian Enterprise Legal Work Association (ʈЪ՘ึ), a lawyer of
Yinghe Law Firm (הa president of Fujian Economic Law Research Association ( ၅
ڗa vice president of Fujian International Economic Law Research Association
(ڗan arbitrator of Quanzhou Arbitration Commission (ࡰ
ึ), arbitrator of Harbin Arbitration Commission (ึ), a mediator of Cross-Strait
Arbitration Center (΀൒ʕː), a deputy director of the research office of Intermediate People’s
Court of Xiamen City, Fujian Province (৫) and a director of China World Trade
Organization Research Association (Ӻึ).
Mr. Xiao graduated from Xiamen University (ɽኪ) in July 1988 with a bachelor’s degree in
international economic law, in July 1991 with a master’s degree in civil and commercial law and in
July 2000 with a doctoral degree in international law. Mr. Xiao obtained the PRC lawyer qualification
(ࣸin June 2020, law professor appointment certificate (ࣣin 2003 and
qualifications for independent directors of listed companies (ࣸ
in August 2010.
DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT
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CHEN Aihua ( ௓ฌശ), aged 37, is an independent non-executive Director. He joined our Group as
an independent Director since December 2020 and was re-designated as an independent non-executive
Director on May 25, 2023. He is primarily responsible for supervising and providing independent advice
on the operation and management of our Group.
Since September 2013, Mr. Chen has been a teacher and associate professor of Xiamen National
Accounting Institute (ኪ৫). He is currently an independent director of Fujian Zhangzhou
Development Co., Ltd., (ʮ̡) (a company listed on the Shenzhen Stock Exchange,
stock code: 000753). He served as an independent director of Power HF Co., Ltd. (ʮ
̡) (a company listed on the Shanghai Stock Exchange, stock code: 605100) from August 2019 to October
2022, an independent director of Beijing Dataway Horizon Co., Ltd. (ʮ
̡) (a company listed on the Shenzhen Stock Exchange, stock code: 301169), an independent director of
Shantui Construction Machinery Co., Ltd. (ʮ̡) (a company listed on the
Shenzhen Stock Exchange, stock code: 000680) and an external supervisor of Shanghai Hengshi Financial
Consulting Co., Ltd. (ʮ̡).
Mr. Chen graduated from Central South University (ɽኪ) in June 2008 with a bachelor’s degree
in business administration, and from Xiamen University (ɽኪ) in June 2013 with a combined master
and doctor degree in accounting. Since December 2012, Mr. Chen is a member of the Chinese Institute of
Certified Public Accountants (՘ึ) and obtained the PRC lawyer qualification (ࢪܛ
ࣸin March 2012.
LAM Yiu Por (ت)aged 47, is an independent non-executive Director. He joined our Group as
an independent non-executive Director since November 20, 2023. He is primarily responsible for
supervising and providing independent advice on the operation and management of our Group. He has
been an independent non-executive director of JNBY Design Limited (ʮ̡) (a company
listed on the Stock Exchange, stock code: 3306) since October 2016 and a chief financial officer and
company secretary of Dingdang Health Technology Group Co., Ltd (ʮ̡)( a
company listed on the Stock Exchange, stock code: 9886) since January 2021.
He served as independent non-executive director of Tian Ge Interactive Holdings Limited ( ˂ᓀʝ
ʮ̡) (a company listed on the Stock Exchange, stock code: 1980) from January 2021 to June
2022, the vice president and chief financial officer of Greentech Technology International Limited (߅
ʮ̡) (formerly known as L’sea Resources International Holdings Ltd. (ٰ
ʮ̡) (a company listed on the Stock Exchange, stock code: 0195) from November 2013 to July 2020,
an independent non-executive director of Denox Environmental & Technology Holdings Limited (ፕ౶
ʮ̡) (a company listed on the Stock Exchange, stock code: 1452) from October 2015
to June 2020, an independent non-executive director of China Tontine Wine Group Co., Ltd. ( ʕ਷ஷ˂ৢ
ʮ̡) (a company listed on the Stock Exchange, stock code: 0389) from November 2016 to
November 2018, an non-executive director of Zhong Ao Home Group Limited (ʮ̡)
(a company listed on the Stock Exchange, stock code: 1538) from April 2015 to May 2017, an independent
non-executive director of Y at Sing Holdings Limited (ʮ̡) (a company listed on the Stock
Exchange, stock code: 3708) (currently known as China Supply Chain Holdings Limited ( ʕ਷ԶᏐᗡପ
ʮ̡) from December 2014 to March 2016, an independent non-executive director of GR
Properties Limited (ʮ̡) (a company listed on the Stock Exchange, stock code: 0108)
(currently known as GR Properties Limited (ʮ̡)) from June 2012 to February 2014, the
chief financial officer and company secretary of Lijun International Pharmaceutical (Holding) Co., Ltd.
(лё਷ყᔼᖹ(ٰ)ʮ̡) (currently known as SSY Group Limited (ʮ̡)) (a
company listed on the Stock Exchange, stock code: 2005) from December 2005 to May 2008 and the chief
financial officer and qualified accountant of Zhongtian International Holdings Limited (Ϟ
ʮ̡) (currently known as China Clean Energy Technology Group Limited (ҦණྠϞ
ʮ̡)) (a company listed on the Stock Exchange, stock code: 2379) from July 2004 to December 2005.
DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT
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--- page 252 ---
Mr. Lam graduated from the Hong Kong Polytechnic University (ಥଣʈɽኪ) with a bachelor
degree of arts in accountancy in November 1997. Mr. Lam has been a member of the Hong Kong Institute
of Certified Public Accountants since October 2004, an associate of The Hong Kong Chartered
Governance Institute since March 2006, a chartered financial analyst of the CFA Institute since September
2006 and a fellow of the Association of Chartered Certified Accountants since November 2007.
SUPERVISORS
ZHENG Feng (ࢤ)aged 52, is a Supervisor since October 2014 and appointed as the chairman
of the board of Supervisors in September 2022. He is responsible for supervising the performance of duties
by our Directors and members of the senior management of our Group. He served as a general manager
at Xiamen Huarui Zhongying Holding Group Co., Ltd. (ʮ̡) (formerly
known as Xiamen Huarui Zhongying Investment Management Co., Ltd. (ʮ
̡)) since January 2006. He served as a general manager of Xiamen Yiding Auction House (ש
ርБ) from April 2003 to December 2005. Mr. Zheng holds 20% of the limited partnership interests in our
Shareholder, Guangyao Tianxiang LP .
Mr. Zheng graduated from Xiamen Jimei Finance College (ࣧin June 1993
majoring in investment economic management.
WEI Wei ( ᕧ③), aged 39, is a Supervisor since July 2016. She is responsible for supervising the
performance of duties by our Directors and members of the senior management of our Group. She has been
served as the purchasing manager from December 2008 and promoted to serve as deputy director of
production center at Y an Sinong. Prior to joining our Group. She served as secretary to the general
manager and the administrative commissioner of the human resource department of Xiamen Suntama from
October 2006 to November 2008.
Ms. Wei graduated from Guizhou University of Finance and Economics ( ൮ψৌ຾ɽኪ) in July 2006
with a bachelor’s degree in financial management.
ZHANG Ning ( ੵྐྵ), aged 34, is a Supervisor since September 2022. She is responsible for
supervising the performance of duties by our Directors and members of the senior management of our
Group. Ms. Zhang served as secretary to the Chairman of our Group, manager of the legal department from
July 2015 to December 2020 and senior manager of legal department of our Group since December 2020.
Prior to joining our Group, she served as a legal consultant and chairman’s secretary at Xiamen Suntama
from March 2013 to June 2015. She served as the campus principal and partner of the Longwen campus
at Zhangzhou Longwen Hanlin Education Consulting Co., Ltd. (ʮ̡) from
March 2012 to March 2013. She served as Campus Director at Beijing Longwen Global Education
Technology Co., Ltd. Xiamen Branch (ʱʮ̡) from December 2010
to December 2012. She served as Office Director of the Nanjing Y urun project department at China
Construction Seventh Engineering Division (Shanghai) Co., Ltd. (ɖ҅(ɪऎ)ʮ̡) from August
2010 to November 2010. Ms. Zhang holds 2.13% of the limited partnership interests in our Shareholder,
Jinyan Tengfei LP .
Ms. Zhang graduated from Chongqing University (ᅅɽኪ) in June 2010 with a bachelor’s degree
in law.
SENIOR MANAGEMENT
LI Y ouquan (ݰ)aged 49, is an executive Director and general manager. See “—Board of
Directors—Executive Directors” for his biographical details.
HUANG Danyan ( රʗᜮ), aged 61, is an executive Director and vice general manager of our
Company. See “—Board of Directors—Executive Directors” for her biographical details.
DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT
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--- page 253 ---
WENG Huizhen (ࠊ)aged 50, is a deputy general manager of our Company since October
2014. She is responsible for the chain business department. Ms. Weng served as the deputy general
manager of Xiamen Y an Palace Bird’s Nest Technology Development Co., Ltd. (Ҧ೯
ʮ̡) from July 2014 to December 2017. Prior to joining our Group, Ms. Weng joined Xiamen
Suntama in July 2005 and successively served as the store manager, manager of the sales department,
marketing director and deputy general manager until July 2014.
LI Liangjie (؏)aged 44, is a deputy general manager of our Company since October 2014. He
is responsible for the online business department. Prior to joining our Group, he worked as the director
of sales and marketing department of Guangdong Runsheng Pharmaceutical Co., Ltd. (ࠢ
ʮ̡) from July 2009 to October 2014.
Li Liangjie graduated from the physician class of Wuhan Railway Health School (ဏ᚛༩ሊ͛ኪ
ࣧcurrently known as Wuhan Tongji Medical University (ɽኪ) in June 1999.
FAN Qunyan (໊ᜮ), aged 42, is a deputy general manager of our Company since December 2020.
He is responsible for R&D and product department business. He has been successively served as the
assistant to the general manager, manager of the technical department, deputy general manager of
production, and the director of bird’s nest research institute of the Y an Sinong when he joined our Group
in April 2014 to December 2020. Prior to joining our Group, he joined Xiamen Suntama in March 2009
and successively served as the R&D member of the technical department of Xiamen Suntama, the
supervisor of its technical department, the manager of its technical department, and its assistant to the
general manager from March 2009 to March 2014.
Mr. Fan graduated from Jiangsu University ( Ϫᘽɽኪ) in July 2007 with a master’s degree in food
science and engineering and Anhui Polytechnic University ( τᏏʈ೻ɽኪ) in July 2004 with a bachelor’s
degree in food science and engineering. Mr. Fan is currently studying at Fujian Agriculture and Forestry
University (ɽኪ) pursuing a doctoral degree in food science and engineering.
CHEN Zhigao ( ௓қ৷), aged 46, is the chief financial officer of our Company. He is responsible
for financial and accounting affairs of our Group. He rejoined our Group as the chief financial officer of
the Company since December 2019. He is responsible for overseeing the financial and accounting affairs
of our Group.
Prior to joining our Group, Mr. Chen served as a partner of Xiamen Hongshi United Investment
Management Partnership LP (ᒿͩᑌΥҳ༟၍ଣΥྫΆุ(Υྫ)) from May 2016 to March 2018.
He then served as the financial director of Talent Clothing Co., Ltd. (ʮ̡) from January
2019 to November 2019. From November 2008 to April 2016, he successively served as the financial
manager, deputy financial director and financial director of Joeone Co., Ltd. (ʮ̡)( a
company listed on the Shanghai Stock Exchange, stock code: 601566). He served as a senior manager of
Solomon Management Consulting (Xiamen) Company (၍ଣፔ༔(ژ)ʮ̡) from February 2003
to February 2007. He also served as a project manager of Xiamen Tianjian Huatian Certified Public
Accountants Co., Ltd. (ʮ̡) from July 1999 to May 2002.
Mr. Chen graduated from Xiamen University (ɽኪ) in July 1999 with a bachelor’s degree in
accounting.
XIONG Ting ( ဤణ), aged 43, is the board secretary of our Company since December 2020 and was
appointed as a joint company secretary since the Listing Date. She is responsible for information
disclosure and investor relations management. She joined our Group in July 2020 and served as the head
of the securities department of the Company from July 2020 to December 2020. Prior to joining our Group,
she served as the deputy director of the business finance department at Joeone Co., Ltd. (΅Ϟ
ʮ̡) (a company listed on the Shanghai Stock Exchange, stock code: 601566). She also served as the
financial manager of Xiamen Topstar Lighting Co., Ltd. (ʮ̡) from August 2000 to
August 2011.
DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT
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Xiong Ting graduated from Xiamen University (ɽኪ) in July 2000 with a bachelor’ degree in
accounting.
Save as disclosed above and the sections headed “Substantial Shareholders” and “Appendix
IV—Statutory and General Information—C. Further Information about our Directors, Supervisors and
Substantial Shareholders—3. Disclosure of interests—Disclosure of interests of Directors, Supervisors
and chief executive of our Company” in this prospectus, each of our Directors and Supervisors confirms
with respect to himself or herself that he or she (1) did not hold other long positions or short positions in
the Shares, underlying Shares, debentures of our Company or any associated corporation (within the
meaning of Part XV of the SFO) as of the Latest Practicable Date; (2) had no other relationship with any
Directors, Supervisors, senior management, substantial shareholders or Controlling Shareholders of our
Company as of the Latest Practicable Date; (3) did not hold any other directorships in the three years prior
to the Latest Practicable Date in any public companies of which the securities are listed on any securities
market in Hong Kong and/or overseas; and (4) there are no other matters concerning our Director’s and
Supervisor’s appointment that need to be brought to the attention of our Shareholders and the Stock
Exchange or shall be disclosed pursuant to Rules 13.51(2)(h) to (v) of the Listing Rules.
JOINT COMPANY SECRETARIES
XIONG Ting ( ဤణ), aged 43, is the board secretary of our Company and has been appointed as one
of our joint company secretaries since the Listing Date. For biographical details of Ms. Xiong, see the
sub-section headed “—Senior Management.”
LEUNG Kwan Wai ( ૑ёᅆ), aged 41, has been appointed as one of the joint company secretaries
of our Company since the Listing Date. Ms. Leung is a senior manager of corporate services of Tricor
Services Limited, a global professional services provider specializing in integrated business, corporate and
investor services.
Ms. Leung has over 15 years of experience in the corporate secretarial service field and has been
providing professional corporate services to Hong Kong listed companies as well as multinational, private
and offshore companies. Ms. Leung is currently acting as the company secretary or joint company
secretary of a few listed companies on the Stock Exchange.
Ms. Leung obtained her master’s degree of Corporate Governance from the Hong Kong Metropolitan
University (ಥேึɽኪ) (formerly known as The Open University of Hong Kong (ಥʮකɽኪ)).
Ms. Leung is a Chartered Secretary, a Chartered Governance Professional and an associate of both The
Hong Kong Chartered Governance Institute (HKCGI) and The Chartered Governance Institute (CGI).
BOARD COMMITTEES
The Company has established four committees under the Board of Directors, namely the Audit
Committee, the Remuneration and Appraisal Committee, the Nomination Committee and the Strategy
Committee.
Audit Committee
The Audit Committee consists of three Directors, namely CHEN Aihua, XIAO Wei and LAM Yiu Por
with CHEN Aihua currently serving as the chairman. Each of CHEN Aihua and LAM Yiu Por has the
appropriate professional qualification and experiences as required under Rules 3.10(2) and 3.21 of the
Listing Rules. The Audit Committee is mainly responsible for reviewing and overseeing the financial
reporting procedure, risk management and internal control system of our Group and have with terms of
reference in compliance with the relevant PRC laws and regulations and Rule 3.21 of the Listing Rules
and paragraph D.3 of part 2 of the Corporate Governance Code as set out in Appendix 14 to the Listing
Rules.
DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT
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Remuneration and Appraisal Committee
The Remuneration and Appraisal Committee consists of three Directors, namely XIAO Wei, Mr. Li
and CHEN Aihua, with XIAO Wei currently serving as the chairman. The Remuneration and Appraisal
Committee is mainly responsible for evaluating the remuneration policies for Directors, Supervisors and
senior management of our Group and making recommendations thereon to the Board of Directors and have
with terms of reference in compliance with relevant laws and regulations of the PRC and paragraph E.1
of part 2 of the Corporate Governance Code as set out in Appendix 14 to the Hong Kong Listing Rules.
Nomination Committee
The Nomination Committee consists of three Directors, namely Mr. Huang, XIAO Wei and CHEN
Aihua, with Mr. Huang currently serving as the chairman. The Nomination Committee is mainly
responsible for identifying, screening and recommending to the Board of Directors qualified candidates to
serve as the Directors, Supervisors and senior management and monitoring the procedures for evaluating
the performance of the Board of Directors and have with terms of reference in compliance with the
relevant laws and regulations of the PRC and paragraph B.3 of part 2 of the Corporate Governance Code
as set out in Appendix 14 to the Hong Kong Listing Rules.
Strategy Committee
We have established the Strategy Committee, which consists of Mr. Huang, Mr. Zheng and LAM Yiu
Por, with Mr. Huang being the chairperson of the Strategy Committee according to the relevant laws and
regulations of the PRC. The main duties of the Strategy Committee are to research and recommend
development strategy and capital operation of our Company.
DIVERSITY POLICY OF THE BOARD OF DIRECTORS
The Board of Directors has adopted a board diversity policy (the “Board Diversity Policy”) in order
to enhance the effectiveness of our Board of Directors and to maintain high standard of corporate
governance. The Board Diversity Policy sets out the criteria in selecting candidates to our Board of
Directors, including but not limited to gender, age, cultural and educational background, ethnicity,
professional experience, skills, knowledge and length of service. The ultimate decision will be based on
merit and contribution that the selected candidates will bring to our Board of Directors.
Our Directors have a balanced mixed of knowledge and skills, including but not limited to overall
business management, finance and accounting and material science. They obtained degrees in diversified
majors including mathematics, business, marketing, law and accounting. In addition, our Board of
Directors has a wide range of age, ranging from 34 years old to 61 years old. One of our Directors is also
a female Director. Our Board is of the view that our Board of Directors satisfies the Board Diversity
Policy. Our Board will also ensure that appropriate balance of gender diversity is achieved with reference
to investors’ expectation, and international and local recommended best practices.
The Nomination Committee is responsible for reviewing the diversity of our Board. After the Listing,
the Nomination Committee will monitor and evaluate the implementation of the Board Diversity Policy
from time to time to ensure its continued effectiveness. The Nomination Committee will also include in
successive annual reports a summary of the Board Diversity Policy, including any measurable objectives
set for implementing the Board Diversity Policy and the progress on achieving these objectives.
CORPORATE GOVERNANCE
Our Directors recognize the importance of good corporate governance in management and internal
procedures so as to achieve effective accountability. Our Group is expected to comply with the Corporate
Governance Code as set out in Appendix 14 to the Listing Rules.
DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT
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NON-COMPETITION
Each of our Directors confirms that save as disclosed in the section headed “Relationship with Our
Controlling Shareholders,” as of the Latest Practicable Date, they are not interested in any business, apart
from our business, which competes or is likely to compete, either directly or indirectly, with our business
and requires disclosure under Rule 8.10(2) of the Listing Rules.
COMPENSATION OF DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT
The compensation and remuneration of the Directors, Supervisors and members of the senior
management of our Company are determined by the Shareholders’ meetings and our Board as appropriate
in the form of salaries and bonuses. Our Company also reimburses them for expenses which are necessary
and reasonably incurred in providing services to our Company or discharging their duties in relation to the
operations of our Company. When reviewing and determining the specific remuneration packages for our
Directors, Supervisors and members of the senior management of our Company, the Shareholders’
meetings and our Board take into account factors such as salaries paid by comparable companies, time
commitment, level of responsibilities, employment elsewhere in our Group and desirability of
performance-based remuneration. As required by the relevant PRC laws and regulations, our Company
also participates in various defined contribution plans organized by relevant provincial and municipal
government authorities and welfare schemes for employees of our Company, including medical insurance,
injury insurance, unemployment insurance, pension insurance, maternity insurance and housing provident
fund.
Our Company offers executive Directors and senior management members, who are our employees,
compensation in the form of salaries, bonuses, social security plans, housing provident fund plans and
other benefits. Our independent non-executive Directors receive compensation based on their
responsibilities.
The aggregate amounts of remuneration paid to the Directors and Supervisors for the three years
ended December 31, 2020, 2021 and 2022 and the five months ended May 31, 2023, were RMB10.1
million, RMB10.7 million, RMB11.8 million and RMB4.9 million, respectively.
The aggregate amounts of remuneration (including fees, salaries, contribution to pension schemes,
housing allowances, other allowances and benefits-in-kind and discretionary bonuses) paid to the five
highest paid individuals for the three years ended December 31, 2020, 2021 and 2022 and the five months
ended May 31, 2023, were RMB11.4 million, RMB12.4 million, RMB12.3 million and RMB5.0 million,
respectively.
It is estimated that remuneration equivalent to approximately RMB13.0 million in aggregate will be
paid to the Directors and Supervisors by our Company for the year ending December 31, 2023, based on
the arrangements in force as of the date of the prospectus.
No remuneration was paid by our Company to the Directors or the five highest paid individuals as
inducement to join or upon joining our Company or as a compensation for loss of office during the Track
Record Period. Furthermore, none of the Directors had waived or agreed to waive any remuneration during
the Track Record Period.
COMPLIANCE ADVISOR
Our Company appointed Ping An of China Capital (Hong Kong) Company Limited as the compliance
advisor pursuant to Rule 3A.19 of the Listing Rules, and the compliance advisor will advise our Company
in the following circumstances.
(i) before the publication of any regulatory announcement, circular or financial report;
(ii) where a transaction, which might be a notifiable or connected transaction, is contemplated,
including share issues and share repurchases;
DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT
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(iii) where our Company proposes to use the proceeds of the Global Offering in a manner that is
different from that detailed in this prospectus or where our business activities, developments
or results deviate from any forecasts, estimates or other information in this prospectus; and
(iv) responding to inquiries made by the Exchange to the Company pursuant to Rule 13.10 of the
Listing Rules.
Meanwhile, pursuant to Rule 3A.24 of the Listing Rules, the compliance advisor shall inform us on
a timely basis of any amendment or supplement to the Listing Rules issued by the Stock Exchange from
time to time and any new or amended laws and regulations in Hong Kong applicable to our Company. The
compliance advisor shall also provide advice to us on the continuing requirements under the Listing Rules
and applicable laws and regulations.
The terms of the appointment of the compliance advisor will commence on the Listing Date and end
on the date when the Company distributes the annual report of its financial results for the first full
financial year commencing after the Listing Date.
DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT
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SUBSTANTIAL SHAREHOLDERS
So far as our Directors are aware, immediately following the completion of the Global Offering and
Conversion of Unlisted Shares into H Shares (assuming the Over-allotment Option is not exercised), the
following persons will have, or be deemed, or taken to have an interest and/or short position in the Shares
or the underlying Shares which would fall to be disclosed to our Company and the Stock Exchange under
the provisions of Divisions 2 and 3 of Part XV of the SFO, or will be, directly or indirectly, interested in
10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances
at general meetings of our Company:
Name of
Shareholder
Nature of
interest
Shares held as of the
Latest Practicable Date
Shares held immediately following the
completion of the Global Offering and
Conversion of Unlisted Shares into H Shares
(assuming the Over-allotment Option is not
exercised)
Description
of Shares
Number of
Shares (1)
Percentage of
shareholding
in our total
issued share
capital
Number of
Shares (1)
Percentage of
shareholding
in our
Unlisted
Shares/
H Shares
Percentage of
shareholding
in our total
issued share
capital (7)
Mr. Huang ..... Beneficial owner Unlisted
Shares
4,335,000 1.00% — — —
H Shares — — 4,335,000 1.32% 0.93%
Interest held
jointly with
another
person
(2)
Unlisted
Shares
75,147,185 17.33% 33,261,090 24.35% 7.15%
H Shares — — 41,886,095 12.73% 9.00%
Interest in a
controlled
corporation
(3)
Unlisted
Shares
91,785,560 21.17% 45,892,780 33.60% 9.86%
H Shares — — 45,892,780 13.95% 9.86%
Interest in a
controlled
corporation
(4)
Unlisted
Shares
8,208,320 1.89% — — —
H Shares — — 8,208,320 2.50% 1.76%
Xiamen
Suntama .....
Beneficial interest Unlisted
Shares
91,785,560 21.17% 45,892,780 33.60% 9.86%
H Shares — — 45,892,780 13.95% 9.86%
Interest held
jointly with
another
person
(2)
Unlisted
Shares
87,690,505 20.23% 33,261,090 24.35% 7.15%
H Shares — — 54,429,415 16.55% 11.69%
Mr. Zheng ..... Beneficial owner Unlisted
Shares
33,273,040 7.68% 16,636,520 12.18% 3.57%
H Shares — — 16,636,520 5.06% 3.57%
Interest held
jointly with
another
person
(2)
Unlisted
Shares
137,578,025 31.74% 62,517,350 45.77% 13.43%
H Shares — — 75,060,675 22.82% 16.12%
Interest of
spouse (6)
Unlisted
Shares
8,625,000 1.99% — — —
H Shares — — 8,625,000 2.62% 1.85%
SUBSTANTIAL SHAREHOLDERS
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--- page 259 ---
Name of
Shareholder
Nature of
interest
Shares held as of the
Latest Practicable Date
Shares held immediately following the
completion of the Global Offering and
Conversion of Unlisted Shares into H Shares
(assuming the Over-allotment Option is not
exercised)
Description
of Shares
Number of
Shares (1)
Percentage of
shareholding
in our total
issued share
capital
Number of
Shares (1)
Percentage of
shareholding
in our
Unlisted
Shares/
H Shares
Percentage of
shareholding
in our total
issued share
capital (7)
M r . L i ....... Beneficial owner Unlisted
Shares
33,249,145 7.67% 16,624,570 12.17% 3.57%
H Shares — — 16,624,575 5.05% 3.57%
Interest held
jointly with
another
person
(2)
Unlisted
Shares
146,226,920 33.73% 62,529,300 45.78% 13.43%
H Shares — — 83,697,620 25.45% 17.98%
XUE Fengying . . . Beneficial owner Unlisted
Shares
8,625,000 1.99% — — —
H Shares – – 8,625,000 2.62% 1.85%
Interest of
spouse (6)
Unlisted
Shares
170,851,065 39.41% 79,153,870 57.95% 17.00%
H Shares – – 91,697,195 27.88% 19.70%
LIU Zhen
(ᄎቤ) ......
Beneficial owner Unlisted
Shares
12,020,475 2.77% — — —
H Shares — — 12,020,475 3.65% 2.58%
Interest in a
controlled
corporation
(5)
Unlisted
Shares
60,000,000 13.84% 30,000,000 21.97% 6.44%
H Shares — — 30,000,000 9.12% 6.44%
Guangyao
Tianxiang LP . .
Beneficial interest Unlisted
Shares
60,000,000 13.84% 30,000,000 21.97% 6.44%
H Shares — — 30,000,000 9.12% 6.44%
Xiamen Guangyao
Tianxiang
Investment Co.,
Ltd. (Έᘴ˂
ʮ
̡) ........
Interest in a
controlled
corporation
(5)
Unlisted
Shares
60,000,000 13.84% 30,000,000 21.97% 6.44%
H Shares – – 30,000,000 9.12% 6.44%
Xiamen Jinyanlai
L P........
Beneficial interest Unlisted
Shares
41,666,670 9.61% — — —
H Shares — — 41,666,670 12.67% 8.95%
W ANG Junjie
(؏ڲ.....)
Interest in a
controlled
corporation
(8)
Unlisted
Shares
41,666,670 9.61% — — —
H Shares – – 41,666,670 12.67% 8.95%
Hongyan
Investment LP . .
Beneficial interest Unlisted
Shares
38,857,460 8.96% — — —
H Shares — — 38,857,460 11.81% 8.35%
SUBSTANTIAL SHAREHOLDERS
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Name of
Shareholder
Nature of
interest
Shares held as of the
Latest Practicable Date
Shares held immediately following the
completion of the Global Offering and
Conversion of Unlisted Shares into H Shares
(assuming the Over-allotment Option is not
exercised)
Description
of Shares
Number of
Shares (1)
Percentage of
shareholding
in our total
issued share
capital
Number of
Shares (1)
Percentage of
shareholding
in our
Unlisted
Shares/
H Shares
Percentage of
shareholding
in our total
issued share
capital (7)
Beijing Y anshi
Investment
Management
Center LLP ( ̏
ԯೋͩҳ༟၍ଣ
ʕː(Υྫ)) .
Interest in a
controlled
corporation
(9)
Unlisted
Shares
38,857,460 8.96% — — —
H Shares – – 38,857,460 11.81% 8.35%
Y ANG Lei
(เᆾ) ......
Interest in a
controlled
corporation
(9)
Unlisted
Shares
38,857,460 8.96% — — —
H Shares — — 38,857,460 11.81% 8.35%
Shannan Y anshi
V enture
Investment Co.,
Ltd. (ೋͩ௴
ʮ
̡) ........
Interest in a
controlled
corporation
(9)
Unlisted
Shares
38,857,460 8.96% — — —
H Shares — — 38,857,460 11.81% 8.35%
W ANG Jinghui
(ˮ౻ึ).....
Interest in a
controlled
corporation
(9)
Unlisted
Shares
38,857,460 8.96% — — —
H Shares — — 38,857,460 11.81% 8.35%
W ANG Y along
(ˮԭᎲ).....
Interest in a
controlled
corporation
(9)
Unlisted
Shares
38,857,460 8.96% — — —
H Shares — — 38,857,460 11.81% 8.35%
HU Qiaohong
(ߎ.....)
Beneficial owner Unlisted
Shares
32,978,655 7.61% 16,489,330 12.07% 3.54%
H Shares — — 16,489,325 5.01% 3.54%
Y angming Kangyi
LP and Jinjun
Hongyan LP
(10) .
Beneficial owner Unlisted
Shares
19,444,445 4.49% 8,333,330 6.10% 1.79%
H Shares — — 11,111,115 3.38% 2.39%
Y angming
V enture(10) ....
Interest in a
controlled
corporation
Unlisted
Shares
19,444,445 4.49% 8,333,330 6.10% 1.79%
H Shares — — 11,111,115 3.38% 2.39%
Notes:
(1) All interests stated are long positions. The number of Shares as of the Latest Practicable Date is the number assuming the
Share Subdivision is completed. See “History, Development and Corporate Structure” for details of the Share Subdivision.
(2) (i) Mr. Huang, our founder, chairman and executive Director; (ii) Xiamen Suntama, an entity controlled by Mr. Huang; (iii)
Mr. Zheng, our vice chairman and executive Director; and (iv) Mr. Li, our general manager and executive Director, are acting
in concert (Mr. Huang, Mr. Zheng, Mr. Li and Xiamen Suntama, together the “Concert Parties”). See “History, Development
and Corporate Structure—Concert Party Arrangement” for more information. The equity interest held by Jinyan Tengfei LP
(the employee incentive share platform controlled by Mr. Huang, who is the general partner of such limited partnership) and
by Ms. Xue (the spouse of Mr. Zheng), are also deemed to be controlled by the Concert Parties pursuant to the Listing Rules.
(3) Xiamen Suntama is controlled by Mr. Huang as of the Latest Practicable Date. Mr. Huang is therefore deemed to be interested
in the Shares held by Xiamen Suntama under the SFO.
SUBSTANTIAL SHAREHOLDERS
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(4) As of the Latest Practicable Date, Mr. Huang was the sole general partner of Jinyan Tengfei LP . Mr. Huang is deemed to be
interested in the Shares in which Jinyan Tengfei LP is interested in.
(5) Xiamen Guangyao Tianxiang Investment Co., Ltd. is the sole general partner of Guangyao Tianxiang LP and is therefore
deemed to be interest in the Shares held by Guangyao Tianxiang under the SFO. LIU Zhen held 80% of the limited partnership
interests of Guangyao Tianxiang LP and controls Xiamen Guangyao Tianxiang Investment. Co., Ltd. as of the Latest
Practicable Date. LIU Zhen is therefore deemed to be interested in the Shares held by Guangyao Tianxiang LP under the SFO.
(6) Ms. Xue is the spouse of Mr. Zheng. Accordingly, they are deemed to be interested in the same number of Shares of each other
for the purpose of the SFO.
(7) For the avoidance of doubt, both Unlisted Shares and H Shares are ordinary Shares in the share capital of our Company, and
are considered as one class of Shares.
(8) The general partner of Xiamen Jinyanlai LP is Wang Junjie, who is therefore deemed to be interest in the Shares held by
Xiamen Jinyanlai under the SFO.
(9) Beijing Y anshi Investment Management Center LLP is the sole general partner of Hongyan Investment. The general partner
of Beijing Y anshi Investment Management Center LLP is Y ANG Lei and the limited partner of Beijing Y anshi Investment
Management Center LLP holds more than one-third of its limited partnership interest is Shannan Y anshi V enture Investment
Co., Ltd. (a company owned as to 51% by W ANG Jinghui and 45% by W ANG Y along). As such, each of Beijing Y anshi
Investment Management Center LLP , Y ANG Lei, Shannan Y anshi V enture Investment Co., Ltd., W ANG Jinghui and W ANG
Y along is deemed to be interested in the Shares held by Hongyan Investment under the SFO.
(10) Fujian Y angming V enture Capital Co., Ltd. (ʮ̡) (“Y angming V enture”) is the general partner of both
of Y angming Kangyi LP and Jinjun Hongyan LP , and therefore Y angming V enture is deemed to be interested in the interests
held by Y angming Kangyi LP and Jinjun Hongyan LP .
Save as disclosed herein, our Directors are not aware of any person who will, immediately following
the completion of the Global Offering and Conversion of Unlisted Shares into H Shares (assuming the
Over-allotment Option is not exercised), have an interest or short position in the Shares or underlying
Shares which will be required to be disclosed to our Company and the Stock Exchange under the
provisions of Divisions 2 and 3 of Part XV of the SFO or will be, directly or indirectly, interested in 10%
or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at
general meetings of our Company.
SUBSTANTIAL SHAREHOLDERS
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THE CORNERSTONE PLACING
Our Company has entered into cornerstone investment agreements (each a “ Cornerstone
Investment Agreement ”, and together the “ Cornerstone Investment Agreements ”) with the cornerstone
investors set out below (each a “ Cornerstone Investor ”, and together the “ Cornerstone Investors ”),
pursuant to which the Cornerstone Investors have agreed to, subject to certain conditions, subscribe, or
cause their designated entities to subscribe, for such number of Offer Shares with an aggregate amount of
US$16.0 million (approximately HK$124.7 million) (exclusive of brokerage, SFC transaction levy, AFRC
transaction levy and the Stock Exchange trading fee) at the Offer Price as set out in the tables below (the
“Cornerstone Placing ”).
Based on the Offer Price of HK$8.80 per H Share, being the low-end of the Offer Price range, the
total number of Offer Shares to be subscribed for by the Cornerstone Investors would be approximately
14,176,000 H Shares, representing (i) approximately 44.3% of the Offer Shares and approximately 3.0%
of the total issued share capital of our Company immediately upon completion of the Global Offering
(assuming the Over-allotment Option is not exercised); or (ii) approximately 38.5% of the Offer Shares
and approximately 3.0% of the total issued share capital of our Company immediately upon completion
of the Global Offering (assuming the Over-allotment Option is fully exercised).
Based on the Offer Price of HK$9.90 per H Share, being the mid-point of the Offer Price range, the
total number of Offer Shares to be subscribed for by the Cornerstone Investors would be approximately
12,599,200 H Shares, representing (i) approximately 39.4% of the Offer Shares and approximately 2.7%
of the total issued share capital of our Company immediately upon completion of the Global Offering
(assuming the Over-allotment Option is not exercised); or (ii) approximately 34.2% of the Offer Shares
and approximately 2.7% of the total issued share capital of our Company immediately upon completion
of the Global Offering (assuming the Over-allotment Option is fully exercised).
Based on the Offer Price of HK$11.00 per H Share, being the high-end of the Offer Price range, the
total number of Offer Shares to be subscribed for by the Cornerstone Investors would be approximately
11,340,800 H Shares, representing (i) approximately 35.4% of the Offer Shares and approximately 2.4%
of the total issued share capital of our Company immediately upon completion of the Global Offering
(assuming the Over-allotment Option is not exercised); or (ii) approximately 30.8% of the Offer Shares
and approximately 2.4% of the total issued share capital of our Company immediately upon completion
of the Global Offering (assuming the Over-allotment Option is fully exercised).
Our Company is of the view that, leveraging on the Cornerstone Investors’ investment experience
and market position, the Cornerstone Placing will help to raise the profile of our Company and to signify
that such investors have confidence in our Company’s business and prospect. Our Company became
acquainted with (i) V alue Partners Hong Kong Limited, V alue Partners Limited and WU Chen through
introduction by the relevant Underwriters, and (ii) PT. Anugerah Citra Walet Indonesia, PT Niaga
Cakrawala Sukses, PT Esta Indonesia and WONG Sing Kwong Cyrus in the ordinary course of operation
through the business network or introduction by business contact of our Group.
The Cornerstone Placing forms part of the International Offering, and the Cornerstone Investors will
not acquire any Offer Shares under the Global Offering other than pursuant to the Cornerstone Investment
Agreements. The Offer Shares to be subscribed by the Cornerstone Investors will rank pari passu in all
respects with the fully paid H Shares in issue following the completion of the Global Offering and will
be listed on the Stock Exchange and counted towards the public float of our Company for the purpose of
Rule 8.08 of the Listing Rules.
CORNERSTONE INVESTORS
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Immediately following the completion of the Global Offering, each of the Cornerstone Investors will
not become a substantial Shareholder or connected person (as defined in the Listing Rules) of our
Company and will not have any Board representation in our Company. To the best knowledge of our
Company, each of the Cornerstone Investors (i) is an Independent Third Party and is not our connected
person (as defined under the Listing Rules), (ii) is independent of other Cornerstone Investors, (iii) is not
directly or indirectly financed by our Company, our subsidiaries, our Directors, Supervisors, chief
executive, our Controlling Shareholders, substantial Shareholders, existing Shareholders or any of their
respective close associates, and (iv) is not accustomed to taking instructions from our Company, our
subsidiaries, our Directors, Supervisors, chief executive, our Controlling Shareholders, substantial
Shareholders, existing Shareholders or any of their respective close associates in relation to the
acquisition, disposal, voting or other disposition of the Shares registered in their name or otherwise held
by them. Other than a guaranteed allocation of the relevant Offer Shares at the Offer Price, the Cornerstone
Investors do not have any preferential rights in the Cornerstone Investment Agreements compared with
other public Shareholders. There are no side agreements or arrangements between us and the Cornerstone
Investors or any benefit, direct or indirect, conferred on the Cornerstone Investors by virtue of or in
relation to the Cornerstone Placing, other than a guaranteed allocation of the relevant Offer Shares at the
Offer Price.
As confirmed by each of the Cornerstone Investors, its subscription under the Cornerstone Placing
would be financed by its own internal financial resources or the financial resources of its parent company
or the funds under its management. Each of the Cornerstone Investors has confirmed that all necessary
approvals have been obtained with respect to the Cornerstone Placing. Except for V alue Partners Hong
Kong Limited and V alue Partners Limited, none of the Cornerstone Investors or their holding companies
is listed on any stock exchange, and each of the Cornerstone Investors has confirmed that no specific
approval from any stock exchange (if relevant) or its shareholders is required for the relevant cornerstone
investment.
If there is over-allocation in the International Offering, there may be delayed delivery of the Offer
Shares to be subscribed by the Cornerstone Investors under the Cornerstone Placing. All of the
Cornerstone Investors have agreed that the Overall Coordinators may, in their sole discretion, defer the
delivery of all or part of the Offer Shares that such Cornerstone Investors have subscribed for to a date
later than the Listing Date. All of the Cornerstone Investors, including the aforesaid Cornerstone Investors
who have agreed to a potential delayed delivery arrangement, have agreed to pay for the relevant Offer
Shares that they have subscribed before dealings in the Company’s Offer Shares commence on the Stock
Exchange.
The Offer Shares to be subscribed by the Cornerstone Investors may be affected by the reallocation
in the event of over-subscription under the Hong Kong Public Offering, as described in “Structure of the
Global Offering—The Hong Kong Public Offering—Reallocation.” Details of the allocations to the
Cornerstone Investors will be disclosed in the allotment results announcement in the Hong Kong Public
Offering to be published on or around Monday, December 11, 2023.
CORNERSTONE INVESTORS
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The table below sets forth the details of the Cornerstone Placing:
Assuming the Over-Allotment Option is not
exercised
Assuming the Over-Allotment Option is fully
exercised
Cornerstone Investor (each as
defined below)
Investment
amount
(in US$
million) (1)
Hong Kong
dollar
equivalent (1)
(in million)
Number of
the Offer
Shares (2)
Approximate
% of the total
Offer Shares
Approximate
%o ft h e
International
Offer Shares
Approximate
% of the total
issued share
capital (3)
Approximate
% of the total
Offer Shares
Approximate
% of the
International
Offer Shares
Approximate
% of the total
issued share
capital (3)
Based on an Offer Price of HK$8.80 (being the low-end of the indicative Offer Price range)
PT. Anugerah Citra
Walet Indonesia . . . 5.0 39.0 4,430,000 13.8 15.4 1.0 12.0 13.2 0.9
PT Niaga Cakrawala
Sukses ........ 3 . 0 23.4 2,658,000 8.3 9.2 0.6 7.2 7.9 0.6
PT Esta Indonesia . . . 3.0 23.4 2,658,000 8.3 9.2 0.6 7.2 7.9 0.6
V alue Partners Hong
Kong Limited and
V alue Partners
Limited ....... 2 . 0 15.6 1,772,000 5.5 6.2 0.4 4.8 5.3 0.4
WU Chen ........ 2 . 0 15.6 1,772,000 5.5 6.2 0.4 4.8 5.3 0.4
WONG Sing Kwong
Cyrus ......... 1 . 0 7 . 8 886,000 2.8 3.1 0.2 2.4 2.6 0.2
Based on an Offer Price of HK$9.90 (being the mid-point of the indicative Offer Price range)
PT. Anugerah Citra
Walet Indonesia . . . 5.0 39.0 3,937,600 12.3 13.7 0.8 10.7 11.7 0.8
PT Niaga Cakrawala
Sukses ........ 3 . 0 23.4 2,362,400 7.4 8.2 0.5 6.4 7.0 0.5
PT Esta Indonesia . . . 3.0 23.4 2,362,400 7.4 8.2 0.5 6.4 7.0 0.5
V alue Partners Hong
Kong Limited and
V alue Partners
Limited ....... 2 . 0 15.6 1,574,800 4.9 5.5 0.3 4.3 4.7 0.3
WU Chen ........ 2 . 0 15.6 1,574,800 4.9 5.5 0.3 4.3 4.7 0.3
WONG Sing Kwong
Cyrus ......... 1 . 0 7 . 8 787,200 2.5 2.7 0.2 2.1 2.3 0.2
Based on an Offer Price of HK$11.00 (being the high-end of the indicative Offer Price range)
PT. Anugerah Citra
Walet Indonesia . . . 5.0 39.0 3,544,000 11.1 12.3 0.8 9.6 10.5 0.8
PT Niaga Cakrawala
Sukses ........ 3 . 0 23.4 2,126,400 6.6 7.4 0.5 5.8 6.3 0.5
PT Esta Indonesia . . . 3.0 23.4 2,126,400 6.6 7.4 0.5 5.8 6.3 0.5
V alue Partners Hong
Kong Limited and
V alue Partners
Limited ....... 2 . 0 15.6 1,417,600 4.4 4.9 0.3 3.9 4.2 0.3
WU Chen ........ 2 . 0 15.6 1,417,600 4.4 4.9 0.3 3.9 4.2 0.3
WONG Sing Kwong
Cyrus ......... 1 . 0 7 . 8 708,800 2.2 2.5 0.2 1.9 2.1 0.2
Notes:
(1) The total investment amount excludes brokerage, SFC transaction levy, AFRC transaction levy and the Stock Exchange
trading fee and is calculated based on the exchange rates as described in the section headed “Information about this Prospectus
and the Global Offering—Exchange Rate Conversion”. The actual investment amount of the Cornerstone Investors in Hong
Kong dollars may vary due to the actual exchange rate prescribed in the Cornerstone Investment Agreements.
(2) Subject to rounding down to the nearest whole board lot of 400 H Shares. Calculated based on the exchange rate set out in
the section headed “Information about this Prospectus and the Global Offering—Exchange Rate Conversion.”
(3) Immediately following the completion of the Global Offering.
(4) Any discrepancies in the table above between the total shown and the sum of the amounts listed are due to rounding.
CORNERSTONE INVESTORS
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THE CORNERSTONE INVESTORS
The information about our Cornerstone Investors set forth below has been provided by the
Cornerstone Investors in connection with the Cornerstone Placing.
PT. Anugerah Citra Walet Indonesia
PT. Anugerah Citra Walet Indonesia (“ACWI”) is a company incorporated in Republik Indonesia in
2016 and is mainly engaged in bird’s nest processing and exporting business. ACWI is controlled as to
99% by Rudy Foniaty, an Independent Third Party, and as to 1% by Chia Enyanto, an Independent Third
Party. ACWI is one of our major suppliers during the Track Record Period and an Independent Third Party.
PT Niaga Cakrawala Sukses
PT Niaga Cakrawala Sukses (“PNCS”) is a company incorporated in the Republik Indonesia in 2021,
and is an investment holding company established for holding investment in bird’s nest industry and
related business and companies. PNCS is 99% controlled by Hendromartono Hartanto, an Independent
Third Party and 1% controlled by Nelly Hartanto, an Independent Third Party. An affiliate of PNCS is one
of our major suppliers during the Track Record Period and an Independent Third Party. Mr.
Hendromartono Hartanto is the founder and was the chairman of such major supplier of the Company, and
has extensive experience in bird’s nest related sales and trading business and insights in bird’s nest
industry.
PT Esta Indonesia
PT Esta Indonesia (“PEI”) is a company incorporated in Republik Indonesia in 2000 and is mainly
engaged in EBN trading and industrial business. PEI is controlled as to 99.9% by Hoo Anton Siswanto,
an Independent Third Party, and as to 0.1% by Djoko Hartanto, an Independent Third Party. PEI has a
long-term relationship with the Company and is one of our major suppliers during the Track Record Period
and an Independent Third Party. PEI is also known to be one of the top upstream EBN players in Indonesia.
Value Partners Hong Kong Limited and Value Partners Limited
Each of V alue Partners Hong Kong Limited (incorporated in Hong Kong in 1999) and V alue Partners
Limited (incorporated in the British Virgin Islands in 1991) has agreed to procure certain investment funds
that it has actual discretionary investment management power over, to subscribe for, and failing which it
will itself subscribe for, such number of Offer Shares which may be purchased with an aggregate amount
of approximately US$1.44 million (exclusive of brokerage, SFC transaction levy, the Stock Exchange
trading fee, the AFRC transaction levy and other related expenses) and appproximately US$0.56 million
(exclusive of brokerage, SFC transaction levy, the Stock Exchange trading fee, the AFRC transaction levy
and other related expenses), respectively, at the Offer Price.
Each of V alue Partners Hong Kong Limited and V alue Partners Limited (together with other
subsidiaries under V alue Partners Group Limited (“V alue Partners”)), acts as investment manager or
investment advisor to certain investment funds. Both V alue Partners Hong Kong Limited and V alue
Partners Limited are wholly-owned subsidiaries of V alue Partners Group Limited, a company listed on the
Stock Exchange (stock code: 806). V alue Partners is one of Asia’s largest independent asset management
firms. It is headquartered in Hong Kong and operates in Shanghai, Shenzhen, Singapore, Malaysia and
London. V alue Partners’ investment strategies cover equities, fixed income, multi-asset, quantitative
investment solutions and alternatives for institutional and individual clients in the Asia Pacific, Europe and
the United States. As of October 31, 2023, it had asset under management of approximately US$5.5
billion.
WU Chen ( юೠ)
WU Chen ( юೠ) (“Ms. Wu”), an Independent Third Party, is an experienced individual investor with
nearly twenty years of investment experience. Ms. Wu currently focuses mainly on secondary market
equity and fund investments. Ms. Wu has invested in a number of secondary market equity funds as well
as publicly listed companies such as Anhui Gourgen Traffic Construction Co., Ltd. (stock code:
603815.SH) and Daan Gene Co., Ltd. (stock code: 002030.SZ).
CORNERSTONE INVESTORS
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WONG Sing Kwong Cyrus ( රϓΈ)
WONG Sing Kwong Cyrus ( රϓΈ) (“Mr. Wong”), an Independent Third Party, is the chief
executive officer of Skypro Medical Supplies Company (“Skypro Medical”), which is principally engaged
in supplying medical consumables. Skypro Medical has factories that are set up in Hong Kong and
Xiamen. It has distribution network and marketing team in the PRC and in overseas markets, with active
presence in many countries and regions around the world. Since joining Skypro Medical in 2003,
Mr. Wong is primarily responsible for its overall operation and management as well as managing the
overall operations and resources of the company. Mr. Wong is also an individual investor focusing on
investment in Singapore and Hong Kong listed companies.
CLOSING CONDITIONS
The subscription obligation of each Cornerstone Investor under the respective Cornerstone
Investment Agreement is subject to, among other things, the following closing conditions:
(a) the Hong Kong Underwriting Agreement and the International Underwriting Agreement for the
Hong Kong Public Offering and the International Offering being entered into and having
become effective and unconditional (in accordance with their respective original terms or as
subsequently waived or varied by agreement of the parties thereto) by no later than the time
and date as specified in such underwriting agreements, and neither of such underwriting
agreements having been terminated;
(b) the Offer Price having been agreed upon according to the Underwriting Agreements and the
Price Determination Agreement to be signed among our Company and the Overall Coordinators
(for themselves and on behalf of the underwriters of the Global Offering);
(c) the Listing Committee of the Stock Exchange having granted the approval for the listing of, and
permission to deal in, the H Shares (including the Offer Shares subscribed for by the
Cornerstone Investors) as well as other applicable waivers and approvals, and such approval,
permission or waiver having not been revoked prior to the commencement of dealings in the
H Shares on the Stock Exchange;
(d) no applicable laws shall have been enacted or promulgated by any governmental authority
which prohibits the consummation of the transactions contemplated in the Global Offering or
in the respective Cornerstone Investment Agreements and there shall be no orders or
injunctions from a court of competent jurisdiction in effect precluding or prohibiting
consummation of such transactions; and
(e) the representations, warranties, undertakings, acknowledgements and confirmations of such
Cornerstone Investor under the respective Cornerstone Investment Agreement are and will be
accurate, true and complete in all respects and not misleading or deceptive, and that there is
no material breach of such Cornerstone Investment Agreement on the part of such Cornerstone
Investor.
RESTRICTIONS ON DISPOSALS BY THE CORNERSTONE INVESTORS
Each of the Cornerstone Investors has agreed that it will not, whether directly or indirectly, at any
time during the period of one year following the Listing Date, dispose of any of the Offer Shares they have
purchased pursuant to the relevant Cornerstone Investment Agreement, save for certain limited
circumstances, such as transfers to any of its wholly-owned subsidiaries who will be bound by the same
obligations of such Cornerstone Investor; except for V alue Partners Hong Kong Limited, V alue Partners
Limited and WU Chen, which/whom will be subject to the same lock-up restrictions for a period of six
months following the Listing Date.
CORNERSTONE INVESTORS
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Our registered share capital as of the Latest Practicable Date was RMB86,700,000, divided into
86,700,000 Unlisted Shares of par value RMB1.00 each. Upon Listing, the ordinary shares of the Company
will be split on a one for five basis, and the aforementioned registered share capital of the Company of
RMB86,700,000 will be divided into 433,500,000 Shares of par value RMB0.20 each.
Assuming the Over-allotment Option is not exercised, the share capital of our Company immediately
after the Global Offering and Conversion of Unlisted Shares into H Shares will be as follows:
Description of Shares Number of Shares
Aggregate nominal
value of Shares
(RMB)
Unlisted Shares ................................ 136,580,700 27,316,140
H Shares to be converted from Unlisted Shares ......... 296,919,300 59,383,860
H Shares to be issued pursuant to the Global Offering .... 32,000,000 6,400,000
Total ........................................ 465,500,000 93,100,000
Assuming the Over-allotment Option is exercised in full, the share capital of our Company
immediately after the Global Offering and Conversion of Unlisted Shares into H Shares will be as follows:
Description of Shares Number of Shares
Aggregate nominal
value of Shares
(RMB)
Unlisted Shares ................................ 136,580,700 27,316,140
H Shares to be converted from Unlisted Shares ......... 296,919,300 59,383,860
H Shares to be issued pursuant to the Global Offering .... 36,800,000 7,360,000
Total ........................................ 470,300,000 94,060,000
Note: See “Our Corporate Structure Immediately Following the Global Offering” in the section headed “History,
Development and Corporate Structure” for details of the identities of our Shareholders whose Shares will remain as
Unlisted Shares and whose Shares will be converted into H Shares upon Listing.
The above table assumes that the Global Offering has become unconditional and the H Shares are
issued pursuant to the Global Offering.
OUR SHARES
Upon the completion of the Global Offering and the Conversion of Unlisted Shares into H Shares,
the Shares will consist of Unlisted Shares and H Shares. The H Shares in issue following the completion
of the Global Offering and the Unlisted Shares are ordinary Shares in the share capital of our Company,
and are considered as one class of Shares. However, apart from certain qualified domestic institutional
investors in the PRC, qualified PRC investors under the Shanghai-Hong Kong stock exchanges
connectivity mechanism (Shanghai-Hong Kong Stock Connect) and the Shenzhen-Hong Kong stock
exchanges connectivity mechanism (Shenzhen-Hong Kong Stock Connect) and other persons entitled to
hold H Shares pursuant to the relevant PRC laws and regulations or upon approval by any competent
authorities, H Shares generally may not be subscribed for by, or traded between, legal or natural persons
of the PRC. On the other hand, Unlisted Shares may only be subscribed for by, and traded between, legal
persons of the PRC, certain qualified foreign institution investors and qualified foreign strategic investors.
H Shares may only be subscribed for and traded in Hong Kong dollars. Unlisted Shares, on the other hand,
may only be subscribed for and transferred in Renminbi.
RANKING
Unlisted Shares and H Shares are regarded as one class of Shares under our Articles of Association
and will rank pari passu with each other in all other respects and, in particular, will rank equally for all
dividends or distributions declared, paid or made after the date of this prospectus.
SHARE CAPITAL
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All dividends for H Shares will be denominated and declared in Renminbi, and paid in Hong Kong
dollars or Renminbi, whereas all dividends for Unlisted Shares will be paid in Renminbi. Other than cash,
dividends could also be paid in the form of shares.
CIRCUMSTANCES UNDER WHICH GENERAL MEETINGS ARE REQUIRED
For details of circumstances under which the Shareholders’ general meeting are required, please refer
to “Shareholders and Shareholders’ General Meetings—V oting and Resolutions of Shareholders’ General
Meetings” under “Appendix III—Summary of Articles of Association of the Company” to this prospectus.
CONVERSION OF OUR UNLISTED SHARES INTO H SHARES
Pursuant to the regulations prescribed by the securities regulatory authorities of the State Council
and the Articles of Association, the Unlisted Shares may be converted into overseas-listed Shares. Such
converted Shares could be listed or traded on an overseas stock exchange, provided that prior to the
conversion and trading of such converted Shares, any requisite internal approval process has been duly
completed, all the filling procedures with relevant PRC regulatory authorities, including the CSRC are
followed. In addition, such conversion and trading shall comply with the regulations, requirements and
procedures prescribed by the relevant overseas stock exchange. If any of the Unlisted Shares are to be
converted, listed and traded as H Shares on the Stock Exchange, such conversion, listing and trading will
need to be filed with relevant PRC regulatory authorities, including the CSRC, and the approval of the
Stock Exchange.
Filing with the CSRC for Full Circulation
According to the Trial Administrative Measures of Overseas Securities Offering and Listing by
Domestic Companies (جannounced by the CSRC, for an
H-share listed company, shareholders of its domestic unlisted shares applying to convert such shares into
shares listed and traded on an overseas trading venue shall conform to relevant regulations promulgated
by the CSRC, and authorize the domestic company to file with the CSRC on their behalf.
In accordance with the Guidelines for the “Full Circulation” Program for Domestic Unlisted Shares
of H-share Listed Companies (H΅͡ሗ “ஷ”ˏ) announced by the CSRC,
an unlisted domestic joint stock company may apply for “full circulation” when applying for an overseas
initial public offering.
We have filed with the CSRC for the conversion of 296,919,300 Unlisted Shares into H Shares on
a one-for-one basis (“Conversion of Unlisted Shares into H Shares”) upon the completion of the Listing
(assuming the Share Subdivision is completed and the nominal value is RMB0.2 each Share) (“Full
Circulation Application of the Company”), which has been completed on September 25, 2023.
Listing Approval by the Stock Exchange
We have applied to the Listing Committee of the Stock Exchange for the granting of listing of, and
permission to deal in, our H Shares to be issued pursuant to the Global Offering (including any H Shares
which may be issued pursuant to the exercise of the Over-allotment Option) and the H Shares to be
converted from 296,919,300 Unlisted Shares (assuming the Share Subdivision is completed and the
nominal value is RMB0.2 each Share) on the Stock Exchange.
SHARE CAPITAL
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We will perform the following procedures for the conversion of Unlisted Shares into H Shares after
receiving the approval of the Stock Exchange: (1) giving instructions to our H Share Registrar regarding
relevant share certificates of the converted H Shares; and (2) enabling the converted H Shares to be
accepted as eligible securities by HKSCC for deposit, clearance and settlement in the CCASS. Until the
converted Shares are re-registered on our H Share register, such Shares will not be listed as H Shares. The
participating shareholders may only deal in the Shares upon completion of domestic procedures.
Unlisted Shareholders can work with the Company according to the Articles of Association and
follow the procedures set out in this prospectus to convert the Unlisted Shares into H Shares after the
Listing if they want, provided that such conversion of Unlisted Shares into and listing and trading of H
Shares will be subject to the filling procedures of the relevant PRC regulatory authorities, including the
CSRC, the approval of the Stock Exchange and the satisfaction of the public float requirement under the
Listing Rules by the Company.
REGISTRATION OF SHARES NOT LISTED ON AN OVERSEAS STOCK EXCHANGE
According to the Guidelines for the “Full Circulation” Program for Domestic Unlisted Shares of
H-share Listed Companies (H΅͡ሗ“ஷ”ˏ) announced by the CSRC, the
domestic shareholders of unlisted shares shall handle share transfer registration business in accordance
with the relevant business rules of CSDC. And H-share companies should submit relevant status reports
to the CSRC within 15 days after the shares involved in the application completing the transfer registration
in CSDC.
SHAREHOLDERS’ APPROV AL FOR THE GLOBAL OFFERING
Approval from holders of the Shares is required for the Company to issue H Shares and seek the
listing of H Shares on the Stock Exchange. The Company has obtained such approval at the Shareholders’
general meeting held on May 25, 2023.
RESTRICTIONS ON TRANSFER OF SHARES ISSUED PRIOR TO THE GLOBAL OFFERING
According to the Company Law, the Shares issued by the Company prior to the Global Offering are
restricted from trading within one year from the Listing Date.
Our Directors, Supervisors and members of the senior management (as defined in our Articles of
Association) of our Company shall declare their shareholdings in our Company and any changes in their
shareholdings. Shares transferred by our Directors, Supervisors and such members of the senior
management each year during their term of office shall not exceed 25% of their total respective
shareholdings in our Company. The Shares that the aforementioned persons held in our Company cannot
be transferred within one year from the date on which the shares are listed and traded, nor within half a
year after they leave their positions in our Company. The Articles of Association may contain other
restrictions or conditions on the transfer of the Shares held by our Directors, Supervisors, members of
senior management of our Company and other Shareholders. For further details, see “Summary of Articles
of Association” in Appendix III to this prospectus.
The Company will work with the domestic securities company to be engaged by the Company to
restrict the trading of the H Shares converted from Unlisted Shares technically within one year after the
Listing.
SHARE CAPITAL
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You should read the following discussion and analysis in conjunction with our consolidated
financial statements as of and for the years ended December 31, 2020, 2021 and 2022 and the five
months ended May 31, 2022 and 2023, including the notes thereto, as set forth in the Accountants’
Report in Appendix I to this prospectus. You should read the entire Accountants’ Report in Appendix
I to this prospectus and not rely merely on the information contained in this section. The
consolidated financial statements as of and for the years ended December 31, 2020, 2021 and 2022
and the five months ended May 31, 2022 and 2023 have been prepared in accordance with all
applicable International Financial Reporting Standards (“IFRSs”), which may differ in material
aspects from generally accepted accounting principles in other jurisdictions, including the United
States.
The following discussion and analysis contain forward-looking statements that reflect our
current views with respect to future events and financial performance. These statements are based
on our assumptions and analysis in light of our experience and perception of historical trends,
current conditions and expected future development, as well as other factors we believe are
appropriate under the circumstances. However , whether actual outcomes and developments will
meet our expectations and predictions depends on a number of risks and uncertainties. In evaluating
our business, you should carefully consider the information provided in “Risk Factors” and
“Forward-looking Statements” in this prospectus.
For the purpose of this section, unless the context otherwise requires, references to 2020, 2021
and 2022 refer to our financial years ended December 31 of such years. Unless the context otherwise
requires, financial information described in this section is described on a consolidated basis.
OVERVIEW
We are a leading brand in China’s EBN product market, dedicated to the development, production
and marketing of high-quality modern EBN products. We are the largest EBN product company in the
traceable EBN market in China with a market share of 14.0% in terms of retail value in 2022, according
to the F&S Report. We also ranked No.1 by the number of EBN specialty storefronts and the volume of
CAIQ-certified imports in the EBN product market in China in 2022, according to the same source. We
have developed an advanced and sophisticated product research and development capability, a diversified
product portfolio, a robust quality assurance scheme, and an established sales network, which has allowed
us to prevail in the market competition.
Consumer experience is our top priority. We leverage modern technology to continually drive
product innovation that elevates consumer experience. Our product portfolio primarily consists of three
product categories, i.e., pure EBN products, EBN+ products and +EBN products, to meet the differentiated
consumer needs for experience in different life scenarios. In 2022, we had 250 SKUs, among which 194
were pure EBN SKUs under four major product series, including One Nest (ມዲ), Freshly Stewed Bird’s
Nest ( ᒻዮዲ၊), Crystal Sugar Bird’s Nest (ዲ), and dried EBN ( ৻ዲ၊). In addition, leveraging
our extensive research of active ingredients extraction from EBN, we have expanded the value chain of
the EBN industry by developing other EBN products, including EBN+ products (which are ready-to-serve
EBN products enhanced with other ingredients and/or nutrients), such as One Nest — Vitality (ມዲ–ʩं
ಛ) and Crystal Sugar Bird’s Nest with Ginseng (ዲ), and +EBN products (which are products
that feature EBN as an enhancement for elevated nutrition or other benefits), such as EBN porridge and
EBN skincare products which use bird’s nest peptides as an enhancement.
FINANCIAL INFORMATION
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We achieved robust growth and profitability during the Track Record Period. Our revenue increased
from RMB1,301.2 million in 2020 to RMB1,729.9 million in 2022, at a CAGR of 15.3%, and increased
by 12.3% from RMB696.9 million in the five months ended May 31, 2022 to RMB782.6 million in the
five months ended May 31, 2023. Our net profit increased from RMB123.4 million in 2020 to RMB205.9
million in 2022, at a CAGR of 29.2%, and increased by 20.0% from RMB83.8 million in the five months
ended May 31, 2022 to RMB100.5 million in the five months ended May 31, 2023. Our net profit margin
was 9.5%, 11.4%, 11.9%, 12.0% and 12.8% for 2020, 2021, 2022 and the five months ended May 31, 2022
and 2023, respectively. Our adjusted net profit (non-IFRS measure) increased from RMB123.9 million in
2020 to RMB211.1 million in 2022, at a CAGR of 30.5%, and increased by 32.4% from RMB85.9 million
in the five months ended May 31, 2022 to RMB113.7 million in the five months ended May 31, 2023.
According to the F&S Report, our profitability during the Track Record Period was higher than the
industry average, which was estimated to be 5.0% to 9.0% during the same periods.
KEY FACTORS AFFECTING OUR RESULTS OF OPERATIONS
Our business, financial condition and results of operations have been, and are expected to continue
to be, affected by a number of factors, primarily including the following:
Consumer Demand for EBN Products
Our success hinges on consumer’s demand for quality EBN products. Underpinned by the broad and
venerable cultural foundations and history of consumptions of EBN in China, the consumer demand for
quality EBN products has shown a significant growth trajectory in China. In particular, the size of the EBN
product market in China, in terms of retail value, has grown rapidly from RMB12.9 billion in 2017 to
RMB43.0 billion in 2022, at a CAGR of 27.2%, and is expected to reach RMB92.1 billion in 2027, at a
CAGR of 16.5% from 2022 to 2027, according to the F&S Report. Capitalizing on our industry position,
we believe we will continue to benefit from the rising consumer demand for quality EBN products in
China.
The potential growth of the EBN market may be affected by a number of factors, such as general
economic health, change in lifestyle, consumer awareness of beauty and wellness, and consumer attitudes
toward EBN products. As a leading brand in the EBN product market with strong brand reputation, high
quality products and proven track record of business success, we believe we are well positioned to capture
the growth opportunities in the EBN product market.
Product Offering and Mix
Our results of operations depend on our ability to address evolving consumer preferences in the EBN
product market with a diverse product portfolio. In 2022, we had 250 SKUs, among which 194 were pure
EBN SKUs under four major product series, including One Nest , Freshly Stewed Bird’s Nest, Crystal
Sugar Bird’s Nest, and dried EBN, to meet the differentiated consumer needs for experience in different
life scenarios. We are closely attuned to changes in consumer behavior and lifestyle trends as we continue
to expand our product offering through innovation. For instance, our signature product series, One Nest ,
was launched in 2012 in response to the market demand for ready-to-serve EBN products in China. In
recent years, we have also expanded the value chain of the EBN industry by developing other innovative
EBN products, such as EBN+ products and +EBN products. Our ability to align our product offerings with
customer needs has been a cornerstone of our growth.
During the Track Record Period, among our diversified product portfolio, One Nest (pure EBN)
represented the largest revenue contribution, accounting for 43.0%, 44.0%, 38.9%, 41.3% and 36.2% of
our total revenue in 2020, 2021, 2022 and the five months ended May 31, 2022 and 2023, respectively.
Freshly Stewed Bird’s Nest experienced the highest growth rate during the Track Record Period, from
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RMB321.1 million in 2020 to RMB485.4 million in 2022, at a CAGR of 22.9%, and from RMB188.7
million in the five months ended May 31, 2022 to RMB215.2 million in the five months ended May 31,
2023 at a growth rate of 14.0%. One Nest and Crystal Sugar Bird’s Nest, however, tend to have higher
gross profit margins than Freshly Stewed Bird’s Nest and dried EBN. One Nest and Crystal Sugar Bird’s
Nest have such higher gross profit margins because (1) we position One Nest as our premium product
series, and primarily sell One Nest products through offline sales channels, which require limited online
promotional activities and logistics costs, and (2) Crystal Sugar Bird’s Nest as our traditional product
series has built its stable customer base, resulting in a pricing strategy that entails less promotional
activities, and its less demanding transportation condition to certain extent reduced relevant logistics
costs. Any significant change in our product offering and mix will likely have an impact on our revenue
growth and profitability.
Distribution Channels
Our diverse and expansive distribution network plays a crucial role in our market reach and revenue
growth. We have established an expansive national sales network covering online and offline channels,
enabling us to effectively reach a broad customer base and reinforce our premium brand image. We have
rapidly expanded our offline sales network through a combination of self-operated stores and distributor-
operated stores. As of May 31, 2023, we had a nationwide offline sales network, consisting of 91
self-operated stores and 214 offline distributors covering 614 distributor-operated stores in China.
According to the F&S Report, we ranked No.1 as measured by the number of EBN specialty storefronts
as of December 31, 2022 and surpassed the runner-up by over 100%. Revenues from offline channels
increased from RMB578.5 million in 2020 to RMB738.7 million in 2021 and further to RMB792.0 million
in 2022, and increased from RMB333.9 million in the five months ended May 31, 2022 to RMB353.2
million in the five months ended May 31, 2023, accounting for 44.5%, 49.0%, 45.8%, 47.9% and 45.2%
of our total revenues in the same periods, respectively. In particular, our direct sales to offline customers
have demonstrated strong momentum, growing from RMB168.7 million in 2020 to RMB314.5 million in
2022, at a CAGR of 36.5%, and from RMB135.2 million in the five months ended May 31, 2022 to
RMB144.6 million in the five months ended May 31, 2023 at a growth rate of 7.0%. The table below sets
forth the number of our offline stores by type as of the dates indicated.
As of December 31, As of May 31
2020 2021 2022 2023
Offline stores
Self-operated stores ............. 4 0 8 9 8 9 9 1
Distributor-operated stores ........ 4 8 3 5 4 4 6 1 5 6 1 4
Total ........................ 523 633 704 705
In addition to the traditional offline channels, we have expanded our online presence by establishing
online stores on all major e-commerce platforms. Our direct sales to online customers through
self-operated online stores accounted for 44.1%, 37.4%, 40.2%, 38.0% and 41.8% of our total revenues
in 2020, 2021, 2022 and the five months ended May 31, 2022 and 2023, respectively. In recent years, we
have also engaged e-commerce platforms to distribute our products through platform-operated online
stores to further expand our online presence. Our direct sales to e-commerce platforms increased from
RMB137.5 million in 2020 to RMB227.1 million in 2022, at a CAGR of 28.5%, and increased by 1.6%
from RMB92.2 million in the five months ended May 31, 2022 to RMB93.7 million in the five months
ended May 31, 2023. We adopt a differentiated product and service offering strategy for different channels
to maximize sales potential across all channels. For instance, Freshly Stewed Bird’s Nest was launched
specifically for online channels with a subscription model, catering to demands from younger generations.
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Ability to Control Cost of Raw Materials
Our results of operations have been, and will continue to be, affected by our ability to control cost
of sales. Cost of raw materials was the most significant component of our cost of sales during the Track
Record Period, accounting for 76.7%, 79.3%, 77.3%, 77.8% and 77.7% of our total cost of sales in 2020,
2021, 2022 and the five months ended May 31, 2022 and 2023, respectively. The principal raw materials
we use are raw nests. During the Track Record Period, substantially all of raw nests used in our production
process were sourced from suppliers in Indonesia, the largest raw nest production country in the world.
In 2020 and 2021, we also sourced a total of RMB1.9 million of raw nests from suppliers in China, which,
to the best knowledge of our Directors, imported these raw nests from Malaysia and Thailand.The price
of raw nests may be affected by a number of factors, such as market demand, quality of raw nests, climate
conditions, natural habitat preservation, logistics costs, and international trade policies. We have built
strong and stable relationships with various suppliers for raw nests in Indonesia. In 2020, 2021, 2022 and
the five months ended May 31, 2022 and 2023, our purchase for raw nests was RMB770.1 million,
RMB603.5 million, RMB617.0 million, RMB195.0 million and RMB284.3 million, respectively. We
believe our long-lasting relationship with local suppliers in Indonesia has positioned us advantageously
within the EBN market to ensure a reliable and consistent supply of high-quality raw nests and, at the same
time, negotiate favorable pricing terms to lower our costs.
Marketing Effectiveness
We have invested, and is expected to continue to invest, in our sales and marketing activities, which
we believe is critical to raising our brand awareness among consumers and maintaining our premium brand
positioning, which will contribute to our long-term revenue growth and profitability. In 2020, 2021, 2022
and the five months ended May 31, 2022 and 2023, our selling and distribution expenses were RMB317.8
million, RMB399.0 million, RMB503.9 million, RMB205.8 million and RMB208.5 million, respectively,
accounting for 24.4%, 26.5%, 29.1%, 29.5% and 26.6% of our total revenues for the same periods,
respectively. Advertising and promotion fees constituted the largest component of our selling and
distribution expenses during the Track Record Period, accounting for 74.3%, 67.4%, 64.8%, 66.7% and
60.0% of the total selling and distribution expenses in 2020, 2021, 2022 and the five months ended May
31, 2022 and 2023, respectively.
We adopt a multi-channel marketing approach that allows us to reach and influence a broad target
customer base. Our focus is on maintaining and enhancing brand awareness through professional
marketing and branding strategies. We conduct advertising campaigns via traditional channels such as
television, radio and billboards. Additionally, we leverage e-commerce and social media platforms to
promote our brand and products, collaborating with influencers and implementing targeted marketing
campaigns on emerging e-commerce platforms, such as Douyin and Xiaohongshu. Our marketing efforts
also include sponsorship and celebrity endorsements. For instance, we partnered with the China national
fencing team as their official EBN product supplier and enlisted Ms. Liying Zhao ( Ⴛᘆ጑), a highly
influential celebrity in China, as our brand ambassador. We actively organize and sponsor various
interactive events, such as immersive Xiamen factory tours, golf tournaments, the Zhigang Think Tank
Forum (ሞእ) led by Mr. Zhigang Wang ( ˮқၤ), a strategic consulting expert, and sharing
sessions with renowned host Ms. Lan Y ang ( เᘜ). These initiatives help consolidate our distribution
system, attract more consumers, and promote the beauty and wellness lifestyle. We strive to enhance our
marketing efficiency to maximize brand visibility and expand our consumer reach in a cost-effective
manner.
Seasonality
Our financial condition and results of operations are subject to seasonal fluctuations. We typically
carry out more sales and marketing activities before and during holiday seasons and other festivities, such
as the mid-autumn festival and the dragon boat festival. We also actively participate in shopping events
and promotional activities organized by third-party e-commerce platforms, such as Singles’ Day Shopping
Carnival (Ӯᛇື), to capture more sales opportunities. We typically have increased sales
before and during the holiday seasons, festivals and events, most of which happen during the second half
of the year. As a result, we generally record higher revenue in the second half of the year.
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BASIS OF PREPARATION
Our historical financial information has been prepared in accordance with the IFRSs issued by the
International Accounting Standard Board. The historical financial information has been prepared on a
historical cost basis, except for certain financial asset measured at fair value. Details for the financial asset
measured at fair value are as stated in Note 2(g) to the Accountants’ Report in Appendix I to this
prospectus.
The preparation of historical financial information in conformity with IFRSs requires our
management to make judgements, estimates and assumptions that affect the application of policies and
reported amounts of assets, liabilities, income and expenses. Such estimates and associated assumptions
are based on historical experience and various other factors that are believed to be reasonable under the
circumstances, the results of which form the basis of making the judgements about carrying values of
assets and liabilities that are not readily apparent from other sources. Actual results may differ from these
estimates. Judgements made by our management in the application of IFRSs that have significant effect
on the financial statements and major sources of estimation uncertainty are stated in Note 3 to the
Accountants’ Report in Appendix I to this prospectus.
All effective standards, amendments to standards and interpretation, which are mandatory for the
financial year beginning on January 1, 2023, are consistently applied to us for the Track Record Period.
MATERIAL ACCOUNTING POLICY INFORMATION AND CRITICAL ACCOUNTING
ESTIMATES AND JUDGEMENTS
We have identified certain accounting policies that we believe are the most significant to the
preparation of our consolidated financial statements. Our material accounting policy information and
critical estimates and judgements, which are important for understanding our results of operations and
financial condition, are set forth in Notes 2 and 3 to the Accountants’ Report in Appendix I to this
prospectus. Some of the accounting policies involve subjective assumptions and estimates, as well as
complex judgements relating to accounting items. In each case, the determination of these items requires
our management’s judgement based on information and financial data that may change in future periods.
When reviewing our consolidated financial statements, you should consider (1) our selection of material
accounting policies, (2) the judgement and other uncertainties affecting the application of such policies,
and (3) the sensitivity of reported results to changes in conditions and assumptions.
Revenue and Other Income
We classify income as revenue when it arises from the sales of EBN products in the ordinary course
of our business. We are the principal for our revenue transactions and recognizes revenue on a gross basis.
In determining whether we act as a principal or as an agent, we consider whether we obtain control of the
products before they are transferred to our customers. Control refers to our ability to direct the use of and
obtain substantially all of the remaining benefits from the products.
Further details of our revenue and other income recognition policies are set forth below.
Revenue from contracts with customers
We recognize revenue when control over a product is transferred to the customer at the amount of
promised consideration to which we are expected to be entitled, excluding those amounts collected on
behalf of third parties such as value added tax or other sales taxes.
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Direct sales to customers
We recognize direct sales of our EBN products through self-operated online and offline stores to
customers as follows:
 For retail customers that purchase from our offline stores, sales revenue is recognised when
customers take possession of the products and make payment.
 For retail customers that purchase from our online stores, payment is collected when customers
place purchase orders and sales revenue is recognised when customers accept the products upon
delivery.
We typically offer retail customers a right of return for a period of seven days upon customer
acceptance. We estimate the constrained transaction price with all reasonably available information and
updates the variable consideration at each reporting date.
We operate membership programs for retail customers and members can earn loyalty points on their
purchases from stores operated by our Group as well as our distributors. Points are redeemable against any
future purchases of our products or other offerings provided by us. We allocate a portion of the
consideration received from direct sales and sales to distributors as appropriate to loyalty points based on
the relative stand-alone selling prices. The amount allocated to the membership programs is deferred and
recognised as revenue when loyalty points are redeemed or expire. Unused loyalty points generally expire
in 12 to 15 months after they are granted.
Sales to distributors
We sell EBN products to distributors through offline and online channels.
Offline channel distributors make payments for their purchase orders before product shipment. Sales
revenue is recognized when the products are delivered to and accepted by distributors at the locations
specified in the purchase orders.
We generally do not accept return of products from offline channel distributors, except for quality
defects or transportation damages in rare cases.
We provide sales rebates to distributors who satisfy relevant requirements specified in the
distribution agreements and our distributor incentivising policies.
The above sales rebates and the rights of return (where applicable) to distributors give rise to
variable consideration. We use the most likely amount approach to estimate variable consideration based
on our current and future performance expectations and all information that is reasonably available. This
estimated amount is included in the transaction price to the extent it is highly probable that a significant
reversal of cumulative revenue recognised will not occur when the uncertainty associated with the variable
consideration is resolved. At the time of sale of products to distributors, we recognize revenue after taking
into account adjustment to transaction price arising from sales rebates and returns which are estimated and
updated at each reporting date.
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Sales to e-commerce platform
We sell EBN products to e-commerce platforms. Sales of products sold to e-commerce platforms are
recognized when the products are accepted by the platforms upon delivery to their designated premises.
Certain e-commerce platforms can return unsold products to us (1). We also provide a profit
protection (2) to an e-commerce platform such that the monthly overall gross margin generated by this
e-commerce platform from selling the products is not less than a floor.
The above rights of return and profit protection give rise to variable consideration. We use the most
likely amount approach to estimate variable consideration based on our current and future performance
expectations and all information that is reasonably available. This estimated amount is included in the
transaction price to the extent it is highly probable that a significant reversal of cumulative revenue
recognised will not occur when the uncertainty associated with the variable consideration is resolved. At
the time of sale of products to e-commerce platforms, we recognize revenue after taking into account
adjustment to transaction price arising from returns and profit protection which are estimated and updated
at each reporting date.
Revenue from other sources and other income
Interest income
Interest income is recognized as it accrues under the effective interest method using the rate that
exactly discounts estimated future cash receipts through the expected life of the financial asset to the gross
carrying amount of the financial asset. For financial assets measured at amortized cost that are not
credit-impaired, the effective interest rate is applied to the gross carrying amount of the asset. For
credit-impaired financial assets, the effective interest rate is applied to the amortized cost, i.e., gross
carrying amount net of loss allowance, of the asset. See Note 2(k)(i) to the Accountants’ Report in
Appendix I to this prospectus for details.
Government grants
Government grants are recognized in the statement of financial position initially when there is
reasonable assurance that they will be received and that we will comply with the conditions attaching to
them. Grants that compensate us for expenses incurred are recognized as income in profit or loss on a
systematic basis in the same periods in which the expenses are incurred. Grants that compensate us for the
cost of an asset are initially recognized as deferred income and subsequently recognized in profit or loss
on a systematic basis over the useful life of the asset.
(1) All e-commerce platform customers that enjoy the right to return unsold products are established and publicly listed
companies operating mainstream e-commerce platforms. In 2020, 2021, 2022 and the five months ended May 31, 2023, the
total value of returned products from these e-commerce platform customers (including those returned by their end customers)
was RMB3.1 million, RMB4.5 million, RMB6.4 million and RMB3.3 million, respectively. The increase in the total value of
returned products from these e-commerce platform customers during the Track Record Period was generally in line with our
increased transaction amounts with such customers.
(2) Pursuant to an e-commerce platform customer’s standard form contract with us, in the event that its monthly overall gross
margin for products purchased from us, as calculated by the method stipulated in the contract, failed to reach the minimum
level, we shall deduct a certain amount of payment due from it as appropriate so that its gross margin could at least satisfy
such minimum requirement. Such profit protection amounts were recognized as a reduction of the sales revenue from the
e-commerce platform. According to the F&S Report, e-commerce platforms in China that include such boilerplate profit
protection clauses in their standard form contracts generally do not concede to removing such clauses.
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Inventories and Other Contract Costs
Inventories
Inventories are assets which are held for sale in the ordinary course of business, in the process of
production for such sale or in the form of materials or supplies to be consumed in the production process
or in the rendering of services.
Inventories are carried at the lower of cost and net realizable value.
Costs is calculated using the weighted average cost formula and comprises all costs of purchase,
costs of conversion and other costs incurred in bringing the inventories to their present location and
condition.
Net realizable value is the estimated selling price in the ordinary course of business less the
estimated costs of completion and the estimated costs necessary to make the sale.
When inventories are sold, the carrying amount of those inventories is recognized as an expense in
the period in which the related revenue is recognized.
The amount of any write-down of inventories to net realizable value and all losses of inventories are
recognized as an expense in the period the write-down or loss occurs. The amount of any reversal of any
write-down of inventories is recognized as a reduction in the amount of inventories recognized as an
expense in the period in which the reversal occurs.
A right to recover returned goods is recognized for the right to recover products from customers sold
with a right of return. It is measured in accordance with the policy set out in Note 2(u)(i) to the
Accountants’ Report in Appendix I to this prospectus.
Other contract costs
Other contract costs are the costs to fulfil a contract with a customer which are not capitalized as
inventory. See Note 2(l)(ii) to the Accountants’ Report in Appendix I to this prospectus for details.
Costs to fulfil a contract are capitalized if the costs relate directly to an existing contract or to a
specifically identifiable anticipated contract; generate or enhance resources that will be used to provide
goods or services in the future; and are expected to be recovered. Costs that relate directly to an existing
contract or to a specifically identifiable anticipated contract may include direct labor, direct materials,
allocations of costs, costs that are explicitly chargeable to the customer and other costs that are incurred
only because we entered into the contract. Other costs of fulfilling a contract, which are not capitalized
as inventory, are expensed as incurred.
Capitalized contract costs are stated at cost less accumulated amortization and impairment losses.
Impairment losses are recognized to the extent that the carrying amount of the contract cost asset exceeds
the net of (1) remaining amount of consideration that we expect to receive in exchange for the goods or
services to which the asset relates, less (2) any costs that relate directly to providing those goods or
services that have not yet been recognized as expenses.
Amortization of capitalized contract costs is charged to profit or loss when the revenue to which the
asset relates is recognized. The accounting policy for revenue recognition is set out in Note 2(u)(i) to the
Accountants’ Report in Appendix I to this prospectus.
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Property, Plant and Equipment
Property, plant and equipment are stated at cost less accumulated depreciation and impairment
losses. See Note 2(k)(ii) to the Accountants’ Report in Appendix I to this prospectus for details.
 Interests in leasehold land and buildings where we are the registered owner of the property
interest. See Note 2(j) to the Accountants’ Report in Appendix I to this prospectus for details;
 Right-of-use assets arising from leases over leasehold properties where we are not the
registered owner of the property interest; and
 Items of plant and equipment, including right-of-use assets arising from leases of underlying
plant and equipment. See Note 2(j) to the Accountants’ Report in Appendix I to this prospectus
for details.
The cost of self-constructed items of property, plant and equipment includes the cost of materials,
direct labor, the initial estimate, where relevant, of the costs of dismantling and removing the items and
restoring the site on which they are located, and an appropriate proportion of production overheads and
borrowing costs. See Note 2(v) to the Accountants’ Report in Appendix I to this prospectus for details.
Items may be produced while bringing an item of property, plant and equipment to the location and
condition necessary for it to be capable of operating in the manner intended by our management. The
proceeds from selling any such items and the related costs are recognized in profit or loss.
Gains or losses arising from the retirement or disposal of an item of property, plant and equipment
are determined as the difference between the net disposal proceeds and the carrying amount of the item
and are recognized in profit or loss on the date of retirement or disposal.
Depreciation is calculated to write off the cost of items of property, plant and equipment, less their
estimated residual value, if any, using the straight-line method over their estimated useful lives as follows.
Our interests in buildings situated on leasehold land are depreciated over the shorter of the unexpired
term of lease and the buildings’ estimated useful lives, being no more than 50 years after the date of
completion.
Motor vehicles four to five years
Machinery five to 10 years
Office and other equipment three to five years
Leasehold improvements Shorter of the lease terms or the estimated
useful life of the assets
Where parts of an item of property, plant and equipment have different useful lives, the cost of the
item is allocated on a reasonable basis between the parts and each part is depreciated separately. Both the
useful life of an asset and its residual value, if any, are reviewed annually.
Employee Benefits
Short term employee benefits and contributions to defined contribution retirement plans
Salaries, annual bonuses, paid annual leave, contributions to defined contribution retirement plans
and the cost of non-monetary benefits are accrued in the year in which the associated services are rendered
by employees. Where payment or settlement is deferred and the effect would be material, these amounts
are stated at their present values.
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Share-based payments
The grant-date fair value of equity-settled share-based payment arrangements granted to employees
is generally recognized as an expense, with a corresponding increase in equity, over the vesting period of
the awards. The amount recognized as an expense is adjusted to reflect the number of awards for which
the related service and non-market performance conditions are expected to be met, such that the amount
ultimately recognized is based on the number of awards that meet the related service and non-market
performance conditions at the vesting date. For share-based payment awards with non-vesting conditions,
the grant-date fair value of the share-based payment is measured to reflect such conditions and there is no
true-up for differences between expected and actual outcomes.
RESULTS OF OPERATIONS
The following table sets forth our results of operations for the periods indicated.
Y ear ended December 31,
Five months ended
May 31,
2020 2021 2022 2022 2023
(Unaudited)
(RMB in thousands)
Revenue .......................... 1,301,157 1,506,997 1,729,945 696,876 782,576
Cost of sales ....................... (745,448) (780,214) (851,693) (337,313) (376,565)
Gross profit ....................... 555,709 726,783 878,252 359,563 406,011
Other net income ..................... 20,714 32,680 27,692 5,123 3,293
Selling and distribution expenses ........... (317,762) (398,951) (503,879) (205,800) (208,533)
Administrative expenses ................. (76,060) (108,020) (111,543) (41,462) (60,807)
Research and development expenses .......... (17,679) (18,982) (24,320) (8,809) (9,579)
Profit from operations ................. 164,922 233,510 266,202 108,615 130,385
Finance costs ....................... (4,882) (3,337) (1,636) (764) (857)
Share of loss of an associate .............. (214) — — — —
Profit before taxation ................. 159,826 230,173 264,566 107,851 129,528
Income tax ........................ (36,401) (57,814) (58,688) (24,096) (29,031)
Profit and total comprehensive income
for the year/period .................. 123,425 172,359 205,878 83,755 100,497
Attributable to:
Equity shareholders of the Company ......... 122,017 167,353 191,840 78,772 95,058
Non-controlling interests ................ 1,408 5,006 14,038 4,983 5,439
Profit and total comprehensive income
for the year/period .................. 123,425 172,359 205,878 83,755 100,497
NON-IFRS MEASURE
In order to supplement our consolidated financial statements presented in accordance with the IFRSs,
we use adjusted net profit (non-IFRS measure) as an additional financial measure, which is not required
by, or not presented in accordance with IFRSs. Our adjusted net profit (non-IFRS measure) represents our
profit and total comprehensive income for the year/period, adjusted to add back equity-settled share-based
payment expenses and listing expenses that we recognized in our consolidated statements of profit or loss
and other comprehensive income during the Track Record Period less related income tax. Equity-settled
share-based payment expenses are adjusted for as they are non-cash in nature and were not expected to
result in future cash payments. We believe that the non-IFRS measure facilitates comparisons of operating
FINANCIAL INFORMATION
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performance from period to period and company to company by eliminating potential impacts of certain
items. However, adjusted net profit (non-IFRS measure) presented by us may not be comparable to the
similar financial measure presented by other companies. There are limitations to the non-IFRS measure
used as an analytical tool, and you should not consider it in isolation or regard it as a substitute for our
results of operation or financial position analysis that is in accordance with IFRSs.
Y ear ended December 31, Five months ended May 31,
2020 2021 2022 2022 2023
(Unaudited)
(RMB in thousands)
Profit and total
comprehensive income for
the year/period ......... 123,425 172,359 205,878 83,755 100,497
Add:
Equity-settled share-based
payment expenses ....... 4 3 8 21,813 5,253 2,189 2,189
Listing expenses ......... — — — — 14,650
Less:
Income tax in relation to
listing expenses ........ — — — — 3,663
Adjusted net profit
(non-IFRS measure) ..... 123,863 194,172 211,131 85,944 113,673
KEY COMPONENTS OF OUR RESULTS OF OPERATIONS
Revenue
During the Track Record Period, we generated revenue primarily from sales and distribution of EBN
products. Our total revenue increased from RMB1,301.2 million in 2020 to RMB1,729.9 million in 2022,
and from RMB696.9 million in the five months ended May 31, 2022 to RMB782.6 million in the five
months ended May 31, 2023.
Revenue by Product
We currently have primarily three major product categories, i.e., pure EBN products, EBN+ products
and +EBN products. During the Track Record Period, our pure EBN products primarily consisted of (1)
One Nest (ມዲ), (2) Freshly Stewed Bird’s Nest ( ᒻዮዲ၊), (3) Crystal Sugar Bird’s Nest (ዲ), and
(4) dried EBN. In addition to pure EBN products, we have also developed EBN+ products and +EBN
products.
During the Track Record Period, we generated a substantial majority of revenue from sales of pure
EBN products, accounting for 96.4%, 95.8%, 94.7%, 95.4% and 94.3% of our total revenue in 2020, 2021,
2022 and the five months ended May 31, 2022 and 2023, respectively. To a lesser extent, we also generated
revenue from EBN+ and +EBN products. The following table sets forth a breakdown of our revenue by
product category for the periods indicated.
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Y ear ended December 31, Five months ended May 31,
2020 2021 2022 2022 2023
RMB
Percentage
of total
revenue RMB
Percentage
of total
revenue RMB
Percentage
of total
revenue RMB
Percentage
of total
revenue RMB
Percentage
of total
revenue
(Unaudited)
(RMB in thousands except for percentages)
Pure EBN products .... 1,253,900 96.4 1,442,951 95.8 1,638,127 94.7 665,161 95.4 738,613 94.3
— One Nest ....... 559,288 43.0 661,412 44.0 672,640 38.9 287,958 41.3 283,406 36.2
— Freshly Stewed Bird’s
Nest ......... 321,144 24.7 423,264 28.1 485,372 28.1 188,664 27.1 215,168 27.5
— Other bottle-canned
bird’s nest (1) ..... 201,298 15.5 193,318 12.8 305,105 17.6 122,816 17.6 169,259 21.6
— Dried EBN ...... 172,170 13.2 164,957 10.9 175,010 10.1 65,723 9.4 70,780 9.0
EBN+ and +EBN
products ....... 43,051 3.3 56,115 3.7 73,103 4.2 28,619 4.1 37,237 4.8
Others (2) ........ 4,206 0.3 7,931 0.5 18,715 1.1 3,096 0.5 6,726 0.9
Total revenue ...... 1,301,157 100.0 1,506,997 100.0 1,729,945 100.0 696,876 100.0 782,576 100.0
Notes:
(1) Include primarily Crystal Sugar Bird’s Nest.
(2) Include non-EBN products, promotional gifts to customers, and products for internal sales.
The following table sets forth a breakdown of our sales volume and average selling price per
minimum unit or gram by product series for the periods indicated.
Y ear ended December 31, Five months ended May 31,
2020 2021 2022 2022 2023
Sales
volume
Average
selling
price (1)
Sales
volume
Average
selling
price (1)
Sales
volume
Average
selling
price (1)
Sales
volume
Average
selling
price (1)
Sales
volume
Average
selling
price (1)
One Nest (pure EBN) ............. 3,430,930
bowls
RMB163
per bowl
3,855,506
bowls
RMB172
per bowl
3,868,281
bowls
RMB174
per bowl
1,648,520
bowls
RMB175
per bowl
1,596,938
bowls
RMB177
per bowl
Freshly Stewed Bird’s Nest .......... 5,943,315
bottles
RMB54
per bottle
8,116,586
bottles
RMB52
per bottle
8,941,642
bottles
RMB54
per bottle
3,564,531
bottles
RMB53
per bottle
4,066,314
bottles
RMB53
per bottle
Other bottle-canned bird’s nest (pure EBN) (2) . . 5,162,726
bottles
RMB39
per bottle
4,366,735
bottles
RMB44
per bottle
7,162,425
bottles
RMB43
per bottle
2,719,766
bottles
RMB45
per bottle
4,056,142
bottles
RMB42
per bottle
Dried EBN ................. 6,064
kilograms
RMB28
per gram
5,949
kilograms
RMB28
per gram
6,497
kilograms
RMB27
per gram
2,319
kilograms
RMB28
per gram
2,658
kilograms
RMB27
per gram
Notes:
(1) Calculated by dividing the total revenue from a given product series in the indicated period with the total sales volume
of such product series sold in same period.
(2) Include primarily Crystal Sugar Bird’s Nest.
FINANCIAL INFORMATION
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Revenue by Sales Channel
We have built a broad sales network for our products, covering both online and offline channels. We
not only engage distributors to distribute our products through their online and offline stores but also sell
directly to customers through self-operated online and offline stores. In addition, we have engaged
e-commerce platform customers to further expand our online channels. The following table sets forth a
breakdown of our revenue by sales channel for the periods indicated.
Y ear ended December 31, Five months ended May 31,
2020 2021 2022 2022 2023
RMB
Percentage
of total
revenue RMB
Percentage
of total
revenue RMB
Percentage
of total
revenue RMB
Percentage
of total
revenue RMB
Percentage
of total
revenue
(Unaudited)
(RMB in thousands except for percentages)
Offline channels ........ 578,506 44.5 738,711 49.0 791,991 45.8 333,941 47.9 353,209 45.2
— Sales to offline distributors . . . 409,777 31.5 509,917 33.8 477,525 27.6 198,716 28.5 208,563 26.7
— Direct sales to offline customers . 168,729 13.0 228,794 15.2 314,466 18.2 135,225 19.4 144,646 18.5
Online channels ........ 722,651 55.5 768,286 51.0 937,954 54.2 362,935 52.1 429,367 54.8
— Direct sales to online customers . 575,220 44.1 564,587 37.4 695,265 40.2 264,361 38.0 327,802 41.8
— Direct sales to e-commerce
platforms
(1) ......... 137,545 10.6 189,196 12.6 227,071 13.1 92,228 13.2 93,700 12.0
— Sales to online distributors . . . 9,886 0.8 14,503 1.0 15,618 0.9 6,346 0.9 7,865 1.0
Total ............ 1,301,157 100.0 1,506,997 100.0 1,729,945 100.0 696,876 100.0 782,576 100.0
Note:
(1) Include sales to platform-operated online stores by JD.com, Vipshop and Tmall Supermarket, among others.
Revenue by City Tier
We have established a nationwide offline sales network covering substantially all provincial
administrative divisions across China. As of May 31, 2023, our stores had a nationwide presence covering
over 200 cities in China, with a strong foothold in all tier-1 cities and the majority of new tier-1 cities.
In 2020, 2021, 2022 and the five months ended May 31, 2022 and 2023, the revenue generated from our
offline channels was RMB578.5 million, RMB738.7 million, RMB792.0 million, RMB333.9 million and
RMB353.2 million, respectively, accounting for 44.5%, 49.0%, 45.8%, 47.9% and 45.2% of our total
revenue in the same periods, respectively. The following table sets forth a breakdown of our revenue from
offline channels by city tier for the periods indicated.
Y ear ended December 31, Five months ended May 31,
2020 2021 2022 2022 2023
RMB Percentage RMB Percentage RMB Percentage RMB Percentage RMB Percentage
(Unaudited)
(RMB in thousands except for percentage)
Offline channels
Tier 1 cities ....... 107,371 18.6 145,612 19.7 163,562 20.7 71,144 21.3 81,661 23.1
New tier 1 cities ..... 131,157 22.7 174,133 23.6 173,581 21.9 73,941 22.1 78,881 22.4
Tier 2 cities ....... 164,145 28.4 207,503 28.1 237,544 30.0 101,036 30.3 103,626 29.3
Other cities ....... 175,833 30.3 211,463 28.6 217,304 27.4 87,820 26.3 89,041 25.2
Total revenue from
offline channels .... 578,506 100.0 738,711 100.0 791,991 100.0 333,941 100.0 353,209 100.0
FINANCIAL INFORMATION
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Cost of Sales
During the Track Record Period, our cost of sales consisted primarily of cost of raw materials,
employee benefits expenses and courier fees. The principal raw materials we use in the production of our
products are raw nests. During the Track Record Period, substantially all of raw nests used in our
production process were sourced from suppliers in Indonesia, the largest raw nest production country in
the world. During the same period, our packaging materials consisted primarily of polypropylene bowls
(an FDA-approved food contact plastic), glass bottles, cardboard, and metal packaging materials to
produce our products.
Our employee benefits expenses primarily included salaries that we pay to our employees.
Production costs represent expenses in connection with the production of our EBN products, primarily
including purchase of consumable manufacturing supplies and general overhead. Courier fees are fees paid
to express companies responsible for delivering our EBN products to our customers.
In 2020, 2021, 2022 and the five months ended May 31, 2022 and 2023, our cost of sales was
RMB745.4 million, RMB780.2 million, RMB851.7 million, RMB337.3 million and RMB376.6 million,
respectively, accounting for 57.3%, 51.8%, 49.2%, 48.4% and 48.1% of our total revenue for the same
periods, respectively. The following table sets forth a breakdown of our cost of sales by nature for the
periods indicated.
Y ear ended December 31, Five months ended May 31,
2020 2021 2022 2022 2023
RMB Percentage RMB Percentage RMB Percentage RMB Percentage RMB Percentage
(Unaudited)
(RMB in thousands except for percentages)
Cost of raw materials. . . 571,875 76.7 618,780 79.3 658,101 77.3 262,274 77.8 292,648 77.7
Employee benefits
expenses ....... 72,654 9.7 69,400 8.9 86,373 10.1 33,701 10.0 36,752 9.8
Production costs ..... 23,284 3.1 20,674 2.6 23,318 2.7 9,012 2.7 11,977 3.2
Courier fees ....... 38,834 5.2 36,970 4.7 40,035 4.7 16,142 4.8 16,983 4.5
Others (1) ........ 38,801 5.3 34,390 4.5 43,866 5.2 16,184 4.7 18,205 4.8
Total .......... 745,448 100.0 780,214 100.0 851,693 100.0 337,313 100.0 376,565 100.0
Note:
(1) Include primarily e-commerce platform commissions, cost of consumables, taxes and surcharges, and asset impairment
loss.
The following table sets forth a breakdown of our cost of sales by product category for the periods
indicated.
Y ear ended December 31, Five months ended May 31,
2020 2021 2022 2022 2023
RMB Percentage RMB Percentage RMB Percentage RMB Percentage RMB Percentage
(Unaudited)
(RMB in thousands except for percentages)
Pure EBN products .... 709,009 95.1 736,576 94.4 792,700 93.1 317,214 93.9 349,472 92.7
— One Nest ....... 248,388 33.3 276,006 35.4 258,445 30.3 110,044 32.6 106,695 28.3
— Freshly Stewed Bird’s
Nest ......... 237,546 31.9 267,055 34.2 282,555 33.2 112,059 33.2 116,807 31.0
— Other bottle-canned
bird’s nest (1) ..... 1 14,634 15.4 94,585 12.1 146,275 17.2 57,174 16.9 84,407 22.4
— Dried EBN ...... 108,441 14.5 98,930 12.7 105,425 12.4 37,937 11.2 41,563 11.0
EBN+ and +EBN
products ....... 28,531 3.8 30,760 3.9 36,934 4.3 14,288 4.2 18,419 4.9
Others (2) ........ 7,908 1.1 12,878 1.7 22,059 2.6 5,811 1.9 8,674 2.4
Total .......... 745,448 100.0 780,214 100.0 851,693 100.0 337,313 100.0 376,565 100.0
FINANCIAL INFORMATION
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Notes:
(1) Include primarily Crystal Sugar Bird’s Nest.
(2) Include non-EBN products, promotional gifts to customers, and products for internal sales.
The following table sets forth a breakdown of our cost of sales by sales channel for the periods
indicated.
Y ear ended December 31, Five months ended May 31,
2020 2021 2022 2022 2023
RMB
Percentage
of total
cost of
sales RMB
Percentage
of total
cost of
sales RMB
Percentage
of total
cost of
sales RMB
Percentage
of total
cost of
sales RMB
Percentage
of total
cost of
sales
(Unaudited)
(RMB in thousands except for percentages)
Offline channels .... 286,160 38.4 340,740 43.6 342,823 40.2 142,915 42.4 149,542 39.7
— Sales to offline
distributors ..... 218,382 29.3 263,150 33.7 240,550 28.2 98,872 29.3 104,049 27.6
— Direct sales to
offline customers . . 67,778 9.1 77,590 9.9 102,273 12.0 44,043 13.1 45,493 12.1
Online channels .... 459,288 61.6 439,474 56.4 508,870 59.8 194,398 57.6 227,023 60.3
— Direct sales to online
customers ...... 383,500 51.4 341,349 43.8 389,770 45.8 149,146 44.2 174,186 46.3
— Direct sales to
e-commerce
platforms
(1) ..... 70,188 9.4 89,418 11.5 110,151 12.9 41,582 12.3 48,415 12.9
— Sales to online
distributors ..... 5,600 0.8 8,707 1.1 8,949 1.1 3,670 1.1 4,422 1.1
Total ......... 745,448 100.0 780,214 100.0 851,693 100.0 337,313 100.0 376,565 100.0
Note:
(1) Include sales to platform-operated online stores by JD.com, Vipshop and Tmall Supermarket, among others.
Gross Profit and Gross Profit Margin
In 2020, 2021, 2022 and the five months ended May 31, 2022 and 2023, our gross profit was
RMB555.7 million, RMB726.8 million, RMB878.3 million, RMB359.6 million and RMB406.0 million,
respectively. In the same periods, our gross profit margin was 42.7%, 48.2%, 50.8%, 51.6% and 51.9%,
respectively. Gross margins of all major product series improved during the Track Record Period, except
for other products, which consisted primarily of non-EBN products, promotional gifts to customers, and
products for internal sales. The following table sets forth a breakdown of our gross profit and gross profit
margin by product category for the periods indicated.
Y ear ended December 31, Five months ended May 31,
2020 2021 2022 2022 2023
Gross
Profit
Gross
Profit
Margin
Gross
Profit
Gross
Profit
Margin
Gross
Profit
Gross
Profit
Margin
Gross
Profit
Gross
Profit
Margin
Gross
Profit
Gross
Profit
Margin
(Unaudited)
(RMB in thousands except for percentages)
Pure EBN products. . . 544,891 43.5% 706,375 49.0% 845,427 51.6% 347,947 52.3% 389,141 52.7%
— One Nest ...... 310,900 55.6% 385,406 58.3% 414,195 61.6% 177,914 61.8% 176,711 62.4%
— Freshly Stewed
Bird’s Nest ..... 83,598 26.0% 156,209 36.9% 202,817 41.8% 76,605 40.6% 98,361 45.7%
— Other bottle-canned
bird’s nest (1) .... 86,664 43.1% 98,733 51.1% 158,830 52.1% 65,642 53.4% 84,852 50.1%
— Dried EBN ..... 63,729 37.0% 66,027 40.0% 69,585 39.8% 27,786 42.3% 29,217 41.3%
EBN+ and +EBN
products ...... 14,520 33.7% 25,355 45.2% 36,169 49.5% 14,331 50.1% 18,818 50.5%
Others (2) ....... (3,702) (88.0)% (4,947) (62.4)% (3,344) (17.9)% (2,715) (87.7)% (1,948) (29.0)%
Total ......... 555,709 42.7% 726,783 48.2% 878,252 50.8% 359,563 51.6% 406,011 51.9%
FINANCIAL INFORMATION
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Notes:
(1) Include primarily Crystal Sugar Bird’s Nest.
(2) Include non-EBN products, promotional gifts to customers, and products for internal sales.
The following table sets forth a breakdown of our gross profit and gross profit margin by sales
channel for the periods indicated.
Y ear ended December 31, Five months ended May 31,
2020 2021 2022 2022 2023
RMB
Gross
profit
margin RMB
Gross
profit
margin RMB
Gross
profit
margin RMB
Gross
profit
margin RMB
Gross
profit
margin
(Unaudited)
(RMB in thousands except for percentages)
Offline channels .... 292,346 50.5% 397,971 53.9% 449,168 56.7% 191,026 57.2% 203,667 57.7%
— Sales to offline
distributors ..... 191,395 46.7% 246,767 48.4% 236,975 49.6% 99,844 50.2% 104,514 50.1%
— Direct sales to
offline customers . . 100,951 59.8% 151,204 66.1% 212,193 67.5% 91,182 67.4% 99,153 68.5%
Online channels .... 263,363 36.4% 328,812 42.8% 429,084 45.7% 168,537 46.4% 202,344 47.1%
— Direct sales to online
customers ...... 191,720 33.3% 223,238 39.5% 305,495 43.9% 115,215 43.6% 153,616 46.9%
— Direct sales to
e-commerce
platforms
(1) ..... 67,357 49.0% 99,778 52.7% 116,920 51.5% 50,646 54.9% 45,285 48.3%
— Sales to online
distributors ..... 4,286 43.4% 5,796 40.0% 6,669 42.7% 2,676 42.2% 3,443 43.8%
Total ......... 555,709 42.7% 726,783 48.2% 878,252 50.8% 359,563 51.6% 406,011 51.9%
Note:
(1) Include sales to platform-operated online stores by JD.com, Vipshop and Tmall Supermarket, among others.
Selling and Distribution Expenses
Our selling and distribution expenses consisted primarily of advertising and promotion fees as well
as employee benefits expenses. Advertising and promotion fees constitute the most significant component
of our selling and distribution expenses, as we adopted a multi-channel marketing approach that allows us
to reach and influence a broad target customer base. For instance, we partnered with the China national
fencing team as their official EBN product supplier and enlisted Ms. Liying Zhao ( Ⴛᘆ጑), a highly
influential celebrity in China, as our brand ambassador. Employee benefits expenses are primarily salaries
paid to sales and marketing staff. Technical service fees are primarily annual fees, promotional activity
fees and data analysis service fees charged by e-commerce platforms.
We incurred selling and distribution expenses of RMB317.8 million, RMB399.0 million, RMB503.9
million, RMB205.8 million and RMB208.5 million in 2020, 2021, 2022 and the five months ended May
31, 2022 and 2023, respectively, accounting for 24.4%, 26.5%, 29.1%, 29.5% and 26.6% of our total
revenue for the same periods, respectively. The following table sets forth a breakdown of our selling and
distribution expenses for the periods indicated.
FINANCIAL INFORMATION
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--- page 286 ---
Y ear ended December 31, Five months ended May 31,
2020 2021 2022 2022 2023
RMB Percentage RMB Percentage RMB Percentage RMB Percentage RMB Percentage
(Unaudited)
(RMB in thousands except for percentages)
Advertising and promotion fees . . 235,952 74.3 269,011 67.4 326,325 64.8 137,325 66.7 125,050 60.0
Employee benefits expenses . . . 47,386 14.9 71,728 18.0 106,601 21.2 41,020 19.9 46,133 22.1
Sample and gift costs ...... 7,459 2.3 12,928 3.2 14,941 3.0 3,514 1.7 4,500 2.2
Technical service fees ...... 6,490 2.0 5,292 1.3 3,109 0.6 3,820 1.9 5,291 2.5
Rent .............. 5,107 1.6 10,364 2.6 16,937 3.3 7,545 3.7 8,642 4.1
Depreciation and amortization . . 5,432 1.7 12,031 3.1 13,376 2.7 5,698 2.8 5,595 2.7
Others
(1) ............ 9,936 3.2 17,597 4.4 22,590 4.4 6,878 3.3 13,322 6.4
Total ............. 317,762 100.0 398,951 100.0 503,879 100.0 205,800 100.0 208,533 100.0
Note:
(1) Include primarily design fees, conference fees, property utilities, office expenses, business hospitality, travel expenses and
decoration and maintenance costs.
The following table sets forth a breakdown of our advertising and promotion fees by marketing
channel for the periods indicated.
Y ear ended December 31, Five months ended May 31,
2020 2021 2022 2022 2023
RMB Percentage RMB Percentage RMB Percentage RMB Percentage RMB Percentage
(Unaudited)
(RMB in thousands except for percentage)
Offline Channels ........ 1 17,269 49.7 120,124 44.7 145,237 44.5 55,015 40.1 55,128 44.1
Online Channels ........ 1 18,683 50.3 148,888 55.3 181,088 55.5 82,310 59.9 69,922 55.9
Total ............. 235,952 100.0 269,011 100.0 326,325 100.0 137,325 100.0 125,050 100.0
The following table sets forth a breakdown of our advertising and promotion fees by major service
provider for the periods indicated.
Suppliers
Advertising and
promotion fee
Percentage
of total
advertising and
promotion fee Background
(RMB in
thousands) (Percentage)
For the five months ended
May 31, 2023
Service Provider A ........ 15,890 12.7 Independent third-party
e-commerce platform group
Zhongshi Hongyun and its
related parties ..........
14,915 11.9 Related party that is controlled
by Mr. LIU Zhen
Service Provider B ........ 8,804 7.0 Independent third-party
advertisement company
Service Provider C ........ 8,091 6.5 Independent third-party social
media platform group
Service Provider D ........ 6,905 5.5 Independent third-party
advertisement company
Other service providers ..... 70,445 56.4
Total .................. 125,050 100.0
FINANCIAL INFORMATION
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--- page 287 ---
Suppliers
Advertising and
promotion fee
Percentage
of total
advertising and
promotion fee Background
(RMB in
thousands) (Percentage)
For the year ended
December 31, 2022
Zhongshi Hongyun and its
related parties ..........
60,298 18.5 Related party that is controlled
by Mr. LIU Zhen
Service Provider A ........ 47,448 14.5 Independent third-party
e-commerce platform group
Service Provider D ........ 20,666 6.3 Independent third-party
advertisement company
Service Provider B ........ 19,207 5.9 Independent third-party
advertisement company
Service Provider C ........ 14,664 4.5 Independent third-party social
media platform group
Other service providers ..... 164,042 50.3
Total .................. 326,325 100.0
For the year ended
December 31, 2021
Zhongshi Hongyun and its
related parties ..........
53,514 19.9 Related party that is controlled
by Mr. LIU Zhen
Service Provider A ........ 47,877 17.8 Independent third-party
e-commerce platform group
Service Provider E ........ 12,686 4.7 Independent third-party
advertisement company
Service Provider B ........ 1 1,086 4.1 Independent third-party
advertisement company
Service Provider F ........ 10,225 3.8 Independent third-party
marketing company
Other service providers ..... 133,623 49.7
Total .................. 269,011 100.0
For the year ended
December 31, 2020
Zhongshi Hongyun and its
related parties ..........
61,475 26.1 Related party that is controlled
by Mr. LIU Zhen
Service Provider A ........ 39,017 16.5 Independent third-party
e-commerce platform group
Service Provider F ........ 1 1,594 4.9 Independent third-party
marketing company
Service Provider G ........ 7,400 3.1 Independent third-party
advertisement company
Service Provider H ........ 7,083 3.0 Independent third-party
advertisement company
Other service providers ..... 109,383 46.4
Total .................. 235,952 100.0
FINANCIAL INFORMATION
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--- page 288 ---
Administrative Expenses
Our administrative expenses consisted primarily of employee benefits expenses, consulting service
fee, office expenses, and depreciation and amortization. Employee benefits expenses are primarily salaries
and share-based compensations that we paid to administrative staff. The consulting service fee consisted
primarily of expenses in connection with strategic and management consulting services as well as the
listing expenses for our previous A-share listing application and the Listing application. Office expenses
are expenditures related to the daily operation of our business.
We incurred administrative expenses of RMB76.1 million, RMB108.0 million, RMB111.5 million,
RMB41.5 million and RMB60.8 million in 2020, 2021, 2022 and the five months ended May 31, 2022 and
2023, respectively, accounting for 5.8%, 7.2%, 6.4%, 5.9% and 7.8% of our total revenue for the same
periods, respectively. The following table sets forth a breakdown of our administrative expenses for the
periods indicated.
Y ear ended December 31, Five months ended May 31,
2020 2021 2022 2022 2023
RMB Percentage RMB Percentage RMB Percentage RMB Percentage RMB Percentage
(Unaudited)
(RMB in thousands except for percentages)
Employee benefits
expenses ....... 44,323 58.3 72,318 66.9 65,444 58.7 25,505 61.5 29,566 48.6
Consulting service
fee(1) ......... 13,601 17.9 8,792 8.1 14,862 13.3 2,360 5.7 18,748 30.8
Office expenses ..... 4,828 6.3 9,426 8.7 9,015 8.1 4,179 10.1 3,133 5.2
Travel and business
reception expenses . . . 3,927 5.1 5,718 5.3 5,158 4.7 2,059 4.9 2,809 4.6
Depreciation and
amortization ...... 4,556 6.0 5,397 5.0 9,142 8.2 3,632 8.8 3,818 6.3
Property utilities ..... 9 0 4 1 . 2 2,741 2.5 3,967 3.6 1,089 2.6 911 1.5
Credit impairment
loss (2) ........ 9 7 7 1 . 3 1,859 1.7 2,205 2.0 2,144 5.2 64 0.1
Others (3) ........ 2,944 3.9 1,769 1.8 1,750 1.4 494 1.2 1,758 2.9
Total .......... 76,060 100.0 108,020 100.0 111,543 100.0 41,462 100.0 60,807 100.0
Notes:
(1) Include primarily expenses in connection with strategic and management consulting services as well as the listing
expenses for our previous A-share listing application and the Listing application.
(2) Represent the provision for impairment of certain receivables.
(3) Include primarily cost of low-value consumables and notary fees.
FINANCIAL INFORMATION
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--- page 289 ---
The following table sets forth a breakdown of our consulting service fee for the periods indicated.
Y ear ended December 31, Five months ended May 31,
2020 2021 2022 2022 2023
RMB Percentage RMB Percentage RMB Percentage RMB Percentage RMB Percentage
(Unaudited)
(RMB in thousands except for percentage)
Strategic and management
consulting services . . . 11,353 83.5 4,842 55.1 4,367 29.4 1,717 72.8 3,214 17.1
Listing expenses for
previous A-share listing
application ...... 2,248 16.5 3,950 44.9 10,494 70.6 643 27.2 884 4.7
Listing expenses for the
Listing application . . . – – – – – – – – 14,650 78.2
Total consulting service
fee .......... 13,601 100.0 8,792 100.0 14,862 100.0 2,360 100.0 18,748 100.0
We typically procure services for strategic consulting, public relations, brand marketing, and IT
development on an on-going basis. During the Track Record Period, the service providers for the strategic
and management consulting services were primarily third-party consulting firms, public relation firms,
brand marketing firms and IT service companies, among others. In 2020, we recorded higher strategic and
management consulting service fees as compared to other periods during the Track Record Period,
primarily due to (1) a strategic positioning consulting fee of RMB5.2 million, (2) an uniform design fee
of RMB0.9 million, (3) a business model consulting fee of RMB0.9 million and (4) a market research fee
of RMB0.5 million.
Research and Development Expenses
Our research and development expenses consisted primarily of employee benefits expenses as well
as research and development materials and process development costs. Employee benefits expenses are
primarily salaries paid to research and development staff. We also incurred costs for purchase of raw
materials to be used in research and development activities and process development during the course of
our continuous product research and development.
We incurred research and development expenses of RMB17.7 million, RMB19.0 million, RMB24.3
million, RMB8.8 million and RMB9.6 million in 2020, 2021, 2022 and the five months ended May 31,
2022 and 2023, respectively, accounting for 1.4%, 1.3%, 1.4%, 1.3% and 1.2% of our total revenue for
the same periods, respectively. The following table sets forth a breakdown of our research and
development expenses for the periods indicated.
Y ear ended December 31, Five months ended May 31,
2020 2021 2022 2022 2023
RMB Percentage RMB Percentage RMB Percentage RMB Percentage RMB Percentage
(Unaudited)
(RMB in thousands except for percentages)
Employee benefits
expenses ....... 7,186 40.6 7,818 41.2 10,386 42.7 3,950 44.8 4,501 47.0
Research and development
materials and process
development costs . . . 5,948 33.6 5,584 29.4 7,624 31.3 2,666 30.3 2,559 26.7
Depreciation and
amortization ...... 3,740 21.2 3,986 21.0 4,198 17.3 1,706 19.4 1,731 18.1
Others
(1) ........ 8 0 5 4 . 6 1,594 8.4 2,112 8.7 487 5.5 788 8.2
Total .......... 17,679 100.0 18,982 100.0 24,320 100.0 8,809 100.0 9,579 100.0
Note:
(1) Include primarily expenses in connection with our research and development cooperation with third parties and travel
expenses for research and development staff.
FINANCIAL INFORMATION
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--- page 290 ---
Other Net Income
Our other net income consisted primarily of government grants, interest income and net fair value
changes on financial assets measured at fair value through profit or loss. We recorded other net income
of RMB20.7 million, RMB32.7 million, RMB27.7 million, RMB5.1 million and RMB3.3 million in 2020,
2021, 2022 and the five months ended May 31, 2022 and 2023, respectively. The following table sets forth
a breakdown of our other income for the periods indicated.
Y ear ended December 31, Five months ended May 31,
2020 2021 2022 2022 2023
RMB Percentage RMB Percentage RMB Percentage RMB Percentage RMB Percentage
(Unaudited)
(RMB in thousands except for percentages)
Government grants .... 17,156 82.8 36,507 111.7 24,553 88.7 4,378 85.5 1,085 32.9
Interest income ..... 4,276 20.6 1,884 5.8 1,950 7.0 567 11.1 1,048 31.8
Net fair value changes on
financial assets
measured at fair value
through profit or loss . . 1,128 5.4 2,329 7.1 1,455 5.3 480 9.4 1,169 35.5
Gain on disposal of
investments in a
subsidiary ....... — — — — 3 8 0 1 . 4————
Gain on disposal of
interest in an associate . — — 33 0.1 — —————
Net (loss)/gain on disposal
of property, plant and
equipment ....... (29) (0.1) 159 0.5 (60) (0.2) 52 1.0 52 1.6
Other expenses ..... (1,817) (8.7) (8,232) (25.2) (586) (2.2) (354) (7.0) (61) (1.8)
Total .......... 20,714 100.0 32,680 100.0 27,692 100.0 5,123 100.0 3,293 100.0
During the Track Record Period, the net fair value changes on financial assets measured at fair value
through profit or loss was primarily related to our investments in short-term wealth management products
issued by reputable commercial banks in China.
During the Track Record Period, government grants were primarily awarded by local government
authorities as a recognition of our contribution towards the local economic development. During the same
period, we only had one type of government grants, i.e., grants that compensate us for expenses incurred.
Such grants were recognized as income in profit or loss on a systematic basis in the same periods in which
the expenses were incurred. The criteria and/or conditions for substantially all government grants we
received during the Track Record Period were related to our financial conditions, including revenue,
taxation and research and development expenditures. Our management is of the view that there are no
significant unfulfilled conditions or other contingencies attached to these subsidies. During the Track
Record Period, the amount of government grants experienced fluctuations, primarily because certain
government grants were one-off in nature.
Other expenses during the Track Record Period represented primarily donations and late fee for
overdue taxation. The spike in 2021 was primarily attributed to multiple one-time donations of RMB3.0
million as well as a late fee for tax overdue of RMB5.5 million. The late fee was resulted from an overdue
taxation of RMB18.0 million by Y an Sinong, one of our subsidiaries, in 2018 and 2019. In 2021, all of
such overdue taxation and late fee had been fully settled by Y an Sinong. As advised by our PRC Legal
Advisor, late fees due to failure to pay taxes within the prescribed time limit constitute tax collection by
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relevant tax authorities rather than administrative penalties. Therefore, the late fee of RMB5.5 million was
not penalty in nature. To prevent similar events in the future, we regularly conduct internal and external
trainings for our finance personnel to keep them abreast of the latest developments in the relevant
accounting and tax regulations. Y an Sinong has also obtained tax compliance certificates from the local
tax authority, confirming that it did not violate PRC laws and regulations in relation to tax in material
aspects during the Track Record Period. As further advised by our PRC Legal Advisor, such local tax
authority is competent government authority to issue such confirmation.
Finance Costs
Finance costs consisted primarily of our lease liabilities and interest expenses on bank loans. We
incurred finance costs of RMB4.9 million, RMB3.3 million, RMB1.6 million, RMB0.8 million and
RMB0.9 million in 2020, 2021, 2022 and the five months ended May 31, 2022 and 2023, respectively.
Income Tax
We incurred income tax of RMB36.4 million, RMB57.8 million, RMB58.7 million, RMB24.1
million and RMB29.0 million in 2020, 2021, 2022 and the five months ended May 31, 2022 and 2023,
respectively. The effective tax rate for the same periods was 22.8%, 25.1%, 22.2%, 22.3% and 22.4%,
respectively, calculated by dividing the income tax in a given period by the profit before taxation in that
period.
Pursuant to the EIT Law and related regulations, enterprises which operate in China are subject to
enterprise income tax at a rate of 25% on the taxable profit. During the Track Record Period, one of our
subsidiaries, Guanghe Y an Palace, is qualified to enjoy the preferential income tax rate of 15% and is
expected to enjoy such preferential income tax treatment until December 31, 2030. During the same
period, our Company and other subsidiaries were all subject to enterprise income tax at a rate of 25%.
During the Track Record Period and up to the Latest Practicable Date, we had paid all relevant taxes
when due and there are no matters in dispute or unresolved with the relevant tax authorities.
Profit for the Period
Our profit for the period increased from RMB123.4 million in 2020 to RMB205.9 million in 2022,
and increased from RMB83.8 million in the five months ended May 31, 2022 to RMB100.5 million in the
five months ended May 31, 2023.
PERIOD TO PERIOD COMPARISON OF RESULTS OF OPERATIONS
Five Months Ended May 31, 2023 Compared to Five Months Ended May 31, 2022
Revenue
Our revenue increased by 12.3% from RMB696.9 million in the five months ended May 31, 2022 to
RMB782.6 million in the five months ended May 31, 2023, primarily as a result of our continued efforts
to grow our business, optimize sales channels, and launch products that cater to the evolving consumer
demand. More specifically:
 One Nest (pure EBN) . Our revenue generated from One Nest (pure EBN) decreased by 1.6%
from RMB288.0 million in the five months ended May 31, 2022 to RMB283.4 million in the
five months ended May 31, 2023, primarily due to (1) our strategic shift to focus on the offline
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sales of One Nest in the second half of 2022, which led to a decrease in online sales revenue
from One Nest in the five months ended May 31, 2023, and (2) seasonal fluctuation due to the
stocking up of inventory by offline distributors in December 2022 ahead of the Spring Festival
in January 2023, which resulted in a squeeze on the sales in January 2023, despite the rebound
in sales from the impact of pandemic.
 Freshly Stewed Bird’ s Nest . Our revenue generated from Freshly Stewed Bird’ s Nest increased
by 14.0% from RMB188.7 million in the five months ended May 31, 2022 to RMB215.2
million in the five months ended May 31, 2023, primarily due to continued popularity of our
Freshly Stewed Bird’s Nest products among online consumers.
 Other bottle-canned bird’ s nest (pure EBN) . Our revenue generated from other bottle-canned
bird’s nest (pure EBN) increased by 37.8% from RMB122.8 million in the five months ended
May 31, 2022 to RMB169.3 million in the five months ended May 31, 2023, primarily due to
our enhanced sales efforts both online and offline.
 Dried EBN . Our revenue generated from Dried EBN increased by 7.7% from RMB65.7 million
in the five months ended May 31, 2022 to RMB70.8 million in the five months ended May 31,
2023, primarily due to the recovery of offline sales from the impact of the pandemic, partially
offset by the seasonal fluctuation caused by the stocking up of inventory by offline distributors
in December 2022 ahead of the Spring Festival in January 2023.
 EBN+ and +EBN products . Our revenue generated from EBN+ and +EBN products increased
by 38.6% from RMB31.7 million in the five months ended May 31, 2022 to RMB44.0 million
in the five months ended May 31, 2023, primarily because we launched Little Blue Bottle (ૉ
τʃᔝଧ) in April 2022, which quickly became popular among consumers, and other EBN+
and +EBN products such as One Nest—Vitality continued to gain traction.
Cost of Sales
Our cost of sales increased by 11.6% from RMB337.3 million in the five months ended May 31, 2022
to RMB376.6 million in the five months ended May 31, 2023, generally consistent with our business
growth.
Gross Profit and Gross Profit Margin
As a result of the foregoing, our gross profit increased by 12.9% from RMB359.6 million in the five
months ended May 31, 2022 to RMB406.0 million in the five months ended May 31, 2023, and our gross
profit margin increased from 51.6% in the five months ended May 31, 2022 to 51.9% in the five months
ended May 31, 2023. More specifically:
 One Nest (pure EBN) . The gross profit margin of One Nest (pure EBN) remained stable at
61.8% in the five months ended May 31, 2022 and 62.4% in the five months ended May 31,
2023.
 Freshly Stewed Bird’ s Nest . The gross profit margin of Freshly Stewed Bird’ s Nest increased
from 40.6% in the five months ended May 31, 2022 to 45.7% in the five months ended May
31, 2023, primarily due to reduced discounts for Freshly Stewed Bird’s Nest products in the
five months ended May 31, 2023 as a result of our products’ established market position.
 Other bottle-canned bird’ s nest (pure EBN) . The gross profit margin of other bottle-canned
bird’s nest (pure EBN) decreased from 53.4% in the five months ended May 31, 2022 to 50.1%
in the five months ended May 31, 2022 and 2023, primarily due to increased magnitude of
discounts for other bottle-canned bird’s nest (pure EBN) products through online channels in
the five months ended May 31, 2023 to enhance online sales.
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 Dried EBN . The gross profit margin of Dried EBN remained stable at 42.3% in the five months
ended May 31, 2022 and 41.3% in the five months ended May 31, 2023.
 EBN+ and +EBN products . The gross profit margin of EBN+ and +EBN products remained
stable at 36.6% in the five months ended May 31, 2022 and 38.4% in the five months ended
May 31, 2023.
Selling and Distribution Expenses
Our selling and distribution expenses remained relatively stable at RMB205.8 million and
RMB208.5 million in the five months ended May 31, 2022 and 2023, respectively.
Administrative Expenses
Our administrative expenses increased by 46.7% from RMB41.5 million in the five months ended
May 31, 2022 to RMB60.8 million in the five months ended May 31, 2023, primarily due to (1) an increase
in employee benefits expenses as a result of headcount increase in administrative personnel, and (2) an
increase in consulting service fee in the five months ended May 31, 2023 in connection with the Listing
application.
Research and Development Expenses
Our research and development expenses increased by 8.7% from RMB8.8 million in the five months
ended May 31, 2022 to RMB9.6 million in the five months ended May 31, 2023, primarily due to (1) an
increase in employee benefits expenses as a result of headcount increase in research and development
personnel, and (2) increases in traveling expenses and consulting service fees in connection with our new
research and development projects.
Other Net Income
Our other net income decreased by 35.7% from RMB5.1 million in the five months ended May 31,
2022 to RMB3.3 million in the five months ended May 31, 2023, primarily due to a decrease in
government grants as certain government grants in the five months ended May 31, 2022 were one-off in
nature.
Finance Costs
Our finance costs increased by 12.2% from RMB0.8 million in the five months ended May 31, 2022
to RMB0.9 million in the five months ended May 31, 2023, primarily due to an increase in interest on lease
liabilities in connection with the additional leased properties in the five months ended May 31, 2023 as
a result of our business expansion.
Income Tax
Our income tax increased by 20.5% from RMB24.1 million in the five months ended May 31, 2022
to RMB29.0 million in the five months ended May 31, 2023, largely in line with our profit growth.
Profit for the Period
As a result of the above factors, we recorded net profit of RMB83.8 million and RMB100.5 million
in the five months ended May 31, 2022 and 2023, respectively. Our net profit margin was 12.0% and
12.8% in the five months ended May 31, 2022 and 2023, respectively.
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Y ear Ended December 31, 2022 Compared to Y ear Ended December 31, 2021
Revenue
Our revenue increased by 14.8% from RMB1,507.0 million in 2021 to RMB1,729.9 million in 2022,
primarily as a result of our continued efforts to grow our business, optimize sales channels, and launch
products that cater to the evolving consumer demand. More specifically:
 One Nest (pure EBN) . Our revenue generated from One Nest (pure EBN) increased by 1.7%
from RMB661.4 million in 2021 to RMB672.6 million in 2022, primarily due to the expansion
of our offline stores from 633 as of December 31, 2021 to 704 as of December 31, 2022,
partially offset by the negative impact caused by the resurgence of COVID-19 in 2022. In
particular, our One Nest products are distributed generally through our offline stores, most of
which experienced temporary store closures, reduced operating hours, and reduced offline
customer traffic in 2022, which resulted in a slower growth rate.
 Freshly Stewed Bird’ s Nest . Our revenue generated from Freshly Stewed Bird’s Nest increased
by 14.7% from RMB423.3 million in 2021 to RMB485.4 million in 2022, primarily due to
rising demand of our Freshly Stewed Bird’s Nest products among online consumers seeking
products with higher standards for freshness and quality.
 Other bottle-canned bird’s nest (pure EBN) . Our revenue generated from other bottle-canned
bird’s nest (pure EBN) increased by 57.8% from RMB193.3 million in 2021 to RMB305.1
million in 2022, primarily due to our (1) efforts to diversify the Crystal Sugar Bird’s Nest
product portfolio with new flavors and packaging options that appealed to more customer
segments, and (2) enhanced marketing and promotional activities for Crystal Sugar Bird’s Nest
in 2022.
 Dried EBN . Our revenue generated from Dried EBN increased by 6.1% from RMB165.0
million in 2021 to RMB175.0 million in 2022, which is largely in line with our business
growth.
 EBN+ and +EBN products . Our revenue generated from EBN+ and +EBN products increased
by 43.4% from RMB64.0 million in 2021 to RMB91.8 million in 2022, primarily because we
launched innovative products in 2022 which quickly gained popularity, such as bird nest with
quinoa and gas bladder (ᇭዲ၊) and drinkable EBN essence imbued with ginseng (ߎ
ਞၚശභ).
Cost of Sales
Our cost of sales increased by 9.2% from RMB780.2 million in 2021 to RMB851.7 million in 2022,
generally consistent with our business growth but outpaced by the revenue growth as our margin profile
improved. In particular, we managed to reduce the average raw material costs which led to a general
decrease in production costs for our products in 2022.
Gross Profit and Gross Profit Margin
As a result of the foregoing, our gross profit increased by 20.8% from RMB726.8 million in 2021
to RMB878.3 million in 2022, and our gross profit margin increased from 48.2% in 2021 to 50.8% in 2022.
More specifically:
 One Nest (pure EBN) . The gross profit margin of One Nest (pure EBN) increased from 58.3%
in 2021 to 61.6% in 2022, primarily because (1) we acquired four companies primarily engaged
in offline sales of EBN products, our sales through which became direct sales to customers,
effectively driving up the gross profit margin of One Nest , and (2) a decrease in production
costs for One Nest in 2022 primarily as a result of decreased raw material price.
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 Freshly Stewed Bird’ s Nest . The gross profit margin of Freshly Stewed Bird’s Nest increased
from 36.9% in 2021 to 41.8% in 2022, primarily due to (1) an increase in the average selling
prices of our Freshly Stewed Bird’s Nest products from RMB52 per bottle to RMB54 per bottle,
(2) a decline in production costs for Freshly Stewed Bird’s Nest in 2022 primarily as a result
of decreased raw material price, and (3) a decline in courier fee because we launched
non-refrigerated Freshly Stewed Bird’s Nest, which required less demanding transportation
condition, and we established our production base in Shanghai in 2021 to shorten the delivery
distance in light of the short shelf life of our Freshly Stewed Bird’s Nest. See
“Business—Production—Production Bases.”
 Other bottle-canned bird’s nest (pure EBN) . The gross profit margin of other bottle-canned
bird’s nest (pure EBN) slightly increased from 51.1% in 2021 to 52.1% in 2022, primarily due
to the decrease in raw material price in 2022.
 Dried EBN . The gross profit margin of Dried EBN remained stable at 40.0% in 2021 and 39.8%
in 2022.
 EBN+ and +EBN products . The gross profit margin of EBN+ and +EBN products increased
from 31.9% in 2021 to 35.8% in 2022, primarily due to the launch of several innovative
products with a higher margin in 2022, such as Little Blue Bottle (ૉτʃᔝଧ) as well as the
continued popularity of One Nest—Vitality .
Selling and Distribution Expenses
Our selling and distribution expenses increased by 26.3% from RMB399.0 million in 2021 to
RMB503.9 million in 2022, primarily due to our increased investment in marketing efforts to promote our
EBN products, which was primarily reflected by (1) an increase in our employee benefits expenses as a
result of our sales force expansion partially attributable to the addition of sales personnel from the four
companies we acquired in 2021 that were primarily engaged in offline sales of EBN products, and (2) an
increase in our advertising and promotion fees.
Administrative Expenses
Our administrative expenses increased by 3.3% from RMB108.0 million in 2021 to RMB111.5
million in 2022, primarily due to an increase in our consulting service fee in 2022 in connection with our
previous A-share listing application.
Research and Development Expenses
Our research and development expenses increased by 28.1% from RMB19.0 million in 2021 to
RMB24.3 million in 2022, primarily due to (1) an increase in employee benefits expenses as the number
of our research and development staff increased from 47 as of December 31, 2021 to 51 as of December
31, 2022, and (2) an increase in our investment in research and development projects with certain
universities and research institutions.
Other Net Income
Our other net income decreased by 15.3% from RMB32.7 million in 2021 to RMB27.7 million in
2022, primarily due to the decrease in government grants for our contribution towards the local economic
development from RMB36.5 million in 2021 to RMB24.6 million in 2022.
Finance Costs
Our finance costs decreased by 51.0% from RMB3.3 million in 2021 to RMB1.6 million in 2022,
primarily due to a decrease in interest expenses on bank loans.
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Income Tax
Our income tax remained stable at RMB57.8 million and RMB58.7 million in 2021 and 2022,
respectively.
Profit for the Period
As a result of the above factors, we recorded net profit of RMB172.4 million and RMB205.9 million
in 2021 and 2022, respectively. Our net profit margin was 11.4% and 11.9% in 2021 and 2022,
respectively.
Y ear Ended December 31, 2021 Compared to Y ear Ended December 31, 2020
Revenue
Our revenue increased by 15.8% from RMB1,301.2 million in 2020 to RMB1,507.0 million in 2021,
primarily as a result of our continued efforts to grow our business, optimize sales channels and launch
products that cater to the evolving consumer demand. More specifically:
 One Nest (pure EBN) . Our revenue generated from One Nest (pure EBN) increased by 18.3%
from RMB559.3 million in 2020 to RMB661.4 million in 2021, primarily due to the rapid
expansion of our offline stores from 523 as of December 31, 2020 to 633 as of December 31,
2021, spurring the sales of our One Nest products in 2021.
 Freshly Stewed Bird’ s Nest . Our revenue generated from Freshly Stewed Bird’s Nest increased
by 31.8% from RMB321.1 million in 2020 to RMB423.3 million in 2021, primarily due to our
optimization of online sales channels, which spurred stronger demand for our Freshly Stewed
Bird’s Nest, which is available primarily for online channels.
 Other bottle-canned bird’s nest (pure EBN) . Our revenue generated from other bottle-canned
bird’s nest (pure EBN) decreased by 4.0% from RMB201.3 million in 2020 to RMB193.3
million in 2021, primarily due to our strategic decision to rebalance our marketing and
promotion focus, which resulted in reduced sales and marketing resources for Crystal Sugar
Bird’s Nest.
 Dried EBN . Our revenue generated from Dried EBN decreased by 4.2% from RMB172.2
million in 2020 to RMB165.0 million in 2021, primarily from a slight decrease in the online
sales volume of our dried EBN products.
 EBN+ and +EBN products . Our revenue generated from EBN+ and +EBN products increased
by 35.5% from RMB47.3 million in 2020 to RMB64.0 million in 2021, primarily because we
launched One Nest — Vitality in 2020, which quickly gained popularity and contributed to
revenue growth in 2021.
Cost of Sales
Our cost of sales increased by 4.7% from RMB745.4 million in 2020 to RMB780.2 million in 2021,
generally consistent with our business growth but outpaced by the revenue growth as our margin profile
improved.
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Gross Profit and Gross Profit Margin
As a result of the foregoing, our gross profit increased by 30.8% from RMB555.7 million in 2020
to RMB726.8 million in 2021. Our gross profit margin increased from 42.7% in 2020 to 48.2% in 2021.
More specifically:
 One Nest (pure EBN) . The gross profit margin of One Nest (pure EBN) increased from 55.6%
in 2020 to 58.3% in 2021, primarily because (1) we adjusted our sales strategies for One Nest
by reducing discounts for One Nest products, which increased the average selling prices of One
Nest products from RMB163 per bowl in 2020 to RMB172 per bowl in 2021, and (2) the
purchasing prices of raw materials experienced decreases in 2021.
 Freshly Stewed Bird’ s Nest . The gross profit margin of Freshly Stewed Bird’s Nest increased
from 26.0% in 2020 to 36.9% in 2021, primarily due to (1) reduced discounts for Freshly
Stewed Bird’s Nest as our products had gained a foothold in the market, and (2) decreases in
the purchasing prices of raw materials and courier fees for Freshly Stewed Bird’s Nest.
 Other bottle-canned bird’s nest (pure EBN) . The gross profit margin of other bottle-canned
bird’s nest (pure EBN) increased from 43.1% in 2020 to 51.1% in 2021, primarily because (1)
we reduced discounts for Crystal Sugar Bird’s Nest based on market competition condition,
which increased the average selling prices of Crystal Sugar Bird’s Nest products from RMB39
per bottle in 2020 to RMB44 per bottle in 2021, and (2) the purchasing prices of raw materials
experienced decreases in 2021. Additionally, we undertook two large customized product
orders with a total contract value of RMB24.7 million from a corporate client in 2020.
Compared to retail products, such orders had a relatively lower margin, which had a negative
impact on the overall gross profit margin for the year.
 Dried EBN . The gross profit margin of Dried EBN increased from 37.0% in 2020 to 40.0% in
2021, primarily due to the decrease in the purchasing prices for raw nests in 2021.
 EBN+ and +EBN products . The gross profit margin of EBN+ and +EBN products increased
from 22.9% in 2020 to 31.9% in 2021 primarily due to the launch of One Nest—Vitality in
2020, which had a higher margin profile.
Selling and Distribution Expenses
Our selling and distribution expenses increased by 25.6% from RMB317.8 million in 2020 to
RMB399.0 million in 2021, primarily due to our increased investment in marketing efforts to promote our
EBN products, which was primarily reflected by (1) an increase in our employee benefits expenses as we
expanded our sales force as a result of the increase of the number of self-operated stores from 40 as of
December 31, 2020 to 89 as of December 31, 2021, and (2) an increase in our advertising and promotion
fees.
Administrative Expenses
Our administrative expenses increased by 42.0% from RMB76.1 million in 2020 to RMB108.0
million in 2021, primarily due to an increase in employee benefits expenses as the number of our
administrative staff increased from 156 as of December 31, 2020 to 208 as of December 31, 2021.
Research and Development Expenses
Our research and development expenses increased by 7.4% from RMB17.7 million in 2020 to
RMB19.0 million in 2021, primarily due to (1) an increase in employee benefits expenses as the number
of our research and development staff increased from 40 as of December 31, 2020 to 47 as of December
31, 2021 as we established more research and development cooperations with third parties, (2) an increase
in travel expenses for research and development personnel, and (3) increased research and development
activities in collaboration with third parties in 2021.
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Other Net Income
Our other net income increased by 57.8% from RMB20.7 million in 2020 to RMB32.7 million in
2021, primarily due to the increase in government grants recognizing our contribution towards the local
economic development from RMB17.2 million in 2020 to RMB36.5 million in 2021.
Finance Costs
Our finance costs decreased by 31.6% from RMB4.9 million in 2020 to RMB3.3 million in 2021,
primarily due to a significant decrease in the interest expenses on bank loans as the amount of our bank
loans decreased in 2021.
Share of Loss of An Associate
We recorded RMB0.2 million in 2020. The share of loss of an associate in 2020 was primarily
attributable to the loss of a then joint venture in Shanghai.
Income Tax
Our income tax increased by 58.8% from RMB36.4 million in 2020 to RMB57.8 million in 2021,
primarily due to the growth of our profit before taxation from RMB159.8 million in 2020 to RMB230.2
million in 2021.
Profit for the Period
As a result of the above factors, we recorded net profit of RMB123.4 million and RMB172.4 million
in 2020 and 2021, respectively. Our net profit margin was 9.5% and 11.4% in 2020 and 2021, respectively.
DISCUSSION OF SELECTED BALANCE SHEET ITEMS
The following table sets forth details of our consolidated statements of financial position as of the
dates indicated.
As of December 31, As of May 31,
2020 2021 2022 2023
(RMB in thousands)
Non-current assets
Property, plant and equipment ...... 62,462 91,934 87,782 94,187
Intangible assets ................ 7 0 4 8 7 3 1,275 1,018
Goodwill ..................... — 75,165 75,165 75,165
Interest in an associate ........... 2,06 7———
Deferred tax assets .............. 4,342 16,313 36,130 29,914
Other non-current assets .......... 1,264 6,862 4,679 2,870
Total non-current assets ......... 70,839 191,147 205,031 203,154
Current assets
Financial assets measured at fair
value through profit or loss ...... 46,225 — 4,996 —
Inventories and other contract costs . . 277,045 279,742 271,795 260,354
Trade and other receivables ........ 70,537 87,583 89,459 95,270
Prepayments ................... 33,353 66,759 54,655 48,460
Restricted bank deposits .......... 1,202 2,000 1,600 8,000
Cash and cash equivalents ......... 150,573 169,495 350,818 187,403
Total current assets ............. 578,935 605,579 773,323 599,487
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As of December 31, As of May 31,
2020 2021 2022 2023
(RMB in thousands)
Current liabilities
Trade and other payables ......... 213,699 204,794 239,673 166,805
Contract liabilities .............. 102,084 138,789 176,450 157,079
Bank loans .................... 66,09 7———
Lease liabilities ................ 7,697 15,644 15,657 15,250
Other current liabilities ........... 12,849 17,897 23,274 19,566
Current taxation ................ 16,391 47,133 38,091 7,224
Total current liabilities .......... 418,817 424,257 493,145 365,924
Net current assets .............. 160,118 181,322 280,178 233,563
Total assets less current liabilities .. 230,957 372,469 485,209 436,717
Non-current liabilities
Bank loans .................... 8,59 7———
Lease liabilities ................ 7,793 17,047 11,264 20,918
Deferred tax liabilities ........... 2,802 2,285 1,935 1,103
Total non-current liabilities ....... 19,192 19,332 13,199 22,021
Net assets .................... 211,765 353,137 472,010 414,696
Capital and reserves
Share capital .................. 83,333 86,700 86,700 86,700
Reserves ..................... 124,054 250,253 367,696 304,943
Total equity attributable to equity
shareholders of the Company ... 207,387 336,953 454,396 391,643
Non-controlling interests ......... 4,378 16,184 17,614 23,053
Total equity ................... 211,765 353,137 472,010 414,696
Property, Plant and Equipment
Our property, plant and equipment consisted primarily of other properties leased for own use,
machinery, leasehold improvements and ownership interests in leasehold building held for own use.
We had property, plant and equipment of RMB62.5 million, RMB91.9 million, RMB87.8 million and
RMB94.2 million as of December 31, 2020, 2021 and 2022 and May 31, 2023, respectively. The increase
in our property, plant and equipment as of December 31, 2021 as compared to that as of December 31,
2020 was primarily due to the addition of a production base that primarily manufactures Freshly Stewed
Bird’s Nest in Songjiang District, Shanghai. See “Business—Production—Production Bases.” The slight
decrease in our property, plant and equipment as of December 31, 2022 as compared to that as of
December 31, 2021 was primarily due to the depreciation of equipment for our manufacturing activities
during normal business operations. The increase in our property, plant and equipment as of May 31, 2023
as compared to that as of December 31, 2022 was primarily due to the increases in other properties leased
for own use.
As of December 31, 2020, 2021 and 2022 and May 31, 2023, our property, plant and equipment of
RMB14.7 million, nil, nil and nil were pledged as collateral for our short-term bank loans. For details, see
Note 25 to the Accountants’ Report in Appendix I to this prospectus.
FINANCIAL INFORMATION
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Intangible Assets
Our intangible assets consisted primarily of computer software. We had intangible assets of RMB0.7
million, RMB0.9 million, RMB1.3 million and RMB1.0 million as of December 31, 2020, 2021 and 2022
and May 31, 2023. The increase in our intangible assets in 2022 was primarily due to the purchase of
software for our daily operations. The decrease in our intangible assets in the five months ended May 31,
2023 was primarily due to amortization.
Goodwill
As of December 31, 2020, 2021 and 2022 and May 31, 2023, we recorded goodwill of nil, RMB75.2
million, RMB75.2 million and RMB75.2 million, respectively. Such goodwill arose from our strategic
acquisitions of Beijing Tianfeiyan, Harbin Jinyanhui, Changchun Jinyanhui, and Taiyuan Jixiangyan, all
of which engage in offline sales of EBN products. Goodwill is mainly attributable to the sales talent of
these entities’ work force and the synergies expected to be achieved from integrating such entities into our
existing sales channels. See “History, Development and Corporate Structure—Major Acquisitions,
Disposals and Mergers.”
None of the goodwill recognized is expected to be deductible for tax purposes. Non-controlling
interests recognized at the acquisition date were measured by reference to the non-controlling interests’
proportionate share of the acquiree’s identifiable net assets.
No impairment loss of goodwill was recognized during the Track Record Period. Any adverse change
in the assumptions used in the calculation of recoverable amount would result in further impairment
losses.
Impairment tests for cash-generating units containing goodwill
Goodwill is allocated to our cash-generating units (“CGU”) identified according to city of operation
and operating segment as follows:
As of December 31, As of
May 31,
20232020 2021 2022
(RMB in thousands)
Beijing Tianfeiyan Trading Co., Ltd.
(“Beijing Tianfeiyan”) — offline
retail ....................... — 31,609 31,609 31,609
Harbin Jinyanhui Trading Co., Ltd.
(“Harbin Jinyanhui”) — offline
retail ...................... — 17,301 17,301 17,301
Changchun Jinyanhui Trading Co.,
Ltd. (“Changchun Jinyanhui”) —
offline retail ................. — 15,245 15,245 15,245
Taiyuan Jixiangyan Trading Co., Ltd.
(“Taiyuan Jixiangyan”) — offline
retail ...................... — 1 1,010 11,010 11,010
— 75,165 75,165 75,165
FINANCIAL INFORMATION
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The recoverable amount of the CGU — Beijing Tianfeiyan is determined based on value-in-use
calculations. These calculations use cash flow projections based on financial budgets approved by our
management covering a five-year period. The discount rates used are pre-tax and reflect specific risks
relating to the relevant segments.
As of December 31, As of
May 31,
20232021 2022
Annual growth rate of revenue during five-year
forecast period ........................ 2 % 3 % 3 %
Estimated weighted average growth rate beyond
the five-year period .................... 2 % 2 % 2 %
Pre-tax discount rate ..................... 16.20% 14.58% 14.43%
The headroom calculated based on the recoverable amounts deducting the carrying amount of the
CGU — Beijing Tianfeiyan as of December 31, 2021 and 2022 and May 31, 2023 was RMB2.6 million,
RMB3.7 million and RMB11.4 million, respectively.
Our management has undertaken sensitivity analysis on the impairment test of goodwill. The
following table sets out the hypothetical changes to growth rate and pre-tax discount rate that would, in
isolation, have removed the remaining headroom respectively as of December 31, 2021 and 2022 and May
31, 2023:
As of December 31, As of
May 31,
20232021 2022
Decrease in annual growth rate of revenue
during five-year forecast period .......
0.7 percentage
points
0.9 percentage
points
3.3 percentage
points
Decrease in estimated weighted
average growth rate beyond the
five-year period ...................
0.9 percentage
points
1.1 percentage
points
3.7 percentage
points
Increase in pre-tax discount rate ........
0.6 percentage
points
0.7 percentage
points
2.4 percentage
points
The recoverable amount of the CGU — Harbin Jinyanhui is determined based on value-in-use
calculations. These calculations use cash flow projections based on financial budgets approved by our
management covering a five-year period. The discount rates used are pre-tax and reflect specific risks
relating to the relevant segments.
As of December 31, As of
May 31,
20232021 2022
Annual growth rate of revenue during five-year
forecast period ........................ 2%-3% 4%-5% 4%-5%
Estimated weighted average growth rate beyond
the five-year period .................... 2 % 2 % 2 %
Pre-tax discount rate ..................... 16.20% 14.58% 14.43%
The headroom calculated based on the recoverable amounts deducting the carrying amount of the
CGU — Harbin Jinyanhui as of December 31, 2021 and 2022 and May 31, 2023 was RMB1.9 million,
RMB4.3 million and RMB8.3 million, respectively.
FINANCIAL INFORMATION
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Our management has undertaken sensitivity analysis on the impairment test of goodwill. The
following table sets out the hypothetical changes to growth rate and pre-tax discount rate that would, in
isolation, have removed the remaining headroom respectively as of December 31, 2021 and 2022 and May
31, 2023:
As of December 31, As of
May 31,
20232021 2022
Decrease in annual growth rate of revenue
during five-year forecast period .......
1.2 percentage
points
2.4 percentage
points
5.6 percentage
points
Decrease in estimated weighted
average growth rate beyond the
five-year period ...................
1.3 percentage
points
2.3 percentage
points
4.9 percentage
points
Increase in pre-tax discount rate ........
0.8 percentage
points
1.5 percentage
points
3.0 percentage
points
The recoverable amount of the CGU — Changchun Jinyanhui is determined based on value-in-use
calculations. These calculations use cash flow projections based on financial budgets approved by
management covering a five-year period. The discount rates used are pre-tax and reflect specific risks
relating to the relevant segments.
As of December 31, As of
May 31,
20232021 2022
Annual growth rate of revenue during five-year
forecast period ........................ 2%-3% 3%-4% 3%-4%
Estimated weighted average growth rate beyond
the five-year period .................... 2 % 2 % 2 %
Pre-tax discount rate ..................... 16.20% 14.58% 14.43%
The headroom calculated based on the recoverable amounts deducting the carrying amount of the
CGU – Changchun Jinyanhui as of December 31, 2021 and 2022 and May 31, 2023 was RMB1.1 million,
RMB3.9 million and RMB4.8 million, respectively.
Our management has undertaken sensitivity analysis on the impairment test of goodwill. The
following table sets out the hypothetical changes to growth rate and pre-tax discount rate that would, in
isolation, have removed the remaining headroom respectively as of December 31, 2021 and 2022 and May
31, 2023:
As of December 31, As of
May 31,
20232021 2022
Decrease in annual growth rate of revenue
during five-year forecast period .......
0.7 percentage
points
2.5 percentage
points
3.4 percentage
points
Decrease in estimated weighted
average growth rate beyond the
five-year period ...................
0.8 percentage
points
2.5 percentage
points
3.1 percentage
points
Increase in pre-tax discount rate ........
0.5 percentage
points
1.6 percentage
points
1.9 percentage
points
FINANCIAL INFORMATION
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The recoverable amount of the CGU — Taiyuan Jixiangyan is determined based on value-in-use
calculations. These calculations use cash flow projections based on financial budgets approved by
management covering a five-year period. The discount rates used are pre-tax and reflect specific risks
relating to the relevant segments.
As of December 31, As of
May 31,
20232021 2022
Annual growth rate of revenue during five-year
forecast period ........................ 2 % 2 % 2 %
Estimated weighted average growth rate beyond
the five-year period .................... 2 % 2 % 2 %
Pre-tax discount rate ..................... 16.20% 14.58% 14.43%
The headroom calculated based on the recoverable amounts deducting the carrying amount of the
CGU — Taiyuan Jixiangyan as of December 31, 2021 and 2022 and May 31, 2023 was RMB2.9 million,
RMB7.5 million and RMB14.5 million, respectively.
Our management has undertaken sensitivity analysis on the impairment test of goodwill. The
following table sets out the hypothetical changes to growth rate and pre-tax discount rate that would, in
isolation, have removed the remaining headroom respectively as of December 31, 2021 and 2022 and May
31, 2023:
As of December 31, As of
May 31,
20232021 2022
Decrease in annual growth rate of revenue
during five-year forecast period .......
2.0 percentage
points
3.7 percentage
points
8.1 percentage
points
Decrease in estimated weighted
average growth rate beyond the
five-year period ...................
3.3 percentage
points
7.3 percentage
points
16.5 percentage
points
Increase in pre-tax discount rate ........
1.9 percentage
points
4.1 percentage
points
8.2 percentage
points
Our management adopted Weighted Average Cost of Capital (“W ACC”) model to calculate the
discount rate of the CGUs. Since all CGUs are engaged in sales of the same products in the PRC,
parameters adopted in W ACC model, such as beta extracted from comparable companies, risk free rate,
cost of debt and tax rate, are the same for all CGUs. Further, given that all CGUs are substantially similar
in business model in the PRC, operation scale, stage of development, core competitiveness and financing
costs during the Track Record Period, our management apply consistent CGU-specific risk premium of all
CGUs, which results in the same pre-tax discount rate for all CGUs during the Track Record Period.
No impairment loss of goodwill was recognized in 2021, 2022 and the five months ended May 31,
2023. Except for the pre-tax discount rates, a reasonably possible adverse change in the assumptions used
in the calculation of recoverable amount would not result in impairment losses.
FINANCIAL INFORMATION
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Interest in An Associate
We had interest in an associate of RMB2.1 million, nil, nil and nil as of December 31, 2020, 2021
and 2022 and May 31, 2023, respectively. Our interest in an associate in 2020 was not material and such
then associate was disposed of in 2021.
Financial Assets Measured at Fair Value through Profit or Loss
We had financial assets measured at fair value through profit or loss of RMB46.2 million, nil,
RMB5.0 million and nil as of December 31, 2020, 2021 and 2022 and May 31, 2023, respectively. Our
financial assets measured at fair value through profit or loss represented our investments in short-term
wealth management products issued by reputable commercial banks in China. See “—Liquidity and
Capital Resources—Investment Management Policy.”
Inventories
Our inventories primarily included raw materials, work in progress and finished goods, with raw
materials being the major component. As of December 31, 2020, 2021 and 2022 and May 31, 2023, we
had inventories of RMB277.0 million, RMB279.7 million, RMB271.8 million and RMB260.4 million,
respectively. As of the same dates, the percentage of raw materials to inventories was 62.8%, 58.6%,
46.3% and 72.1%, respectively. The following table sets forth a breakdown of our inventory balances as
of the dates indicated.
As of December 31, As of May 31,
20232020 2021 2022
(RMB in thousands)
Raw materials ................. 174,103 163,851 125,926 187,748
— Raw nests .................. 173,917 163,386 124,722 186,776
— Other raw materials ........... 1 8 6 4 6 5 1,204 972
Work in progress ............... 41,092 33,360 36,467 17,608
Finished goods ................. 42,071 65,189 81,504 34,881
Goods in transit ................ 6,739 4,743 13,295 9,183
Packaging .................... 12,981 12,498 14,370 10,832
Right to recover returned goods ..... 5 9 1 0 1 2 3 3 1 0 2
Total ........................ 277,045 279,742 271,795 260,354
In 2020, we stocked up raw nests to prevent raw material shortage amid the pandemic, which resulted
in a raw material inventory balance of RMB174.1 million as of December 31, 2020. While the pandemic
generally came under control in China in 2021, we adjusted our inventory management strategy to
maintain raw materials at a level that was in line with our production pace. As such, our raw materials
decreased from RMB163.9 million as of December 31, 2021 to RMB125.9 million as of December 31,
2022. Our raw materials increased from RMB125.9 million as of December 31, 2022 to RMB187.7 million
as of May 31, 2023, primarily because we purchased a certain amount of raw nests for production in
anticipation of the “618” shopping festival.
Our inventories of raw materials primarily included raw nests, which generally have a shelf life of
three years. Our inventories of work in progress primarily included raw nests that have gone through
feather picking process. Our inventories of finished goods primarily included our EBN products that can
immediately be sold to our distributors and/or direct sale customers.
FINANCIAL INFORMATION
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--- page 305 ---
The following tables set forth an aging analysis of our inventories as of the dates indicated.
Within
one year
One to two
years
Two to three
years
Over three
years Total
(RMB in thousands)
As of December 31, 2020
Raw materials ........... 173,787 279 37 — 174,103
Work in progress ......... 41,083 9 — — 41,092
Finished goods ........... 40,683 1,332 1 55 42,071
Goods in transit .......... 6,739 — — — 6,739
Packaging .............. 1 1,710 643 409 219 12,981
Right to recover returned
goods ................ 5 9 — — — 5 9
Total .................. 274,061 2,263 447 274 277,045
Within
one year
One to two
years
Two to three
years
Over three
years Total
(RMB in thousands)
As of December 31, 2021
Raw materials ........... 160,258 3,585 1 7 163,851
Work in progress ......... 33,357 3 — — 33,360
Finished goods ........... 64,463 347 328 51 65,189
Goods in transit .......... 4,743 — — — 4,743
Packaging .............. 1 1,545 501 160 292 12,498
Right to recover returned
goods ................ 1 0 1 — — — 1 0 1
Total .................. 274,467 4,436 489 350 279,742
Within
one year
One to two
years
Two to three
years
Over three
years Total
(RMB in thousands)
As of December 31, 2022
Raw materials ........... 124,797 895 234 — 125,926
Work in progress ......... 36,446 21 — — 36,467
Finished goods ........... 81,317 153 32 2 81,504
Goods in transit .......... 13,295 — — — 13,295
Packaging .............. 13,536 593 127 114 14,370
Right to recover returned
goods ................ 2 3 3 — — — 2 3 3
Total .................. 269,624 1,662 393 116 271,795
Within
one year
One to two
years
Two to three
years
Over three
years Total
(RMB in thousands)
As of May 31, 2023
Raw materials ........... 185,672 1,516 560 — 187,748
Work in progress ......... 17,603 5 — — 17,608
Finished goods ........... 34,523 350 7 1 34,881
Goods in transit .......... 9,183 — — — 9,183
Packaging .............. 9,634 937 173 88 10,832
Right to recover returned
goods ................ 1 0 2 — — — 1 0 2
Total .................. 256,717 2,808 740 89 260,354
FINANCIAL INFORMATION
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--- page 306 ---
The following table sets forth our inventory turnover days for the periods indicated.
Y ear ended December 31,
Five months
ended
May 31,
20232020 2021 2022
Inventory turnover days (1) ......... 91.2 130.2 118.2 106.7
Note:
(1) Calculated based on the average of the beginning and ending balances of inventory for that period divided by cost of
sales for that period and multiplied by the number of days in that period.
Our inventory turnover days increased from 91.2 days in 2020 to 130.2 days in 2021, primarily
because we stocked up raw nests to prevent raw material shortage amid the pandemic in 2020, which
resulted in a slower turnover in 2021.
The following table sets forth our turnover days for work-in-progress and finished goods by shelf life
for the periods indicated.
Turnover days Shelf life
Y ear ended December 31,
Five months
ended
May 31,
20232020 2021 2022
Work in progress and
finished goods .....
15 to 100 days 4.9 6.0 7.4 8.3
Six to 18 months 45.9 67.1 84.3 57.4
24 months 45.6 67.1 56.6 34.4
36 months 34.7 60.5 59.0 52.7
Our turnover days for work in progress and finished goods with a shelf life from six to 18 months
increased from 67.1 days in 2021 to 84.3 days in 2022, primarily because we produced more One Nest
products for offline channels in anticipation of 2023 spring festival which was earlier than usual. Our
turnover days for work in progress and finished goods with a shelf life of 24 months decreased from 56.6
days in 2022 to 34.4 days in the five months ended May 31, 2023, primarily due to the growing demand
for our Crystal Sugar Bird’s Nest products in the five months ended May 31, 2023.
As of September 30, 2023, approximately RMB233.4 million, or 89.7%, of our total inventories as
of May 31, 2023 were utilized or sold.
Trade and Other Receivables
During the Track Record Period, our trade receivables were primarily related to the sales of EBN
products. For offline distributors, we typically require them to make payment before the delivery of our
products. However, under rare circumstances, we may provide short-term payment period, typically less
than two months, for certain offline distributors with excellent qualifications and stable business
relationships with us. For online distributors, we generally deliver our products after receiving the orders
from e-commerce consumers who have made the payments online and settle full payments with online
distributors on a monthly basis for such orders. For e-commerce platform customers, we settle payment
with them according to respective cooperation agreements with such customers and typically have an
agreed payment cycle of 60 days. Deposits represent rental deposits for our office and production bases.
FINANCIAL INFORMATION
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The following table sets forth the details of our trade and other receivables as of the dates indicated.
As of December 31, As of May 31,
20232020 2021 2022
(RMB in thousands)
Trade receivables, net of loss
allowance ...................
— Third parties ................ 23,340 38,442 62,834 58,223
— Related parties ............... 1 3 5———
Deposits ...................... 6,157 9,416 9,282 10,683
Amounts due from related parties (1) . . 1,827 1,015 1,900 1,900
V A T recoverable................ 27,905 14,769 13,956 16,723
Government grants receivables ..... 10,067 22,242 — —
Other receivables ............... 1,106 1,699 1,487 1,738
Current tax recoverable .......... — — — 6,003
Total ........................ 70,537 87,583 89,459 95,270
Note:
(1) See Note 33 to the Accountants’ Report in Appendix I to this prospectus.
Our trade and other receivables increased from RMB70.5 million as of December 31, 2020 to
RMB87.6 million as of December 31, 2021 and further to RMB89.5 million as of December 31, 2022,
primarily due to the increases in trade receivables from third parties, which was generally in line with our
business expansion. Our trade and other receivables remained stable at RMB95.3 million as of May 31,
2023.
The following table sets forth an aging analysis of our trade receivables as of the dates indicated.
As of December 31, As of May 31,
20232020 2021 2022
(RMB in thousands)
Current (not past due) ............ 21,275 38,038 62,643 58,220
Less than three months past due .... 2,200 404 191 3
Total ........................ 23,475 38,442 62,834 58,223
The following table sets forth the number of our trade receivable turnover days for the periods
indicated.
Y ear ended December 31,
Five months
ended
May 31,
20232020 2021 2022
Trade receivable turnover days (1) .... 6 . 1 7 . 5 10.7 11.7
Note:
(1) Calculated based on the average of the beginning and ending balances of trade receivables for that period divided by
revenue for that period and multiplied by the number of days in that period.
FINANCIAL INFORMATION
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Our trade receivable turnover days increased from 6.1 days in 2020 to 7.5 days in 2021 and further
to 10.7 days in 2022, primarily due to an increase in revenue generated from direct sales to e-commerce
platform customers which generally have a longer credit period.
As of September 30, 2023, approximately RMB57.3 million, or 98.5%, of our trade receivables as
of May 31, 2023 had been settled.
Prepayments
Our prepayments primarily included prepayments for purchase of raw materials and prepayments for
selling and distribution expenses. Prepayments for purchase of raw materials are primarily for purchasing
raw nests. Prepayments for selling and distribution expenses are primarily for advertising activities to
promote our EBN products.
As of December 31, 2020, 2021 and 2022 and May 31, 2023, our prepayments were RMB33.4
million, RMB66.8 million, RMB54.7 million and RMB48.5 million, respectively. The following table sets
forth the details of our prepayments as of the dates indicated.
As of December 31, As of May 31,
20232020 2021 2022
(RMB in thousands)
Prepayments for selling and
distribution expenses (1) .......... 15,249 49,935 42,279 33,568
Prepayments for purchase of
packaging materials ............ 3,899 2,840 3,909 3,694
Prepayments for purchase of raw
nests ....................... 9,402 – ––
Others (2) ...................... 4,803 13,984 8,467 11,198
Total prepayments .............. 33,353 66,759 54,655 48,460
Notes:
(1) Include primarily prepayments for advertising services.
(2) Include primarily prepayments for (i) fees for our previous A-share listing application, (ii) rents and property
maintenance fees, (iii) design fees and (iv) fees for outsourced research and development projects.
Our prepayments increased from RMB33.4 million as of December 31, 2020 to RMB66.8 million as
of December 31, 2021, primarily due to the increases in our prepayments for advertising service fees and
consulting service fees for our previous A-share listing application. In particular, we recorded RMB15.2
million of prepayments for selling and distribution expenses as of December 31, 2020, which was lower
than the same as of the other indicated dates, primarily because we took a conservative approach in our
advertising and marketing activities amid the COVID-19 pandemic in 2020. Our prepayments for selling
and distribution expenses then increased to RMB49.9 million as of December 31, 2021, as we resumed
regular pace of our advertising and marketing activities due to the alleviation of COVID-19 in 2021.
As of September 30, 2023, approximately RMB34.9 million, or 72.0%, of our prepayments, as of
May 31, 2023 had been utilized. In particular, as of the same date, (1) approximately RMB25.1 million,
or 74.8%, of our prepayments for selling and distribution expenses as of May 31, 2023 had been utilized;
(2) approximately RMB2.9 million, or 78.7%, of our prepayments for purchase of packaging materials as
of May 31, 2023 had been utilized; and (3) approximately RMB6.9 million, or 61.3%, of our prepayments
for others as of May 31, 2023 had been utilized.
FINANCIAL INFORMATION
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--- page 309 ---
Trade and Other Payables
Our trade and other payables consisted primarily trade payables, salary and welfare payables as well
as other tax payables. Trade payables primarily represented payables for raw materials and packaging
materials. Salary and welfare payables primarily include salaries payable to our employees. The following
table sets forth the details of our trade and other payables as of the dates indicated.
As of December 31, As of May 31,
20232020 2021 2022
(RMB in thousands)
Trade payables ................. 44,240 62,467 64,087 46,223
Receipts in advance ............. 51,989 24,929 22,035 12,562
Salary and welfare payables ....... 39,872 43,900 53,210 34,816
Amount due to non-controlling
interests .................... — — 7,200 —
Other payables and accruals ....... 17,984 23,050 25,442 39,723
Financial liabilities measured at
amortized
cost ....................... 154,085 154,346 171,974 133,324
Other tax payables .............. 22,174 11,766 18,222 11,694
Refund liabilities
(1) ..............
— arising from right of return ...... 1 1 3 1 9 2 4 7 8 2 1 7
— arising from sales rebates (2) ..... 37,327 38,490 48,999 21,570
Total ........................ 213,699 204,794 239,673 166,805
Notes:
(1) We recognize refund liabilities for the consideration received or receivable of which we do not expect to be entitled.
We also recognize other assets in relation to refunds, measured with reference to the former carrying amount of the
products. See Note 19 to the Accountants’ Report in Appendix I to this prospectus. The costs to recover the products
are not material because the product returned are usually in a saleable condition.
(2) We offer performance-based sales rebates to our distributors which give rise to variable consideration in the
measurement of revenue. See Note 2(u) to the Accountants’ Report in Appendix I to this prospectus. The refund
liabilities arising from sales rebates are accrued when the corresponding sales revenue is recognized. Depending on the
specific arrangement with a particular distributor, we typically reconcile and finalize such distributor’s entitlements to
sales rebates for past sales transactions on a quarterly or annual basis. In practice, our distributors generally select to
utilize their entitlements as part of their upfront payments for subsequent purchases, and will usually utilize their rebate
entitlements within the next two months.
Our trade and other payables increased from RMB213.7 million as of December 31, 2020 to
RMB204.8 million as of December 31, 2021 and further to RMB239.7 million as of December 31, 2022,
primarily due to an increase in trade payables, driven by our business expansion. Our trade and other
payables decreased from RMB239.7 million as of December 31, 2022 to RMB166.8 million as of May 31,
2023, primarily due to (1) decrease in salary and welfare payables due to settlement of year-end bonuses,
(2) decrease in trade payables due to decreased purchase of raw nests with Indonesian suppliers during
their Ramadan, and (3) decrease in refund liabilities primarily due to the annual settlement of sales rebates
with certain distributors.
Our receipts in advance represent advance payments from our distributors for our EBN products. As
of December 31, 2020, we recorded receipts in advance of RMB52.0 million, most of which were
attributable to four then distributors who were acquired by us in 2021 and have become our subsidiaries
since then. See “History, Development and Corporate Structure—Major Acquisitions, Disposals and
Mergers.” We recorded receipts in advance of RMB24.9 million and RMB22.0 million as of December 31,
2021 and 2022, respectively, higher than that as of May 31, 2023, primarily because our distributors
generally make more advance payments in the end of the year in anticipation of the upcoming Spring
Festival.
FINANCIAL INFORMATION
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--- page 310 ---
The following table sets forth an aging analysis of our trade payables as of the dates indicated.
As of December 31, As of May 31,
20232020 2021 2022
(RMB in thousands)
Within three months ............. 42,968 59,969 63,301 45,323
Over three months but within six
months ..................... 2 6 1 3 2 2 0 4 6 7 5
Over six months but within nine
months ..................... — 9 1 3 1 3 9
Over nine months but within one
year ....................... 7 8 5 — — 4 4
Over one year but within two years . 461 2,357 569 42
Total ........................ 44,240 62,467 64,087 46,223
The following table sets forth the number of our trade payable turnover days for the periods
indicated.
Y ear ended December 31, Five months
ended
May 31, 20232020 2021 2022
Trade payable turnover days (1) ...... 19.0 25.0 27.1 22.1
Note:
(1) Calculated based on the average of opening and closing balance of trade payables for the relevant period, divided by
the cost of sales for the same period, and multiplied by the number of days in that period.
Our trade payable turnover days increased from 19.0 days in 2020 to 25.0 days in 2021 and further
to 27.1 days in 2022, primarily because our suppliers granted longer credit periods to us during the Track
Record Period. Our trade payable turnover days decreased from 27.1 days in 2022 to 22.1 days in the five
months ended May 31, 2023, primarily due to decrease in the balance of trade payables as a result of
decreased purchase from Indonesian suppliers during their Ramadan.
As of September 30, 2023, approximately RMB45.6 million, or 98.7%, of our trade payables as of
May 31, 2023 had been settled.
Contract Liabilities
Our contract liabilities primarily represented advance payments received from our customers. As of
December 31, 2020, 2021 and 2022 and May 31, 2023, our contract liabilities was RMB102.1 million,
RMB138.8 million, RMB176.5 million and RMB157.1 million, respectively. Our contract liabilities
increased from RMB102.1 million as of December 31, 2020 to RMB138.8 million as of December 31,
2021 and further to RMB176.5 million as of December 31, 2022, primarily due to our increased direct
sales to online customers, which led to an increase in advance payments from such customers. Our contract
liabilities decreased from RMB176.5 million as of December 31, 2022 to RMB157.1 million as of May
31, 2023, primarily due to decrease in advance payments over time, which tend to increase significantly
during major shopping events such as Singles’ Day Shopping Carnival.
As of September 30, 2023, approximately RMB114.7 million, or 73.0%, of our contract liabilities as
of May 31, 2023 were recognized as revenue.
FINANCIAL INFORMATION
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Bank Loans
Our bank loans consisted primarily of bank loans that are either secured or unsecured. As of
December 31, 2020, 2021 and 2022 and May 31, 2023, our bank loans were RMB74.7 million, nil, nil and
nil, respectively. As of December 31, 2020, all of our bank loans were guaranteed by certain shareholders
of our Group. As of the same date, our bank loans of RMB30.0 million were secured by our property, plant
and equipment with an aggregate value of RMB14.7 million.
Lease Liabilities
During the Track Record Period, we leased various properties mainly used as our stores, offices,
production bases for our business operations. Such lease contracts were generally entered into for fixed
terms of one to five years. We negotiate lease terms, which include different payment terms and
conditions, on an individual basis. The following table sets forth our lease liabilities as of the dates
indicated.
As of December 31, As of May 31,
20232020 2021 2022
(RMB in thousands)
Within one year ................ 7,697 15,644 15,657 15,250
After one year but within two years. . 3,006 10,106 7,970 9,203
After two years but within
five years ................... 3,328 6,428 3,294 10,091
After five years ................ 1,459 513 — 1,624
7,793 17,047 11,264 20,918
Total ........................ 15,490 32,691 26,921 36,168
Our lease liabilities increased from RMB15.5 million as of December 31, 2020 to RMB32.7 million
as of December 31, 2021, as we continued to grow our business and leased more properties for our stores
as well as other business operations. Our lease liabilities then decreased to RMB26.9 million as of
December 31, 2022, primarily due to the expiration of such leases. Our lease liabilities increased from
RMB26.9 million as of December 31, 2022 to RMB36.2 million as of May 31, 2023, primarily because
the lease renewal of the office space for our headquarter in Xiamen.
LIQUIDITY AND CAPITAL RESOURCES
SOURCES OF LIQUIDITY AND WORKING CAPITAL
Our primary uses of cash are to fund our working capital requirements, production of EBN products
and other recurring expenses. During the Track Record Period, we financed our capital expenditures and
working capital requirements principally with cash generated from our operating activities. Going
forward, we believe that our liquidity requirements will be satisfied with a combination of cash flows
generated from our operating activities, bank loans, net proceeds from the Global Offering and other funds
raised from the capital markets from time to time. As of December 31, 2020, 2021 and 2022 and May 31,
2023, we had cash and cash equivalents of RMB150.6 million, RMB169.5 million, RMB350.8 million and
RMB187.4 million, respectively.
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Cash Flows
The following table sets forth a summary of our cash flows for the periods indicated.
Y ear ended December 31, Five months ended May 31,
2020 2021 2022 2022 2023
(Unaudited)
(RMB in thousands)
Operating cash flows before
movements in working
capital
(1) .............. 179,339 281,488 308,089 127,320 147,743
Adjusted for:
Changes in working
capital
(2) .............. ( 1 10,295) (28,074) (85,862) 22,508 (76,161)
Income tax paid .......... (20,031) (39,642) (88,072) (64,484) (60,972)
Net cash generated from
operating activities ...... 49,013 213,772 305,879 85,344 10,610
Net cash generated
from/(used in) investing
activities .............. 60,085 (46,450) (21,024) (53,768) 1,470
Net cash used in financing
activities .............. (54,166) (148,400) (103,532) (92,472) (175,495)
Net change in cash and cash
equivalents ............ 54,932 18,922 181,323 (60,896) (163,415)
Cash and cash equivalents at
beginning of the year .... 95,641 150,573 169,495 350,818 108,599
Cash and cash equivalents at
end of the year ......... 150,573 169,495 350,818 108,599 187,403
Notes:
(1) Our operating cash flows before movements in working capital are the total sum of our Group’s profit before taxation,
with adjustments made, including depreciation, amortization of intangible assets, finance costs, interest income, share
of profits less losses of an associate, loss/(gain) on disposal of property, plant and equipment, gain on financial assets
measured at fair value through profit or loss, gain on disposal of investment in a subsidiary, gain on disposal of
interests in an associate, equity-settled share-based payment expenses, impairment loss on trade and other receivables,
and COVID-19-related rent concessions received.
(2) Our changes in working capital are the total sum of the movements in our Group’s inventories, trade receivables, other
receivables and prepayments, restricted bank deposits, trade and other payables, contract liabilities, and other current
liabilities.
Operating Activities
Net cash generated from operating activities was RMB10.6 million in the five months ended May 31
2023, which primarily reflected our profit before taxation of RMB129.5 million and income tax paid of
RMB61.0 million, as adjusted by certain non-cash and non-operating items, primarily including (1)
depreciation of RMB8.2 million primarily in connection with our right of use assets, (2) depreciation of
RMB7.9 million in connection with our property, plant and equipment, and (3) negative changes in
working capital. Adjustments for changes in working capital primarily included (i) a decrease in trade and
other payables of RMB72.9 million and (ii) a decrease in contract liabilities of RMB19.4 million.
Net cash generated from operating activities was RMB305.9 million in 2022, which primarily
reflected our profit before taxation of RMB264.6 million and income tax paid of RMB88.1 million, as
adjusted by certain non-cash and non-operating items, primarily including (1) depreciation of RMB36.3
FINANCIAL INFORMATION
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million primarily in connection with our right of use assets, (2) equity-settled share-based payment
expenses of RMB5.3 million, and (3) positive changes in working capital. Adjustments for changes in
working capital primarily included (i) an increase in contract liabilities of RMB36.3 million and (ii) an
increase in trade and other payables of RMB32.2 million.
Net cash generated from operating activities was RMB213.8 million in 2021, which primarily
reflected our profit before taxation of RMB230.2 million and income tax paid of RMB39.6 million, as
adjusted by certain non-cash and non-operating items, primarily including (1) depreciation of RMB28.1
million primarily in connection with our right of use assets, (2) equity-settled share-based payment
expenses of RMB21.8 million, and (3) negative changes in working capital. Adjustments for changes in
working capital primarily included (i) an increase in trade receivables, other receivables and prepayments
of RMB37.7 million primarily as a result of increased trade receivables from e-commerce platform
customers, which typically have a longer credit period, and (ii) an decrease in trade and other payables
of RMB28.2 million.
Net cash generated from operating activities was RMB49.0 million in 2020, which primarily
reflected our profit before taxation of RMB159.8 million and income tax paid of RMB20.0 million, as
adjusted by certain non-cash and non-operating items, primarily including (1) depreciation of RMB18.3
million primarily in connection with our right of use assets, (2) finance costs of RMB4.9 million, and (3)
negative changes in working capital. Adjustments for changes in working capital primarily included (i) an
increase in inventories of RMB181.7 million and (ii) an increase in trade receivables, other receivables
and prepayments of RMB26.7 million.
Investing Activities
Net cash generated from investing activities was RMB1.5 million in the five months ended May 31,
2023, primarily attributable to proceeds from disposal of financial assets measured at fair value through
profit or loss of RMB414.2 million, partially offset by payment for acquisition of financial assets
measured at fair value through profit or loss of RMB408.0 million.
Net cash used in investing activities was RMB21.0 million in 2022, primarily attributable to (1)
payment for acquisition of financial assets measured at fair value through profit or loss of RMB555.0
million and (2) payment for purchase of property, plant and equipment and intangible assets of RMB22.5
million, partially offset by proceeds from disposal of financial assets measured at fair value through profit
or loss of RMB551.5 million.
Net cash used in investing activities was RMB46.5 million in 2021, primarily attributable to (1)
payment for acquisition of financial assets measured at fair value through profit or loss of RMB527.3
million, (2) acquisition of subsidiaries, net of cash acquired of RMB73.8 million, and (3) payment for
purchase of property, plant and equipment and intangible assets of RMB24.8 million, partially offset by
proceeds from disposal of financial assets measured at fair value through profit or loss of RMB575.9
million.
Net cash generated from investing activities was RMB60.1 million in 2020, primarily attributable to
(1) proceeds from disposal of financial assets measured at fair value through profit or loss of RMB508.0
million and (2) cash received from entrusted loans of RMB54.0 million, partially offset by payment for
acquisition of financial assets measured at fair value through profit or loss of RMB496.1 million. Xiamen
Suntama, an entity controlled by Mr. Huang, entered into three separate entrusted loan agreements with
us and Xiamen Bank which acted as our agent bank, for an aggregate amount of RMB54.0 million.
Pursuant to these agreements, we lent Xiamen Suntama RMB54.0 million at an annual interest rate of 9.6%
for liquidity purposes such as repayments of historical loans and interests accrued, and the agent bank was
responsible for the collection of the principal and any interest without assumptions of the loan risks. We
FINANCIAL INFORMATION
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adopted such entrusted loan arrangements to ensure compliance with PRC laws and regulations. As
advised by our PRC Legal Advisor, according to the General Rule of Loan (ۆno financing
activities involving lending or borrowing may be conducted between enterprises in violation of state
regulations. Our Directors believe that each of these entrusted loan agreements was entered in the ordinary
course of business on an arm’s length basis.
Financing Activities
Net cash used in financing activities was RMB175.5 million in the five months ended May 31, 2023,
primarily attributable to (1) dividends paid to the shareholders of RMB160.0 million, (2) dividends to
non-controlling interests of subsidiaries of RMB7.2 million and (3) capital element of lease rentals paid
of RMB6.5 million.
Net cash used in financing activities was RMB103.5 million in 2022, primarily attributable to (1)
dividends paid to the shareholders of RMB80.0 million, (2) capital element of lease rentals paid of
RMB16.8 million and (3) repayment of bank loans of RMB12.2 million, partially offset by proceeds from
new bank loans of RMB12.2 million. The majority of such new bank loans were short-term borrowings
from a reputable commercial bank in China for raw nest procurement.
Net cash used in financing activities was RMB148.4 million in 2021, primarily attributable to (1)
repayment of bank loans of RMB129.6 million, (2) dividends paid to the shareholders of RMB100.0
million and (3) capital element of lease rentals paid of RMB13.8 million, partially offset by (i) proceeds
from new bank loans of RMB55.4 million and (ii) issuance of new shares of RMB40.4 million.
Net cash used in financing activities was RMB54.2 million in 2020, primarily attributable to (1)
dividends paid to the shareholders of RMB120.0 million and (2) repayment of bank loans of RMB87.1
million, partially offset by proceeds from new bank loans of RMB161.3 million.
Current Assets and Current Liabilities
The following table sets forth our current assets and liabilities as of the dates indicated.
As of December 31, As of
May 31,
2023
As of
September 30,
20232020 2021 2022
(Unaudited)
(RMB in thousands)
Current assets
Financial assets measured at
fair value through profit or
loss ................... 46,225 — 4,996 — —
Inventories and other contract
costs .................. 277,045 279,742 271,795 260,354 311,073
Trade and other receivables . . . 70,537 87,583 89,459 95,270 140,089
Prepayments .............. 33,353 66,759 54,655 48,460 65,342
Restricted bank deposits ..... 1,202 2,000 1,600 8,000 8,000
Cash and cash equivalents .... 150,573 169,495 350,818 187,403 333,148
Total current assets ........ 578,935 605,579 773,323 599,487 857,652
FINANCIAL INFORMATION
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As of December 31, As of
May 31,
2023
As of
September 30,
20232020 2021 2022
(Unaudited)
(RMB in thousands)
Current liabilities
Trade and other payables ..... 213,699 204,794 239,673 166,805 217,307
Contract liabilities .......... 102,084 138,789 176,450 157,079 247,364
Bank loans ............... 66,09 7——— —
Lease liabilities ............ 7,697 15,644 15,657 15,250 14,985
Other current liabilities ...... 12,849 17,897 23,274 19,566 29,480
Current taxation ........... 16,391 47,133 38,091 7,224 22,189
Total current liabilities ..... 418,817 424,257 493,145 365,924 531,325
Net current assets ......... 160,118 181,322 280,178 233,563 326,327
Our net current asset decreased from RMB280.2 million as of December 31, 2022 to RMB233.6
million as of May 31, 2023, primarily due to a decrease of RMB163.4 million in cash and cash equivalents,
partially offset by (1) a decrease of RMB72.9 million in trade and other payables, and (2) a decrease of
RMB30.9 million in current taxation.
Our net current asset increased from RMB181.3 million as of December 31, 2021 to RMB280.2
million as of December 31, 2022, primarily due to (1) an increase of RMB181.3 million in cash and cash
equivalents, and (2) a decrease of RMB9.0 million in current taxation, partially offset by (i) an increase
of RMB34.9 million in trade and other payables, and (ii) an increase of RMB37.7 million in contract
liabilities.
Our net current asset increased from RMB160.1 million as of December 31, 2020 to RMB181.3
million as of December 31, 2021, primarily due to (1) an increase of RMB33.4 million in prepayments,
(2) an increase of RMB18.9 million in cash and cash equivalents, (3) an increase of RMB17.0 million in
trade and other receivables, and (4) a decrease of RMB8.9 million in trade and other payables, partially
offset by (i) an increase of RMB36.7 million in contract liabilities, and (ii) an increase of RMB30.7
million in current taxation.
We intend to continue to finance our working capital with cash generated from our operations, bank
loans, net proceeds from the Global Offering and other funds raised from the capital markets from time
to time. We will closely monitor the level of our working capital, and diligently review future cash flow
requirements and adjust our operation and expansion plans, if necessary, to ensure that we maintain
sufficient working capital to support our business operations.
Taking into consideration of financial resources presently available to us, our Directors are of the
view that the working capital available to our Group, including our available cash and cash equivalents,
anticipated cash flow from operations, bank loans and net proceeds from the Global Offering, will be
sufficient to meet our present and anticipated cash requirements and for at least the next 12 months from
the date of this prospectus.
FINANCIAL INFORMATION
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Investment Management Policy
We have adopted an internal investment management policy and established a set of internal control
measures to allow us to achieve reasonable returns on our investment while mitigating our exposure to
high investment risks. Such investment management policy regulates our internal investment decision
making procedures and record keeping practices. Under our investment management policy, we only
conduct short-to-medium term financial product investment or fixed-income securities investment
transactions, and the investment period shall not exceed one year. Our finance department is responsible
for the overall management of our investment activities, subject to the supervision of our Directors,
Supervisors and audit department. Depending on, among others, the investment amount and the risk
associated with a particular investment product, our shareholders, the board of directors and/or our senior
management serve as decision-making bodies for our investment activities.
We believe that our internal policies regarding investment and the related risk management
mechanism are adequate. During the Track Record Period, we purchased short-term or mid-term wealth
management products issued by reputable financial institutions in China with annualized interest rates
ranging from approximately 1.5% to 4.0%. We may continue to invest in similar wealth management
products or assets using our surplus cash where we believe it is prudent to do so after the completion of
the Global Offering, subject to the compliance requirement under Chapter 14 of the Listing Rules. We
expect to comply with such applicable requirements, including the relevant size test requirements.
CAPITAL EXPENDITURES AND COMMITMENTS
Capital Expenditures
Our capital expenditures during the Track Record Period consisted primarily of payments for
purchase of property, plant and equipment and purchase of intangible assets, and amounted to RMB11.7
million, RMB24.8 million, RMB22.5 million, RMB9.2 million and RMB4.7 million in 2020, 2021, 2022
and the five months ended May 31, 2022 and 2023, respectively. We funded our capital expenditure
requirements during the Track Record Period mainly from cash generated from our operating activities.
We plan to fund our planned capital expenditure by using the cash flow generated from our operations,
bank loans and the net proceeds received from the Global Offering.
Commitments
Our commitments primarily related to leases which had been contracted but not yet paid for. The
following table sets forth our commitments as of the dates indicated.
As of December 31, As of
May 31,
20232020 2021 2022
(RMB in thousands)
Contracted for new
short-term leases .............. 1,749 3,809 3,327 4,332
FINANCIAL INFORMATION
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INDEBTEDNESS
Our indebtedness during the Track Record Period consisted primarily of bank loans and lease
liabilities. The following table sets forth a breakdown of our indebtedness as of the dates indicated.
As of December 31,
As of
May 31,
As of
September 30,
2020 2021 2022 2023 2023
(Unaudited)
(RMB in thousands)
Current indebtedness
Bank loans ............ 66,09 7——— —
Lease liabilities ........ 7,697 15,644 15,657 15,250 14,985
Subtotal ............. 73,794 15,644 15,657 15,250 14,985
Non-current indebtedness
Bank loans ............ 8,59 7——— —
Lease liabilities ........ 7,793 17,047 11,264 20,918 19,640
Subtotal ............. 16,390 17,047 11,264 20,918 19,640
Total ................ 90,184 32,691 26,921 36,168 34,625
As of September 30, 2023, being the latest practicable date for determining our indebtedness, we had
RMB144.8 million of unutilized and unrestricted bank loans.
Our Directors confirm that as of the Latest Practicable Date, there was no material covenant on any
of our outstanding debt and there was no breach of any covenant during the Track Record Period and up
to the Latest Practicable Date. Our Directors further confirm that we did not experience any difficulty in
obtaining bank loans and other borrowings, default in payment of bank loans and other borrowings or
breach of covenants during the Track Record Period and up to the Latest Practicable Date. Save as
disclosed above, we had no bank loans or other borrowings, or any other loan capital issued and
outstanding or agreed to be issued, bank overdrafts, borrowings or similar indebtedness, liabilities under
acceptance (other than normal trade bills) or acceptance credits, debentures, mortgages, charges, hire
purchases, guarantees or other material contingent liabilities. Our Directors confirm that there has not been
any material change in our indebtedness since September 30, 2023.
CONTINGENT LIABILITIES
As of the Latest Practicable Date, we did not have any material contingent liabilities, guarantees or
any litigations or claims of material importance, pending or threatened against any member of our Group.
LISTING EXPENSES
We expect to incur a total of RMB49.8 million of listing expenses (assuming an Offer Price of
HK$9.90 per Offer Share, being the mid-point of the indicative Offer Price range between HK$8.80 and
HK$11.00, and assuming that the Over-allotment Option is not exercised) until the completion of the
Global Offering. We recognized listing expenses of RMB14.7 million in our consolidated statement of
profit or loss and other comprehensive income for the five months ended May 31, 2023. We estimate that
RMB20.5 million of listing expenses will be charged to our consolidated statement of comprehensive
income after the Track Record Period. The remaining RMB14.6 million is directly attributable to the issue
of our Shares to the public and is expected to be deducted from equity.
FINANCIAL INFORMATION
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Listing expenses include RMB22.4 million of fees for legal advisors and the Reporting Accountant,
RMB16.2 million of other fees unrelated to the underwriting, and RMB11.2 million of underwriting
commissions payable to the Underwriters and transaction fees (including SFC transaction levy, AFRC
transaction levy, and Stock Exchange trading fee) in connection with the offering of Offer Shares under
the Global Offering. The listing expenses above represent approximately 17.1% of our gross proceeds
from the Global Offering and were our best estimate as of the Latest Practicable Date and for reference
only. The actual amount may differ from this estimate.
KEY FINANCIAL RATIOS
As of/for the year ended December 31,
As of/for the five months
ended May 31,
2020 2021 2022 2022 2023
(Unaudited)
Profitability ratios
Gross profit margin (1) .......... 42.7% 48.2% 50.8% 51.6% 51.9%
Net profit margin (2)............ 9.5% 11.4% 11.9% 12.0% 12.8%
Return on equity (3) ............ 59.2% 61.0% 49.9% 23.7% 22.7%
Return on total assets (4) ........ 22.3% 23.8% 23.2% 11.2% 11.3%
Liquidity ratios
Current ratio
(5) ............... 1.4x 1.4x 1.6x 1.5x 1.6x
Gearing ratio (6) ............... 42.6% 9.3% 5.7% 8.5% 8.7%
Notes:
(1) The calculation of gross profit margin is based on gross profit for the period divided by revenue for the respective period and
multiplied by 100%.
(2) The calculation of net profit margin is based on profit for the period divided by revenue for the respective period and
multiplied by 100%.
(3) The calculation of return on equity is based on profit or loss for the period divided by average total equity as of the beginning
and end of the period and multiplied by 100%.
(4) The calculation of return on total assets is based on profit for the period divided by the average of opening and closing balance
of total assets of the same period and multiplied by 100%.
(5) The calculation of current ratio is based on current assets divided by current liabilities as of period end.
(6) The calculation of gearing ratio is based on total debt (including interest-bearing borrowings and lease liabilities) divided by
total equity and multiplied by 100%.
Analysis of Key Financial Ratios
Gross Profit Margin and Net Profit Margin
See “—Period to Period Comparison of Results of Operations” for a discussion of the factors
affecting our gross profit margin and net profit margin during the Track Record Period.
Return on Equity and Return on Total Assets
Our return on equity ratio was 59.2%, 61.0% and 49.9% as of December 31, 2020, 2021 and 2022,
respectively. Our return on equity increased from 59.2% as of December 31, 2020 to 61.0% as of
December 31, 2021, primarily due to the growth rate of our net profit outpacing the growth of our total
equity. Our return on equity ratio decreased from 61.0% as of December 31, 2021 to 49.9% as of December
31, 2022, primarily due to the growth rate of our total equity outpacing the growth of our net profit. The
increase in our total equity was primarily due to an increase in retained profits, which were in line with
our increased net profit, and an increase in statutory reserve.
Our return on total assets was 22.3%, 23.8% and 23.2% as of December 31, 2020, 2021 and 2022,
respectively. Our return on total assets increased from 22.3% as of December 31, 2020 to 23.8% as of
December 31, 2021, primarily due to the growth rate of our net profit outpacing the growth of our total
assets. Our return on total assets remained stable at 23.8% and 23.2% in 2021 and 2022, respectively.
FINANCIAL INFORMATION
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Current Ratio and Gearing Ratio
Our current ratio was 1.4x, 1.4x, 1.6x and 1.6x as of December 31, 2020, 2021 and 2022 and May
31, 2023, respectively. Our current ratio increased from 1.4x as of December 31, 2021 to 1.6x as of
December 31, 2022, primarily due to the growth of our current assets outpacing the growth of current
liabilities, largely due to an increase in cash and cash equivalents. Our current ratio remained stable at 1.6x
as of December 31, 2022 and May 31, 2023, respectively.
Our gearing ratio was 42.6%, 9.3%, 5.7% and 8.7% as of December 31, 2020, 2021 and 2022 and
May 31, 2023. Our gearing ratio decreased from 42.6% as of December 31, 2020 to 9.3% as of December
31, 2021, primarily due to the increase in our total equity and the decrease in our bank loans. Our gearing
ratio further decreased from 9.3% as of December 31, 2021 to 5.7% as of December 31, 2022, primarily
due to the increase in our total equity and the decrease in our lease liabilities. Our gearing ratio increased
from 5.7% as of December 31, 2022 to 8.7% as of May 31, 2023, primarily due to a decrease in our total
equity as well as an increase in our lease liabilities.
RELATED PARTY TRANSACTIONS
For details of our material related party transactions, see Note 33 to the Accountants’ Report in
Appendix I to this prospectus. Our Directors believe that each of the related party transactions was
conducted in the ordinary course of business on an arm’s length basis. Our Directors are of the view that
related party transactions during the Track Record Period would not distort our track record results or
make our historical results not reflective of our future performance.
OFF-BALANCE SHEET COMMITMENTS AND ARRANGEMENTS
During the Track Record Period and up to the Latest Practicable Date, we had not entered into any
off-balance sheet transactions.
DISTRIBUTABLE RESERVES
As of May 31, 2023, our statutory reserve and retained profits were RMB137.0 million. Our statutory
reserve and retained profits represent the distributable reserve of our Group as of the same date.
DIVIDENDS
According to the Articles of Association and applicable laws and regulations, our profit distribution
proposal is formulated by our Board, and upon approval by the Board and the Board of Supervisors, it is
submitted to a Shareholders’ general meeting for consideration where it must be passed by Shareholders
representing more than half of the voting rights of the Shareholders who attend the general meeting. Our
Board will declare dividends, if any, in RMB with respect to the H Shares on a per Share basis and will
pay such dividends in Hong Kong dollars. All of our Shareholders have equal rights to distributable
profits, and our profits will be distributed on a pro-rata basis.
Our future declarations of dividends may or may not reflect our historical declarations of dividends
and will be at the discretion of our Board. Both current and new Shareholders are entitled to our
accumulated retained earnings prior to the Listing, subject to compliance with our Articles of Association
and relevant regulatory requirements.
During the Track Record Period, we declared dividends to our then Shareholders of RMB120.0
million, RMB100.0 million, RMB80.0 million and RMB160.0 million in 2020, 2021, 2022 and the five
months ended May 31, 2023, respectively, in light of our cumulative business growth. As of May 31, 2023,
all of such dividends declared during the Track Record Period had been fully settled by bank transfer to
our then Shareholders. See also Note 30(b) to the Accountants’ Report in Appendix I to this prospectus.
DISCLOSURE REQUIRED UNDER CHAPTER 13 OF THE LISTING RULES
Our Directors have confirmed that, as of the Latest Practicable Date, there were no circumstances
which, had we been required to comply with Rules 13.13 to 13.19 in Chapter 13 of the Listing Rules,
would have given rise to a disclosure requirement under Rules 13.13 to 13.19 of the Listing Rules.
FINANCIAL INFORMATION
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NO MATERIAL ADVERSE CHANGE
Our Directors confirm that, up to the date of this prospectus, there has been no material adverse
change in our financial or trading position since May 31, 2023 (being the date on which the latest audited
consolidated financial information of our Group was prepared) and there has been no event since May 31,
2023 which would materially affect the information shown in our consolidated financial statements
included in the Accountants’ Report in Appendix I to this prospectus.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT FINANCIAL RISKS
We are exposed to a variety of financial risks, including credit risk, liquidity risk and interest rate
risk. Our overall risk management program focuses on the unpredictability of financial markets and seeks
to minimize potential adverse effects on our financial performance. Risk management is carried out by our
management.
Credit Risk
We are primarily exposed to credit risk in relation to our trade receivables. Our trade receivables are
mainly from sales of EBN products. We have established a credit risk management policy, under which
individual credit evaluations are performed on all customers requiring credit over a certain amount. These
evaluations focus on our customers’ past history of making payments when due and current ability to pay,
and take into account information specific to the customer as well as pertaining to the economic
environment in which the customer operates. Normally, we do not obtain collateral from customers.
We do not have significant concentration of credit risk in industries or countries in which the
customers operate. Significant concentrations of credit risk primarily arise when we have significant
exposure to individual customers. As of December 31, 2020, 2021 and 2022 and May 31, 2023, 17.9%,
51.6%, 81.7% and 83.6% of the total trade receivables were due from our largest customer in each
year/period during the Track Record Period, respectively, and 64.7%, 59.0%, 85.5% and 88.6% of the total
trade receivables were due from our five largest customers in each year/period during the Track Record
Period, respectively. Such increase was primarily due to the growth in business scale with e-commerce
platform customers, which tend to have a longer settlement cycle. For further details, see Note 31(a) to
the Accountants’ Report in Appendix I to this prospectus.
Liquidity Risk
To manage the liquidity risk, we manage the treasury function, which includes the short-term
investment of cash surpluses and the raising of funds to cover expected cash demands. We also regularly
monitor our liquidity requirements and compliance with lending covenants, to ensure that we maintain a
level of cash and cash equivalents deemed adequate by our management to finance our Group’s operations
and mitigate the effects of fluctuations in cash flows. The table below analyses our financial liabilities into
relevant maturity groupings based on the remaining period at the statement of financial position dates to
the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash
flows. For details, see Note 31(b) to the Accountants’ Report in Appendix I to this prospectus.
Within one
year or on
demand
More than
one year but
less two
years
More than
two years
but less than
five years
More than
five years Total
(RMB in thousands)
As of December 31, 2020
Bank loans .............. 66,421 1,067 7,585 — 75,073
Trade and other payables . . . 154,085 — — — 154,085
Lease liabilities .......... 8,305 3,325 3,778 1,510 16,918
228,811 4,392 11,363 1,510 246,076
FINANCIAL INFORMATION
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Within one
year or on
demand
More than
one year but
less two
years
More than
two years
but less than
five years
More than
five years Total
(RMB in thousands)
As of December 31, 2021
Trade and other payables . . . 154,346 — — — 154,346
Lease liabilities .......... 17,018 10,729 6,808 516 35,071
171,364 10,729 6,808 516 189,417
As of December 31, 2022
Trade and other payables . . . 171,974 — — — 171,974
Lease liabilities .......... 16,898 8,312 3,474 — 28,684
188,872 8,312 3,474 — 200,658
As of May 31, 2023
Trade and other payables . . . 133,324 — — — 133,324
Lease liabilities .......... 17,637 10,810 11,119 1,637 41,203
150,961 10,810 11,119 1,637 174,527
Interest Rate Risk
Our interest rate risk arises primarily from restricted bank deposits, cash at banks, bank loans issued
at fixed rates and lease liabilities. We are exposed to cash flow interest rate risk and fair value interest rate
risk from interest-bearing financial instruments at variable rates and at fixed rates, respectively. The
following table sets forth the interest rate risk profile of our fixed rate instruments and variable rate
instruments as of the dates indicated.
As of December 31, As of May 31,
20232020 2021 2022
(RMB in thousands)
Fixed rate instruments
Restricted bank deposits .......... 1,202 2,000 1,600 8,000
Lease liabilities ................ 15,490 32,691 26,921 36,168
Bank loans .................... 74,69 4———
Total ........................ 91,386 34,691 28,521 44,168
Variable rate instruments
Cash at bank and on hand ......... 143,239 163,503 338,398 180,425
Cash balances with payment
platforms ................... 7,334 5,992 12,420 6,978
Total ........................ 150,573 169,495 350,818 187,403
FINANCIAL INFORMATION
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UNAUDITED PRO FORMA ADJUSTED NET TANGIBLE ASSETS
The following unaudited pro forma statement of adjusted consolidated net tangible assets of our
Group is prepared in accordance with paragraph 4.29 of the Listing Rules and is set out below to illustrate
the effect of the Global Offering on the consolidated net tangible assets of our Group attributable to equity
shareholders of our Company as if the Global Offering had taken place on May 31, 2023.
This unaudited pro forma statement of adjusted consolidated net tangible assets has been prepared
for illustrative purposes only and, because of its hypothetical nature, it may not provide a true picture of
the financial position of our Group had the Global Offering been completed as of May 31, 2023 or at any
future dates.
Consolidated net
tangible assets
of our Group
attributable
to equity
shareholders of
our Company as
of May 31, 2023 (1)
Estimated
net proceeds
from the
Global
Offering (2)
Unaudited pro
forma adjusted
consolidated net
tangible assets
attributable
to equity
shareholders of
our Company as
of May 31, 2023
Unaudited pro forma
adjusted consolidated net
tangible assets attributable
to equity shareholders of
our Company per Share (3)
(RMB in thousands) RMB HK$
Based on an Offer Price
of HK$8.80 per
H Share ............ 315,460 224,774 540,234 1.16 1.26
Based on an Offer Price
of HK$11.00 per
H Share ........... 315,460 286,941 602,401 1.29 1.41
Notes:
(1) The consolidated net tangible assets of our Group attributable to equity shareholders of our Company as of May 31,
2023 is arrived at after deducting intangible assets of RMB1,018,000 and goodwill of RMB75,165,000 from the total
equity attributable to equity shareholders of our Company of RMB391,643,000 as of May 31, 2023, as shown in the
Accountants’ Report as set out in Appendix I to this prospectus.
(2) The estimated net proceeds from the Global Offering are based on the indicative Offer Price of HK$8.80 and HK$11.00
per H Share, being the low end price and high end price of the indicative Offer Price range respectively, and 32,000,000
H Shares expected to be issued under the Global Offering, after deduction of the underwriting commissions and other
listing related expenses payable by our Company (excluding the listing expenses charged to profit or loss during the
Track Record Period), and takes no account of any shares that may be issued upon exercise of the Over-Allotment
Option or any shares which may be granted under the Shares Purchase Scheme. For illustrative purpose, the estimated
net proceeds have been converted from Hong Kong dollar into Renminbi at the exchange rate of HK$1.09 to RMB1.00.
No representation is made that the Hong Kong dollar amounts have been, could have been or may be converted to
Renminbi, or vice versa, at the rate or at any other rates or at all.
(3) The unaudited pro forma adjusted consolidated net tangible assets of our Group attributable to equity shareholders of
our Company per Share is arrived at after the adjustments referred to the preceding paragraphs and on the basis of
465,500,000 Shares in issue immediately following completion of the Global Offering and sub-division, assuming that
the Global Offering and sub-division have been completed on May 31, 2023, but does not take into account of any
shares that may be issued upon exercise of the Over-Allotment Option or any share which may be granted under the
Shares Purchase Scheme. For illustrative purpose, the unaudited pro forma adjusted consolidated net tangible assets
of our Group attributable to equity shareholders of the Company per Share are converted from Renminbi into Hong
Kong dollar at exchange rate of HK$1.09 to RMB1.00. No representation is made that the Renminbi amounts have
been, could have been, or may be converted to Hong Kong dollar, or vice versa, at the rate of any other rates at all.
(4) No adjustment has been made to reflect any trading result or other transactions of our Group entered into subsequent
to May 31, 2023.
FINANCIAL INFORMATION
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FUTURE PLANS
For further disclosure of our business objectives and strategies, see “Business—Growth Strategies.”
USE OF PROCEEDS
We estimate that the net proceeds of the Global Offering, after deducting the estimated underwriting
commissions and other fees and expenses payable by us in connection with the Global Offering, will be
approximately HK$262.6 million, assuming an Offer Price of HK$9.90 per H Share (being the mid-point
of the indicative range of the Offer Price of HK$11.00 to HK$8.80 per H Share), without the exercise of
the Over-allotment Option.
We currently intend to use the net proceeds from the Global Offering for the purposes and in the
amounts as set out below:
 approximately 10% of the net proceeds, or HK$26.3 million, will be used for research and
development activities to expand our product portfolio and enrich our product features. More
specifically:
(1) approximately 7% of the net proceeds, or HK$18.4 million, will be used to establish new
research and development laboratories and pilot workshops within the next three years
and build joint laboratories with reputable domestic and overseas universities and
research institutions within the next five years to carry out research and development
projects on EBN product features and expand our product portfolio;
(2) approximately 3% of the net proceeds, or HK$7.9 million, will be used to purchase raw
materials to be used in our research and development activities, optimizing production
process and upgrading product packaging design and recruit talents to expand our
research and development team within the next five years;
Our use of proceeds to establish new research and development laboratories and pilot
workshops commensurate with our past R&D investments and our commitment to conducting
more than 20 research projects related to EBN products in the next three to five years. As we
strive to enhance the diversity, reliability, and safety of our products, our existing laboratories
have become inadequate, with outdated equipment and limited space. Moreover, ongoing
research projects further strain our current facilities. To effectively address these challenges
and bolster our research and development capabilities, we plan to establish specialized research
and development laboratories, including R&D, testing, basic research, packaging, sensory
evaluation, and simulation facilities. The new R&D laboratories will allow us to tailor our
research efforts and acquire advanced equipment and systems, thereby ensuring a successful
transformation of scientific achievements into productive capabilities. Additionally, we aim to
create an all-encompassing pilot workshop, optimizing the available space and acquiring
state-of-the-art equipment, to enhance our pilot production capacity and streamline the
technology transfer and industrialization process.
 approximately 25% of the net proceeds, or HK$65.7 million, will be used to expand and
consolidate our sales network. More specifically:
(1) approximately 15% of the net proceeds, or HK$39.4 million, will be used to diversify our
offline channels and upgrade existing offline channels within the next five years;
o approximately 13%, or HK$34.1 million to be used to upgrade and expand our
network of offline self-operated stores. We plan to upgrade our existing offline
stores to establish flagship stores that enhance our premium brand image. Moreover,
FUTURE PLANS AND USE OF PROCEEDS
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we plan to further penetrate our existing markets by (1) establishing integrated
experience stores primarily in tier-1 cities, (2) opening more flagship stores
primarily in tier-2 and tier-3 cities, and (3) setting up signature stores at major
airport hubs and railway stations;
o approximately 2%, or HK$5.3 million to be used to expand our distributor and
e-commerce platform customers network. We plan to establish collaboration with
boutique supermarkets, membership supermarkets and convenience stores to reach
a wider range of consumers. We also plan to tap into new markets by collaborating
with distributors to expand our distribution network into greenfield markets in
China as well as Hong Kong, Macau and other overseas markets;
(2) approximately 7% of the net proceeds, or HK$18.4 million, will be used to further expand
our online channels by further diversifying online distribution channels within the next
three years, expanding our online operation team and collaborating with influencers to
enhance sales effectiveness;
(3) approximately 3%, or HK$7.9 million, to be used to grow our membership base for our
membership program and improve the overall experience for our members within the next
three years;
 approximately 15% of the net proceeds, or HK$39.4 million, will be used to strengthen our
brand building and marketing promotion efforts within the next three years by (1) waging
advertising campaigns through traditional marketing channels including television, radio and
offline advertising such as billboards and print media; (2) partnering with events,
organizations, or individuals that align with our brand values and target audience through brand
sponsorship and naming opportunities; (3) organizing interactive events for valued members;
and (4) allocating more resources for marketing campaigns in emerging online marketing
channels;
 approximately 35% of the net proceeds, or HK$92.0 million, will be used to strengthen our
supply chain management capabilities. More specifically:
(1) approximately 25% of the net proceeds, or HK$65.7 million, will be used for the
construction of another production base in Xiamen within the next five years, including
renting factory buildings, factory renovation and decoration, and purchasing advanced
equipment and intelligent management systems to enhance the automation and
intelligence of our operations;
(2) approximately 10% of the net proceeds, or HK$26.3 million, will be used to selectively
pursue strategic alliances, investment and acquisition opportunities within the next five
years both domestically and overseas in the EBN industry that may help us secure stable
raw nest supply, improve our supply chain efficiency, reduce costs, and enhance our
competitiveness in the market, for instance, high quality raw nest suppliers in Indonesia.
When assessing the investment or acquisition opportunities, we will primarily consider
targets that are complementary to our business and are in line with our corporate
philosophy and growth strategies. As of the Latest Practicable Date, we had not identified
any investment or acquisition target or enter into any definitive investment or acquisition
agreement;
We believe the benefits of establishing another production base in Xiamen outweigh the cost.
Considering (1) our revenue growth during the Track Record Period, (2) the projected growth
of the EBN industry in the coming years, and (3) the near saturation of utilization at our
FUTURE PLANS AND USE OF PROCEEDS
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primary production base in Xiamen, establishing another production base in Xiamen presents
an opportunity to enhance our production capacity and capitalize on future market growth. With
our headquarter and primary production base already situated in Xiamen, we have decades of
experience operating in this region and have fostered strong local resources, which will enable
a smooth establishment process for the new production base. Also, the introduction of advanced
equipment and intelligent management systems that enhance automation and intelligent
operations is expected to reduce the reliance on manual labor and subsequently lower labor
costs. In addition, the establishment of the new production base will present us an opportunity
to enhance our brand image by attracting visitors, including our valued members, to tour our
factory and promote our EBN products and brand effectively.
 approximately 5% of the net proceeds, or HK$12.9 million, will be used to strengthen our
digital infrastructure within the next five years, including (1) developing a membership data
management platform, (2) leasing cloud servers and adding or upgrading of various
management systems, such as membership management system, production management
system, research and development management system, sales management system, and
warehousing and logistics management system, and (3) deployment of data analytics
technology; and
 approximately 10% of the net proceeds, or HK$26.3 million, for working capital and other
general corporate purposes.
The above allocation of the proceeds will be adjusted on a pro rata basis in the event that the Offer
Price is fixed below or above the mid-point of the indicative price range. If the Offer Price is set at
HK$11.00 per H Share, which is the high end of our indicative Offer Price range, the net proceeds from
the Global Offering will increase by approximately HK$33.8 million. If the Offer Price is set at HK$8.80
per H Share, which is the low end of our indicative Offer Price range, the net proceeds from the Global
Offering will decrease by approximately HK$33.8 million. Any additional proceeds received from the
exercise of the Over-allotment Option will also be allocated to the above purposes on a pro rata basis. In
the event that the Over-allotment Option is exercised in full, we will receive net proceeds of HK$308.3
million (after deducting the estimated underwriting commissions and other fees and expenses payable by
us in connection with the Global Offering and assuming an Offer Price of HK$9.90 per H Share, being the
mid-point of our indicative Offer Price range).
To the extent that the net proceeds are not immediately applied to the above purposes, we intend to
only deposit the net proceeds into short-term demand deposits with one or more licensed banks or
authorized financial institutions as defined under the Securities and Futures Ordinance or the applicable
laws and regulations in China, so long as it is deemed to be in the best interests of our Company. In such
event, we will comply with the appropriate disclosure requirements under the Listing Rules.
FUTURE PLANS AND USE OF PROCEEDS
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HONG KONG UNDERWRITERS
China International Capital Corporation Hong Kong Securities Limited
GF Securities (Hong Kong) Brokerage Limited
Citigroup Global Markets Asia Limited
V aluable Capital Limited
Futu Securities International (Hong Kong) Limited
Tiger Brokers (HK) Global Limited
UNDERWRITING ARRANGEMENTS AND EXPENSES
Hong Kong Public Offering
Hong Kong Underwriting Agreement
Pursuant to the Hong Kong Underwriting Agreement, we are offering 3,200,000 Hong Kong Offer
Shares (subject to reallocation) for subscription by the public in Hong Kong at the Offer Price on the terms
and subject to the conditions of this prospectus.
Subject to the Listing Committee granting the listing of, and permission to deal in, our H Shares in
issue and to be issued as mentioned herein (including any additional H Shares which may be made
available pursuant to the exercise of the Over-allotment Option), and to certain other conditions set out
in the Hong Kong Underwriting Agreement, the Hong Kong Underwriters have agreed severally, but not
jointly, to subscribe for or procure subscribers for their respective applicable proportions of the Hong
Kong Offer Shares which are being offered but are not taken up under the Hong Kong Public Offering on
the terms and subject to the conditions of this prospectus and the Hong Kong Underwriting Agreement.
The Hong Kong Underwriting Agreement is conditional upon and subject to the International
Underwriting Agreement having been signed and becoming unconditional and not having been terminated
in accordance with its terms.
Grounds for Termination
The Joint Sponsors and the Overall Coordinators (for themselves and on behalf of the Hong Kong
Underwriters) shall be entitled by notice (in writing) to the Company to terminate the Hong Kong
Underwriting Agreement with immediate effect if prior to 90 minutes before the trading of the H Shares
first commences on the Stock Exchange:
(1) there shall develop, occur, exist or come into effect:
(i) any or a series of local, national, regional or international event(s) or circumstance(s) in
the nature of force majeure (including any acts of government, declaration of a national,
regional or international emergency or war, calamity, crisis, epidemic and pandemic
(including Severe Acute Respiratory Syndrome (SARS), Coronavirus Disease 2019
(COVID-19), H1N1 and H5N1 and such related/mutated forms and the escalation,
mutation or aggravation of such diseases), or interruption or delay in transportation,
UNDERWRITING
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--- page 327 ---
outbreak, escalation, mutation or aggravation of disease, economic sanctions, labour
disputes, strikes, lock-outs, fire, explosion, flooding, earthquake, volcanic eruption, civil
commotion, riots, public disorder, acts of war, outbreak or escalation of hostilities
(whether or not war is declared), acts of God or acts of terrorism (whether or not
responsibility has been claimed)) in or directly or indirectly affecting Hong Kong, the
PRC, the United States, the United Kingdom, Japan, Singapore, the European Union (or
any member thereof), or any other jurisdiction relevant to our Group (collectively, the
“Relevant Jurisdictions”); or
(ii) any change, or any development involving a prospective change, or any event or series
of events or circumstance resulting or likely to result in or representing any change or
development involving a prospective change, in any local, national, regional or
international financial, economic, political, military, industrial, legal, fiscal, regulatory,
currency, credit or market conditions, exchange control or any monetary or trading
settlement system (including conditions in the stock and bond markets, money and
foreign exchange markets, the interbank markets and credit markets) in or directly or
indirectly affecting any Relevant Jurisdictions; or
(iii) any moratorium, suspension or restriction (including any imposition of or requirement for
any minimum or maximum price limit or price range) in or on trading in securities
generally on the Hong Kong Stock Exchange, the Shanghai Stock Exchange, the
Shenzhen Stock Exchange, the Singapore Stock Exchange, the Tokyo Stock Exchange,
the New Y ork Stock Exchange, the NASDAQ Global Market or the London Stock
Exchange; or
(iv) any general moratorium on commercial banking activities in Hong Kong (imposed by the
Financial Secretary or the Hong Kong Monetary Authority or other competent authority),
the PRC, New Y ork (imposed at Federal or New Y ork State level or other competent
authority), London, Singapore, Japan, the European Union (or any member thereof) or
any other Relevant Jurisdiction, or any disruption in commercial banking or foreign
exchange trading or securities settlement or clearance services, procedures or matters in
any Relevant Jurisdiction; or
(v) any new law, or any change or any development involving a prospective change or any
event or circumstance likely to result in a change or a development involving a
prospective change in (or in the interpretation or application by any court or other
competent authority of) existing laws, in each case, in or affecting any of the Relevant
Jurisdictions; or
(vi) the imposition of sanctions, in whatever form, directly or indirectly, under any sanction
laws or regulations, or the withdrawal of trading privileges which existed on the date of
the Hong Kong Underwriting Agreement in, Hong Kong, the PRC or any other Relevant
Jurisdiction; or
(vii) a change or development involving a prospective change in or affecting taxes or exchange
control, currency exchange rates or foreign investment regulations (including a material
devaluation of the Hong Kong dollar or RMB against any foreign currencies and a change
in the system under which the value of the Hong Kong currency is linked to that of the
currency of the United States), or the implementation of any exchange control, in any of
the Relevant Jurisdictions; or
UNDERWRITING
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(viii) any litigation or claim of any third party being threatened or instigated against any
member of our Group or any Director; or
(ix) a contravention by any member of our Group or any Director or any Supervisor of the
Listing Rules or applicable Laws; or
(x) non-compliance of this prospectus and the press announcement to be issued by our
Company in connection with the Hong Kong Public Offering pursuant to the Listing
Rules (or any other documents used in connection with the contemplated offer and sale
of the Offer Shares) or any aspect of the Global Offering with the Listing Rules or any
other applicable Laws; or
(xi) the issue or requirement to issue by our Company of any supplement or amendment to this
prospectus (or to any other documents issued or used in connection with the contemplated
offer and sale of the H Shares) pursuant to the Companies Ordinance or the Companies
(Winding Up and Miscellaneous Provisions) Ordinance or the Listing Rules or any
requirement or request of the Stock Exchange and/or the SFC; or
(xii) any change or development involving a prospective change in, or a materialization of, any
of the risks set out in the section headed “Risk Factors” of this prospectus; or
(xiii) a valid demand by any creditor for repayment or payment of any indebtedness of any
member of our Group or in respect of which any member of our Group is liable prior to
its stated maturity or any loss or damage sustained by that member of our Group
(howsoever caused and whether or not the subject of any insurance or claim against any
person); or
(xiv) an authority or a political body or organisation in any Relevant Jurisdiction (including,
in particular, the CSRC and its local branches and representative offices) commencing
any investigation or other action, or announcing an intention to investigate or take other
action, against any member of our Group or any Director or Supervisor or a member of
our Company’s senior management as named in this prospectus; or
(xv) any order or petition for the winding up or liquidation of any member of our Group (other
than our Company) or any composition or arrangement made by any member of our
Group (other than our Company) with its creditors or a scheme of arrangement entered
into by any member of our Group (other than our Company) or any resolution for the
winding-up of any member of our Group (other than our Company) or the appointment
of a provisional liquidator, receiver or manager over all or part of the material assets or
undertaking of any member of our Group (other than our Company) or anything
analogous thereto occurring in respect of any member of our Group (other than our
Company),
which, individually or in the aggregate, in the sole and absolute opinion of the Joint Sponsors
and the Overall Coordinators (for themselves and on behalf of the Hong Kong Underwriters)
(1) has or will have or may have a material adverse effect on the assets, liabilities, business,
general affairs, management, prospects, shareholders’ equity, profits, losses, results of
operations, position or condition, financial or otherwise, or performance of our Group as a
whole; or (2) has or will have or may have a material adverse effect on the success of the
Global Offering or the level of applications under the Hong Kong Public Offering or the level
of interest under the International Offering; or (3) makes or will make or may make it
inadvisable, inexpedient, impracticable or incapable for any part of the Hong Kong
UNDERWRITING
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--- page 329 ---
Underwriting Agreement, or any part of the Hong Kong Public Offering or the Global Offering,
or the delivery of the Offer Shares, to be performed or implemented or to proceed or to market
the Global Offering in the manner contemplated by this prospectus; or (4) has, will have or may
have the effect of making any part of the Hong Kong Underwriting Agreement (including
underwriting of the Hong Kong Public Offering and/or the Global Offering) impracticable or
incapable of performance in accordance with its terms or preventing or delaying the processing
of applications and/or payments pursuant to the Global Offering or pursuant to the underwriting
thereof (collectively, “Material Adverse Effect”); or
(2) there has come to the notice of the Joint Sponsors and the Overall Coordinators:
(i) that any statement contained in any of the Offering Documents (as defined in the Hong
Kong Underwriting Agreement, the PHIP (as defined in the Hong Kong Underwriting
Agreement), the Preliminary Offering Circular (as defined in the Hong Kong
Underwriting Agreement) and/or in any notices, announcements, advertisements,
communications or other documents issued or used by or on behalf of the Company in
connection with the Hong Kong Public Offering (collectively, the “Offer Related
Documents”) (including any supplement or amendment thereto) was, when it was issued,
or has become, untrue, inaccurate, incorrect in any material aspects or misleading, or that
any forecast, estimate, expression of opinion, intention or expectation contained in any of
the Offer Related Documents (including any supplement or amendment thereto) is not fair
and honest made on reasonable grounds or, where appropriate, and based on reasonable
assumptions with reference to the facts and circumstances then subsisting; or
(ii) that any matter has arisen or has been discovered which would, had it arisen or been
discovered immediately before the date of this prospectus, constitute a material omission
from, or misstatement in, any of the Offer Related Documents (including any supplement
or amendment thereto); or
(iii) any breach of any of the obligations imposed upon our Company or any of the warrantors
in the Hong Kong Underwriting Agreement, the International Underwriting Agreement or
the Cornerstone Investment Agreements; or
(iv) any event, act or omission which gives or is likely to give rise to any liability of any of
the Indemnifying Parties (as defined in the Hong Kong Underwriting Agreement)
pursuant to the provisions of the Hong Kong Underwriting Agreement; or
(v) any adverse change, or any development involving a prospective adverse change, in the
assets, liabilities, business, general affairs, management, prospects, shareholders’ equity,
profits, losses, properties, results of operations, position or condition, financial or
otherwise, or performance of any member of our Group; or
(vi) any Material Adverse Change (as defined in the Hong Kong Underwriting Agreement); or
(vii) any breach of, or any event or matter or arising or has been discovered, or circumstance
rendering untrue, inaccurate, incorrect, incomplete or misleading in any respect, any of
the representations, warranties and undertakings given by the warrantors in the Hong
Kong Underwriting Agreement or the International Underwriting Agreement, as
applicable; or
(viii) the chairman of our Board, the general manager, the chief financial officer, a Director, a
Supervisor or any member of senior management of our Company as named in this
prospectus vacating his or her office; or
UNDERWRITING
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--- page 330 ---
(ix) a prohibition on our Company for whatever reason from offering, allotting, issuing or
selling any of the H Shares (including the H Shares to be issued pursuant to the
Over-allotment Option) pursuant to the terms of the Global Offering; or
(x) that approval by the Listing Committee of the Stock Exchange of the listing of, and
permission to deal in, the H Shares to be issued or sold (including any additional H Shares
that may be issued or sold pursuant to the exercise of the Over-allotment Option) under
the Global Offering is refused or not granted, other than subject to customary conditions,
on or before the Listing Date, or if granted, the approval is subsequently withdrawn,
qualified (other than by customary conditions) or withheld; or
(xi) our Company withdraws any of the Offer Related Documents or the Global Offering; or
(xii) any person named as an expert in this prospectus (other than the Joint Sponsors) has
withdrawn its consent to being named in this prospectus or to the issue of any of this
prospectus and the press announcement to be issued by our Company in connection with
the Hong Kong Public Offering pursuant to the Listing Rules; or
(xiii) a Director or a Supervisor or a member of our Company’s senior management as named
in this prospectus being charged with an indictable offense or prohibited by operation of
law or otherwise disqualified from taking part in the management or taking directorship
of a company or the commencement by any government, political, regulatory body of any
action against any Director in his or her capacity as such or an announcement by any
governmental, political regulatory body that it intends to take any such action; or
(xiv) any order or petition for the winding up or liquidation of our Company or any
composition or arrangement made by our Company with its creditors or a scheme of
arrangement entered into by our Company or any resolution for the winding-up of our
Company or the appointment of a provisional liquidator, receiver or manager over all or
part of the material assets or undertaking of the Company or anything analogous thereto
occurring in respect of the Company; or
(xv) any non-compliance of the CSRC Filings (as defined in the Hong Kong Underwriting
Agreement) with the CSRC Rules (as defined in the Hong Kong Underwriting
Agreement); or
(xvi) that a material portion of the orders placed or confirmed in the book-building process, or
of the investment commitments made by any cornerstone investors under agreements
signed with such cornerstone investors, have been withdrawn, terminated or cancelled.
Undertakings to the Hong Kong Stock Exchange pursuant to the Listing Rules
(A) Undertakings by our Company
Pursuant to Rule 10.08 of the Listing Rules, we have undertaken to the Stock Exchange that no
further Shares or securities convertible into equity securities of the Company (whether or not of a class
already listed) may be issued by the Company or form the subject of any agreement to such an issue within
six months from the Listing Date (whether or not such issue of Shares or securities of the Company will
be completed within six months from the Listing Date) except (a) pursuant to the Global Offering and the
Over-Allotment Option; or (b) in certain circumstances prescribed by Rule 10.08 of the Listing Rules.
UNDERWRITING
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(B) Undertakings by our Controlling Shareholders
In accordance with Rule 10.07(1) of the Listing Rules, each of the Controlling Shareholders has
undertaken to the Stock Exchange and us that, except pursuant to the Global Offering (including the
Over-allotment Option) and the Conversion of Unlisted Shares into H Shares, he/she/it shall not:
(a) in the period commencing on the date by reference to which disclosure of his/her/its
shareholding is made in this prospectus and ending on the date which is six months from the
Listing Date (the “LR First Six-month Period”), dispose of, nor enter into any agreement to
dispose of, or otherwise create any options, rights, interests or encumbrances in respect of, any
of those securities of the Company in respect of which he/she/it is shown by this prospectus
to be the beneficial owner (the “Relevant Securities”); and
(b) in the period of six months commencing from the expiry of the LR First Six-month Period (the
“LR Second Six-month Period”), dispose of, nor enter into any agreement to dispose of, or
otherwise create any options, rights, interests or encumbrances in respect of, any of the
Relevant Securities if, immediately following such disposal or upon the exercise or
enforcement of such options, rights, interests or encumbrances, he/she/it would cease to be the
controlling shareholder (as defined in the Listing Rules) of the Company.
In accordance with Note 3 to Rule 10.07(2) of the Listing Rules, each of the Controlling
Shareholders has also undertaken to the Stock Exchange and us that during the LR First Six-month Period
and the LR Second Six-month Period, he/she/it shall:
(a) when he/she/it pledges or charges any Shares or securities of the Company beneficially owned
by him/her/it in favor of an authorized institution (as defined in the Banking Ordinance,
Chapter 155 of the Laws of Hong Kong) for a bona fide commercial loan, immediately inform
us in writing of such pledge or charge together with the number of such Shares or securities
so pledged or charged; and
(b) when he/she/it receives any indications, either verbal or written, from the pledgee or chargee
that any of the pledged or charged Shares or securities of the Company will be disposed of,
immediately inform the Company in writing of such indications.
We will inform the Stock Exchange as soon as we have been informed of the matters referred to in
paragraphs (a) and (b) above by the Controlling Shareholders and make a public disclosure in relation to
such information by way of an announcement in accordance with the Listing Rules.
Undertakings Pursuant to the Hong Kong Underwriting Agreement
(A) Undertakings by our Company
Except for the offer and sale of the Offer Shares pursuant to the Global Offering (including pursuant
to the Over-allotment Option) or otherwise in compliance with the Listing Rules, during the period
commencing on the date of the Hong Kong Underwriting Agreement and ending on, and including, the
date that is six months after the Listing Date (the “First Six-Month Period”), the Company undertakes to
each of the Joint Sponsors, the Sponsor-Overall Coordinators, the Overall Coordinators, the Joint Global
Coordinators, the Joint Bookrunners, the Joint Lead Managers, the Capital Market Intermediaries and the
Hong Kong Underwriters not to, and to procure each other member of our Group not to, without the prior
written consent of the Joint Sponsors and the Overall Coordinators (for themselves and on behalf of the
Hong Kong Underwriters):
(a) allot, issue, sell, accept subscription for, offer to allot, issue or sell, contract or agree to allot,
issue or sell, mortgage, charge, pledge, hypothecate, lend, grant or sell any option, warrant,
contract or right to subscribe for or purchase, grant or purchase any option, warrant, contract
UNDERWRITING
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or right to allot, issue or sell, or otherwise transfer or dispose of or create an encumbrance over,
or agree to transfer or dispose of or create an encumbrance over, either directly or indirectly,
conditionally or unconditionally, or repurchase, any legal or beneficial interest in any H Shares
or other securities of the Company, or any interest in any of the foregoing (including any
securities convertible into or exchangeable or exercisable for or that represent the right to
receive, or any warrants or other rights to purchase, any H Shares), or deposit any H Shares or
other securities of the Company with a depositary in connection with the issue of depositary
receipts; or
(b) enter into any swap or other arrangement that transfers to another, in whole or in part, any of
the economic consequences of ownership of any H Shares or other securities of our Company,
or any interest in any of the foregoing (including any securities convertible into or
exchangeable or exercisable for or that represent the right to receive, or any warrants or other
rights to purchase, any H Shares); or
(c) enter into any transaction with the same economic effect as any transaction specified in (a) or
(b) above; or
(d) offer to or agree to or announce any intention to effect any transaction specified in (a), (b) or
(c) above,
in each case, whether any of the transactions specified (a), (b) or (c) above is to be settled by delivery of
H Shares or other securities of our Company, or in cash or otherwise (whether or not the issue of such H
Shares or other shares or securities will be completed within the First Six-Month Period). In the event that,
during the period of six months commencing on the date on which the First Six-Month Period expires (the
“Second Six-Month Period”), the Company enters into any of the transactions specified in (a), (b) or (c)
above or offers to or agrees to or announces any intention to effect any such transaction, the Company
shall take all reasonable steps to ensure that it will not create a disorderly or false market in the securities
of our Company. Each of the Controlling Shareholders undertakes to each of the Joint Sponsors, the
Sponsor-Overall Coordinators, the Overall Coordinators, the Joint Global Coordinators, the Joint Lead
Manager, the Joint Bookrunner, the Capital Market Intermediaries and the Hong Kong Underwriters to
procure our Company and each other member of our Group to comply with the undertakings.
(B) Undertakings by our Controlling Shareholders
Each of the Controlling Shareholders jointly and severally undertakes to each of our Company, the
Joint Sponsors, the Sponsor-Overall Coordinators, the Overall Coordinators, the Joint Global
Coordinators, the Joint Bookrunners, the Joint Lead Managers, the Capital Market Intermediaries and the
Hong Kong Underwriters that, except pursuant to the Global Offering (including pursuant to the
Over-allotment Option) or unless in compliance with the requirements of the Listing Rules, without the
prior written consent of the Joint Sponsors and the Overall Coordinators (for themselves and on behalf of
the Hong Kong Underwriters):
(a) he/she/it will not, and will procure that the relevant registered holder(s), any nominee or trustee
holding on trust for him/her/it and the companies controlled by him/her/it will not, at any time
during the First Six-Month Period, (i) sell, offer to sell, contract or agree to sell, mortgage,
charge, pledge, hypothecate, lend, grant or sell any option, warrant, contract or right to
purchase, grant or purchase any option, warrant, contract or right to sell, grant or agree to grant
any option, right or warrant to purchase or subscribe for, lend or otherwise transfer or dispose
of or create an Encumbrance over, or agree to transfer or dispose of or create an encumbrance
over, either directly or indirectly, conditionally or unconditionally, any Shares or other
securities of the Company or any legal or beneficial interest therein that is beneficially owned
UNDERWRITING
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by him/her/it as at the Listing Date (including any securities convertible into or exchangeable
or exercisable for or that represent the right to receive, or any warrants or other rights to
purchase, any such Shares) (the “ Locked-up Securities ”), or deposit any Shares or other
securities of the Company with a depositary in connection with the issue of depositary receipts,
or (ii) enter into any swap or other arrangement that transfers to another, in whole or in part,
any of the economic consequences of ownership of any Locked-up Securities, or (iii) enter into
any transaction with the same economic effect as any transaction specified in (a)(i) or (a)(ii)
above, or (a)(iv) offer to or agree to or announce any intention to effect any transaction
specified in (a)(i), (a)(ii) or (a)(iii) above, in each case, whether any of the transactions
specified in (a)(i), (a)(ii) or (a)(iii) above is to be settled by delivery of Shares or other
securities of the Company or in cash or otherwise (whether or not the settlement or delivery
of such Shares or other securities will be completed within the First Six-Month Period or the
Second Six Month Period);
(b) he/she/it will not, during the Second Six-Month Period, enter into any of the transactions
specified in (a)(i), (a)(ii) or (a)(iii) or (a)(iv) above or offer to or agree to or contract or publicly
announce any intention to effect any such transaction if, immediately following any sale,
transfer or disposal or upon the exercise or enforcement of any option, right, interest or
encumbrance pursuant to such transaction, he/she/it will, individually or collectively with the
other Controlling Shareholders, as applicable, cease to be a “controlling shareholder” (as the
term is defined in the Listing Rules) of the Company;
(c) until the expiry of the Second Six-Month period, in the event that he/she/it enters into any of
the transactions specified in (a)(i), (a)(ii) or (a)(iii) above or offer to or agrees to or announces
any intention to effect any such transaction, he/she/it will take all reasonable steps to ensure
that he/she/it will not create a disorderly or false market in the securities of the Company;
(d) at any time during the First Six-Month Period and the Second Six-Month Period, he/she/it or
any relevant registered holder will (i) if and when he/she/it pledges or charges any Shares or
other securities (or interest therein) of the Company beneficially owned by him/her/it,
immediately inform the Company, the Joint Sponsors and the Overall Coordinators in writing
of such pledge or charge together with the number of Shares or other securities of the Company
so pledged or charged; and (ii) if and when it or any relevant registered holder receives
indications, either verbal or written, from any pledgee or chargee that any of the pledged or
charged Shares or other securities (or interest therein) of the Company will be disposed of,
immediately inform the Company, the Joint Sponsors and the Overall Coordinators in writing
of such indications.
Indemnity
Each of our Company and the Controlling Shareholders has agreed to indemnify each of the Joint
Sponsors, the Overall Coordinators, the Joint Global Coordinators, the Joint Bookrunners, the Joint Lead
Managers, the Hong Kong Underwriters and the Capital Market Intermediaries for certain losses which
they may suffer, including any breach by them, respectively, of the Hong Kong Underwriting Agreement
or certain provisions thereof.
UNDERWRITING
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Underwriting Commission and Expenses
Our Company will pay an underwriting commission of 2.85% of the aggregate Offer Price of all the
Offer Shares, including Offer Shares to be issued pursuant to the Over-allotment Option (the “Fixed
Fees”). Our Company may, at our sole and absolute discretion, pay an incentive fee of up to 1.00% of the
Offer Price in respect of all the Offer Shares (including Offer Shares to be issued pursuant to the
Over-allotment Option) (the “Discretionary Fees”). The ratio of Fixed Fees and Discretionary Fees
payable is therefore 74%:26% (on the basis that the Discretionary Fees will be fully paid). For
unsubscribed Hong Kong Offer Shares reallocated to the International Offering, we will pay an
underwriting commission at the rate applicable to the International Offering and such commission will be
paid to the relevant International Underwriters and not the Hong Kong Underwriters.
The aggregate commissions and fees, together with the listing fees, SFC transaction levy, the Stock
Exchange trading fee, AFRC transaction levy, legal and other professional fees, printing and other
expenses payable by us relating to the Global Offering are estimated to amount to approximately RMB49.8
million (approximately HK$54.2 million) in total (based on the Offer Price of HK$9.90 per Offer Share
which is the mid-point of the Offer Price range and assuming the Over-allotment Option is not exercised).
Hong Kong Underwriters’ interests in our Company
Save for their respective obligations under the Hong Kong Underwriting Agreement and as disclosed
in this prospectus, as of the Latest Practicable Date, none of the Hong Kong Underwriters is interested
directly or indirectly in any Shares or securities in our Company or any other member of the Group or has
any right or option (whether legally enforceable or not) to subscribe for, or to nominate persons to
subscribe for, any Shares or securities in our Company or any other member of the Group.
Following completion of the Global Offering, the Hong Kong Underwriters and their affiliated
companies may hold a certain portion of the H Shares as a result of fulfilling their obligations under the
Hong Kong Underwriting Agreement.
International Offering
In connection with the International Offering, we expect to enter into the International Underwriting
Agreement with, among others, the International Underwriters. Under the International Underwriting
Agreement, the International Underwriters would, subject to certain conditions, severally but not jointly
agree to purchase the International Offer Shares or procure purchasers for the International Offer Shares
initially being offered pursuant to the International Offering.
Under the International Underwriting Agreement, we intend to grant to the International
Underwriters the Over-allotment Option, exercisable in whole or in part at one or more times, at the sole
and absolute discretion of the Joint Global Coordinators and Overall Coordinators on behalf of the
International Underwriters from the date of the International Underwriting Agreement until 30 days from
the last day for the lodging of applications under the Hong Kong Public Offering to require us to allot and
issue up to an aggregate of 4,800,000 additional H Shares, representing approximately 15.0% of the
number of Offer Shares initially available under the Global Offering at the Offer Price to cover
over-allocations in the International Offering, if any.
The International Underwriting Agreement is conditional on and subject to the Hong Kong
Underwriting Agreement having been executed, becoming unconditional and not having been terminated.
It is expected that undertakings similar to those given to the Hong Kong Underwriters will be given by
our Company to the International Underwriters under the International Underwriting Agreement.
UNDERWRITING
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ACTIVITIES BY SYNDICATE MEMBERS
We describe below a variety of activities that underwriters of the Hong Kong Public Offering and
the International Offering, together referred to as “Syndicate Members”, may each individually undertake,
and which do not form part of the underwriting or the stabilizing process. When engaging in any of these
activities, it should be noted that the Syndicate Members are subject to restrictions, including the
following:
(a) under the agreement among the Syndicate Members, all of them (other than the Stabilizing
Manager or any person acting for it) must not, in connection with the distribution of the Offer
Shares, effect any transactions (including issuing or entering into any option or other derivative
transactions relating to the Offer Shares), whether in the open market or otherwise, with a view
to stabilizing or maintaining the market price of any of the Offer Shares at levels other than
those which might otherwise prevail in the open market; and
(b) all of them must comply with all applicable laws, including the market misconduct provisions
of the SFO, including the provisions prohibiting insider dealing, false trading, price rigging and
stock market manipulation.
The Syndicate Members and their affiliates are diversified financial institutions with relationships in
countries around the world. These entities engage in a wide range of commercial and investment banking,
brokerage, funds management, trading, hedging, investing and other activities for their own account and
for the account of others. In relation to the H Shares, those activities could include acting as agent for
buyers and sellers of the H Shares, entering into transactions with those buyers and sellers in a principal
capacity, proprietary trading in the H Shares and entering into over-the-counter or listed derivative
transactions or listed and unlisted securities transactions (including issuing securities such as derivative
warrants listed on a stock exchange) which have the H Shares as their or part of their underlying assets.
Those activities may require hedging activity by those entities involving, directly or indirectly, buying and
selling the H Shares.
All such activities could occur in Hong Kong and elsewhere in the world and may result in the
Syndicate Members and their affiliates holding long and/or short positions in the H Shares, in baskets of
securities or indices including the H Shares, in units of funds that may purchase the H Shares, or in
derivatives related to any of the foregoing.
In relation to issues by Syndicate Members or their affiliates of any listed securities having the
Shares as their or part of their underlying assets, whether on the Stock Exchange or on any other stock
exchange, the rules of the relevant exchange may require the issuer of those securities (or one of its
affiliates or agents) to act as a market maker or liquidity provider in the security, and this will also result
in hedging activity in the Shares in most cases.
All of these activities may occur both during and after the end of the stabilizing period described
under the section headed “Structure of the Global Offering—Stabilizing Action” in this prospectus. These
activities may affect the market price or value of the H Shares, the liquidity or trading volume in the H
Shares and the volatility of their share price, and the extent to which this occurs from day to day cannot
be estimated.
JOINT SPONSORS’ INDEPENDENCE
Each of the Joint Sponsors satisfies the independence criteria applicable to sponsors as set out in
Rule 3A.07 of the Listing Rules.
UNDERWRITING
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THE GLOBAL OFFERING
This prospectus is published in connection with the Hong Kong Public Offering as part of the Global
Offering. The Global Offering comprises of:
(a) the Hong Kong Public Offering of initially 3,200,000 Offer Shares (subject to reallocation) in
Hong Kong as described in the paragraph headed “—The Hong Kong Public Offering” in this
section; and
(b) the International Offering of an aggregate of 28,800,000 Offer Shares (subject to reallocation
and the Over-allotment Option) outside the United States in offshore transactions in reliance
on Regulation S.
Investors may apply for Hong Kong Offer Shares under the Hong Kong Public Offering or apply for
or indicate an interest, if qualified to do so, for the International Offer Shares under the International
Offering, but may not do both.
The number of Hong Kong Offer Shares and International Offer Shares to be offered under the Hong
Kong Public Offering and the International Offering respectively may be subject to reallocation as
described in the paragraph headed “—Pricing and Allocation” in this section.
References in this prospectus to applications, application monies or the procedure for application
relate solely to the Hong Kong Public Offering.
THE HONG KONG PUBLIC OFFERING
Number of Hong Kong Offer Shares initially offered
We are initially offering 3,200,000 Hong Kong Offer Shares at the Offer Price, representing 10.0%
of the total number of Offer Shares initially available under the Global Offering, at the Offer Price for
subscription by the public in Hong Kong. Subject to the reallocation of Shares between (i) the
International Offering, and (ii) the Hong Kong Public Offering, the Hong Kong Offer Shares will represent
approximately 0.69% of our Company’s enlarged issued share capital immediately after completion of the
Global Offering, assuming that the Over-allotment Option is not exercised.
The Hong Kong Public Offering is open to members of the public in Hong Kong as well as to
institutional and professional investors. Professional investors generally include brokers, dealers and
companies (including fund managers) whose ordinary business involves dealing in shares and other
securities, and corporate entities which regularly invest in shares and other securities.
Completion of the Hong Kong Public Offering is subject to the conditions as set out in the paragraph
headed “—Conditions of the Global Offering” in this section.
Allocation
Allocation of Shares to investors under the Hong Kong Public Offering will be based solely on the
level of valid applications received under the Hong Kong Public Offering. The basis of allocation may
vary, depending on the number of Hong Kong Offer Shares validly applied for by applicants. Such
allocation could, where appropriate, consist of balloting, which would mean that some applicants may
receive a higher allocation than others who have applied for the same number of Hong Kong Offer Shares,
and those applicants who are not successful in the ballot may not receive any Hong Kong Offer Shares.
STRUCTURE OF THE GLOBAL OFFERING
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The total number of Hong Kong Offer Shares available under the Hong Kong Public Offering (after
taking account of any reallocation referred to below) will be divided into two pools (with any odd board
lots being allocated to pool A) for allocation purposes.
(a) Pool A : The Hong Kong Offer Shares in Pool A will be allocated on an equitable basis to
applicants who have applied for Hong Kong Offer Shares with an aggregate price of HK$5
million (excluding the brokerage, SFC transaction levy, the Stock Exchange trading fee and the
AFRC transaction levy payable) or less.
(b) Pool B : The Hong Kong Offer Shares in Pool B will be allocated on an equitable basis to
applicants who have applied for Hong Kong Offer Shares with an aggregate price of more than
HK$5 million (excluding the brokerage, SFC transaction levy, the Stock Exchange trading fee
and the AFRC transaction levy payable) and up to the total value of pool B.
For the purpose of this sub-section only, the “subscription price” for Hong Kong Offer Shares means
the price payable on application (without regard to the Offer Price as finally determined).
Applicants should be aware that applications in Pool A and applications in Pool B may receive
different allocation ratios. If Hong Kong Offer Shares in one (but not both) of the two pools are
undersubscribed, the surplus Hong Kong Offer Shares will be transferred to the other pool to satisfy
demand in that other pool and be allocated accordingly.
Applicants can only receive an allocation of Hong Kong Offer Shares from either Pool A or Pool B,
but not from both pools. Multiple or suspected multiple applications and any application for more than
1,600,000 Hong Kong Offer Shares will be rejected.
Reallocation and Clawback
The allocation of the Offer Shares between the Hong Kong Public Offering and the International
Offering is subject to the reallocation. Paragraph 4.2 of Practice Note 18 of the Listing Rules requires a
clawback mechanism to be put in place which would have the effect of increasing the number of Offer
Shares under the Hong Kong Public Offering to a certain percentage of the total number of Offer Shares
offered under the Global Offering if the International Offering is fully subscribed or oversubscribed and
the certain prescribed total demand levels are reached under the Hong Kong Public Offering, subject to
the following:
(a) If the number of the Offer Shares validly applied for under the Hong Kong Public Offering
represents 15 times or more but less than 50 times the number of the Offer Shares initially
available for subscription under the Hong Kong Public Offering, then the Offer Shares will be
reallocated to the Hong Kong Public Offering from the International Offering, so that the total
number of the Offer Shares available under the Hong Kong Public Offering will be 9,600,000
Offer Shares, representing 30% of Offer Shares initially available under the Global Offering.
(b) If the number of the Offer Shares validly applied for under the Hong Kong Public Offering
represents 50 times or more but less than 100 times the number of the Offer Shares initially
available for subscription under the Hong Kong Public Offering, then the number of Offer
Shares to be reallocated to the Hong Kong Public Offering from the International Offering will
be increased so that the total number of the Offer Shares available under the Hong Kong Public
Offering will be 12,800,000 Offer Shares, representing 40% of the Offer Shares initially
available under the Global Offering.
STRUCTURE OF THE GLOBAL OFFERING
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(c) If the number of the Offer Shares validly applied for under the Hong Kong Public Offering
represents 100 times or more the number of the Offer Shares initially available for subscription
under the Hong Kong Public Offering, then the number of Offer Shares to be reallocated to the
Hong Kong Public Offering from the International Offering will be increased, so that the total
number of Offer Shares available under the Hong Kong Public Offering will be 16,000,000
Offer Shares, representing 50% of Offer Shares initially available under the Global Offering.
The Offer Shares to be offered in the Hong Kong Public Offering and the International Offering may,
in certain circumstances, be reallocated as between these offerings at the discretion of the Joint Global
Coordinators and the Overall Coordinators. Subject to the foregoing paragraph, the Joint Global
Coordinators and the Overall Coordinators may in their discretion reallocate Shares from the International
Offering to the Hong Kong Public Offering to satisfy valid applications under the Hong Kong Public
Offering. In addition, if the Hong Kong Public Offering is not fully subscribed, the Joint Global
Coordinators and Overall Coordinators will have the discretion (but shall not be under any obligation) to
reallocate to the International Offering all or any unsubscribed Hong Kong Offer Shares in such amounts
as they deem appropriate.
In each case, the additional Offer Shares reallocated to the Hong Kong Public Offering will be
allocated between Pool A and Pool B and the number of Offer Shares allocated to the International
Offering will be correspondingly reduced in such manner as the Joint Global Coordinators and the Overall
Coordinators deem appropriate. In the event of reallocation of Offer Shares between the International
Offering and the Hong Kong Public Offering in the circumstances where (a) the International Offer Shares
are fully subscribed or oversubscribed and the Hong Kong Offer Shares are fully subscribed or
oversubscribed by less than 15 times the number of the Offer Shares initially available for subscription
under the Hong Kong Public Offering, or (b) the International Offer Shares are undersubscribed and the
Hong Kong Offer Shares are fully subscribed or oversubscribed irrespective of the number of times, then
up to 3,200,000 Offer Shares may be reallocated from the International Offering to the Hong Kong Public
Offering, so that the total number of Offer Shares available for subscription under the Hong Kong Public
Offering will increase up to 6,400,000 Offer Shares, representing two times the number of Hong Kong
Offer Shares initially available under the Hong Kong Public Offering and 20% of the number of the Offer
Shares initially available under the Global Offering (before any exercise of the Over-allotment Option),
and the Offer Price shall be fixed at HK$8.80 per Offer Share (being the low-end of the indicative Offer
Price range) in accordance with Guidance Letter HKEX-GL91-18.
Applications
Each applicant under the Hong Kong Public Offering will also be required to give an undertaking
and confirmation in the application submitted by him that he and any person(s) for whose benefit he is
making the application has not applied for or taken up, or indicated an interest in, and will not apply for
or take up, or indicate an interest in, any International Offer Shares under the International Offering, and
such applicant’s application is liable to be rejected if the said undertaking and/or confirmation is breached
and/or untrue (as the case may be) or it has been or will be placed or allocated International Offer Shares
under the International Offering.
Applicants under the Hong Kong Public Offering are required to pay, on application, the maximum
price of HK$11.00 per Offer Share in addition to the brokerage, SFC transaction levy, the Stock Exchange
trading fee and the AFRC transaction levy payable on each Offer Share. If the Offer Price, as finally
determined in the manner described in the paragraph headed “—Pricing and Allocation” in this section,
is less than the maximum price of HK$11.00 per Offer Share, appropriate refund payments (including the
brokerage, SFC transaction levy, the Stock Exchange trading fee and the AFRC transaction levy
attributable to the surplus application monies) will be made to successful applicants who have applied
through the HK eIPO White Form service, without interest. Further details are set out below in the
section headed “How to Apply for Hong Kong Offer Shares” in this prospectus.
References in this prospectus to applications, application monies or the procedure for application
relate solely to the Hong Kong Public Offering.
STRUCTURE OF THE GLOBAL OFFERING
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THE INTERNATIONAL OFFERING
Number of Offer Shares initially offered
Subject to the reallocation as described above, the number of Offer Shares to be initially offered
under the International Offering will be 28,800,000 Offer Shares (subject to reallocation and the
Over-allotment Option), representing 90.0% of the total number of Offer Shares initially available under
the Global Offering.
Subject to the reallocation of the Offer Shares between the International Offering and the Hong Kong
Public Offering, the number of Offer Shares initially offered under the International Offering will
represent approximately 6.19% of our Company’s enlarged issued share capital immediately after
completion of the Global Offering, assuming that the Over-allotment Option is not exercised.
Allocation
Pursuant to the International Offering, the International Underwriters will conditionally place the
International Offer Shares with institutional and professional investors and other investors and expected
to have a sizeable demand for the Shares in Hong Kong and other jurisdictions outside the United States
in offshore transactions in reliance on Regulation S. The International Offering is subject to the Hong
Kong Public Offering being unconditional.
Allocation of Offer Shares pursuant to the International Offering will be effected in accordance with
the “book-building” process described in the paragraph headed “—Pricing and Allocation” in this section
and based on a number of factors, including the level and timing of demand, total size of the relevant
investor’s invested assets or equity assets in the relevant sector and whether or not it is expected that the
relevant investor is likely to buy further, and/or hold or sell, the Offer Shares, after the Listing. Such
allocation is intended to result in a distribution of the Offer Shares on a basis which would lead to the
establishment of a solid Shareholder base to the benefit of our Company and our Shareholders as a whole.
The Overall Coordinators (for themselves and on behalf of the Underwriters) and the Joint Sponsors
may require any investor who has been offered Offer Shares under the International Offering and who has
made an application under the Hong Kong Public Offering, to provide sufficient information to the Overall
Coordinators and the Joint Sponsors so as to allow them to identify the relevant applications under the
Hong Kong Public Offering and to ensure that they are excluded from any application of Offer Shares
under the Hong Kong Public Offering.
Reallocation and Clawback
The total number of Offer Shares to be issued or sold pursuant to the International Offering may
change as a result of the clawback arrangement described in the paragraph headed “—The Hong Kong
Public Offering—Reallocation and Clawback” in this section, the exercise of the Over-allotment Option
in whole or in part described in the paragraph headed “—Over-allotment Option” in this section, and any
reallocation of unsubscribed Offer Shares originally included in the Hong Kong Public Offering and/or
any Offer Shares from the International Offering to the Hong Kong Public Offering at the discretion of
the Overall Coordinators.
STRUCTURE OF THE GLOBAL OFFERING
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Over-allotment Option
In connection with the Global Offering, it is expected that our Company will grant the
Over-allotment Option to the International Underwriters, which will be exercisable by the Overall
Coordinators (for themselves and on behalf of the International Underwriters).
Pursuant to the Over-allotment Option, the International Underwriters have the right, exercisable by
the Overall Coordinators (on behalf of the International Underwriters) at any time from the Listing Date
to the 30th day after the last day for lodging applications under the Hong Kong Public Offering, to require
our Company to issue and allot up to 4,800,000 Offer Shares, representing 15.0% of the maximum number
of Offer Shares initially available under the Global Offering, at the Offer Price under the International
Offering, to cover over-allocations in the International Offering, if any.
If the Over-allotment Option is exercised in full, the additional International Offer Shares to be
issued pursuant thereto will represent approximately 1.02% of our Company’s enlarged issued share
capital immediately following the completion of the Global Offering and the exercise of the Over-
allotment Option. In the event that the Over-allotment Option is exercised, an announcement will be made.
STABILIZATION ACTION
Stabilization is a practice used by underwriters in some markets to facilitate the distribution of
securities. To stabilize, the underwriters may bid for, or purchase, the securities in the secondary market,
during a specified period of time, to curb and, if possible, prevent any decline in the market price of the
securities below the Offer Price. It may be effected in jurisdictions where it is permissible to do so and
subject to all applicable laws and regulatory requirements. In Hong Kong and certain other jurisdictions,
activity aimed at reducing the market price is prohibited. The price at which stabilization is effected is not
permitted to exceed the Offer Price.
In connection with the Global Offering, the Stabilizing Manager, its affiliates or any person acting
for it, on behalf of the Underwriters, may to the extent permitted by applicable laws of Hong Kong or
elsewhere, over-allocate or effect short sales or any other stabilizing transactions with a view to stabilizing
or maintaining the market price of the Offer Shares at a level higher than that which might otherwise
prevail in the open market for a limited period after the last day of the lodging of applications under the
Hong Kong Public Offering. Short sales involve the sale by the Stabilizing Manager of a greater number
of H Shares than the Underwriters are required to purchase in the Global Offering. “Covered” short sales
are sales made in an amount not greater than the Over-allotment Option. The Stabilizing Manager may
close out the covered short position by either exercising the Over-allotment Option to purchase additional
Offer Shares or purchasing H Shares in the open market. In determining the source of the Offer Shares to
close out the covered short position, the Stabilizing Manager will consider, among other things, the price
of Offer Shares in the open market as compared to the price at which they may purchase additional Offer
Shares pursuant to the Over-allotment Option. Stabilizing transactions consist of certain bids or purchases
made for the purpose of preventing or curbing a decline in the market price of the Offer Shares while the
Global Offering is in progress. Any market purchases of the Shares will be effected on any stock exchange,
including the Stock Exchange, any over-the-counter market or otherwise, provided that they are made in
compliance with all applicable laws, rules and regulatory requirements. However, there is no obligation
on the Stabilizing Manager or any person acting for it to conduct any such stabilizing action. Such
stabilizing activity, if commenced, will be done at the absolute discretion of the Stabilizing Manager and
may be discontinued at any time.
STRUCTURE OF THE GLOBAL OFFERING
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Any such stabilizing activity is required to be brought to an end within 30 days of the last day for
the lodging of applications under the Hong Kong Public Offering. The number of Offer Shares that may
be over-allocated will not exceed the number of Offer Shares that may be sold under the Over-allotment
Option, namely, 4,800,000 Offer Shares, which is 15.0% of the number of Offer Shares initially available
under the Global Offering, and cover such over-allocations by exercising the Over-allotment Option or by
making purchases in the secondary market at prices that do not exceed the Offer Price or a combination
of these means.
In Hong Kong, stabilizing activities must be carried out in accordance with the Securities and
Futures (Price Stabilizing) Rules. Stabilizing actions permitted pursuant to the Securities and Futures
(Price Stabilizing) Rules (Chapter 571W of the Laws of Hong Kong) under the SFO include:
(a) over-allocation for the purpose of preventing or minimizing any reduction in the market price
of our H Shares;
(b) selling or agreeing to sell the H Shares so as to establish a short position in them for the
purpose of preventing or minimizing any reduction in the market price of the H Shares;
(c) purchasing or subscribing for, or agreeing to purchase or subscribe for, our H Shares pursuant
to the Over-allotment Option in order to close out any position established under (a) or (b)
above;
(d) purchasing, or agreeing to purchase, any of the H Shares for the sole purpose of preventing or
minimizing any reduction in the market price of the H Shares;
(e) selling or agreeing to sell any of our H Shares in order to liquidate any position held as a result
of those purchases; and
(f) offering or attempting to do anything as described in (b), (c), (d) or (e) above.
Stabilizing actions by the Stabilizing Manager, or any person acting for it, will be entered into in
accordance with the laws, rules and regulations in place in Hong Kong on stabilization.
Prospective applicants for and investors in the Offer Shares should note that:
(a) the Stabilizing Manager or any person acting for it may, in connection with the stabilizing
action, maintain a long position in the Offer Shares;
(b) there is no certainty as to the extent to which and the time or period for which the Stabilizing
Manager or any person acting for it will maintain such a long position;
(c) liquidation of any such long position by the Stabilizing Manager or any person acting for it and
selling in the open market, may have an adverse impact on the market price of our Shares;
(d) no stabilizing action can be taken to support the price of our H Shares for longer than the
stabilization period, which will begin on the Listing Date, and is expected to expire on the 30th
day after the last date for lodging applications under the Hong Kong Public Offering. After this
date, when no further stabilizing action may be taken, demand for our Shares, and therefore the
price of our H Shares, could fall;
STRUCTURE OF THE GLOBAL OFFERING
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(e) the price of our H Shares cannot be assured to stay at or above the Offer Price by the taking
of any stabilizing action; and
(f) stabilizing bids or transactions effected in the course of the stabilizing action may be made at
any price at or below the Offer Price and can, therefore, be done at a price below the price paid
by applicants for, or investors in, the Offer Shares.
As a result of effecting transactions to stabilize or maintain the market price of the H Shares, the
Stabilizing Manager, or any person acting for it, may maintain a long position in the H Shares. The size
of the long position, and the period for which the Stabilizing Manager, or any person acting for it, will
maintain the long position is at the discretion of the Stabilizing Manager and is uncertain. In the event that
the Stabilizing Manager liquidates this long position by making sales in the open market, this may lead
to a decline in the market price of the H Shares.
Stabilizing action by the Stabilizing Manager, or any person acting for it, is not permitted to support
the price of the H Shares for longer than the stabilizing period, which begins on the day on which trading
of the H Shares commences on the Stock Exchange and ends on the 30th day after the last day for the
lodging of applications under the Hong Kong Public Offering. The stabilizing period is expected to end
on Saturday, January 6, 2024. As a result, demand for the H Shares and their market price, may fall after
the end of the stabilizing period. These activities by the Stabilizing Manager may stabilize, maintain or
otherwise affect the market price of the H Shares. A public announcement in compliance with the
Securities and Futures (Price Stabilizing) Rules will be made within seven days of the expiration of the
stabilizing period.
PRICING AND ALLOCATION
Determining the Offer Price
The International Underwriters will be soliciting from prospective investors’ indications of interest
in acquiring Offer Shares in the International Offering. Prospective professional and institutional investors
will be required to specify the number of Offer Shares under the International Offering they would be
prepared to acquire either at different prices or at a particular price. This process, known as
“book-building”, is expected to continue up to, and to cease on or around, the last day for lodging
applications under the Hong Kong Public Offering.
Pricing for the Offer Shares for the purpose of the various offerings under the Global Offering will
be fixed on the Price Determination Date, which is expected to be on or around Friday, December 8, 2023
and, in any event, no later than 12:00 noon on Friday, December 8, 2023, by agreement between the
Overall Coordinators (for themselves and on behalf of the Underwriters), and our Company and the
number of Offer Shares to be allocated under the various offerings will be determined shortly thereafter.
The Offer Price per Offer Share under the Hong Kong Public Offering will be identical to the Offer
Price per Offer Share under the International Offering based on the Hong Kong dollar price per Offer
Share under the International Offering, as determined by the Overall Coordinators, for themselves and on
behalf of the Underwriters, and our Company.
The Offer Price will not be more than HK$11.00 per Offer Share and is expected to be not less than
HK$8.80 per Offer Share, unless otherwise announced by the Company no later than the morning of the
last day for lodging applications under the Hong Kong Public Offering, as further explained below.
Prospective investors should be aware that the Offer Price to be determined on the Price
Determination Date may be, but is not expected to be, lower than the indicative Offer Price range
stated in this prospectus.
STRUCTURE OF THE GLOBAL OFFERING
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The Overall Coordinators, for themselves and on behalf of the Underwriters, and the Joint Sponsors,
may, where considered appropriate, based on the level of interest expressed by prospective professional
and institutional investors during the book-building process, and with the consent of our Company, reduce
the number of Offer Shares and/or the indicative Offer Price range as stated in this prospectus at any time
on or prior to the morning of the last day for lodging applications under the Hong Kong Public Offering.
In such case, we will, as soon as practicable following the decision to make such reduction, and in any
event not later than the morning of the day which is the last day for lodging applications under the Hong
Kong Public Offering, cause to be published on the website of the Stock Exchange at www.hkexnews.hk
and the Company at http://www.yanzhiwu.com , notices of the reduction of the Offer Shares and/or the
indicative Offer Price range, and the cancellation of the Global Offering and relaunch of the offer at the
revised number of Offer Shares and/or the revised Offer Price. The Company will also, as soon as
practicable following the decision to make such change, issue a supplemental prospectus or a new
prospectus updating investors of the change in the number of Offer Shares being offered under the Global
Offering and/or the Offer Price, and giving investors at least three business days to consider the new
information. The supplemental or new prospectus should include at least the following: updated (i) Offer
Price and market capitalization; (ii) listing timetable and underwriting obligations; (iii) price/earning
multiple, unaudited pro forma and adjusted net tangible assets; and (iv) use of proceeds and working
capital adequacy confirmation based on revised proceeds. In the absence of any such supplemental or new
prospectus so published, the number of Offer Shares will not be reduced and the Offer Price, if agreed
upon by the Overall Coordinators, for themselves and on behalf of the Underwriters, and our Company,
will under no circumstances be set outside the Offer Price range as stated in this prospectus.
If there is any change to the offer size due to change in the number of Offer Shares initially offered
in the Global Offering (other than pursuant to the exercise of the Over-allotment Option and/or
reallocation mechanism as disclosed in this prospectus), or change to the Offer Price which leads to the
resulting price falling outside the indicative Offer Price range as stated in this prospectus, or if the
Company becomes aware that there has been a significant change affecting any matter contained in this
prospectus or a significant new matter has arisen, the inclusion of information in respect of which would
have been required to be in this prospectus if it had arisen before this prospectus was issued, after the issue
of this prospectus and before the commencement of dealings in our H Shares as prescribed under Rule
11.13 of the Listing Rules, we are required to cancel the Global Offering and relaunch the offer and issue
a supplemental prospectus or a new prospectus.
In the event of a reduction in the number of Offer Shares, the Overall Coordinators and the Joint
Sponsors may, at their discretion, reallocate the number of Offer Shares to be offered in the Hong Kong
Public Offering and the International Offering.
The final Offer Price, the level of indications of interest in the Global Offering, the results of
allocations and the basis of allotment of the Hong Kong Offer Shares are expected to be announced on
Monday, December 11, 2023 on the website of the Stock Exchange at www.hkexnews.hk and on the
website of our Company at http://www.yanzhiwu.com .
UNDERWRITING
The Hong Kong Public Offering is fully underwritten by the Hong Kong Underwriters under the
terms of the Hong Kong Underwriting Agreement and is subject to our Company and the Overall
Coordinators, for themselves and on behalf of the Underwriters, agreeing on the Offer Price.
We expect to enter into the International Underwriting Agreement relating to the International
Offering on or around the Price Determination Date.
These underwriting arrangements, and the Hong Kong Underwriting Agreement and the International
Underwriting Agreement, are summarized in the section headed “Underwriting” in this prospectus.
STRUCTURE OF THE GLOBAL OFFERING
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CONDITIONS OF THE GLOBAL OFFERING
Acceptance of all applications for Offer Shares pursuant to the Global Offering will be conditional
on:
(a) the Listing Committee granting approval for the listing of, and permission to deal in, the H
Shares in issue and to be issued pursuant to the Global Offering (including the additional Offer
Shares which may be issued pursuant to the exercise of the Over-allotment Option), and such
listing and permission not subsequently having been revoked prior to the commencement of
dealings in the H Shares on the Stock Exchange;
(b) the Offer Price having been duly agreed between the Overall Coordinators (for themselves and
on behalf of the Underwriters) and the Company;
(c) the execution and delivery of the International Underwriting Agreement on or about the Price
Determination Date; and
(d) the obligations of the Underwriters under the respective Underwriting Agreements becoming
and remaining unconditional (including, if relevant, as a result of the waiver of any conditions
by the Joint Global Coordinators and the Overall Coordinators, for themselves and on behalf
of the Underwriters) and not having been terminated in accordance with the terms of the
respective agreements in each case on or before the dates and times as specified in the
Underwriting Agreements (unless and to the extent such conditions are validly waived on or
before such dates and times) and in any event no later than Saturday, December 30, 2023 (i.e.,
the 30th day after the date of this prospectus).
If, for any reason, the Offer Price is not agreed between our Company and the Overall Coordinators
(for themselves and on behalf of the Underwriters) by 12:00 noon on Friday, December 8, 2023, the Global
Offering will not proceed and will lapse immediately.
The completion of each of the Hong Kong Public Offering and the International Offering is
conditional upon, among other things, the other offering becoming unconditional and not having been
terminated in accordance with their respective terms.
If the above conditions are not fulfilled or waived prior to the times and dates specified, the Global
Offering will lapse and the Stock Exchange will be notified immediately. Notice of the lapse of the Hong
Kong Public Offering will be published by our Company and on the websites of Stock Exchange at
www.hkexnews.hk and our Company at http://www.yanzhiwu.com on the next Business Day following
such lapse. In such eventuality, all application monies will be returned, without interest, on the terms set
out in the section headed “How to Apply for Hong Kong Offer Shares—D. Despatch/Collection of H Share
Certificates and Refund of Application Monies”. In the meantime, all application monies will be held in
separate bank account(s) with the receiving bankers or other bank(s) in Hong Kong licensed under the
Banking Ordinance (Chapter 155 of the Laws of Hong Kong) (as amended).
The consummation of each of the Hong Kong Public Offering and the International Offering is
conditional upon, amongst other things, the other becoming unconditional and not having been terminated
in accordance with its terms.
H Share certificates for the Offer Shares will only become valid evidence of title at 8:00 a.m. on the
Listing Date provided that (i) the Global Offering has become unconditional in all respects, and (ii) the
right of termination as described in the section headed “Underwriting—Underwriting Arrangements and
Expenses—Hong Kong Public Offering—Grounds for Termination” has not been exercised. Investors who
trade the H Shares prior to the receipt of H Share certificates or prior to the H Share certificates bearing
valid evidence of title do so entirely at their own risk.
STRUCTURE OF THE GLOBAL OFFERING
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Application for Listing on the Stock Exchange
We have applied to the Listing Committee for the granting of the listing of, and permission to deal
in, the H Shares in issue and to be issued pursuant to the Global Offering (including any H Shares which
may be issued pursuant to the exercise of the Over-allotment Option) on the Main Board of the Stock
Exchange and the Conversion of Unlisted Shares into H Shares.
SHARES WILL BE ELIGIBLE FOR CCASS
All necessary arrangements have been made enabling the H Shares to be admitted into CCASS,
established and operated by HKSCC.
If the Stock Exchange grants the listing of, and permission to deal in, the H Shares and our Company
complies with the stock admission requirements of HKSCC, the H Shares will be accepted as eligible
securities by HKSCC for deposit, clearance and settlement in CCASS with effect from the date of
commencement of dealings in the H Shares on the Stock Exchange or any other date HKSCC chooses.
Settlement of transactions between participants of the Stock Exchange is required to take place in CCASS
on the second settlement day after any trading day.
All activities under CCASS are subject to the General Rules of HKSCC and HKSCC Operational
Procedures in effect from time to time.
DEALING ARRANGEMENTS
Assuming that the Hong Kong Public Offering becomes unconditional at or before 8:00 a.m. in Hong
Kong on Tuesday, December 12, 2023, it is expected that dealings in the H Shares on the Stock Exchange
will commence at 9:00 a.m. on Tuesday, December 12, 2023.
The H Shares will be traded in board lots of 400 H Shares each and the stock code of the H Shares
will be 1497.
STRUCTURE OF THE GLOBAL OFFERING
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IMPORTANT NOTICE TO INVESTORS
OF HONG KONG OFFER SHARES
FULLY ELECTRONIC APPLICATION PROCESS
We have adopted a fully electronic application process for the Hong Kong Public Offering
and below are the procedures for application.
This prospectus is available at the website of the Stock Exchange at www.hkexnews.hk
under the “HKEXnews > New Listings > New Listing Information” section, and our website at
http://www.yanzhiwu.com.
The contents of this prospectus are identical to the prospectus as registered with the Registrar
of Companies in Hong Kong pursuant to Section 342C of the Companies (Winding Up and
Miscellaneous Provisions) Ordinance.
A. APPLICATION FOR HONG KONG OFFER SHARES
1. Who Can Apply
Y ou can apply for Hong Kong Offer Shares if you or the person(s) for whose benefit you are applying
for:
 are 18 years of age or older;
 are outside the United States; and
 have a Hong Kong address (for the HK eIPO White Form service only).
Unless permitted by the Listing Rules or a waiver and/or consent has been granted by the Stock
Exchange to us, you cannot apply for any Hong Kong Offer Shares if you or the person(s) for whose
benefit you are applying for:
 are an existing Shareholder or his/her/its close associates; or
 are a Director or any of his/her close associates.
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2. Application Channels
The Hong Kong Public Offering period will begin at 9:00 a.m. on Thursday, November 30, 2023
and end at 12:00 noon on Thursday, December 7, 2023 (Hong Kong time) being longer than normal
market practice of three and a half days.
To apply for Hong Kong Offer Shares, you may use one of the following application channels:
Application Channel Platform Target Investors Application Time
HK eIPO White Form
service
IPO App (which can be downloaded
by searching “ IPO App ” in App
Store or Google Play or
downloaded at
www.hkeipo.hk/IPOApp or
www.tricorglobal.com/IPOApp )
or www.hkeipo.hk
Investors who would
like to receive a
physical H Share
certificate. Hong
Kong Offer Shares
successfully
applied for will be
allotted and issued
in your own name.
From 9:00 a.m. on
Thursday, November
30, 2023 to 11:30 a.m.
on Thursday, December
7, 2023, Hong Kong
time.
The latest time for
completing full payment
of application monies
will be 12:00 noon on
Thursday, December 7,
2023, Hong Kong time.
HKSCC EIPO channel Y our broker or custodian who is a
HKSCC Participant will submit an
EIPO application on your behalf
through HKSCC’s FINI system in
accordance with your instruction
Investors who would
not like to receive
a physical H Share
certificate. Hong
Kong Offer Shares
successfully
applied for will be
allotted and issued
in the name of
HKSCC Nominees,
deposited directly
into CCASS and
credited to your
designated HKSCC
Participant’s stock
account.
Contact your broker or
custodian for the
earliest and latest time
for giving such
instructions, as this may
vary by broker or
custodian .
The HK eIPO White Form service and the HKSCC EIPO channel are facilities subject to capacity
limitations and potential service interruptions and you are advised not to wait until the last day of the
application period to apply for Hong Kong Offer Shares.
For those applying through the HK eIPO White Form service, once you complete payment in
respect of any application instructions given by you or for your benefit through the HK eIPO White Form
service to make an application for Hong Kong Offer Shares, an actual application shall be deemed to have
been made. If you are a person for whose benefit the electronic application instructions are given, you
shall be deemed to have declared that only one set of electronic application instructions has been given
for your benefit. If you are an agent for another person, you shall be deemed to have declared that you
have only given one set of electronic application instructions for the benefit of the person for whom you
are an agent and that you are duly authorized to give those instructions as an agent.
For the avoidance of doubt, giving an application instruction under the HK eIPO White Form
service more than once and obtaining different payment reference numbers without effecting full payment
in respect of a particular reference number will not constitute an actual application.
HOW TO APPLY FOR HONG KONG OFFER SHARES
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If you apply through the HK eIPO White Form service, you are deemed to have authorized the HK
eIPO White Form Service Provider to apply on the terms and conditions in this prospectus, as
supplemented and amended by the terms and conditions of the HK eIPO White Form service.
By instructing your broker or custodian to apply for the Hong Kong Offer Shares on your behalf
through the HKSCC EIPO Channel, you (and, if you are joint applicants, each of you jointly and severally)
are deemed to have instructed and authorized HKSCC to cause HKSCC Nominees (acting as nominee for
the relevant HKSCC Participants) to apply for Hong Kong Offer Shares on your behalf and to do on your
behalf all the things stated in this prospectus and any supplement to it.
For those applying through the HKSCC EIPO channel, an actual application will be deemed to have
been made for any application instructions given by you or for your benefit to HKSCC (in which case an
application will be made by HKSCC Nominees on your behalf) provided such application instruction has
not been withdrawn or otherwise invalidated before the closing time of the Hong Kong Public Offering.
HKSCC Nominees will only be acting as a nominee for you and neither HKSCC nor HKSCC
Nominees shall be liable to you or any other person in respect of any actions taken by HKSCC or HKSCC
Nominees on your behalf to apply for Hong Kong Offer Shares or for any breach of the terms and
conditions of this prospectus.
3. Information Required to Apply
Y ou must provide the following information with your application:
For Individual Applicants For Corporate Applicants
 Full name(s) 2 as shown on your identitydocument  Full name(s) 2 as shown on your identity
document
 Identity document’s issuing country or
jurisdiction
 Identity document’s issuing country or
jurisdiction
 Identity document type, with order of
priority:
i. HKID card; or
ii. National identification document; or
iii. Passport; and
 Identity document type, with order of
priority:
i. LEI registration document; or
ii. Certificate of incorporation; or
iii. Business registration certificate; or
iv. Other equivalent document; and
 Identity document number  Identity document number
Notes:
1. If you are applying through the HK eIPO White Form service, you are required to provide a valid e-mail address, a
contact telephone number and a Hong Kong address. Y ou are also required to declare that the identity information
provided by you follows the requirements as described in Note 2 below. In particular, where you cannot provide a
HKID number, you must confirm that you do not hold a HKID card.
2. The applicant’s full name as shown on their identity document must be used. If an applicant’s identity document
contains both an English and Chinese name, both English and Chinese names must be used. Otherwise, either English
or Chinese names will be accepted. The order of priority of the applicant’s identity document type must be strictly
followed and where an individual applicant has a valid HKID card, the HKID number must be used when making an
application to subscribe for shares in a public offer. Similarly for corporate applicants, a LEI number must be used if
an entity has a LEI certificate.
3. If the applicant is a trustee, the client identification data (“ CID”) of the trustee, as set out above, will be required. If
the applicant is an investment fund (i.e. a collective investment scheme, or CIS), the CID of the asset management
company or the individual fund, as appropriate, which has opened a trading account with the broker will be required,
as above.
4. The maximum number of joint account holders on FINI is capped at 4 in accordance with market practice.
5. If you are applying as a nominee, you must provide: (i) the full name (as shown on the identity document), the identity
document’s issuing country or jurisdiction, the identity document type; and (ii), the identity document number, for each
of the beneficial owners or, in the case(s) of joint beneficial owners, for each joint beneficial owner. If you do not
include this information, the application will be treated as being made for your benefit.
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6. If you are applying as an unlisted company and (i) the principal business of that company is dealing in securities; and
(ii) you exercise statutory control over that company, then the application will be treated as being for your benefit and
you should provide the required information in your application as stated above.
“Unlisted company” means a company with no equity securities listed on the Stock Exchange or any other stock
exchange.
“Statutory control” means you:
 control the composition of the board of directors of the company;
 control more than half of the voting power of the company; or
 hold more than half of the issued share capital of the company (not counting any part of it which carries no right
to participate beyond a specified amount in a distribution of either profits or capital).
For those applying through the HKSCC EIPO channel, and making an application under a power of
attorney, we and the Overall Coordinators, as our agents, have discretion to consider whether to accept it
on any conditions we think fit, including evidence of the attorney’s authority.
Failing to provide any required information may result in your application being rejected.
4. Permitted Number of Hong Kong Offer Shares for Application
Board lot size : 400 H Shares
Permitted number of Hong
Kong Offer Shares for
application and amount
payable on
application/successful
allotment
: Hong Kong Offer Shares are available for application in
specified board lot sizes only. Please refer to the amount
payable associated with each specified board lot size in the
table below.
The maximum Offer Price is HK$11.00 per Share.
If you are applying through the HKSCC EIPO channel, you
are required to prefund your application based on the
amount specified by your broker or custodian ,a s
determined based on the applicable laws and regulations in
Hong Kong.
By instructing your broker or custodian to apply for the
Hong Kong Offer Shares on your behalf through the
HKSCC EIPO Channel, you (and, if you are joint
applicants, each of you jointly and severally) are deemed to
have instructed and authorized HKSCC to cause HKSCC
Nominees (acting as nominee for the relevant HKSCC
Participants) to arrange payment of the final Offer Price,
brokerage, SFC transaction levy, the Stock Exchange
trading fee and the AFRC transaction levy by debiting the
relevant nominee bank account at the Designated Bank for
your broker or custodian .
If you are applying through the HK eIPO White Form
service, you may refer to the table below for the amount
payable for the number of H Shares you have selected. Y ou
must pay the respective maximum amount payable on
application in full upon application for Hong Kong Offer
Shares.
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No. of
Hong Kong
Offer Shares
applied for
Maximum
Amount
payable (2) on
application/
successful
allotment
No. of
Hong Kong
Offer Shares
applied for
Maximum
Amount
payable (2) on
application/
successful
allotment
No. of
Hong Kong
Offer Shares
applied for
Maximum
Amount
payable (2) on
application/
successful
allotment
No. of
Hong Kong
Offer Shares
applied for
Maximum
Amount
payable (2) on
application/
successful
allotment
HK$ HK$ HK$ HK$
400 4,444.38 8,000 88,887.48 70,000 777,765.46 900,000 9,999,841.50
800 8,888.75 10,000 111,109.36 80,000 888,874.80 1,000,000 11,110,935.00
1,200 13,333.13 12,000 133,331.22 90,000 999,984.16 1,200,000 13,333,122.00
1,600 17,777.50 14,000 155,553.09 100,000 1,111,093.50 1,400,000 15,555,309.00
2,000 22,221.86 16,000 177,774.95 200,000 2,222,187.00 1,600,000
(1) 17,777,496.00
2,400 26,666.24 18,000 199,996.84 300,000 3,333,280.50
2,800 31,110.62 20,000 222,218.70 400,000 4,444,374.00
3,200 35,554.99 30,000 333,328.06 500,000 5,555,467.50
3,600 39,999.37 40,000 444,437.40 600,000 6,666,561.00
4,000 44,443.75 50,000 555,546.76 700,000 7,777,654.50
6,000 66,665.61 60,000 666,656.10 800,000 8,888,748.00
Notes:
(1) Maximum number of Hong Kong Offer Shares you may apply for and this is 50% of the Hong Kong Offer Shares initially
offered.
(2) The amount payable is inclusive of brokerage, the SFC transaction levy, the Stock Exchange trading fee and the AFRC
transaction levy. If your application is successful, brokerage will be paid to the Exchange Participants (as defined in the
Listing Rules) or to the HK eIPO White Form Service Provider (for applications made through the HK eIPO White Form
service), while the SFC transaction levy, the Stock Exchange trading fee and the AFRC transaction levy will be paid to the
SFC, the Stock Exchange and the AFRC, respectively.
5. Multiple Applications Prohibited
Y ou or your joint applicant(s) shall not make more than one application for your own benefit, except
where you are a nominee and provide the information of the underlying investor in your application as
required under the paragraph headed “—A. Applications for Hong Kong Offer Shares—3. Information
Required to Apply” in this section. If you are suspected of submitting or cause to submit more than one
application, all of your applications will be rejected.
Multiple applications made either through (i) the HK eIPO White Form service, (ii) HKSCC EIPO
channel, or (iii) both channels concurrently are prohibited and will be rejected. If you have made an
application through the HK eIPO White Form service or HKSCC EIPO channel, you or the person(s) for
whose benefit you have made the application shall not apply further for any Offer Shares in the Global
Offering.
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6. Terms and Conditions of An Application
By applying for Hong Kong Offer Shares through the HK eIPO White Form service or HKSCC
EIPO channel, you (or as the case may be, HKSCC Nominees will do the following things on your behalf):
(i) undertake to execute all relevant documents and instruct and authorise us and/or the Overall
Coordinators, as our agents, to execute any documents for you and to do on your behalf all
things necessary to register any Hong Kong Offer Shares allocated to you in your name or in
the name of HKSCC Nominees as required by the Articles of Association, and (if you are
applying through the HKSCC EIPO channel) to deposit the allotted Hong Kong Offer Shares
directly into CCASS for the credit of your designated HKSCC Participant’s stock account on
your behalf;
(ii) confirm that you have read and understand the terms and conditions and application procedures
set out in this prospectus, the IPO App and the designated website of the HK eIPO White
Form service (or as the case may be, the agreement you entered into with your broker or
custodian ), and agree to be bound by them;
(iii) (if you are applying through the HKSCC EIPO channel) agree to the arrangements,
undertakings and warranties under the participant agreement between your broker or
custodian and HKSCC and observe the General Rules of HKSCC and the HKSCC Operational
Procedures for giving application instructions to apply for Hong Kong Offer Shares;
(iv) confirm that you are aware of the restrictions on offers and sales of shares set out in this
prospectus and they do not apply to you, or the person(s) for whose benefit you have made the
application;
(v) confirm that you have read this prospectus and any supplement to it and have relied only on
the information and representations contained therein in making your application (or as the
case may be, causing your application to be made) and will not rely on any other information
or representations;
(vi) agree that the Joint Sponsors, the Overall Coordinators, the Joint Global Coordinators, the Joint
Bookrunners, the Joint Lead Managers, the Underwriters, the Capital Market Intermediaries,
any of their or the Company’s respective directors, officers, employees, partners, agents,
advisers and any other parties involved in the Global Offering (the “Relevant Persons”), the H
Share Registrar and HKSCC will not be liable for any information and representations not in
this prospectus and any supplement to it;
(vii) agree to disclose the details of your application and your personal data and any other personal
data which may be required about you and the person(s) for whose benefit you have made the
application to us, the Relevant Persons, the H Share Registrar, HKSCC, HKSCC Nominees, the
Stock Exchange, the SFC and any other statutory regulatory or governmental bodies or
otherwise as required by laws, rules or regulations, for the purposes under the paragraph
headed “—G. Personal Data—3. Purposes and 4. Transfer of personal data” in this section;
(viii) agree (without prejudice to any other rights which you may have once your application (or as
the case may be, HKSCC Nominees’ application) has been accepted) that you will not rescind
it because of an innocent misrepresentation;
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(ix) agree that subject to Section 44A(6) of the Companies (Winding Up and Miscellaneous
Provisions) Ordinance, any application made by you or HKSCC Nominees on your behalf
cannot be revoked once it is accepted, which will be evidenced by the notification of the result
of the ballot by the H Share Registrar by way of publication of the results at the time and in
the manner as specified in the paragraph headed “—B. Publication of Results” in this section;
(x) confirm that you are aware of the situations specified in the paragraph headed “—C.
Circumstances In Which Y ou Will Not Be Allocated Hong Kong Offer Shares” in this section;
(xi) agree that your application or HKSCC Nominees’ application, any acceptance of it and the
resulting contract will be governed by and construed in accordance with the laws of Hong
Kong;
(xii) agree to comply with the Companies Ordinance, the Companies (Winding Up and
Miscellaneous Provisions) Ordinance, the Articles of Association and laws of any place outside
Hong Kong that apply to your application and that neither we nor the Relevant Persons will
breach any law inside and/or outside Hong Kong as a result of the acceptance of your offer to
purchase, or any action arising from your rights and obligations under the terms and conditions
contained in this prospectus;
(xiii) confirm that (a) your application or HKSCC Nominees’ application on your behalf is not
financed directly or indirectly by the Company, any of the directors, chief executives,
substantial Shareholder(s) or existing shareholder(s) of the Company or any of its subsidiaries
or any of their respective close associates; and (b) you are not accustomed or will not be
accustomed to taking instructions from the Company, any of the directors, chief executives,
substantial shareholder(s) or existing shareholder(s) of the Company or any of its subsidiaries
or any of their respective close associates in relation to the acquisition, disposal, voting or other
disposition of the H Shares registered in your name or otherwise held by you;
(xiv) warrant that the information you have provided is true and accurate;
(xv) confirm that you understand that we and the Overall Coordinators will rely on your declarations
and representations in deciding whether or not to allocate any Hong Kong Offer Shares to you
and that you may be prosecuted for making a false declaration;
(xvi) agree to accept Hong Kong Offer Shares applied for or any lesser number allocated to you
under the application;
(xvii) declare and represent that this is the only application made and the only application intended
by you to be made to benefit you or the person for whose benefit you are applying;
(xviii) (if the application is made for your own benefit) warrant that no other application has been or
will be made for your benefit by giving electronic application instructions to HKSCC directly
or indirectly or through the application channel of the HK eIPO White Form Service Provider
or by any one as your agent or by any other person; and
(xix) (if you are making the application as an agent for the benefit of another person) warrant that
(1) no other application has been or will be made by you as agent for or for the benefit of that
person or by that person or by any other person as agent for that person by giving electronic
application instructions to HKSCC and the HK eIPO White Form Service Provider and (2)
you have due authority to give electronic application instructions on behalf of that other
person as its agent.
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B. PUBLICATION OF RESULTS
Results of Allocation
Y ou can check whether you are successfully allocated any Hong Kong Offer Shares through:
Platform Date/Time
Applying through the HK eIPO White Form service or HKSCC EIPO channel:
Website From the “IPO Results” function in
the IPO App or at
www.hkeipo.hk/IPOResult (or
www.tricor.com.hk/ipo/result )
with a “search by ID Number”
function.
The full list of (i) wholly or partially
successful applicants using the HK
eIPO White Form service and
HKSCC EIPO channel, and (ii) the
number of Hong Kong Offer Shares
conditionally allotted to them,
among other things, will be
displayed on the “IPO Results”
function in the IPO App or at
www.hkeipo.hk/IPOResult or
www.tricor.com.hk/ipo/result
24 hours, no later than 11:00 p.m.
on Monday, December 11, 2023
to 12:00 midnight on Sunday,
December 17, 2023 (Hong Kong
time)
The Stock Exchange’s website at
www.hkexnews.hk and our website
at http://www.yanzhiwu.com
which will provide links to the
above-mentioned websites of the H
Share Registrar.
No later than 11:00 p.m. on
Monday, December 11, 2023
(Hong Kong time)
Telephone +852 3691 8488 — the allocation
results telephone enquiry line
provided by the H Share Registrar
between 9:00 a.m. and 6:00 p.m.,
from Tuesday, December 12,
2023 to Friday, December 15,
2023 (Hong Kong time) on a
business day
For those applying through the HKSCC EIPO channel, you may also check with your broker or
custodian from 6:00 p.m. on Friday, December 8, 2023 (Hong Kong time)
HKSCC Participants can log into FINI and review the allotment result from 6:00 p.m. on Friday,
December 8, 2023 (Hong Kong time) on a 24-hour basis and should report any discrepancies on allotments
to HKSCC as soon as practicable.
Allocation Announcement
We expect to announce the results of the final Offer Price, the level of indications of interest in the
International Offering, the level of applications in the Hong Kong Public Offering and the basis of
allocations of Hong Kong Offer Shares on the Stock Exchange’s website at www.hkexnews.hk and our
website at http://www.yanzhiwu.com by no later than 11:00 p.m. on Monday, December 11, 2023 (Hong
Kong time).
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C. CIRCUMSTANCES IN WHICH YOU WILL NOT BE ALLOCATED HONG KONG OFFER
SHARES
Y ou should note the following situations in which Hong Kong Offer Shares will not be allocated to
you or the person(s) for whose benefit you are applying for:
1. If your application is revoked:
Y our application or the application made by HKSCC Nominees on your behalf may be revoked
pursuant to Section 44A(6) of the Companies (Winding Up and Miscellaneous Provisions) Ordinance.
2. If we or our agents exercise our discretion to reject your application:
We, the Overall Coordinators, the H Share Registrar and their respective agents and nominees have
full discretion to reject or accept any application, or to accept only part of any application, without giving
any reasons.
3. If the allocation of Hong Kong Offer Shares is void:
The allocation of Hong Kong Offer Shares will be void if the Stock Exchange does not grant
permission to list the H Shares either:
 within three weeks from the closing date of the application lists; or
 within a longer period of up to six weeks if the Stock Exchange notifies us of that longer period
within three weeks of the closing date of the application lists.
4. If:
 you make multiple applications or suspected multiple applications. Y ou may refer to the
paragraph headed “—A. Applications for Hong Kong Offer Shares—5. Multiple Applications
Prohibited” in this section on what constitutes multiple applications;
 your application instruction is incomplete;
 your payment (or confirmation of funds, as the case may be) is not made correctly;
 the Underwriting Agreements do not become unconditional or are terminated; or
 we or the Overall Coordinators believe that by accepting your application, it or we would
violate applicable securities or other laws, rules or regulations.
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5. If there is money settlement failure for allotted H Shares:
Based on the arrangements between HKSCC Participants and HKSCC, HKSCC Participants will be
required to hold sufficient application funds on deposit with their Designated Bank before balloting. After
balloting of Hong Kong Offer Shares, the Receiving Bank will collect the portion of these funds required
to settle each HKSCC Participant’s actual Hong Kong Offer Share allotment from their Designated Bank.
There is a risk of money settlement failure. In the extreme event of money settlement failure by
a HKSCC Participant (or its Designated Bank), who is acting on your behalf in settling payment for your
allotted shares, HKSCC will contact the defaulting HKSCC Participant and its Designated Bank to
determine the cause of failure and request such defaulting HKSCC Participant to rectify or procure to
rectify the failure.
However, if it is determined that such settlement obligation cannot be met, the affected Hong Kong
Offer Shares will be reallocated to the International Offering. Hong Kong Offer Shares applied for by you
through the broker or custodian may be affected to the extent of the settlement failure. In the extreme
case, you will not be allocated any Hong Kong Offer Shares due to the money settlement failure by such
HKSCC Participant. None of us, the Relevant Persons, the H Share Registrar and HKSCC is or will be
liable if Hong Kong Offer Shares are not allocated to you due to the money settlement failure.
D. DESPATCH/COLLECTION OF H SHARE CERTIFICATES AND REFUND OF
APPLICATION MONIES
Y ou will receive one H Share certificate for all Hong Kong Offer Shares allotted to you under the
Hong Kong Public Offering (except pursuant to applications made through the HKSCC EIPO channel
where the H Share certificates will be deposited into CCASS as described below).
No temporary document of title will be issued in respect of the H Shares. No receipt will be issued
for sums paid on application.
H Share certificates will only become valid at 8:00 a.m. on Tuesday, December 12, 2023 (Hong Kong
time), provided that the Global Offering has become unconditional and the right of termination described
in the section headed “Underwriting” has not been exercised. Investors who trade H Shares prior to the
receipt of H Share certificates or the H Share certificates becoming valid do so entirely at their own risk.
The right is reserved to retain any H Share certificate(s) and (if applicable) any surplus application
monies pending clearance of application monies.
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The following sets out the relevant procedures and time:
HK eIPO White Form service HKSCC EIPO channel
Despatch/collection of H Share certificate 1
For application of
1,000,000 Hong
Kong Offer
Shares or more
Collection in person at H Share
Registrar, Tricor Investor Services
Limited at 17/F, Far East Finance
Centre, 16 Harcourt Road, Hong Kong
Time: from 9:00 a.m. to 1:00 p.m. on
Tuesday, December 12, 2023 (Hong
Kong time)
If you are an individual, you must not
authorise any other person to collect
for you. If you are a corporate
applicant, your authorised
representative must bear a letter of
authorization from your corporation
stamped with your corporation’s chop
Both individuals and authorised
representatives must produce, at the
time of collection, evidence of
identity acceptable to the H Share
Registrar
Note: If you do not collect your H
Share certificate(s) personally within
the time above, it/they will be sent to
the address specified in your
application instructions by ordinary
post at your own risk
Share certificate(s) will be
issued in the name of
HKSCC Nominees,
deposited into CCASS and
credited to your designated
HKSCC Participant’s stock
account
No action by you is
required
For application of
less than
1,000,000 Hong
Kong Offer
Shares
Y our H Share certificate(s) will be sent
to the address specified in your
application instructions by ordinary
post at your own risk
Date: Monday, December 11, 2023
1 Except in the event of a tropical cyclone warning signal number 8 or above, a black rainstorm warning and/or an “extreme
conditions” announcement being in force in Hong Kong in the morning on Monday, December 11, 2023, rendering it
impossible for the relevant share certificates to be dispatched to HKSCC in a timely manner, in which case the Company shall
procure the H Share Registrar to arrange for delivery of the supporting documents and share certificates in accordance with
the contingency arrangements as agreed between them. Y ou may refer to “– E. Severe Weather Arrangements” in this section.
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HK eIPO White Form service HKSCC EIPO channel
Refund mechanism for surplus application monies paid by you
Date Tuesday, December 12, 2023 Subject to the arrangement
between you and your
broker or custodian
Responsible party H Share Registrar Y our broker or custodian
Application monies
paid through
single bank
account
HK eIPO White Form e-Auto Refund
payment instructions to your
designated bank account
Y our broker or custodian
will arrange refund to your
designated bank account
subject to the arrangement
between you and it
Application monies
paid through
multiple bank
accounts
Refund cheque(s) will be despatched to
the address as specified in your
application instructions by ordinary
post at your own risk
E. SEVERE WEATHER ARRANGEMENTS
The Opening and Closing of the Application Lists
The application lists will not open or close on Thursday, December 7, 2023 if, there is/are:
 a tropical cyclone warning signal number 8 or above;
 a black rainstorm warning; and/or
 Extreme Conditions,
(collectively, “ Severe Weather Signals ”),
in force in Hong Kong at any time between 9:00 a.m. and 12:00 noon on Thursday, December 7, 2023.
Instead they will open between 11:45 a.m. and 12:00 noon and/or close at 12:00 noon on the next
business day which does not have Severe Weather Signals in force at any time between 9:00 a.m. and
12:00 noon.
Prospective investors should be aware that a postponement of the opening/closing of the application
lists may result in a delay in the listing date. Should there be any changes to the dates mentioned in the
section headed “Expected Timetable” in this prospectus, an announcement will be made and published on
the Stock Exchange’s website at www.hkexnews.hk and our website at http://www.yanzhiwu.com of the
revised timetable.
If a Severe Weather Signal is hoisted on Monday, December 11, 2023, the H Share Registrar will
make appropriate arrangements for the delivery of the H Share certificates to the CCASS Depository’s
service counter so that they would be available for trading on Tuesday, December 12, 2023.
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If a Severe Weather Signal is hoisted on Monday, December 11, 2023, the despatch of physical H
Share certificates of less than 1,000,000 Offer Shares issued under your own name will be made by
ordinary post when the post office re-opens after the Severe Weather Signal is lowered or cancelled (e.g.
in the afternoon of Monday, December 11, 2023 or on Tuesday, December 12, 2023).
If a Severe Weather Signal is hoisted on Tuesday, December 12, 2023, physical H Share certificates
of 1,000,000 Offer Shares or more issued under your own name is available for collection in person at the
H Share Registrar’s office after the Severe Weather Signal is lowered or cancelled (e.g. in the afternoon
of Tuesday, December 12, 2023 or on Wednesday, December 13, 2023).
Prospective investors should be aware that if they choose to receive physical H Share
certificates issued in their own name, there may be a delay in receiving the H Share certificates.
F. ADMISSION OF THE H SHARES INTO CCASS
If the Stock Exchange grants the listing of, and permission to deal in, the H Shares on the Stock
Exchange and we comply with the stock admission requirements of HKSCC, the H Shares will be accepted
as eligible securities by HKSCC for deposit, clearance and settlement in CCASS with effect from the date
of commencement of dealings in the H Shares or any other date HKSCC chooses. Settlement of
transactions between Exchange Participants is required to take place in CCASS on the second settlement
day after any trading day.
All activities under CCASS are subject to the General Rules of HKSCC and HKSCC Operational
Procedures in effect from time to time.
All necessary arrangements have been made enabling the H Shares to be admitted into CCASS.
Y ou should seek the advice of your broker or other professional advisor for details of the settlement
arrangement as such arrangements may affect your rights and interests.
G. PERSONAL DATA
The following Personal Information Collection Statement applies to any personal data collected and
held by the Company, the H Share Registrar, the receiving bank and the Relevant Persons about you in
the same way as it applies to personal data about applicants other than HKSCC Nominees. This personal
data may include client identifier(s) and your identification information. By giving application instructions
to HKSCC, you acknowledge that you have read, understood and agree to all of the terms of the Personal
Information Collection Statement below.
1. Personal Information Collection Statement
This Personal Information Collection Statement informs the applicant for, and holder of, Hong Kong
Offer Shares, of the policies and practices of the Company and the H Share Registrar in relation to
personal data and the Personal Data (Privacy) Ordinance (Chapter 486 of the Laws of Hong Kong).
2. Reasons for the collection of your personal data
It is necessary for applicants and registered holders of Hong Kong Offer Shares to ensure that
personal data supplied to the Company or its agents and the H Share Registrar is accurate and up-to-date
when applying for Hong Kong Offer Shares or transferring Hong Kong Offer Shares into or out of their
names or in procuring the services of the H Share Registrar.
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Failure to supply the requested data or supplying inaccurate data may result in your application for
Hong Kong Offer Shares being rejected, or in the delay or the inability of the Company or the H Share
Registrar to effect transfers or otherwise render their services. It may also prevent or delay registration or
transfers of Hong Kong Offer Shares which you have successfully applied for and/or the despatch of H
Share certificate(s) to which you are entitled.
It is important that applicants for and holders of Hong Kong Offer Shares inform the Company and
the H Share Registrar immediately of any inaccuracies in the personal data supplied.
3. Purposes
Y our personal data may be used, held, processed, and/or stored (by whatever means) for the
following purposes:
 processing your application and refund cheque and HK eIPO White Form e-Auto Refund
payment instruction(s), where applicable, verification of compliance with the terms and
application procedures set out in this prospectus and announcing results of allocation of Hong
Kong Offer Shares;
 compliance with applicable laws and regulations in Hong Kong and elsewhere;
 registering new issues or transfers into or out of the names of the holders of the H Shares
including, where applicable, HKSCC Nominees;
 maintaining or updating the register of members of the Company;
 verifying identities of applicants for and holders of the H Shares and identifying any duplicate
applications for the H Shares;
 facilitating Hong Kong Offer Shares balloting;
 establishing benefit entitlements of holders of the H Shares, such as dividends, rights issues,
bonus issues, etc.;
 distributing communications from the Company and its subsidiaries;
 compiling statistical information and profiles of the holder of the H Shares;
 disclosing relevant information to facilitate claims on entitlements; and
 any other incidental or associated purposes relating to the above and/or to enable the Company
and the H Share Registrar to discharge their obligations to applicants and holders of the H
Shares and/or regulators and/or any other purposes to which applicants and holders of the H
Shares may from time to time agree.
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4. Transfer of personal data
Personal data held by the Company and the H Share Registrar relating to the applicants for and
holders of Hong Kong Offer Shares will be kept confidential but the Company and the H Share Registrar
may, to the extent necessary for achieving any of the above purposes, disclose, obtain or transfer (whether
within or outside Hong Kong) the personal data to, from or with any of the following:
 the Company’s appointed agents such as financial advisers, receiving bank and overseas
principal share registrar;
 HKSCC or HKSCC Nominees, who will use the personal data and may transfer the personal
data to the H Share Registrar, in each case for the purposes of providing its services or facilities
or performing its functions in accordance with its rules or procedures and operating FINI and
CCASS (including where applicants for the Hong Kong Offer Shares request a deposit into
CCASS);
 any agents, contractors or third-party service providers who offer administrative,
telecommunications, computer, payment or other services to the Company or the H Share
Registrar in connection with their respective business operation;
 the Stock Exchange, the SFC and any other statutory regulatory or governmental bodies or
otherwise as required by laws, rules or regulations, including for the purpose of the Stock
Exchange’s administration of the Listing Rules and the SFC’s performance of its statutory
functions; and
 any persons or institutions with which the holders of Hong Kong Offer Shares have or propose
to have dealings, such as their bankers, solicitors, accountants or brokers, etc.
5. Retention of personal data
The Company and the H Share Registrar will keep the personal data of the applicants and holders
of Hong Kong Offer Shares for as long as necessary to fulfil the purposes for which the personal data were
collected. Personal data which is no longer required will be destroyed or dealt with in accordance with the
Personal Data (Privacy) Ordinance (Chapter 486 of the Laws of Hong Kong).
6. Access to and correction of personal data
Applicants for and holders of Hong Kong Offer Shares have the right to ascertain whether the
Company or the H Share Registrar hold their personal data, to obtain a copy of that data, and to correct
any data that is inaccurate. The Company and the H Share Registrar have the right to charge a reasonable
fee for the processing of such requests. All requests for access to data or correction of data should be
addressed to the Company and the H Share Registrar, at their registered address disclosed in the section
headed “Corporate information” in this prospectus or as notified from time to time, for the attention of the
company secretary, or the H Share Registrar for the attention of the privacy compliance officer.
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--- page 361 ---
The following is the text of a report set out on pages I-1 to I-68, received from the Company’ s
reporting accountants, KPMG, Certified Public Accountants, Hong Kong, for the purpose of incorporation
in this prospectus.
ACCOUNTANTS’ REPORT ON HISTORICAL FINANCIAL INFORMATION TO THE
DIRECTORS OFʮ̡ XIAMEN YAN PALACE BIRD’S NEST
INDUSTRY CO., LTD. (FORMERLY KNOWN ASʮ̡ XIAMEN YAN
PALACE BIOENGINEERING CO., LTD.), CHINA INTERNATIONAL CAPITAL CORPORATION
HONG KONG SECURITIES LIMITED AND GF CAPITAL (HONG KONG) LIMITED
Introduction
We report on the historical financial information ofʮ̡ Xiamen Y an
Palace Bird’s Nest Industry Co., Ltd. (formerly known asʮ̡ Xiamen Y an
Palace Bioengineering Co., Ltd.) (the “Company”) and its subsidiaries (together, the “Group”) set out on
pages I-3 to I-68, which comprises the consolidated statements of financial position of the Group and the
statements of financial position of the Company as at 31 December 2020, 2021 and 2022 and 31 May 2023
and the consolidated statements of profit or loss and other comprehensive income, the consolidated
statements of changes in equity and the consolidated cash flow statements, for each of the years ended 31
December 2020, 2021 and 2022 and the five months ended 31 May 2023 (the “Relevant Periods”), and a
summary of material accounting policy information and other explanatory information (together, the
“Historical Financial Information”). The Historical Financial Information set out on pages I-3 to I-68
forms an integral part of this report, which has been prepared for inclusion in the prospectus of the
Company dated 30 November 2023 (the “Prospectus”) in connection with the initial listing of shares of
the Company on the Main Board of The Stock Exchange of Hong Kong Limited.
Directors’ responsibility for Historical Financial Information
The directors of the Company are responsible for the preparation of the Historical Financial
Information that gives a true and fair view in accordance with the basis of preparation and presentation
set out in Note 1 to the Historical Financial Information, and for such internal control as the directors of
the Company determine is necessary to enable the preparation of the Historical Financial Information that
is free from material misstatement, whether due to fraud or error.
Reporting accountants’ responsibility
Our responsibility is to express an opinion on the Historical Financial Information and to report our
opinion to you. We conducted our work in accordance with Hong Kong Standard on Investment Circular
Reporting Engagements 200 “Accountants’ Reports on Historical Financial Information in Investment
Circulars” issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”). This standard
requires that we comply with ethical standards and plan and perform our work to obtain reasonable
assurance about whether the Historical Financial Information is free from material misstatement.
Our work involved performing procedures to obtain evidence about the amounts and disclosures in
the Historical Financial Information. The procedures selected depend on the reporting accountants’
judgement, including the assessment of risks of material misstatement of the Historical Financial
Information, whether due to fraud or error. In making those risk assessments, the reporting accountants
consider internal control relevant to the entity’s preparation of Historical Financial Information that gives
a true and fair view in accordance with the basis of preparation and presentation set out in Note 1 to the
Historical Financial Information in order to design procedures that are appropriate in the circumstances,
but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Our
work also included evaluating the appropriateness of accounting policies used and the reasonableness of
accounting estimates made by the directors, as well as evaluating the overall presentation of the Historical
Financial Information.
APPENDIX I ACCOUNTANTS’ REPORT
– I-1 –


--- page 362 ---
We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
Opinion
In our opinion, the Historical Financial Information gives, for the purpose of the accountants’ report,
a true and fair view of the Company’s and the Group’s financial position as at 31 December 2020, 2021
and 2022 and 31 May 2023 of the Group’s financial performance and cash flows for the Relevant Periods
in accordance with the basis of preparation and presentation set out in Note 1 to the Historical Financial
Information.
Review of stub period corresponding financial information
We have reviewed the stub period corresponding financial information of the Group which comprises
the consolidated statement of profit or loss and other comprehensive income, the consolidated statement
of changes in equity and the consolidated cash flow statement for the five months ended 31 May 2022 and
other explanatory information (the “Stub Period Corresponding Financial Information”). The directors of
the Company are responsible for the preparation and presentation of the Stub Period Corresponding
Financial Information in accordance with the basis of preparation and presentation set out in Note 1 to the
Historical Financial Information. Our responsibility is to express a conclusion on the Stub Period
Corresponding Financial Information based on our review. We conducted our review in accordance with
Hong Kong Standard on Review Engagements 2410 “Review of Interim Financial Information Performed
by the Independent Auditor of the Entity” issued by the HKICPA. A review consists of making enquiries,
primarily of persons responsible for financial and accounting matters, and applying analytical and other
review procedures. A review is substantially less in scope than an audit conducted in accordance with
Hong Kong Standards on Auditing and consequently does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in an audit. Accordingly, we do not express
an audit opinion. Based on our review, nothing has come to our attention that causes us to believe that the
Stub Period Corresponding Financial Information, for the purpose of the accountants’ report, is not
prepared, in all material respects, in accordance with the basis of preparation and presentation set out in
Note 1 to the Historical Financial Information.
Report on matters under the Rules Governing the Listing of Securities on The Stock Exchange of
Hong Kong Limited and the Companies (Winding Up and Miscellaneous Provisions) Ordinance
Adjustments
In preparing the Historical Financial Information, no adjustments to the Underlying Financial
Statements as defined on page I–3 have been made.
Dividends
We refer to Note 30(b) to the Historical Financial Information which contains information about the
dividends paid by the Company in respect of the Relevant Periods.
KPMG
Certified Public Accountants
8th Floor, Prince’s Building
10 Chater Road
Central, Hong Kong
30 November 2023
APPENDIX I ACCOUNTANTS’ REPORT
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--- page 363 ---
HISTORICAL FINANCIAL INFORMATION
Set out below is the Historical Financial Information which forms an integral part of this
accountants’ report.
The consolidated financial statements of the Group for the Relevant Periods, on which the Historical
Financial Information is based, were audited by KPMG Huazhen LLP Xiamen Branch in accordance with
Hong Kong Standards on Auditing issued by the HKICPA (“Underlying Financial Statements”).
APPENDIX I ACCOUNTANTS’ REPORT
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--- page 364 ---
CONSOLIDATED STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE
INCOME
(Expressed in Renminbi)
Y ear ended 31 December Five months ended 31 May
Note 2020 2021 2022 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(unaudited)
Revenue .............. 4 1,301,157 1,506,997 1,729,945 696,876 782,576
Cost of sales ........... (745,448) (780,214) (851,693) (337,313) (376,565)
Gross profit ........... 555,709 726,783 878,252 359,563 406,011
Other net income ........ 5 20,714 32,680 27,692 5,123 3,293
Selling and distribution
expenses ............ (317,762) (398,951) (503,879) (205,800) (208,533)
Administrative expenses. . . (76,060) (108,020) (111,543) (41,462) (60,807)
Research and development
expenses ............ (17,679) (18,982) (24,320) (8,809) (9,579)
Profit from operations . . . 164,922 233,510 266,202 108,615 130,385
Finance costs ........... 6(a) (4,882) (3,337) (1,636) (764) (857)
Share of loss of an
associate ............ (214) – – – –
Profit before taxation .... 6 159,826 230,173 264,566 107,851 129,528
Income tax ............ 7(a) (36,401) (57,814) (58,688) (24,096) (29,031)
Profit and total
comprehensive
income for the
year/period .......... 123,425 172,359 205,878 83,755 100,497
Attributable to:
Equity shareholders of the
Company ............ 122,017 167,353 191,840 78,772 95,058
Non-controlling interests . . 1,408 5,006 14,038 4,983 5,439
Profit and total
comprehensive
income for the
year/period .......... 123,425 172,359 205,878 83,755 100,497
Earnings per share
Basic and diluted (RMB) . . 10 1.46 1.95 2.21 0.91 1.09
The Notes on pages I-14 to I-68 form part of the Historical Financial Information.
APPENDIX I ACCOUNTANTS’ REPORT
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--- page 365 ---
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(Expressed in Renminbi)
Note
As at 31 December As at 31 May
2020 2021 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000
Non-current assets
Property, plant and equipment ..... 11 62,462 91,934 87,782 94,187
Intangible assets ............... 12 704 873 1,275 1,018
Goodwill .................... 13 – 75,165 75,165 75,165
Interest in an associate .......... 16 2,067 – – –
Deferred tax assets ............. 29(b) 4,342 16,313 36,130 29,914
Other non-current assets ......... 17 1,264 6,862 4,679 2,870
70,839 191,147 205,031 203,154--------- --------- ---- ----- ------- ---
Current assets
Financial assets measured at fair
value through profit or loss ..... 18 46,225 – 4,996 –
Inventories ................... 19 277,045 279,742 271,795 260,354
Trade and other receivables ....... 20 70,537 87,583 89,459 95,270
Prepayments .................. 20 33,353 66,759 54,655 48,460
Restricted bank deposits ......... 21(b) 1,202 2,000 1,600 8,000
Cash and cash equivalents ........ 21(a) 150,573 169,495 350,818 187,403
578,935 605,579 773,323 599,487--------- --------- ---- ----- ------- ---
Current liabilities
Trade and other payables ......... 23 213,699 204,794 239,673 166,805
Contract liabilities .............. 24 102,084 138,789 176,450 157,079
Bank loans ................... 25 66,097 – – –
Lease liabilities ................ 26 7,697 15,644 15,657 15,250
Other current liabilities .......... 24 12,849 17,897 23,274 19,566
Current taxation ............... 29(a) 16,391 47,133 38,091 7,224
418,817 424,257 493,145 365,924--------- --------- --------- ----------
Net current assets ............. 160,118 181,322 280,178 233,563--------- --------- --------- ----------
Total assets less current liabilities . 230,957 372,469 485,209 436,717--------- --------- ---- ----- ------- ---
Non-current liabilities
Bank loans ................... 25 8,597 – – –
Lease liabilities ................ 26 7,793 17,047 11,264 20,918
Deferred tax liabilities ........... 29(b) 2,802 2,285 1,935 1,103
19,192 19,332 13,199 22,021--------- --------- --------- ----------
NET ASSETS ................ 2 1 1,765 353,137 472,010 414,696
CAPITAL AND RESERVES
Share capital .................. 30(c) 83,333 86,700 86,700 86,700
Reserves ..................... 124,054 250,253 367,696 304,943
Total equity attributable to equity
shareholders of the Company . . . 207,387 336,953 454,396 391,643
Non-controlling interests ........ 4,378 16,184 17,614 23,053
TOTAL EQUITY .............. 2 1 1,765 353,137 472,010 414,696
The Notes on pages I-14 to I-68 form part of the Historical Financial Information.
APPENDIX I ACCOUNTANTS’ REPORT
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--- page 366 ---
STATEMENTS OF FINANCIAL POSITION OF THE COMPANY
(Expressed in Renminbi)
Note
As at 31 December As at 31 May
2020 2021 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000
Non-current assets
Property, plant and equipment ..... 11 10,717 13,671 15,053 14,053
Intangible assets ............... 1 6 3 2 8 4 5 0 2 2 8 8
Investments in subsidiaries ....... 15 96,461 188,060 188,694 189,761
Interest in an associate .......... 16 2,067 – – –
Deferred tax assets ............. 2 1 8 2 8 7 7,314 4,844
Other non-current assets ......... 1 1 0 3,165 774 820
109,736 205,467 212,337 209,766--------- --------- ---- ----- ------- ---
Current assets
Financial assets measured at fair
value through profit or loss ..... 18 10,068 – 4,996 –
Inventories ................... 19 5,894 711 4,381 3,006
Trade and other receivables ....... 20 15,049 29,062 9,689 15,952
Amounts due from subsidiaries .... 22 50,620 61,841 181,236 66,308
Prepayments .................. 20 83,303 85,662 64,424 91,954
Cash and cash equivalents ........ 21(a) 46,061 62,126 162,177 40,490
210,995 239,402 426,903 217,710--------- --------- ---- ----- ------- ---
Current liabilities
Trade and other payables ......... 23 117,197 84,773 99,286 73,988
Amounts due to subsidiaries ...... 22 1 29,467 4,064 600
Contract liabilities .............. 24 31,325 48,983 53,782 34,461
Lease liabilities ................ 26 563 2,004 1,387 885
Other current liabilities .......... 24 4,023 6,225 6,861 4,020
Current taxation ............... 6 2 7,680 9,174 –
153,171 179,132 174,554 113,954--------- --------- ---- ----- ------- ---
Net current assets ............. 57,824 60,270 252,349 103,756--------- --------- --------- ----------
Total assets less current liabilities . 167,560 265,737 464,686 313,522--------- --------- ---- ----- ------- ---
Non-current liability
Lease liabilities ................ 26 514 2,645 684 1,256
514 2,645 684 1,256--------- --------- --------- ----------
NET ASSETS ................ 167,046 263,092 464,002 312,266
CAPITAL AND RESERVES 30(a)
Paid-in capital/share capital ....... 30(c) 83,333 86,700 86,700 86,700
Reserves ..................... 83,713 176,392 377,302 225,566
TOTAL EQUITY .............. 167,046 263,092 464,002 312,266
The Notes on pages I-14 to I-68 form part of the Historical Financial Information.
APPENDIX I ACCOUNTANTS’ REPORT
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--- page 367 ---
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(Expressed in Renminbi)
Attributable to equity shareholders of the Company
Note
Paid-in
capital
Share
capital
Capital
reserve
Share
premium
Share-based
payment reserve
Statutory
reserve
Retained
profits Total
Non-
controlling
interests
Total
equity
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(Note 30(c)) (Note 30(c)) (Note 30(d)(i)) (Note 30(d)(i)) (Note 30(d)(ii)) (Note 30(d)(iii))
Balance at 1 January 2020 .... 83,333 – 64,327 – – 21,215 33,459 202,334 2,970 205,304-------- -- ------ ---------- ----------- ----------- ----------- ------- ------- ------- -------
Changes in equity for 2020:
Profit and total comprehensive
income for the year ........ – – – – – – 122,017 122,017 1,408 123,425
Capital injection from equity
shareholders ............ – – 2,598 – – – – 2,598 – 2,598
Equity settled share-based
transactions ............ 28(a) – – – – 438 – – 438 – 438
Appropriation to statutory reserve . 30(d)(iii) – – – – – 3,525 (3,525) – – –
Conversion to a joint stock
limited liability company .... 30(c) (83,333) 83,333 (66,925) 100,845 – (10,441) (23,479) – – –
Dividends approved and paid to
the shareholders .......... 30(b) – – – – – – (120,000) (120,000) – (120,000)
Balance at 31 December 2020 . . – 83,333 – 100,845 438 14,299 8,472 207,387 4,378 211,765
The Notes on pages I-14 to I-68 form part of the Historical Financial Information.
APPENDIX I ACCOUNTANTS’ REPORT
– I-7 –


--- page 368 ---
Attributable to equity shareholders of the Company
Note
Share
capital
Share
premium
Shares held for
employee
incentive
scheme
Share-based
payment
reserve
Statutory
reserve
Retained
profits Total
Non-controlling
interests Total equity
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(Note 30(c)) (Note 30(d)(i)) (Note 28) (Note 30(d)(ii)) (Note 30(d)(iii))
Balance at 1 January
2021 ........... 83,333 100,845 – 438 14,299 8,472 207,387 4,378 211,765---------- ---------- ---------- ----------- ---------- ---------- ---------- ----------
Changes in equity for
2021:
Profit and total
comprehensive income
for the year ....... – – – – – 167,353 167,353 5,006 172,359
Issuance of new shares . . 30(c) 3,367 38,675 (1,642) – – – 40,400 – 40,400
Equity settled share-based
transactions ....... 28(a) – 16,560 – 5,253 – – 21,813 – 21,813
Appropriation to statutory
reserve .......... 30(d)(iii) – – – – 19,811 (19,811) – – –
Dividends approved and
paid to the
shareholders ....... 30(b) – – – – – (100,000) (100,000) – (100,000)
Dividends to non-
controlling interests of
subsidiaries ....... – – – – – – – (560) (560)
Acquisition of
subsidiaries with
non-controlling
interests ......... 14 – – – – – – – 3,760 3,760
Capital contribution from
non-controlling
interests of subsidiaries. – – – – – – – 3,600 3,600
Balance at 31 December
2021 ........... 86,700 156,080 (1,642) 5,691 34,110 56,014 336,953 16,184 353,137
The Notes on pages I-14 to I-68 form part of the Historical Financial Information.
APPENDIX I ACCOUNTANTS’ REPORT
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--- page 369 ---
Attributable to equity shareholders of the Company
Note
Share
capital
Share
premium
Shares held for
employee
incentive
scheme
Share-based
payment
reserve
Statutory
reserve
Retained
profits Total
Non-controlling
interests Total equity
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(Note 30(c)) (Note 30(d)(i)) (Note 28) (Note 30(d)(ii)) (Note 30(d)(iii))
Balance at
1 January 2022 . . 86,700 156,080 (1,642) 5,691 34,110 56,014 336,953 16,184 353,137---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Changes in equity
for 2022:
Profit and total
comprehensive
income for the
year ......... – – – – – 191,840 191,840 14,038 205,878
Equity settled share-
based transactions . 28(a) – – – 5,253 – – 5,253 – 5,253
Appropriation to
statutory reserve . . 30(d)(iii) – – – – 31,137 (31,137) – – –
Dividends approved
and paid to the
shareholders ..... 30(b) – – – – – (80,000) (80,000) – (80,000)
Dividends to non-
controlling interests
of subsidiaries . . . – – – – – – – (11,258) (11,258)
Acquisition of non-
controlling interests
of subsidiaries . . . – 350 – – – – 350 (1,350) (1,000)
Balance at
31 December
2022 ......... 86,700 156,430 (1,642) 10,944 65,247 136,717 454,396 17,614 472,010
The Notes on pages I-14 to I-68 form part of the Historical Financial Information.
APPENDIX I ACCOUNTANTS’ REPORT
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--- page 370 ---
(unaudited) Attributable to equity shareholders of the Company
Note
Share
capital
Share
premium
Shares held for
employee
incentive
scheme
Share-based
payment
reserve
Statutory
reserve
Retained
profits Total
Non-controlling
interests Total equity
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(Note 30(c)) (Note 30(d)(i)) (Note 28) (Note 30(d)(ii)) (Note 30(d)(iii))
Balance at
1 January 2022 . . 86,700 156,080 (1,642) 5,691 34,110 56,014 336,953 16,184 353,137---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Changes in equity
for the five
months ended
31 May 2022:
Profit and total
comprehensive
income for the
period ........ – – – – – 78,772 78,772 4,983 83,755
Equity settled
share-based
transactions ..... 28(a) – – – 2,189 – – 2,189 – 2,189
Dividends approved
and paid to the
shareholders ..... 30(b) – – – – – (80,000) (80,000) – (80,000)
Dividends to non-
controlling interests
of subsidiaries . . . – – – – – – – (3,330) (3,330)
Acquisition of non-
controlling interests
of subsidiaries . . . – 350 – – – – 350 (1,350) (1,000)
Balance at
31 May 2022 .... 86,700 156,430 (1,642) 7,880 34,110 54,786 338,264 16,487 354,751
The Notes on pages I-14 to I-68 form part of the Historical Financial Information.
APPENDIX I ACCOUNTANTS’ REPORT
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--- page 371 ---
Attributable to equity shareholders of the Company
Note
Share
capital
Share
premium
Shares held for
employee
incentive
scheme
Share-based
payment
reserve
Statutory
reserve
Retained
profits Total
Non-controlling
interests Total equity
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(Note 30(c)) (Note 30(d)(i)) (Note 28) (Note 30(d)(ii)) (Note 30(d)(iii))
Balance at
1 January 2023 . . 86,700 156,430 (1,642) 10,944 65,247 136,717 454,396 17,614 472,010---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Changes in equity
for the five
months ended
31 May 2023:
Profit and total
comprehensive
income for the
period ........ – – – – – 95,058 95,058 5,439 100,497
Equity settled
share-based
transactions ..... 28(a) – – – 2,189 – – 2,189 – 2,189
Dividends approved
and paid to the
shareholders ..... 30(b) – – – – – (160,000) (160,000) – (160,000)
Balance at
31 May 2023 .... 86,700 156,430 (1,642) 13,133 65,247 71,775 391,643 23,053 414,696
The Notes on pages I-14 to I-68 form part of the Historical Financial Information.
APPENDIX I ACCOUNTANTS’ REPORT
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--- page 372 ---
CONSOLIDATED CASH FLOW STATEMENTS
(Expressed in Renminbi)
Note Y ear ended 31 December Five months ended 31 May
2020 2021 2022 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(unaudited)
Operating activities
Cash generated from
operations ........... 21(c) 69,044 253,414 393,951 149,828 71,582
Income tax paid ......... (20,031) (39,642) (88,072) (64,484) (60,972)
Net cash generated from
operating activities .... 49,013 213,772 305,879 85,344 10,610--------- --------- --------- --------- ---------
Investing activities
Payment for purchase of
property, plant and
equipment and intangible
assets .............. ( 1 1,742) (24,806) (22,478) (9,248) (4,695)
Proceeds from disposal of
property, plant and
equipment ........... 3 3 0 2 7–––
Payment for acquisition of
financial assets measured
at fair value through
profit or loss ......... (496,100) (527,340) (555,000) (240,000) (408,000)
Proceeds from disposal of
financial assets measured
at fair value through
profit or loss ......... 508,003 575,894 551,459 195,480 414,165
Acquisition of subsidiaries,
net of cash acquired .... 21 – (73,817) – – –
Cash received from
repayment of entrusted
loans ............... 54,00 0––––
Interest received ........ 3,994 1,49 2–––
Proceeds from disposal of
investment in an
associate ............ – 2,10 0–––
Proceeds from disposal of
subsidiaries .......... 1,600 – 4,995 – –
Net cash generated
from/(used in) investing
activities ............ 60,085 (46,450) (21,024) (53,768) 1,470--------- --------- --------- --------- ---------
APPENDIX I ACCOUNTANTS’ REPORT
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--- page 373 ---
Note Y ear ended 31 December Five months ended 31 May
2020 2021 2022 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(unaudited)
Financing activities
Capital element of lease
rentals paid .......... 21(d) (6,484) (13,809) (16,838) (7,378) (6,515)
Interest element of lease
rentals paid .......... 21(d) (784) (1,411) (1,621) (749) (857)
Proceeds from new bank
loans ............... 21(d) 161,275 55,371 12,183 12,183 –
Repayment of bank loans . . 21(d) (87,141) (129,597) (12,183) (12,183) –
Interest and other
borrowing costs paid . . . 21(d) (3,630) (2,394) (15) (15) –
Issuance of new shares .... – 40,400 – – –
Capital injection from
equity shareholders ..... 2,598 – – – –
Acquisition of non-
controlling interests of
subsidiaries .......... – – (1,000) (1,000) –
Dividends paid to the
shareholders .......... 21(d) (120,000) (100,000) (80,000) (80,000) (160,000)
Dividends to non-
controlling interests of
subsidiaries .......... 21(d) – (560) (4,058) (3,330) (7,200)
Contribution from non-
controlling interests .... – 3,600 – – –
Payment of listing
expenses ............ – – – – (923)
Net cash used in
financing activities .... (54,166) (148,400) (103,532) (92,472) (175,495)---------
--------- --------- --------- ---------
Net change in cash and
cash equivalents ...... 54,932 18,922 181,323 (60,896) (163,415)
Cash and cash
equivalents at the
beginning of the
year/period .......... 95,641 150,573 169,495 169,495 350,818
Cash and cash
equivalents at the end
of the year/period ..... 21(a) 150,573 169,495 350,818 108,599 187,403
The Notes on pages I-14 to I-68 form part of the Historical Financial Information.
APPENDIX I ACCOUNTANTS’ REPORT
– I-13 –


--- page 374 ---
NOTES TO THE HISTORICAL FINANCIAL INFORMATION
1 BASIS OF PREPARATION AND PRESENTATION OF HISTORICAL FINANCIAL INFORMATION
Xiamen Y an Palace Bird’s Nest Industry Co., Ltd. (ʮ̡) (formerly known as Xiamen Y an
Palace Bioengineering Co., Ltd. (ʮ̡)) (“the Company”), was established in the People’s Republic of
China (the “PRC”) on 31 October 2014 as a limited liability company under the Companies laws of the PRC. The Company was
converted into a joint stock limited liability company on 23 December 2020.
The Company and its subsidiaries (together, the “Group”) are principally engaged in the development, production and
marketing of edible bird’s nest products.
The audited financial statements of the Company for the years ended 31 December 2021 and 2022 were prepared in
accordance with the Accounting Standards for Business Enterprises applicable to the enterprises in the PRC and audited by Da Hua
CPAs LLP (ה(౷ஷΥྫ)) and Xiamen Zhongyou CPA Co., Ltd. (ʮ̡) respectively.
During the Relevant Periods and as at the date of this report, the Company has direct interests in the following principal
subsidiaries, all of which are private companies:
Company Name
Place and date of
establishment
Particulars of
issued and
paid-up capital
Proportion of
ownership interest
Principal
activities
Held by the
Company
Held by the
subsidiary
Xiamen Y an Palace Si Nong Food
Co., Ltd. (ۜ࠮
ʮ̡) (note (a) and (b))
PRC/
23 November
2007
RMB21,260,000 100% – Research,
development
and production
of bird’s nest
products
Xiamen Y an Palace Electronic
Commerce Technology Co., Ltd.
(ʮ
̡) (note (a) and (b))
PRC/
6 May 2020
RMB10,000,000 100% – Online retail
business of
bird’s nest
products
Notes:
(a) The official name of this entity is in Chinese. The English name is for identification purpose only. The company was
registered as a limited liability company under the PRC Law.
(b) No audited financial statements has been prepared for these entities for the year ended 31 December 2020. The audited
financial statements of this company for the year ended 31 December 2021 were prepared in accordance with the
Accounting Standards for Business Enterprises applicable to the enterprises in the PRC and audited by Da Hua CPAs
LLP . The audited financial statements of this company for the year ended 31 December 2022 were prepared in
accordance with the Accounting Standards for Business Enterprises applicable to the enterprises in the PRC and
audited by Xiamen Zhongyou CPA Co., Ltd..
All companies comprising the Group have adopted 31 December as their financial year end date.
The Historical Financial Information has been prepared in accordance with all applicable International Financial Reporting
Standards (“IFRSs”) which collective term includes all applicable individual International Financial Reporting Standards,
International Accounting Standards and Interpretations issued by the International Accounting Standard Board (“IASB”). Further
details of the material accounting policy information adopted are set out in note 2.
The IASB has issued a number of new and revised IFRSs. For the purpose of preparing this Historical Financial Information,
the Group has adopted all applicable new and revised IFRSs to the Relevant Periods, except for any new standards or interpretations
that are not yet effective for the accounting period beginning on 1 January 2023. The revised and new accounting standards and
interpretations issued but not yet effective for the accounting period beginning on 1 January 2023 are set out in note 35.
The Historical Financial Information also complies with the applicable disclosure provisions of the Rules Governing the
Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Stock Exchange”).
The accounting policies set out below have been applied consistently to all periods presented in the Historical Financial
Information.
The Stub Period Corresponding Financial Information has been prepared in accordance with the same basis of preparation and
presentation adopted in respect of the Historical Financial Information.
2 MATERIAL ACCOUNTING POLICY INFORMATION
(a) Basis of measurement
The measurement basis used in the preparation of the Historical Financial Information is the historical cost basis, except for
certain financial assets measured at their fair value (see note 2(g)).
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The Historical Financial Information is presented in Renminbi (“RMB”), rounded to the nearest thousand. All of the
companies comprising the Group are operating in PRC and their functional currency is RMB, hence, RMB is used as the presentation
currency of the Group.
(b) Use of estimates and judgements
The preparation of financial statements in conformity with IFRSs requires management to make judgements, estimates and
assumptions that affect the application of policies and reported amounts of assets, liabilities, income and expenses. The estimates
and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the
circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are
not readily apparent from other sources. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised
in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods
if the revision affects both current and future periods.
Judgements made by management in the application of IFRSs that have significant effect on the financial statements and major
sources of estimation uncertainty are discussed in note 3.
(c) Subsidiaries and non-controlling interests
Subsidiaries are entities controlled by the Group. The Group controls an entity when it is exposed, or has rights, to variable
returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. When
assessing whether the Group has power, only substantive rights (held by the Group and other parties) are considered.
An investment in a subsidiary is consolidated into the consolidated financial statements from the date that control commences
until the date that control ceases. Intra-group balances, transactions and cash flows and any unrealised profits arising from
intra-group transactions are eliminated in full in preparing the consolidated financial statements. Unrealised losses resulting from
intra-group transactions are eliminated in the same way as unrealised gains but only to the extent that there is no evidence of
impairment.
Non-controlling interests represent the equity in a subsidiary not attributable directly or indirectly to the Company, and in
respect of which the Group has not agreed any additional terms with the holders of those interests which would result in the Group
as a whole having a contractual obligation in respect of those interests that meets the definition of a financial liability. For each
business combination, the Group can elect to measure any non-controlling interests either at fair value or at the non-controlling
interests’ proportionate share of the subsidiary’s net identifiable assets.
Non-controlling interests are presented in the consolidated statements of financial position within equity, separately from
equity attributable to the equity shareholders of the Company. Non-controlling interests in the results of the Group are presented on
the face of the consolidated statements of profit or loss and other comprehensive income as an allocation of the total profit or loss
and total comprehensive income for the period between non-controlling interests and the equity shareholders of the Company. Loans
from holders of non-controlling interests and other contractual obligations towards these holders are presented as financial liabilities
in the consolidated statements of financial position in accordance with note 2(n).
Changes in the Group’s interests in a subsidiary that do not result in a loss of control are accounted for as equity transactions,
whereby adjustments are made to the amounts of controlling and non-controlling interests within consolidated equity to reflect the
change in relative interests, but no adjustments are made to goodwill and no gain or loss is recognised.
When the Group loses control of a subsidiary, it is accounted for as a disposal of the entire interest in that subsidiary, with
a resulting gain or loss being recognised in profit or loss.
In the Company’s statement of financial position, an investment in a subsidiary is stated at cost less impairment losses (see
note 2(k)(ii)), unless the investment is classified as held for sale (or included in a disposal group that is classified as held for sale).
(d) Associates
An associate is an entity in which the Group or Company has significant influence, but not control or joint control, over its
management, including participation in the financial and operating policy decisions.
An investment in an associate is accounted for in the consolidated financial statements under the equity method, unless it is
classified as held for sale (or included in a disposal group that is classified as held for sale). Under the equity method, the investment
is initially recorded at cost, adjusted for any excess of the Group’s share of the acquisition-date fair values of the investee’s
identifiable net assets over the cost of the investment (if any). The cost of the investment includes purchase price, other costs directly
attributable to the acquisition of the investment, and any direct investment into the associate that forms part of the Group’s equity
investment. Thereafter, the investment is adjusted for the post acquisition change in the Group’s share of the investee’s net assets
and any impairment loss relating to the investment (see note 2(k)(ii)). At each reporting date, the Group assesses whether there is
any objective evidence that the investment is impaired. Any acquisition-date excess over cost, the Group’s share of the
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post-acquisition, post-tax results of the investees and any impairment losses for the period are recognised in the consolidated
statements of profit or loss and other comprehensive income, whereas the Group’s share of the post-acquisition post-tax items of the
investees’ other comprehensive income is recognised in the consolidated statements of profit or loss and other comprehensive
income.
When the Group’s share of losses exceeds its interest in the associate, the Group’s interest is reduced to nil and recognition
of further losses is discontinued except to the extent that the Group has incurred legal or constructive obligations or made payments
on behalf of the investee. For this purpose, the Group’s interest is the carrying amount of the investment under the equity method,
together with any other long-term interests that in substance form part of the Group’s net investment in the associate, after applying
the ECL model to such other long-term interests where applicable (see note 2(k)(i)).
Unrealised profits and losses resulting from transactions between the Group and its associates are eliminated to the extent of
the Group’s interest in the investee, except where unrealised losses provide evidence of an impairment of the asset transferred, in
which case they are recognised immediately in profit or loss.
When the Group ceases to have significant influence over an associate, it is accounted for as a disposal of the entire interest
in that investee, with a resulting gain or loss being recognised in profit or loss. Any interest retained in that former investee at the
date when significant influence is lost is recognised at fair value and this amount is regarded as the fair value on initial recognition
of a financial asset (see note 2(g)).
In the Company’s statement of financial position, investments in associates are stated at cost less impairment losses (see note
2(k)(ii)), unless classified as held for sale (or included in a disposal group that is classified as held for sale).
(e) Business combination
The Group accounts for business combinations using the acquisition method when the acquired set of activities and assets
meets the definition of a business and control is transferred to the Group (see note 2(c)). In determining whether a particular set of
activities and assets is a business, the Group assesses whether the set of assets and activities acquired includes, at a minimum, an
input and substantive process and whether the acquired set has the ability to produce outputs.
The Group has an option to apply a ‘concentration test’ that permits a simplified assessment of whether an acquired set of
activities and assets is not a business. The optional concentration test is met if substantially all of the fair value of the gross assets
acquired is concentrated in a single identifiable asset or group of similar identifiable assets.
The consideration transferred in the acquisition is generally measured at fair value, as are the identifiable net assets acquired.
Any goodwill that arises is tested annually for impairment (see note 2(k)(ii)). Any gain on a bargain purchase is recognised in profit
or loss immediately. Transaction costs are expensed as incurred, except if related to the issue of debt or equity securities.
The consideration transferred does not include amounts related to the settlement of pre-existing relationships. Such amounts
are generally recognised in profit or loss.
(f) Goodwill
Goodwill represents the excess of
(i) the aggregate of the fair value of the consideration transferred, the amount of any non-controlling interest in the
acquiree and the fair value of the group’s previously held equity interest in the acquiree; over
(ii) the net fair value of the acquiree’s identifiable assets and liabilities measured as at the acquisition date.
When (ii) is greater than (i), then this excess is recognised immediately in profit or loss as a gain on a bargain purchase.
Goodwill is stated at cost less accumulated impairment losses. Goodwill arising on a business combination is allocated to each
cash-generating unit, or groups of cash generating units, that is expected to benefit from the synergies of the combination and is
tested annually for impairment (see note 2(k)(ii)).
On disposal of a cash generating unit during the period, any attributable amount of purchased goodwill is included in the
calculation of the profit or loss on disposal.
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(g) Other investments in debt and equity securities
The Group’s policies for investment in debt and equity securities, other than investments in subsidiaries and associates, are
set out below.
Investments in debt and equity securities are recognised/derecognised on the date the Group commits to purchase/sell the
investment. The investments are initially stated at fair value plus directly attributable transaction costs, except for those investments
measured at fair value through profit or loss (FVPL) for which transaction costs are recognised directly in profit or loss. For an
explanation of how the Group determines fair value of financial instruments, see note 31(d). These investments are subsequently
accounted for as follows, depending on their classification.
(i) Investments other than equity investments
Non-equity investments held by the Group are classified into one of the following measurement categories:
– amortised cost, if the investment is held for the collection of contractual cash flows which represent solely
payments of principal and interest. Interest income from the investment is calculated using the effective interest
method (see note 2(u)(ii)(a)).
– fair value through other comprehensive income (FVOCI) – recycling, if the contractual cash flows of the
investment comprise solely payments of principal and interest and the investment is held within a business
model whose objective is achieved by both the collection of contractual cash flows and sale. Changes in fair
value are recognised in other comprehensive income, except for the recognition in profit or loss of expected
credit losses, interest income (calculated using the effective interest method) and foreign exchange gains and
losses. When the investment is derecognised, the amount accumulated in other comprehensive income is
recycled from equity to profit or loss.
– fair value at profit or loss (FVPL), if the investment does not meet the criteria for being measured at amortised
cost or FVOCI (recycling). Changes in the fair value of the investment (including interest) are recognised in
profit or loss.
(h) Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses (see note 2(k)(ii)):
– interests in leasehold land and buildings where the Group is the registered owner of the property interest (see note 2(j));
– right-of-use assets arising from leases over leasehold properties where the Group is not the registered owner of the
property interest; and
– items of plant and equipment, including right-of-use assets arising from leases of underlying plant and equipment (see
note 2(j)).
The cost of self-constructed items of property, plant and equipment includes the cost of materials, direct labour, the initial
estimate, where relevant, of the costs of dismantling and removing the items and restoring the site on which they are located, and
an appropriate proportion of production overheads and borrowing costs (see note 2(v)).
Items may be produced while bringing an item of property, plant and equipment to the location and condition necessary for
it to be capable of operating in the manner intended by management. The proceeds from selling any such items and the related costs
are recognised in profit or loss.
Gains or losses arising from the retirement or disposal of an item of property, plant and equipment are determined as the
difference between the net disposal proceeds and the carrying amount of the item and are recognised in profit or loss on the date
of retirement or disposal.
Depreciation is calculated to write off the cost of items of property, plant and equipment, less their estimated residual value,
if any, using the straight line method over their estimated useful lives as follows:
– The Group’s interests in buildings situated on leasehold land are depreciated over the shorter of the unexpired term of
lease and the buildings’ estimated useful lives, being no more than 50 years after the date of completion.
– Motor vehicles 4 – 5 years
– Machinery 5 – 10 years
– Office and other equipment 3 – 5 years
– Leasehold improvements The shorter of the lease terms or the estimated useful life of the assets
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Where parts of an item of property, plant and equipment have different useful lives, the cost of the item is allocated on a
reasonable basis between the parts and each part is depreciated separately. Both the useful life of an asset and its residual value, if
any, are reviewed annually.
(i) Intangible assets (other than goodwill)
Research and development costs comprise all costs that are directly attributable to research and development activities or that
can be allocated on a reasonable basis to such activities. Because of the nature of the Group’s research and development activities,
the criteria for the recognition of such costs as an asset are generally not met until late in the development stage of the project when
the remaining development costs are immaterial. Hence both research costs and development costs are generally recognised as
expenses in the period in which they are incurred.
Other intangible assets that are acquired by the Group are stated at cost less accumulated amortisation (where the estimated
useful life is finite) and impairment losses (see note 2(k)(ii)). Expenditure on internally generated goodwill and brands is recognised
as an expense in the period in which it is incurred.
Amortisation of intangible assets with finite useful lives is charged to profit or loss on a straight-line basis over the assets’
estimated useful lives. The following intangible assets with finite useful lives are amortised from the date they are available for use
and their estimated useful lives are as follows:
– Patent rights 6.5 to 17 years
– Software 2 to 3 years
The useful life of patent rights was assessed based on the protection terms of patent rights.
The useful life of software was assessed based on the expected service life during which relevant software performs its desired
functionality.
Both the period and method of amortisation are reviewed annually.
(j) Leased assets
At inception of a contract, the Group assesses whether the contract is, or contains, a lease. A contract is, or contains, a lease
if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. Control
is conveyed where the customer has both the right to direct the use of the identified asset and to obtain substantially all of the
economic benefits from that use.
As a lessee
Where the contract contains lease component(s) and non-lease component(s), the Group has elected not to separate
non-lease components and accounts for each lease component and any associated non-lease components as a single lease
component for all leases.
At the lease commencement date, the Group recognises a right-of-use asset and a lease liability, except for short-term
leases that have a lease term of 12 months or less. When the Group enters into a lease in respect of a low-value asset, the
Group decides whether to capitalise the lease on a lease-by-lease basis. The lease payments associated with those leases which
are not capitalised are recognised as an expense on a systematic basis over the lease term.
Where the lease is capitalised, the lease liability is initially recognised at the present value of the lease payments
payable over the lease term, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined,
using a relevant incremental borrowing rate. After initial recognition, the lease liability is measured at amortised cost and
interest expense is calculated using the effective interest method. V ariable lease payments that do not depend on an index or
rate are not included in the measurement of the lease liability and hence are charged to profit or loss in the accounting period
in which they are incurred.
The right-of-use asset recognised when a lease is capitalised is initially measured at cost, which comprises the initial
amount of the lease liability plus any lease payments made at or before the commencement date, and any initial direct costs
incurred. Where applicable, the cost of the right-of-use assets also includes an estimate of costs to dismantle and remove the
underlying asset or to restore the underlying asset or the site on which it is located, discounted to their present value, less
any lease incentives received. The right-of-use asset is subsequently stated at cost less accumulated depreciation and
impairment losses (see Notes 2(h) and 2(k)(ii)).
The initial fair value of refundable rental deposits is accounted for separately from the right-of-use assets in accordance
with the accounting policy applicable to investments in debt securities carried at amortised cost (see notes 2(g)(i), 2(u)(ii)(a)
and 2(k)(i)). Any difference between the initial fair value and the nominal value of the deposits is accounted for as additional
lease payments made and is included in the cost of right-of-use assets.
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The lease liability is remeasured when there is a change in future lease payments arising from a change in an index
or rate, or there is a change in the Group’s estimate of the amount expected to be payable under a residual value guarantee,
or there is a change arising from the reassessment of whether the Group will be reasonably certain to exercise a purchase,
extension or termination option. When the lease liability is remeasured in this way, a corresponding adjustment is made to
the carrying amount of the right-of-use asset, or is recorded in profit or loss if the carrying amount of the right-of-use asset
has been reduced to zero.
The lease liability is also remeasured when there is a change in the scope of a lease or the consideration for a lease
that is not originally provided for in the lease contract (“lease modification”) that is not accounted for as a separate lease. In
this case the lease liability is remeasured based on the revised lease payments and lease term using a revised discount rate
at the effective date of the modification. The only exceptions are rent concessions that occurred as a direct consequence of
the COVID-19 pandemic and met the conditions set out in paragraph 46B of IFRS 16 Leases . In such cases, the Group has
taken advantage of the practical expedient not to assess whether the rent concessions are lease modifications, and recognised
the change in consideration as negative variable lease payments in profit or loss in the period in which the event or condition
that triggers the rent concessions occurred.
In the consolidated statements of financial position, the current portion of long-term lease liabilities is determined as
the present value of contractual payments that are due to be settled within twelve months after the reporting period.
(k) Credit losses and impairment of assets
(i) Credit losses from financial instruments
The Group recognises a loss allowance for expected credit losses (ECLs) on financial assets measured at amortised cost
(including cash and cash equivalents, restricted bank deposits, trade receivables and other receivables).
Other financial assets measured at fair value, including equity and debt securities measured at FVPL, are not subject
to the ECL assessment.
Measurement of ECLs
ECLs are a probability-weighted estimate of credit losses. Credit losses are measured as the present value of
all expected cash shortfalls (i.e. the difference between the cash flows due to the Group in accordance with the contract
and the cash flows that the Group expects to receive).
The expected cash shortfalls are discounted using the following discount rates where the effect of discounting
is material:
– fixed-rate financial assets and trade and other receivables: effective interest rate determined at initial
recognition or an approximation thereof;
– variable-rate financial assets: current effective interest rate.
The maximum period considered when estimating ECLs is the maximum contractual period over which the
Group is exposed to credit risk.
In measuring ECLs, the Group takes into account reasonable and supportable information that is available
without undue cost or effort. This includes information about past events, current conditions and forecasts of future
economic conditions.
ECLs are measured on either of the following bases:
– 12-month ECLs: these are losses that are expected to result from possible default events within the 12
months after the reporting date; and
– lifetime ECLs: these are losses that are expected to result from all possible default events over the
expected lives of the items to which the ECL model applies.
Loss allowances for trade receivables are always measured at an amount equal to lifetime ECLs. ECLs on these
financial assets are estimated using a provision matrix based on the Group’s historical credit loss experience, adjusted
for factors that are specific to the debtors and an assessment of both the current and forecast general economic
conditions at the reporting date.
For all other financial instruments, the Group recognises a loss allowance equal to 12-month ECLs unless there
has been a significant increase in credit risk of the financial instrument since initial recognition, in which case the loss
allowance is measured at an amount equal to lifetime ECLs.
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Significant increases in credit risk
In assessing whether the credit risk of a financial instrument has increased significantly since initial recognition,
the Group compares the risk of default occurring on the financial instrument assessed at the reporting date with that
assessed at the date of initial recognition. In making this reassessment, the Group considers that a default event occurs
when (i) the borrower is unlikely to pay its credit obligations to the Group in full, without recourse by the Group to
actions such as realising security (if any is held); or (ii) the financial asset is 90 days past due. The Group considers
both quantitative and qualitative information that is reasonable and supportable, including historical experience and
forward-looking information that is available without undue cost or effort.
In particular, the following information is taken into account when assessing whether credit risk has increased
significantly since initial recognition:
– failure to make payments of principal or interest on their contractually due dates;
– an actual or expected significant deterioration in a financial instrument’s external or internal credit rating
(if available);
– an actual or expected significant deterioration in the operating results of the debtor; and
– existing or forecast changes in the technological, market, economic or legal environment that have a
significant adverse effect on the debtor’s ability to meet its obligation to the Group.
Depending on the nature of the financial instruments, the assessment of a significant increase in credit risk is
performed on either an individual basis or a collective basis. When the assessment is performed on a collective basis,
the financial instruments are grouped based on shared credit risk characteristics, such as past due status and credit risk
ratings.
ECLs are remeasured at each reporting date to reflect changes in the financial instrument’s credit risk since
initial recognition. Any change in the ECL amount is recognised as an impairment gain or loss in profit or loss. The
Group recognises an impairment gain or loss for all financial instruments with a corresponding adjustment to their
carrying amount through a loss allowance account.
Basis of calculation of interest income
Interest income recognised in accordance with Note 2(u)(ii)(a) is calculated based on the gross carrying amount
of the financial asset unless the financial asset is credit-impaired, in which case interest income is calculated based on
the amortised cost (i.e. the gross carrying amount less loss allowance) of the financial asset.
At each reporting date, the Group assesses whether a financial asset is credit-impaired. A financial asset is
credit-impaired when one or more events that have a detrimental impact on the estimated future cash flows of the
financial asset have occurred.
Evidence that a financial asset is credit-impaired includes the following observable events:
– significant financial difficulties of the debtor;
– a breach of contract, such as a default or past due event;
– it becoming probable that the borrower will enter into bankruptcy or other financial reorganisation;
– significant changes in the technological, market, economic or legal environment that have an adverse
effect on the debtor; or
– the disappearance of an active market for a security because of financial difficulties of the issuer.
Write-off policy
The gross carrying amount of a financial asset is written off (either partially or in full) to the extent that there
is no realistic prospect of recovery. This is generally the case when the asset becomes 30 to 90 days past due or when
the Group determines that the debtor does not have assets or sources of income that could generate sufficient cash flows
to repay the amounts subject to the write-off.
Subsequent recoveries of an asset that was previously written off are recognised as a reversal of impairment in
profit or loss in the period in which the recovery occurs.
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(ii) Impairment of other non-current assets
Internal and external sources of information are reviewed at the end of each reporting period to identify indications
that the following assets may be impaired or, except in the case of goodwill, an impairment loss previously recognised no
longer exists or may have decreased:
– property, plant and equipment, including right-of-use assets;
– intangible assets;
– interest in an associate;
– goodwill; and
– investments in subsidiaries in the Company’s statement of financial position.
If any such indication exists, the asset’s recoverable amount is estimated. In addition, for goodwill, the recoverable
amount is estimated annually whether or not there is any indication of impairment.
– Calculation of recoverable amount
The recoverable amount of an asset is the greater of its fair value less costs of disposal and value in use. In assessing value
in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market
assessments of the time value of money and the risks specific to the asset. Where an asset does not generate cash inflows largely
independent of those from other assets, the recoverable amount is determined for the smallest Group of assets that generates cash
inflows independently (i.e. a cash-generating unit). A portion of the carrying amount of a corporate asset (for example, head office
building) is allocated to an individual cash-generating unit if the allocation can be done on a reasonable and consistent basis, or to
the smallest group of cash-generating units if otherwise.
– Recognition of impairment losses
An impairment loss is recognised in profit or loss if the carrying amount of an asset, or the cash-generating unit to which it
belongs, exceeds its recoverable amount. Impairment losses recognised in respect of cash-generating units are allocated first to
reduce the carrying amount of any goodwill allocated to the cash-generating unit (or group of units) and then, to reduce the carrying
amount of the other assets in the unit (or group of units) on a pro rata basis, except that the carrying value of an asset will not be
reduced below its individual fair value less costs of disposal (if measurable) or value in use (if determinable).
– Reversals of impairment losses
In respect of assets other than goodwill, an impairment loss is reversed if there has been a favourable change in the estimates
used to determine the recoverable amount. An impairment loss in respect of goodwill is not reversed.
A reversal of an impairment loss is limited to the asset’s carrying amount that would have been determined had no impairment
loss been recognised in prior years. Reversals of impairment losses are credited to profit or loss in the period in which the reversals
are recognised.
(l) Inventories and other contract costs
(i) Inventories
Inventories are assets which are held for sale in the ordinary course of business, in the process of production for such
sale or in the form of materials or supplies to be consumed in the production process or in the rendering of services.
Inventories are carried at the lower of cost and net realisable value.
Costs is calculated using the weighted average cost formula and comprises all costs of purchase, costs of conversion
and other costs incurred in bringing the inventories to their present location and condition.
Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of
completion and the estimated costs necessary to make the sale.
When inventories are sold, the carrying amount of those inventories is recognised as an expense in the period in which
the related revenue is recognised.
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The amount of any write-down of inventories to net realisable value and all losses of inventories are recognised as an
expense in the period the write-down or loss occurs. The amount of any reversal of any write-down of inventories is
recognised as a reduction in the amount of inventories recognised as an expense in the period in which the reversal occurs.
A right to recover returned goods is recognised for the right to recover products from customers sold with a right of
return. It is measured in accordance with the policy set out in note 2(u)(i).
(ii) Other contract costs
Other contract costs are the costs to fulfil a contract with a customer which are not capitalised as inventory (see note
2(l)(i)).
Costs to fulfil a contract are capitalised if the costs relate directly to an existing contract or to a specifically identifiable
anticipated contract; generate or enhance resources that will be used to provide goods or services in the future; and are
expected to be recovered. Costs that relate directly to an existing contract or to a specifically identifiable anticipated contract
may include direct labour, direct materials, allocations of costs, costs that are explicitly chargeable to the customer and other
costs that are incurred only because the Group entered into the contract. Other costs of fulfilling a contract, which are not
capitalised as inventory, are expensed as incurred.
Capitalised contract costs are stated at cost less accumulated amortisation and impairment losses. Impairment losses
are recognised to the extent that the carrying amount of the contract cost asset exceeds the net of (i) remaining amount of
consideration that the Group expects to receive in exchange for the goods or services to which the asset relates, less (ii) any
costs that relate directly to providing those goods or services that have not yet been recognised as expenses.
Amortisation of capitalised contract costs is charged to profit or loss when the revenue to which the asset relates is
recognised. The accounting policy for revenue recognition is set out in note 2(u)(i).
(m) Contract liabilities
A contract liability is recognised when the customer pays non-refundable consideration before the Group recognises the
related revenue (see note 2(u)(i)). A contract liability would also be recognised if the Group has an unconditional right to receive
non-refundable consideration before the Group recognises the related revenue. In such cases, a corresponding receivable would also
be recognised (see note 2(n)).
(n) Trade and other receivables
A receivable is recognised when the Group has an unconditional right to receive consideration. A right to receive consideration
is unconditional if only the passage of time is required before payment of that consideration is due.
Trade receivables that do not contain a significant financing component are initially measured at their transaction price. Other
receivables are initially measured at fair value plus transaction costs. All receivables are subsequently stated at amortised cost, using
the effective interest method and including an allowance for credit losses (see Note 2(k)(i)).
(o) Cash and cash equivalents
Cash and cash equivalents comprise cash at bank and on hand, demand deposits with banks and other financial institutions,
and short-term, highly liquid investments that are readily convertible into known amounts of cash and which are subject to an
insignificant risk of changes in value, having been within three months of maturity at acquisition. Cash and cash equivalents are
assessed for expected credit losses (ECL) in accordance with the policy set out in note 2(k)(i).
(p) Trade and other payables (other than refund liabilities)
Trade and other payables are initially recognised at fair value. Subsequent to initial recognition, trade and other payables are
stated at amortised cost unless the effect of discounting would be immaterial, in which case they are stated at invoice amounts.
Refund liabilities arising from rights of returns and volume rebates are recognised in accordance with the policy set out in
note 2(u)(i).
(q) Interest-bearing borrowings
Interest-bearing borrowings are measured initially at fair value less transaction costs. Subsequent to initial recognition,
interest-bearing borrowings are stated at amortised cost using the effective interest method. Interest expense is recognised in
accordance with the Group’s accounting policy for borrowing costs (see note 2(v)).
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(r) Employee benefits
(i) Short term employee benefits and contributions to defined contribution retirement plans
Salaries, annual bonuses, paid annual leave, contributions to defined contribution retirement plans and the cost of
non-monetary benefits are accrued in the period in which the associated services are rendered by employees. Where payment
or settlement is deferred and the effect would be material, these amounts are stated at their present values.
(ii) Share-based payments
The grant-date fair value of equity-settled share-based payment arrangements granted to employees is generally
recognized as an expense, with a corresponding increase in equity, over the vesting period of the awards. The amount
recognised as an expense is adjusted to reflect the number of awards for which the related service and non-market performance
conditions are expected to be met, such that the amount ultimately recognised is based on the number of awards that meet
the related service and non-market performance conditions at the vesting date. For share-based payment awards with
non-vesting conditions, the grant-date fair value of the share-based payment is measured to reflect such conditions and there
is no true-up for differences between expected and actual outcomes.
(s) Income tax
Income tax for the period comprises current tax and movements in deferred tax assets and liabilities. Current tax and
movements in deferred tax assets and liabilities are recognised in profit or loss except to the extent that they relate to items
recognised in other comprehensive income or directly in equity, in which case the relevant amounts of tax are recognised in other
comprehensive income or directly in equity, respectively.
Current tax is the expected tax payable on the taxable income for the period, using tax rates enacted or substantively enacted
at the end of the reporting period, and any adjustment to tax payable in respect of previous years.
Deferred tax assets and liabilities arise from deductible and taxable temporary differences respectively, being the differences
between the carrying amounts of assets and liabilities for financial reporting purposes and their tax bases. Deferred tax assets also
arise from unused tax losses and unused tax credits.
Apart from certain limited exceptions, all deferred tax liabilities, and all deferred tax assets to the extent that it is probable
that future taxable profits will be available against which the asset can be utilised, are recognised. Future taxable profits that may
support the recognition of deferred tax assets arising from deductible temporary differences include those that will arise from the
reversal of existing taxable temporary differences, provided those differences relate to the same taxation authority and the same
taxable entity, and are expected to reverse either in the same period as the expected reversal of the deductible temporary difference
or in periods into which a tax loss arising from the deferred tax asset can be carried back or forward. The same criteria are adopted
when determining whether existing taxable temporary differences support the recognition of deferred tax assets arising from unused
tax losses and credits, that is, those differences are taken into account if they relate to the same taxation authority and the same
taxable entity, and are expected to reverse in a period, or periods, in which the tax loss or credit can be utilised.
The limited exceptions to recognition of deferred tax assets and liabilities are those temporary differences arising from
goodwill not deductible for tax purposes, the initial recognition of assets or liabilities that affect neither accounting nor taxable profit
(provided they are not part of a business combination), and temporary differences relating to investments in subsidiaries to the extent
that, in the case of taxable differences, the Group controls the timing of the reversal and it is probable that the differences will not
reverse in the foreseeable future, or in the case of deductible differences, unless it is probable that they will reverse in the future.
The amount of deferred tax recognised is measured based on the expected manner of realisation or settlement of the carrying
amount of the assets and liabilities, using tax rates enacted or substantively enacted at the end of the reporting period. Deferred tax
assets and liabilities are not discounted.
The carrying amount of a deferred tax asset is reviewed at the end of each reporting period and is reduced to the extent that
it is no longer probable that sufficient taxable profits will be available to allow the related tax benefit to be utilised. Any such
reduction is reversed to the extent that it becomes probable that sufficient taxable profits will be available.
Additional income taxes that arise from the distribution of dividends are recognised when the liability to pay the related
dividends is recognised.
Current tax balances and deferred tax balances, and movements therein, are presented separately from each other and are not
offset. Current tax assets are offset against current tax liabilities, and deferred tax assets against deferred tax liabilities, if the
Company or the Group has the legally enforceable right to set off current tax assets against current tax liabilities and the following
additional conditions are met:
– in the case of current tax assets and liabilities, the Company or the Group intends either to settle on a net basis, or to
realise the asset and settle the liability simultaneously; or
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– in the case of deferred tax assets and liabilities, if they relate to income taxes levied by the same taxation authority
on either:
– the same taxable entity; or
– different taxable entities, which, in each future period in which significant amounts of deferred tax liabilities
or assets are expected to be settled or recovered, intend to realise the current tax assets and settle the current
tax liabilities on a net basis or realise and settle simultaneously.
(t) Provisions and contingent liabilities
Provisions are recognised when the Group has a legal or constructive obligation arising as a result of a past event, it is
probable that an outflow of economic benefits will be required to settle the obligation and a reliable estimate can be made. Where
the time value of money is material, provisions are stated at the present value of the expenditure expected to settle the obligation.
Where it is not probable that an outflow of economic benefits will be required, or the amount cannot be estimated reliably,
the obligation is disclosed as a contingent liability, unless the probability of outflow of economic benefits is remote. Possible
obligations, whose existence will only be confirmed by the occurrence or non-occurrence of one or more future events are also
disclosed as contingent liabilities unless the probability of outflow of economic benefits is remote.
(u) Revenue and other income
Income is classified by the Group as revenue when it arises from the sale of bird’s nest products in the ordinary course of
the Group’s business.
The Group is the principal for its revenue transactions and recognises revenue on a gross basis. In determining whether the
Group acts as a principal or as an agent, it considers whether it obtains control of the products before they are transferred to the
customers. Control refers to the Group’s ability to direct the use of and obtain substantially all of the remaining benefits from the
products.
Further details of the Group’s revenue and other income recognition policies are as follows:
(i) Revenue from contracts with customers
(a) Sales of edible bird’ s nest products
Revenue is recognised when control over a product is transferred to the customer at the amount of promised
consideration to which the Group is expected to be entitled, excluding those amounts collected on behalf of third
parties such as value added tax or other sales taxes.
Sales of the Group’s edible bird’s nest products are recognised as follows:
(i) Direct sales to customers
In direct sales, the Group sells edible bird’s nest products to retail customers through self-operated online
and offline stores.
 For retail customers that purchase from the Group’s offline stores, sales revenue is recognised
when customers take possession of the products and make payment.
 For retail customers that purchase from the Group’s online stores, payment is collected when
customers place purchase orders and sales revenue is recognised when customers accept the
products upon delivery.
The Group typically offers retail customers a right of return for a period of 7 days upon customer
acceptance. The Group estimates the constrained transaction price with all reasonably available information and
updates the variable consideration at each reporting date.
The Group operates membership programs and members can earn loyalty points on their purchases from
stores operated by the Group as well as the Group’s distributors. Points are redeemable against any future
purchases of the Group’s products or other offerings provided by the Group. The Group allocates a portion of
the consideration received from direct sales and sales to distributors (see (ii) below) as appropriate to loyalty
points based on the relative stand-alone selling prices. The amount allocated to the membership programs is
deferred and recognised as revenue when loyalty points are redeemed or expire. Unused loyalty points generally
expire in 12 to 15 months after they are granted.
APPENDIX I ACCOUNTANTS’ REPORT
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(ii) Sales to distributors
The Group sells edible bird’s nest products to distributors through offline and online channels.
Offline channel distributors make payments for their purchase orders before product shipment. Sales
revenue is recognised when the products are delivered to and accepted by distributors at the locations specified
in the purchase orders.
The Group generally does not accept return of products from offline channel distributors, except for
quality defects or transportation damages in rare cases.
Group provides sales rebates to distributors who satisfy relevant requirements specified in the
distribution agreements and the Group’s distributor incentivising policies.
The above sales rebates and the rights of return (where applicable) to distributors give rise to variable
consideration. The Group uses the most likely amount approach to estimate variable consideration based on the
Group’s current and future performance expectations and all information that is reasonably available. This
estimated amount is included in the transaction price to the extent it is highly probable that a significant reversal
of cumulative revenue recognised will not occur when the uncertainty associated with the variable consideration
is resolved. At the time of sale of products to distributors, the Group recognises revenue after taking into
account adjustment to transaction price arising from sales rebates and returns which are estimated and updated
at each reporting date.
(iii) Sales to e-commerce platform
The Group sells edible bird’s nest products to e-commerce platforms. Sales of products sold to
e-commerce platforms are recognised when the products are accepted by the platforms upon delivery to their
designated premises.
Certain e-commerce platforms can return unsold products to the Group. The Group also provides a profit
protection to certain e-commence platform such that the monthly overall gross margin generated by the
e-commerce platform from selling the products is not less than a floor.
The above rights of return and profit protection give rise to variable consideration. The Group uses the
most likely amount approach to estimate variable consideration based on the Group’s current and future
performance expectations and all information that is reasonably available. This estimated amount is included in
the transaction price to the extent it is highly probable that a significant reversal of cumulative revenue
recognised will not occur when the uncertainty associated with the variable consideration is resolved. At the
time of sale of products to e-commerce platforms, the Group recognises revenue after taking into account
adjustment to transaction price arising from returns and profit protection which are estimated and updated at
each reporting date.
(ii) Revenue from other sources and other income
(a) Interest income
Interest income is recognised as it accrues under the effective interest method using the rate that exactly
discounts estimated future cash receipts through the expected life of the financial asset to the gross carrying amount
of the financial asset. For financial assets measured at amortised cost that are not credit-impaired, the effective interest
rate is applied to the gross carrying amount of the asset. For credit-impaired financial assets, the effective interest rate
is applied to the amortised cost (i.e. gross carrying amount net of loss allowance) of the asset (see note 2(k)(i)).
(b) Government grants
Government grants are recognised in the statement of financial position initially when there is reasonable
assurance that they will be received and that the Group will comply with the conditions attaching to them. Grants that
compensate the Group for expenses incurred are recognised as income in profit or loss on a systematic basis in the same
periods in which the expenses are incurred. Grants that compensate the Group for the cost of an asset are initially
recognised as deferred income and subsequently recognised in profit or loss on a systematic basis over the useful life
of the asset.
(v) Borrowing costs
Borrowing costs are expensed in the period in which they are incurred.
(w) Related parties
(a) A person, or a close member of that person’s family, is related to the Group if that person:
APPENDIX I ACCOUNTANTS’ REPORT
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(i) has control or joint control over the Group;
(ii) has significant influence over the Group; or
(iii) is a member of the key management personnel of the Group or the Group’s parent.
(b) An entity is related to the Group if any of the following conditions applies:
(i) The entity and the Group are members of the same group (which means that each parent, subsidiary and fellow
subsidiary is related to the others).
(ii) One entity is an associate or joint venture of the other entity (or an associate or joint venture of a member of
a group of which the other entity is a member).
(iii) Both entities are joint ventures of the same third party.
(iv) One entity is a joint venture of a third entity and the other entity is an associate of the third entity.
(v) The entity is a post-employment benefit plan for the benefit of employees of either the Group or an entity related
to the Group.
(vi) The entity is controlled or jointly controlled by a person identified in (a).
(vii) A person identified in (a)(i) has significant influence over the entity or is a member of the key management
personnel of the entity (or of a parent of the entity).
(viii) The entity, or any member of a group of which it is a part, provides key management personnel services to the
Group or to the Group’s parent.
Close members of the family of a person are those family members who may be expected to influence, or be influenced by,
that person in their dealings with the entity.
(x) Segment reporting
Operating segments, and the amounts of each segment item reported in the financial statements, are identified from the
financial information provided regularly to the Group’s most senior executive management for the purposes of allocating resources
to, and assessing the performance of, the Group’s various lines of business and geographical locations.
Individually material operating segments are not aggregated for financial reporting purposes unless the segments have similar
economic characteristics and are similar in respect of the nature of products and services, the nature of production processes, the type
or class of customers, the methods used to distribute the products or provide the services, and the nature of the regulatory
environment. Operating segments which are not individually material may be aggregated if they share a majority of these criteria.
3 ACCOUNTING JUDGEMENTS AND ESTIMATES
Notes 13, 28 and 31 contain information about the assumptions and their risk factors relating to goodwill impairment, fair
value of share granted and financial instruments. Other significant sources of estimation uncertainty are as follows:
(a) Variable consideration for volume rebates
The Group estimates variable consideration included in the transaction price arising from the sales of bird’s nest products
where volume rebates are offered. The Group uses judgement in estimating the amount of volume rebates based on the customer’s
historical rebate rates, accumulated purchases to date, as well as estimates of future purchases. Changes in these estimates could have
a significant impact on the amount of revenue recognised in future periods.
(b) Impairment of goodwill
Determining whether goodwill is impaired requires an estimation of the value in use of the cash-generating units to which
goodwill has been allocated. The value in use calculation requires the Group to estimate the future cash flows expected to arise from
the cash-generating unit and a suitable discount rate in order to calculate the present value.
V alue in use is determined using the discounted cash flow method. Due to inherent risk associated with estimations in the
timing and magnitude of the future cash flows, the estimated recoverable amount of the assets may be different from its actual
recoverable amount and the Group’s profit or loss could be affected by the accuracy of the estimations. Changes in facts and
circumstances may result in revisions to the estimates of recoverable amount, which would affect profit or loss in future years.
(c) Expected credit losses for receivables
The credit losses for trade and other receivables are based on assumptions about the expected loss rates. The Group uses
judgement in making these assumptions and selecting the inputs to the impairment calculation, which are based on the Group’s past
collection history, existing market conditions as well as forward looking estimates at the end of each reporting period. For details
of the key assumptions and inputs used, see note 31(a). Changes in these assumptions and estimates could materially affect the result
of the assessment and the Group may be necessary to make additional loss allowances in future periods.
APPENDIX I ACCOUNTANTS’ REPORT
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(d) Net realisable value of inventories
Net realisable value of inventories is the estimated selling price in the ordinary course of businesses, less estimated costs of
completion and the estimated costs necessary to make the sale. These estimates are based on the current market conditions and the
historical experience of selling products with similar nature. It could change significantly as a result of changes in customer
preferences and competitor actions in response to severe industry cycles. Management reassesses these estimates at the end of each
reporting period.
4 REVENUE AND SEGMENT REPORTING
(a) Revenue
The principal activities of the Group are the development, production and marketing of edible bird’s nest products. Further
details regarding the Group’s principal activities are disclosed in note 4(b).
Disaggregation of revenue from contracts with customers by sales channel is as follows:
Y ear ended 31 December Five months ended 31 May
2020 2021 2022 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(unaudited)
Revenue from contracts with
customers within
the scope of IFRS 15
Offline channels
– Sales to offline distributors . . . 409,777 509,917 477,525 198,716 208,563
– Direct sales to offline
customers ............. 168,729 228,794 314,466 135,225 144,646
Online channels
– Direct sales to online customers 575,220 564,587 695,265 264,361 327,802
– Direct sales to E-commerce
platform .............. 137,545 189,196 227,071 92,228 93,700
– Sales to online distributors .... 9,886 14,503 15,618 6,346 7,865
1,301,157 1,506,997 1,729,945 696,876 782,576
The revenue of the Group is mainly generated from sales of bird’s nest products, which is recognised at a point in time.
The Group’s customer base is diversified and includes nil, nil, 1, 1 (unaudited) and nil customer with whom transactions have
exceeded 10% of the Group’s revenues for the years ended 31 December 2020, 2021 and 2022 and the five months ended 31 May
2022 and 2023, respectively. During the year ended 31 December 2022 and five months ended 31 May 2022, revenues from sales
of edible bird’s nest products to the customer, including sales to entities which are known to the Group to be under common control
with the customer, amounted to approximately RMB189,036,000 and RMB75,986,000 (unaudited), respectively.
The Group has applied the practical expedient in paragraph 121(a) of IFRS 15 to its sales contracts for bird’s nest products
that had an original expected duration of one year or less and does not disclose the information related to the aggregated amount
of the transaction price allocated to the remaining performance obligations.
(b) Segment reporting
The Group manages its businesses by sales channel categories. In a manner consistent with the way in which information is
reported internally to the Group’s most senior executive management for the purposes of resource allocation and performance
assessment, the Group has presented the following five reportable segments.
– Direct sales to online customers: this segment engaged in sales of bird’s nest products to retail customers through
online platform.
– Direct sales to offline customers: this segment engaged in sales of bird’s nest products to retail customers in
brick-and-mortar stores.
– Sales to offline distributors: this segment engaged in sales of bird’s nest products to offline distributors.
APPENDIX I ACCOUNTANTS’ REPORT
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– Direct sales to E-commerce platform: this segment engaged in sales of bird’s nest products to online platform.
– Sales to online distributors: this segment engaged in sales of bird’s nest products to online distributors.
(i) Segment results
For the purposes of assessing segment performance and allocating resources between segments, the Group’s most
senior executive management monitors the results attributable to each reportable segment on the following bases:
Revenue and expenses are allocated to the reportable segments with reference to revenue generated by those segments
and direct expenses incurred by those segments respectively. The measure used for reporting segment result is gross profit
which is calculated based on revenue less cost of sales for the relevant segment. No inter-segment sales have occurred during
the Relevant Periods. Assistance provided by one segment to another, including sharing of assets and technical know-how,
is not measured.
The Group’s other operating income and expenses, such as other net income, selling and distribution expenses,
administrative expenses, research and development expenses, finance costs, share of loss of an associate, and assets and
liabilities are not measured under individual segments. Accordingly, neither information on segment assets and liabilities nor
information concerning capital expenditure, other operating income and expenses is presented.
Information regarding the Group’s reportable segments as provided to the Group’s most senior executive management
for the purposes of resource allocation and assessment of segment performance for the Relevant Periods is set out below.
Y ear ended 31 December 2020
Direct sales
to online
customers
Direct sales
to offline
customers
Sales to offline
distributors
Direct sales to
E-commerce
platform
Sales to online
distributors Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Revenue ............ 575,220 168,729 409,777 137,545 9,886 1,301,157
Gross profit .......... 191,720 100,951 191,395 67,357 4,286 555,709
Y ear ended 31 December 2021
Direct sales
to online
customers
Direct sales
to offline
customers
Sales to offline
distributors
Direct sales to
E-commerce
platform
Sales to online
distributors Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Revenue ............ 564,587 228,794 509,917 189,196 14,503 1,506,997
Gross profit .......... 223,238 151,204 246,767 99,778 5,796 726,783
Y ear ended 31 December 2022
Direct sales
to online
customers
Direct sales
to offline
customers
Sales to offline
distributors
Direct sales to
E-commerce
platform
Sales to online
distributors Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Revenue ............ 695,265 314,466 477,525 227,071 15,618 1,729,945
Gross profit .......... 305,495 212,193 236,975 116,920 6,669 878,252
Five months ended 31 May 2022
Direct sales to
online
customers
Direct sales to
offline
customers
Sales to offline
distributors
Direct sales to
E-commerce
platform
Sales to online
distributors Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (unaudited)
Revenue ............ 264,361 135,225 198,716 92,228 6,346 696,876
Gross profit .......... 1 15,215 91,182 99,844 50,646 2,676 359,563
Five months ended 31 May 2023
Direct sales to
online
customers
Direct sales to
offline
customers
Sales to offline
distributors
Direct sales to
E-commerce
platform
Sales to online
distributors Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Revenue ............ 327,802 144,646 208,563 93,700 7,865 782,576
Gross profit .......... 153,616 99,153 104,514 45,285 3,443 406,011
APPENDIX I ACCOUNTANTS’ REPORT
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(ii) Reconciliation of reportable segment profit or loss
Y ear ended 31 December Five months ended 31 May
2020 2021 2022 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(unaudited)
Total reportable segment gross
profit ................ 555,709 726,783 878,252 359,563 406,011
Other net income .......... 20,714 32,680 27,692 5,123 3,293
Selling and distribution expenses . (317,762) (398,951) (503,879) (205,800) (208,533)
Administrative expenses ...... (76,060) (108,020) (111,543) (41,462) (60,807)
Research and development
expenses .............. (17,679) (18,982) (24,320) (8,809) (9,579)
Finance costs ............. (4,882) (3,337) (1,636) (764) (857)
Share of loss of an associate .... (214) ––––
Consolidated profit before
taxation .............. 159,826 230,173 264,566 107,851 129,528
(iii) Geographic information
The Group generated all of its revenue in the PRC and its non-current assets are all located in the PRC, and accordingly,
no analysis of geographic information is presented.
5 OTHER NET INCOME
Y ear ended 31 December Five months ended 31 May
2020 2021 2022 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(unaudited)
Net fair value changes on financial
assets measured at fair value through
profit or loss ................ 1,128 2,329 1,455 480 1,169
Gain on disposal of investments in a
subsidiary ................. – – 3 8 0 – –
Gain on disposal of interest in an
associate .................. – 3 3 – – –
Interest income ............... 4,276 1,884 1,950 567 1,048
Government grants (note (i)) ........ 17,156 36,507 24,553 4,378 1,085
Net (loss)/gain on disposal of property,
plant and equipment ........... (29) 159 (60) 52 52
Other expenses ................ (1,817) (8,232) (586) (354) (61)
20,714 32,680 27,692 5,123 3,293
Note:
(i) Government grants were received or receivable from several local government authorities as a recognition of the
Group’s contribution towards the local economic development.
6 PROFIT BEFORE TAXATION
Profit before taxation is arrived at after charging:
(a) Finance costs
Y ear ended 31 December Five months ended 31 May
2020 2021 2022 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(unaudited)
Interest on bank loans (note 21(d)) .... 4,098 1,926 15 15 –
Interest on lease liabilities (note 21(d)). . 784 1,411 1,621 749 857
4,882 3,337 1,636 764 857
APPENDIX I ACCOUNTANTS’ REPORT
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(b) Staff costs #
Y ear ended 31 December Five months ended 31 May
2020 2021 2022 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(unaudited)
Salaries, wages and other benefits ..... 178,022 224,826 255,528 95,926 108,639
Contributions to defined contribution
retirement plan .............. 3 3 1 6,784 12,160 4,825 5,608
Equity-settled share-based payment
expenses (note 28) ............ 4 3 8 21,813 5,253 2,189 2,189
178,791 253,423 272,941 102,940 116,436
(c) Other items
Y ear ended 31 December Five months ended 31 May
2020 2021 2022 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(unaudited)
Amortisation of intangible assets
(note 12) .................. 4 5 8 2 7 2 5 4 0 1 8 9 2 5 7
Depreciation charge # (note 11)
– owned property, plant and
equipment ................ 10,429 12,771 17,889 7,069 7,861
– right-of-use assets ........... 7,868 15,371 18,413 7,692 8,208
Impairment loss of trade and other
receivables ................. 8 5 2 2,098 2,040 2,144 64
Auditors’ remuneration ........... 1,226 967 2,675 19 41
Listing expenses ............... – – – – 14,650
Cost of inventories # (note 19(a)) ..... 671,495 711,816 771,235 306,381 342,733
# Cost of inventories includes RMB85,594,000, RMB82,531,000, RMB97,666,000, RMB36,514,000 (unaudited) and
RMB39,869,000 relating to staff costs and depreciation, which amount is also included in the respective total amounts
disclosed separately above or note 6(b) for each of these types of expenses for the years ended 31 December 2020, 2021
and 2022 and the five months ended 31 May 2022 and 2023, respectively.
APPENDIX I ACCOUNTANTS’ REPORT
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7 INCOME TAX IN THE CONSOLIDATED STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE
INCOME
(a) Taxation in the consolidated statements of profit or loss and other comprehensive income represents:
Y ear ended 31 December Five months ended 31 May
2020 2021 2022 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(unaudited)
Current tax – PRC Corporate
Income Tax (“PRC CIT”)
Provision for the year/period ..... 34,627 69,675 78,411 33,019 23,420
Under-provision in respect of prior
years .................. – 4 5 0 4 4 4 4 4 4 2 2 7
34,627 70,125 78,855 33,463 23,647
Deferred tax
Origination and reversal of
temporary differences
(note 29(b)) .............. 1,774 (12,311) (20,167) (9,367) 5,384
36,401 57,814 58,688 24,096 29,031
In accordance with relevant rules and regulations of CIT in the PRC, a subsidiary of the Group, Guanghe Y an Palace
Biotechnology Development Co., Ltd., is subject to PRC CIT at a preferential tax rate of 15% for the years ended 31 December 2020,
2021 and 2022 and the five months ended 31 May 2022 and 2023. In addition, Xiamen Jinyan Tengfei Equity Investment Partnership
(Limited Partnership) (“Jinyan Tengfei LP”), the special purpose vehicles to hold the ordinary shares for the Company’s employees
under the employee incentive scheme as disclosed in note 28, are not subject to corporate income tax of the PRC. All the other PRC
subsidiaries of the Group and the Company are subject to income tax at 25% for the years ended 31 December 2020, 2021 and 2022
and the five months ended 31 May 2022 and 2023 under the PRC Corporate Income Tax Law which was enacted on 16 March 2007.
According to the relevant tax rules in the PRC, qualified research and development costs are allowed for bonus deduction for
income tax purpose, as a result, an additional 75%, 100%, 100%, 100% and 100% of the qualified research and development costs
could be deemed as deductible expenses for the years ended 31 December 2020, 2021 and 2022 and the five months ended 31 May
2022 and 2023 respectively.
(b) Reconciliation between tax expense and accounting profit at applicable tax rates:
Y ear ended 31 December Five months ended 31 May
2020 2021 2022 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(unaudited)
Profit before taxation .............. 159,826 230,173 264,566 107,851 129,528
Notional tax on profit before taxation,
calculated at the applicable rates in the
jurisdictions concerned ........... 39,957 57,543 66,142 26,963 32,382
Tax effect of non-deductible expenses .... 2,656 6,901 3,010 1,717 1,953
Tax effect of additional deduction for
qualified research and development
expenses .................... (2,430) (3,136) (4,750) (1,635) (2,169)
Utilisation of previously unrecognised tax
losses ..................... (204) – (130) (62) (61)
Tax effect of unused tax losses not
recognised ................... 1 7 1 6 3 6 1 9 0 4 1
Statutory tax concession ............ (3,595) (4,107) (6,089) (3,421) (3,342)
Under-provision in prior years ........ – 4 5 0 4 4 4 4 4 4 2 2 7
Actual tax expense ............... 36,401 57,814 58,688 24,096 29,031
APPENDIX I ACCOUNTANTS’ REPORT
– I-31 –


--- page 392 ---
8 DIRECTORS’ AND SUPERVISORS’ EMOLUMENTS
Directors’ and supervisors’ emoluments during the years ended 31 December 2020, 2021 and 2022 and the five months ended
31 May 2022 and 2023 are as follows:
Y ear ended 31 December 2020
Directors’ fees
Salaries,
allowances
and benefits
in kind
Discretionary
bonuses
Retirement
scheme
contributions Sub-Total
Equity-settled
share-based
payments
(note) Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Chairman and
executive director
Mr. Huang Jian ...... – 1,577 1,243 2 2,822 –* 2,822
Executive directors
Mr. Zheng Wenbin .... – 4 8 5 2 9 – 5 1 4 – 5 1 4
Mr. Li Y ouquan ...... – 1,738 1,712 – 3,450 – 3,450
Ms. Huang Danyan . . . – 401 1,100 – 1,501 23 1,524
Non-executive directors
Mr. Liu Zhen ....... – 2 5 0 – – 2 5 0 – 2 5 0
Mr. Wang Y along .... – 2 5 0 – – 2 5 0 – 2 5 0
Mr. Zhao Chaoming
(resigned on
10 December 2020) . . – – – – – – –
Independent non-
executive directors
Mr. Xiao Wei
(appointed on
10 December 2020) . . – – – – – – –
Mr. Chen Aihua
(appointed on
10 December 2020) . . – – – – – – –
Mr. Zeng Hongliang
(appointed on
10 December 2020) . . – – – – – – –
Supervisors
M r . F u Y u ......... – 6 1 7 – – 6 1 7 – 6 1 7
Mr. Zheng Feng ..... – 5 0 – – 5 0 – 5 0
M s . W e i W e i....... – 1 7 7 4 0 7 1 2 5 9 6 1 6 6 1 2
– 5,545 4,491 14 10,050 39 10,089
* The amount represents amount less than RMB1,000.
APPENDIX I ACCOUNTANTS’ REPORT
– I-32 –


--- page 393 ---
Y ear ended 31 December 2021
Directors’ fees
Salaries,
allowances
and benefits
in kind
Discretionary
bonuses
Retirement
scheme
contributions Sub-Total
Equity-settled
share-based
payments
(note) Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Chairman and
executive director
Mr. Huang Jian ...... – 1,561 1,152 27 2,740 2 2,742
Executive directors
Mr. Zheng Wenbin .... – 5 1 0 – 1 6 5 2 6 – 5 2 6
Mr. Li Y ouquan ...... – 2,328 1,152 16 3,496 – 3,496
Ms. Huang Danyan . . . – 482 808 – 1,290 272 1,562
Non-executive directors
Mr. Liu Zhen ....... – 2 5 0 – – 2 5 0 – 2 5 0
Mr. Wang Y along ..... – 2 5 0 – – 2 5 0 – 2 5 0
Independent
non-executive
directors
Mr. Xiao Wei ....... 1 2 0 – – – 1 2 0 – 1 2 0
Mr. Chen Aihua ..... 1 2 0 – – – 1 2 0 – 1 2 0
Mr. Zeng Hongliang . . . 120 – – – 120 – 120
Supervisors
M r . F u Y u ......... – 5 9 0 – 1 6 6 0 6 – 6 0 6
Mr. Zheng Feng ..... – 5 0 – – 5 0 – 5 0
M s . W e i W e i....... – 2 4 9 4 2 6 1 4 6 8 9 1 9 2 8 8 1
360 6,270 3,538 89 10,257 466 10,723
Y ear ended 31 December 2022
Directors’ fees
Salaries,
allowances
and benefits
in kind
Discretionary
bonuses
Retirement
scheme
contributions Sub-Total
Equity-settled
share-based
payments
(note) Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Chairman and executive
director
Mr. Huang Jian ...... – 1,621 1,143 37 2,801 2 2,803
Executive directors
Mr. Zheng Wenbin .... – 6 5 9 2 5 7 3 7 9 5 3 – 9 5 3
Mr. Li Y ouquan ...... – 2,386 1,143 37 3,566 – 3,566
Ms. Huang Danyan .... – 4 6 2 7 1 7 – 1,179 272 1,451
Non-executive directors
Mr. Liu Zhen ....... – 3 0 0 – – 3 0 0 – 3 0 0
Mr. Wang Y along ..... – 3 0 0 – – 3 0 0 – 3 0 0
Independent non-
executive directors
Mr. Xiao Wei ....... 1 2 0 – – – 1 2 0 – 1 2 0
Mr. Chen Aihua ...... 1 2 0 – – – 1 2 0 – 1 2 0
Mr. Zeng Hongliang . . . 120 – – – 120 – 120
Supervisors
Mr. Fu Y u
(resigned on
22 September 2022) . . – 440 – 27 467 – 467
Mr. Zheng Feng ...... – 1 0 0 – – 1 0 0 – 1 0 0
M s . W e i W e i ........ – 2 7 4 3 8 1 1 8 6 7 3 1 9 2 8 6 5
Ms. Zhang Ning
(appointed on
26 September 2022) . . – 202 276 16 494 112 606
360 6,744 3,917 172 11,193 578 11,771
APPENDIX I ACCOUNTANTS’ REPORT
– I-33 –


--- page 394 ---
Five months ended 31 May 2022 (unaudited)
Directors’ fees
Salaries,
allowances
and benefits
in kind
Discretionary
bonuses
Retirement
scheme
contributions Sub-Total
Equity-settled
share-based
payments
(note) Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Chairman and
executive director
Mr. Huang Jian ...... – 6 7 9 4 5 3 1 5 1,147 1 1,148
Executive directors
Mr. Zheng Wenbin .... – 4 2 4 1 0 3 1 5 5 4 2 – 5 4 2
Mr. Li Y ouquan ...... – 1,020 453 15 1,488 – 1,488
Ms. Huang Danyan . . . – 142 162 – 304 113 417
Non-executive directors
Mr. Liu Zhen ....... – 1 2 5 – – 1 2 5 – 1 2 5
Mr. Wang Y along ..... – 1 2 5 – – 1 2 5 – 1 2 5
Independent
non-executive
directors
Mr. Xiao Wei ....... 5 0 – – – 5 0 – 5 0
Mr. Chen Aihua ..... 5 0 – – – 5 0 – 5 0
Mr. Zeng Hongliang . . . 50 – – – 50 – 50
Supervisors
M r . F u Y u ......... – 1 6 4 – 1 5 1 7 9 – 1 7 9
Mr. Zheng Feng ..... – 4 2 – – 4 2 – 4 2
M s . W e i W e i....... – 7 9 9 4 8 1 8 1 8 0 2 6 1
150 2,800 1,265 68 4,283 194 4,477
Five months ended 31 May 2023
Directors’ fees
Salaries,
allowances
and benefits
in kind
Discretionary
bonuses
Retirement
scheme
contributions Sub-Total
Equity-settled
share-based
payments
(note) Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Chairman and
executive director
Mr. Huang Jian ...... – 6 8 2 5 9 3 1 6 1,291 1 1,292
Executive directors
Mr. Zheng Wenbin .... – 4 3 2 1 1 7 1 6 5 6 5 – 5 6 5
Mr. Li Y ouquan ...... – 1,025 593 16 1,634 – 1,634
Ms. Huang Danyan . . . – 113 237 – 350 113 463
Non-executive directors
Mr. Liu Zhen ....... – 1 2 5 – – 1 2 5 – 1 2 5
Mr. Wang Y along ..... – 1 2 5 – – 1 2 5 – 1 2 5
Independent
non-executive
directors (i)
Mr. Xiao Wei ....... 5 0 – – – 5 0 – 5 0
Mr. Chen Aihua ..... 5 0 – – – 5 0 – 5 0
Mr. Zeng Hongliang
(resigned on
25 May 2023) ..... 4 8 – – – 4 8 – 4 8
Mr. Lam Yiu Por
(appointed on
20 November 2023) . . – – – – – – –
Supervisors
Mr. Zheng Feng ..... – 4 2 – – 4 2 – 4 2
M s . W e i W e i....... – 7 4 1 3 3 1 6 2 2 3 8 0 3 0 3
Ms. Zhang Ning ..... – 5 0 1 0 5 7 1 6 2 4 7 2 0 9
148 2,668 1,778 71 4,665 241 4,906
Note:
These represent the estimated value of restricted shares granted to the directors and supervisors under the Group’s share award
scheme. The value of these share awards is measured according to the Group’s accounting policies for share-based payment
transactions as set out in note 2(r)(ii) and, in accordance with that policy, includes adjustments to reverse amounts accrued
in previous years where grants of equity instruments are forfeited prior to vesting.
The details of these benefits in kind, including the principal terms and number of shares granted, are disclosed in note 28.
APPENDIX I ACCOUNTANTS’ REPORT
– I-34 –


--- page 395 ---
9 INDIVIDUALS WITH HIGHEST EMOLUMENTS
Of the five individuals with the highest emoluments, 3, 2, 2, 2 (unaudited) and 2 are directors whose emoluments are disclosed
in note 8 for the years ended 31 December 2020, 2021 and 2022 and the five months ended 31 May 2022 and 2023 respectively. The
aggregate of the emoluments in respect of the other 2, 3, 3, 3 (unaudited) and 3 individuals for the years ended 31 December 2020,
2021 and 2022 and the five months ended 31 May 2022 and 2023 are as follows:
Y ear ended 31 December Five months ended 31 May
2020 2021 2022 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(unaudited)
Salaries and other emoluments .... 1,050 1,505 1,512 611 580
Discretionary bonuses ......... 2,520 3,759 3,487 863 1,086
Equity-settled share-based payments . 46 816 816 339 339
Retirement scheme contributions . . . 2 70 109 44 48
3,618 6,150 5,924 1,857 2,053
The emoluments of the 2, 3, 3, 3 (unaudited) and 3 individuals with the highest emoluments for the years ended 31 December
2020, 2021 and 2022 and the five months ended 31 May 2022 and 2023 are within the following bands:
Y ear ended 31 December Five months ended 31 May
2020 2021 2022 2022 2023
Number of
individuals
Number of
individuals
Number of
individuals
Number of
individuals
Number of
individuals
(unaudited)
HK$Nil – HK$1,000,000 ....... –––32
HK$1,000,001 – HK$1,500,000 . . . ––––1
HK$1,500,001 – HK$2,000,000 . . . 1–1––
HK$2,000,001 – HK$2,500,000 . . . 112––
HK$2,500,001 – HK$3,000,000 . . . –2–––
10 EARNINGS PER SHARE
(a) Basic earnings per share
The calculation of basic earnings per share during the Relevant Periods is based on the profit attributable to ordinary equity
shareholders of the Company and the weighted average number of ordinary shares in issue or deemed to be in issue for the respective
year/period and does not take into account the effect of sub-division detailed in Note 36. The profit attributable to unvested ordinary
shares held for employee incentive scheme with employees (see note 28) and the number of such shares have been excluded from
the calculation of basic earnings per share.
As set out in note 30(c), the Company was converted from a limited liability company into a joint stock limited liability
company on 23 December 2020. The Company’s paid-in capital of RMB83,333,000 was converted into 83,333,000 shares of
RMB1.00 each accordingly. For the purpose of determining basic earnings per share, the weighted average number of ordinary shares
were deemed to be in issue before the Company’s conversion into a joint stock limited liability company as if the above conversion
had occurred on 1 January 2020 at the exchange ratio established on 23 December 2020.
(i) Profit attributable to ordinary equity shareholders of the Company
Y ear ended 31 December Five months ended 31 May
2020 2021 2022 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(unaudited)
Profit for the year/period attributable
to all ordinary equity shareholders
of the Company ........... 122,017 167,353 191,840 78,772 95,058
Allocation of profit for the
year/period attributable to
unvested shares held for employee
incentive scheme (note 28) ..... – (2,865) (3,633) (1,589) (1,995)
Profit for the year/period attributable
to ordinary equity shareholders
of the Company ........... 122,017 164,488 188,207 77,183 93,063
APPENDIX I ACCOUNTANTS’ REPORT
– I-35 –


--- page 396 ---
(ii) Weighted average number of ordinary shares
Y ear ended 31 December Five months ended 31 May
2020 2021 2022 2022 2023
’000 ’000 ’000 ’000 ’000
(unaudited)
Ordinary shares (deemed to be)
in issue at 1 January ......... 83,333 83,333 86,700 86,700 86,700
Effect of issuance of new shares . . . – 2,34 6–––
Effect of unvested shares held
for employee incentive scheme
(note 28) ............... – (1,467) (1,642) (1,642) (1,642)
Weighted average number of
ordinary shares at
31 December/31 May ........ 83,333 84,212 85,058 85,058 85,058
(b) Diluted earnings per share
For the Relevant Periods, the effects of unvested ordinary shares held for employee incentive scheme with employees have
not been included in the calculation of diluted earnings per share because their inclusion would be anti-dilutive. The Company does
not have other potential ordinary shares and therefore the amounts of diluted earnings per share are the same as basic earnings per
share.
APPENDIX I ACCOUNTANTS’ REPORT
– I-36 –


--- page 397 ---
11 PROPERTY, PLANT AND EQUIPMENT
(a) Reconciliation of carrying amount
The Group
Ownership
interests in
leasehold
buildings held
for own use
Other
properties
leased for
own use
Motor
vehicles Machinery
Office and
other
equipment
Leasehold
improvement
Construction
in progress Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Cost:
At 1 January 2020 ......... 16,815 21,440 4,513 25,189 3,375 10,922 – 82,254
Additions .............. – 7,421 1,127 5,385 1,221 1,885 770 17,809
Transfer from construction in
progress ............. – – – 4 9 3 – 2 7 7 (770) –
Disposals .............. – (3,876) (840) (591) – (1,510) – (6,817)
At 31 December 2020 and
1 January 2021 ......... 16,815 24,985 4,800 30,476 4,596 11,574 – 93,246
Additions .............. – 29,127 248 5,378 2,045 12,433 2,671 51,902
Business combination
(note 14) ............. – 5,553 232 – – 437 – 6,222
Transfer from construction in
progress ............. – – – 1,379 – – (1,379) –
Disposals .............. – (7,288) – (27) (198) (5,744) – (13,257)
At 31 December 2021 and
1 January 2022 ......... 16,815 52,377 5,280 37,206 6,443 18,700 1,292 138,113
Additions .............. – 17,717 282 5,308 2,990 9,718 1,040 37,055
Transfer from construction in
progress ............. – – – 1,402 – – (1,402) –
Disposals .............. – (17,658) (80) (887) (376) (5,367) – (24,368)
At 31 December 2022 and
1 January 2023 ......... 16,815 52,436 5,482 43,029 9,057 23,051 930 150,800
Additions .............. – 20,534 51 4,617 291 1,545 – 27,038
Transfer from construction
in progress ............ – – – 9 3 0 – – (930) –
Disposals .............. – (14,149) (171) – – (6,697) – (21,017)
At 31 May 2023 .......... 16,815 58,821 5,362 48,576 9,348 17,899 – 156,821-------- ------ ------ ------ ------ -------- -- ------ ------
Accumulated depreciation:
At 1 January 2020 ......... (1,292) (5,781) (1,424) (5,042) (1,785) (3,433) – (18,757)
Charge for the year ........ (799) (7,868) (928) (4,055) (696) (3,951) – (18,297)
Written back on disposals ..... – 3,876 518 366 – 1,510 – 6,270
At 31 December 2020 and
1 January 2021 ......... (2,091) (9,773) (1,834) (8,731) (2,481) (5,874) – (30,784)
Charge for the year ........ (799) (15,371) (1,078) (4,556) (925) (5,413) – (28,142)
Written back on disposals ..... – 6,804 – 22 177 5,744 – 12,747
At 31 December 2021 and
1 January 2022 ......... (2,890) (18,340) (2,912) (13,265) (3,229) (5,543) – (46,179)
Charge for the year ........ (799) (18,413) (1,142) (5,508) (1,543) (8,897) – (36,302)
Written back on disposals ..... – 12,906 16 817 357 5,367 – 19,463
At 31 December 2022 and
1 January 2023 ......... (3,689) (23,847) (4,038) (17,956) (4,415) (9,073) – (63,018)
Charge for the period ....... (333) (8,208) (245) (2,821) (705) (3,757) – (16,069)
Written back on disposals ..... – 9,585 171 – – 6,697 – 16,453
At 31 May 2023 .......... (4,022) (22,470) (4,112) (20,777) (5,120) (6,133) – (62,634)-------- ------ ------ ------ ------ -------- -------- ------
Net book value:
At 31 December 2020 ....... 14,724 15,212 2,966 21,745 2,115 5,700 – 62,462
At 31 December 2021 ....... 13,925 34,037 2,368 23,941 3,214 13,157 1,292 91,934
At 31 December 2022 ....... 13,126 28,589 1,444 25,073 4,642 13,978 930 87,782
At 31 May 2023 .......... 12,793 36,351 1,250 27,799 4,228 11,766 – 94,187
APPENDIX I ACCOUNTANTS’ REPORT
– I-37 –


--- page 398 ---
The Company
Ownership
interests in
leasehold buildings
held for own use
Other
properties
leased for
own use
Motor
vehicles
Office and
other
equipment
Leasehold
improvement Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Cost:
At 1 January 2020 ......... 8,901 1,217 108 703 252 11,181
Additions .............. – 6 4 5 3 7 9 7 9 4 5 5 6 2,374
At 31 December 2020 and
1 January 2021 ......... 8,901 1,862 487 1,497 808 13,555
Additions .............. – 4,715 – 786 187 5,688
Disposals .............. – (391) – – – (391)
At 31 December 2021 and
1 January 2022 ......... 8,901 6,186 487 2,283 995 18,852
Additions .............. – 2 2 9 – 1,989 4,837 7,055
Disposals .............. – (2,420) – (194) (654) (3,268)
At 31 December 2022 and
1 January 2023 ......... 8,901 3,995 487 4,078 5,178 22,639
Additions .............. – 2,282 – 245 75 2,602
Disposals .............. – (3,766) – – (996) (4,762)
At 31 May 2023 .......... 8,901 2,511 487 4,323 4,257 20,479----------- --------- --------- -------- - ---------- ---------
Accumulated depreciation:
At 1 January 2020 ......... (916) (282) (26) (140) (55) (1,419)
Charge for the year ........ (423) (486) (25) (308) (177) (1,419)
At 31 December 2020 and
1 January 2021 ......... (1,339) (768) (51) (448) (232) (2,838)
Charge for the year ........ (423) (1,312) (116) (508) (298) (2,657)
Written back on disposals ..... – 3 1 4 – – – 3 1 4
At 31 December 2021 and
1 January 2022 ......... (1,762) (1,766) (167) (956) (530) (5,181)
Charge for the year ........ (423) (1,470) (115) (844) (1,766) (4,618)
Written back on disposals ..... – 1,375 – 184 654 2,213
At 31 December 2022 and
1 January 2023 ......... (2,185) (1,861) (282) (1,616) (1,642) (7,586)
Charge for the period ....... (176) (383) (38) (390) (709) (1,696)
Written back on disposals ..... – 1,860 – – 996 2,856
At 31 May 2023 .......... (2,361) (384) (320) (2,006) (1,355) (6,426)----------- --------- --------- --------- ---------- ---------
Net book value:
At 31 December 2020 ....... 7,562 1,094 436 1,049 576 10,717
At 31 December 2021 ....... 7,139 4,420 320 1,327 465 13,671
At 31 December 2022 ....... 6,716 2,134 205 2,462 3,536 15,053
At 31 May 2023 .......... 6,540 2,127 167 2,317 2,902 14,053
As at 31 December 2020, 2021 and 2022 and 31 May 2023, the Group’s buildings with carrying amount of RMB14,724,000,
nil, nil and nil were pledged as collateral for the Group’s short-term bank loans (note 25).
APPENDIX I ACCOUNTANTS’ REPORT
– I-38 –


--- page 399 ---
(b) Right-of-use assets
The analysis of the net book value of right-of-use assets by class of underlying asset is as follows:
As at 31 December As at 31 May
2020 2021 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000
Included in “Property, plant and equipment”:
Ownership interests in leasehold buildings held
for own use, carried at depreciated cost in
the PRC, with remaining lease term of:
– between 20 to 38 years ............. 14,724 13,925 13,126 12,793
Other properties leased for own use, carried at
depreciated cost ................. 15,212 34,037 28,589 36,351
The analysis of expense items in relation to leases recognised in profit or loss is as follows:
Y ear ended 31 December Five months ended 31 May
2020 2021 2022 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(unaudited)
Depreciation charge of right-of-use
assets by class of underlying asset:
Properties leased for own use ..... 7,868 15,371 18,413 7,692 8,208
Interest on lease liabilities
(note 6(a)) .............. 7 8 4 1,411 1,621 749 857
Expense relating to short-term
leases ................. 4,329 6,196 7,783 3,250 4,035
V ariable lease payments not included
in the measurement of lease
liabilities ............... 1 3 5 3 8 0 4 5 3 5 2 7
COVID-19-related rent concessions
received ................ (535) (334) (473) (46) –
During the years ended 31 December 2020, 2021 and 2022 and the five months ended 31 May 2023, additions to right-of-use
assets were RMB7,421,000, RMB29,127,000, RMB17,717,000 and RMB20,534,000, respectively. This amount primarily related to
the capitalised lease payments payable under new tenancy agreements.
Details of total cash outflow for leases and the maturity analysis of lease liabilities are set out in notes 21(e) and 26
respectively.
(i) Ownership interests in leasehold land and buildings held for own use
The Group holds several commercial buildings as administrative offices. The Group is the registered owner of these property
interests, including the whole or part of undivided share in the underlying land. Lump sum payments were made upfront to acquire
these property interests from their previous registered owners, and there are no ongoing payments to be made under the terms of the
land lease.
(ii) Other properties leased for own use
The Group has obtained the right to use other properties as its retail stores, manufacturing facilities and administrative offices
through tenancy agreements. The leases typically run for an initial period of 1 to 10 years. Lease payments are usually increased
every 1 year to reflect market rentals. None of properties leased for own used include an option to renew the lease for an additional
period after the end of the contract term.
The Group leased a number of retail stores which contain variable lease payment terms that are based on sales generated from
the retail stores and minimum annual lease payment terms that are fixed. These payment terms are common in retail stores in PRC
where the Group operates. During the years ended 31 December 2020, 2021 and 2022 and the five months ended 31 May 2022 and
2023, the Group received rent concessions in the form of a discount on fixed payments as a result of severe social distancing and
travel restriction measures introduced to contain the spread of COVID-19. The amount of fixed and variable lease payments for the
years/periods is summarised below:
APPENDIX I ACCOUNTANTS’ REPORT
– I-39 –


--- page 400 ---
2020
Fixed payments Variable payments
COVID-19 rent
concessions Total payments
RMB’000 RMB’000 RMB’000 RMB’000
Retail stores ..................... 5,077 135 (513) 4,699
Manufacturing facilities and administrative
offices ....................... 3,618 – (22) 3,596
8,695 135 (535) 8,295
2021
Fixed payments Variable payments
COVID-19 rent
concessions Total payments
RMB’000 RMB’000 RMB’000 RMB’000
Retail stores ..................... 9,859 380 (334) 9,905
Manufacturing facilities and administrative
offices ....................... 8,263 – – 8,263
18,122 380 (334) 18,168
2022
Fixed payments Variable payments
COVID-19 rent
concessions Total payments
RMB’000 RMB’000 RMB’000 RMB’000
Retail stores ..................... 9,615 45 (473) 9,187
Manufacturing facilities and administrative
offices ....................... 10,853 – – 10,853
20,468 45 (473) 20,040
Five months ended 31 May 2022 (unaudited)
Fixed payments Variable payments
COVID-19 rent
concessions Total payments
RMB’000 RMB’000 RMB’000 RMB’000
Retail stores ..................... 3,569 35 (46) 3,558
Manufacturing facilities and administrative
offices ....................... 4,746 – – 4,746
8,315 35 (46) 8,304
Five months ended 31 May 2023
Fixed payments Variable payments Total payments
RMB’000 RMB’000 RMB’000
Retail stores ............................. 3,128 27 3,155
Manufacturing facilities and administrative offices ...... 4,476 – 4,476
7,604 27 7,631
At 31 December 2020, 2021 and 2022 and 31 May 2022 and 2023, it is estimated that an increase in sales generated from
these retail stores by 5% would have increased the lease payments by RMB36,000, RMB42,000, RMB14,000, RMB3,000 (unaudited)
and RMB6,000, respectively.
APPENDIX I ACCOUNTANTS’ REPORT
– I-40 –


--- page 401 ---
12 INTANGIBLE ASSETS
Patent rights Software Total
RMB’000 RMB’000 RMB’000
Cost:
At 1 January 2020, 31 December 2020 and 1 January 2021 . . . 519 1,091 1,610
Additions ................................ 1 0 0 3 4 1 4 4 1
At 31 December 2021 and 1 January 2022 ............. 6 1 9 1,432 2,051
Additions ................................ 1 0 0 8 4 2 9 4 2
At 31 December 2022 and 1 January 2023 ............. 7 1 9 2,274 2,993
Additions ................................ – – –
At 31 May 2023 ............................ 7 1 9 2,274 2,993
------------ ------------ ------------
Accumulated amortisation:
At 1 January 2020 ........................... (205) (243) (448)
Charge for the year .......................... (26) (432) (458)
At 31 December 2020 and 1 January 2021 ............. (231) (675) (906)
Charge for the year .......................... (23) (249) (272)
At 31 December 2021 and 1 January 2022 ............. (254) (924) (1,178)
Charge for the year .......................... (30) (510) (540)
At 31 December 2022 and 1 January 2023 ............. (284) (1,434) (1,718)
Charge for the period ......................... (13) (244) (257)
At 31 May 2023 ............................ (297) (1,678) (1,975)
------------
------------ ------------
Net book value:
At 31 December 2020 ......................... 2 8 8 4 1 6 7 0 4
At 31 December 2021 ......................... 3 6 5 5 0 8 8 7 3
At 31 December 2022 ......................... 4 3 5 8 4 0 1,275
At 31 May 2023 ............................ 4 2 2 5 9 6 1,018
The amortization charge for the years ended 31 December 2020, 2021 and 2022 and the five months ended 31 May 2023 is
included in administrative expenses, selling and distribution expenses and research and development expenses in the consolidated
statements of profit or loss and other comprehensive income.
13 GOODWILL
RMB’000
Cost:
At 1 January 2020, 31 December 2020 and 1 January 2021 ....................... –
Arising from business combination (note 14) ................................ 75,165
At 31 December 2021 and 2022 and 31 May 2023 ............................ 75,165--------------
Accumulated impairment losses:
At 31 December 2020, 2021 and 2022 and 31 May 2023 ......................... – --------------
Carrying amount:
At 31 December 2020 ............................................. –
At 31 December 2021 and 2022 and 31 May 2023 ............................ 75,165
APPENDIX I ACCOUNTANTS’ REPORT
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Impairment tests for cash-generating units containing goodwill
Goodwill is allocated to the Group’s cash-generating units (CGU) identified according to city of operation and operating
segment as follows:
As at 31 December As at 31 May
2020 2021 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000
Beijing Tianfeiyan Trading Co., Ltd.
(“Beijing Tianfeiyan”) – offline retail ..... – 31,609 31,609 31,609
Harbin Jinyanhui Trading Co., Ltd.
(“Harbin Jinyanhui”) – offline retail ..... – 17,301 17,301 17,301
Changchun Jinyanhui Trading Co., Ltd.
(“Changchun Jinyanhui”) – offline retail . . . – 15,245 15,245 15,245
Taiyuan Jixiangyan Trading Co., Ltd.
(“Taiyuan Jixiangyan”) – offline retail .... – 1 1,010 11,010 11,010
– 75,165 75,165 75,165
The recoverable amount of the CGU- Beijing Tianfeiyan is determined based on value-in-use calculations. These calculations
use cash flow projections based on financial budgets approved by management covering a five-year period. The discount rates used
are pre-tax and reflect specific risks relating to the relevant segments.
As at 31 December As at 31 May
2021 2022 2023
Annual growth rate of revenue during five-year forecast
period ............................... 2 % 3 % 3 %
Estimated weighted average growth rate beyond the
five-year period ......................... 2 % 2 % 2 %
Pre-tax discount rate ........................ 16.20% 14.58% 14.43%
The headroom calculated based on the recoverable amounts deducting the carrying amount of the CGU- Beijing Tianfeiyan
as at 31 December 2021 and 2022 and 31 May 2023 is RMB2,622,000, RMB3,749,000 and RMB11,446,000 respectively.
Management have undertaken sensitivity analysis on the impairment test of goodwill. The following table sets out the
hypothetical changes to growth rate and pre-tax discount rate that would, in isolation, have removed the remaining headroom
respectively as at 31 December 2021 and 2022 and 31 May 2023:
As at 31 December As at 31 May
2021 2022 2023
Decrease in annual growth rate of revenue during five-year
forecast period ............................
0.7 percentage
points
0.9 percentage
points
3.3 percentage
points
Decrease in estimated weighted average growth rate beyond the
five-year period ...........................
0.9 percentage
points
1.1 percentage
points
3.7 percentage
points
Increase in pre-tax discount rate ...................
0.6 percentage
points
0.7 percentage
points
2.4 percentage
points
The recoverable amount of the CGU- Harbin Jinyanhui is determined based on value-in-use calculations. These calculations
use cash flow projections based on financial budgets approved by management covering a five-year period. The discount rates used
are pre-tax and reflect specific risks relating to the relevant segments.
As at 31 December As at 31 May
2021 2022 2023
Annual growth rate of revenue during five-year
forecast period .......................... 2%-3% 4%-5% 4%-5%
Estimated weighted average growth rate beyond the five-
year period ............................ 2 % 2 % 2 %
Pre-tax discount rate ........................ 16.20% 14.58% 14.43%
The headroom calculated based on the recoverable amounts deducting the carrying amount of the CGU- Harbin Jinyanhui as
at 31 December 2021 and 2022 and 31 May 2023 is RMB1,895,000, RMB4,265,000 and RMB8,301,000, respectively.
APPENDIX I ACCOUNTANTS’ REPORT
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--- page 403 ---
Management have undertaken sensitivity analysis on the impairment test of goodwill. The following table sets out the
hypothetical changes to growth rate and pre-tax discount rate that would, in isolation, have removed the remaining headroom
respectively as at 31 December 2021 and 2022 and 31 May 2023:
As at 31 December As at 31 May
2021 2022 2023
Decrease in annual growth rate of revenue during five-year
forecast period ............................
1.2 percentage
points
2.4 percentage
points
5.6 percentage
points
Decrease in estimated weighted average growth rate beyond the
five-year period ...........................
1.3 percentage
points
2.3 percentage
points
4.9 percentage
points
Increase in pre-tax discount rate ...................
0.8 percentage
points
1.5 percentage
points
3.0 percentage
points
The recoverable amount of the CGU- Changchun Jinyanhui is determined based on value-in-use calculations. These
calculations use cash flow projections based on financial budgets approved by management covering a five-year period. The discount
rates used are pre-tax and reflect specific risks relating to the relevant segments.
As at 31 December As at 31 May
2021 2022 2023
Annual growth rate of revenue during five-year forecast
period ............................... 2%-3% 3%-4% 3%-4%
Estimated weighted average growth rate beyond the five-
year period ............................ 2 % 2 % 2 %
Pre-tax discount rate ........................ 16.20% 14.58% 14.43%
The headroom calculated based on the recoverable amounts deducting the carrying amount of the CGU- Changchun Jinyanhui
as at 31 December 2021 and 2022 and 31 May 2023 is RMB1,092,000, RMB3,902,000 and RMB4,798,000, respectively.
Management have undertaken sensitivity analysis on the impairment test of goodwill. The following table sets out the
hypothetical changes to growth rate and pre-tax discount rate that would, in isolation, have removed the remaining headroom
respectively as at 31 December 2021 and 2022 and 31 May 2023:
As at 31 December As at 31 May
2021 2022 2023
Decrease in annual growth rate of revenue during five-year
forecast period ............................
0.7 percentage
points
2.5 percentage
points
3.4 percentage
points
Decrease in estimated weighted average growth rate beyond the
five-year period ...........................
0.8 percentage
points
2.5 percentage
points
3.1 percentage
points
Increase in pre-tax discount rate ...................
0.5 percentage
points
1.6 percentage
points
1.9 percentage
points
The recoverable amount of the CGU- Taiyuan Jixiangyan is determined based on value-in-use calculations. These calculations
use cash flow projections based on financial budgets approved by management covering a five-year period. The discount rates used
are pre-tax and reflect specific risks relating to the relevant segments.
As at 31 December As at 31 May
2021 2022 2023
Annual growth rate of revenue during five-year
forecast period .......................... 2 % 2 % 2 %
Estimated weighted average growth rate beyond the five-
year period ............................ 2 % 2 % 2 %
Pre-tax discount rate ........................ 16.20% 14.58% 14.43%
The headroom calculated based on the recoverable amounts deducting the carrying amount of the CGU- Taiyuan Jixiangyan
as at 31 December 2021 and 2022 and 31 May 2023 is RMB2,905,000, RMB7,464,000 and RMB14,526,000, respectively.
APPENDIX I ACCOUNTANTS’ REPORT
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--- page 404 ---
Management have undertaken sensitivity analysis on the impairment test of goodwill. The following table sets out the
hypothetical changes to growth rate and pre-tax discount rate that would, in isolation, have removed the remaining headroom
respectively as at 31 December 2021 and 2022 and 31 May 2023:
As at 31 December As at 31 May
2021 2022 2023
Decrease in annual growth rate of revenue during five-year
forecast period ............................
2.0 percentage
points
3.7 percentage
points
8.1 percentage
points
Decrease in estimated weighted average growth rate beyond the
five-year period ...........................
3.3 percentage
points
7.3 percentage
points
16.5 percentage
points
Increase in pre-tax discount rate ...................
1.9 percentage
points
4.1 percentage
points
8.2 percentage
points
Management adopted Weighted Average Cost of Capital (“W ACC”) model to calculate the discount rate of the CGUs. Since
all CGUs are engaged in sales of the same products in the PRC, parameters adopted in W ACC model, such as beta extracted from
comparable companies, risk free rate, cost of debt and tax rate, are the same for all CGUs. Further, given that all CGUs are
substantially similar in business model in the PRC, operation scale, stage of development, core competitiveness and financing costs
during the Relevant Periods, management apply consistent CGU-specific risk premium of all CGUs, which results in the same pre-tax
discount rate for all CGUs during the Relevant Periods.
No impairment loss of goodwill was recognised during the years ended 31 December 2021 and 2022 and the five months
ended 31 May 2023. Except for the pre-tax discount rates, a reasonably possible adverse change in the assumptions used in the
calculation of recoverable amount would not result in impairment losses.
14 ACQUISITIONS OF SUBSIDIARIES
On 21 June 2021, the Group entered into agreements in relation to acquisition of 55% equity interest in each of Beijing
Tianfeiyan Trading Co., Ltd. (“Beijing Tianfeiyan”), Harbin Jinyanhui Trading Co., Ltd. (“Harbin Jinyanhui”) and Changchun
Jinyanhui Trading Co., Ltd. (“Changchun Jinyanhui”) with Mr. Zheng Wenbin (a controlling shareholder and executive director of
the Company) at consideration of RMB32,670,000, RMB18,370,000 and RMB16,060,000, respectively. Beijing Tianfeiyan, Harbin
Jinyanhui and Changchun Jinyanhui principally engage in offline sales of bird’s nest products. In light of the good historical
performance of such companies and to reduce the related party transactions and consolidating selling channels, the Group acquired
them as subsidiaries. The transaction was approved by the shareholder of the Company on 21 June 2021 and completed on 29 June
2021.
From the post acquisition date to 31 December 2021, Beijing Tianfeiyan and its subsidiaries contributed revenue of
RMB48,918,000 and profit of RMB3,371,000 to the Group’s results.
From the post acquisition date to 31 December 2021, Harbin Jinyanhui and its subsidiary contributed revenue of
RMB10,955,000 and profit of RMB1,518,000 to the Group’s results.
From the post acquisition date to 31 December 2021, Changchun Jinyanhui and its subsidiary contributed revenue of
RMB10,745,000 and profit of RMB1,198,000 to the Group’s results.
On 9 August 2021, the Group entered into an agreement in relation to acquisition of 55% equity interest in Taiyuan Jixiangyan
Trading Co., Ltd. (“Taiyuan Jixiangyan”) with Mr. Li Y ouquan (a controlling shareholder and executive director of the Company)
at consideration of RMB12,540,000. Taiyuan Jixiangyan principally engages in offline sales of bird’s nest products. The transaction
was approved by the board of directors of the Company on 9 August 2021 and completed on 10 September 2021.
From the post acquisition date to 31 December 2021, Taiyuan Jixiangyan contributed revenue of RMB11,240,000 and profit
of RMB1,797,000 to the Group’s results.
If the above mentioned four acquisitions had occurred on 1 January 2021, management estimates the consolidated revenue
for year ended 31 December 2021 would have been RMB1,536,220,000 and consolidated profit for the year ended 31 December 2021
would have been RMB179,804,000.
APPENDIX I ACCOUNTANTS’ REPORT
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--- page 405 ---
The following tables summarise the recognised amounts of assets and liabilities acquired at the date of acquisition. The
management considered the fair value of these assets and liabilities are not materially different from the book value.
Beijing Tianfeiyan:
RMB’000
Property, plant and equipment ........................................ 3,496
Deferred tax assets ............................................... 1 5 7
Inventories ................................................... 5,158
Trade and other receivables .......................................... 3,977
Prepayments ................................................... 2,927
Cash and cash equivalents ........................................... 1,745
Trade and other payables ........................................... (7,422)
Contract liabilities ............................................... (4,854)
Lease liabilities ................................................. (861)
Other current liabilities ............................................ (2,393)
Total identifiable net assets acquired ..................................... 1,930
Non-controlling interests (45%) ....................................... 8 6 9
Consideration in cash paid .......................................... 32,670
Goodwill arising on acquisition ........................................ 31,609
Harbin Jinyanhui:
RMB’000
Property, plant and equipment ........................................ 1,736
Deferred tax assets ............................................... 1 0
Inventories ................................................... 1,154
Trade and other receivables .......................................... 7 3 5
Prepayments ................................................... 1,000
Cash and cash equivalents ........................................... 1,800
Trade and other payables ........................................... (2,279)
Contract liabilities ............................................... (1,234)
Lease liabilities ................................................. (372)
Other current liabilities ............................................ (607)
Total identifiable net assets acquired ..................................... 1,943
Non-controlling interests (45%) ....................................... 8 7 4
Consideration in cash paid .......................................... 18,370
Goodwill arising on acquisition ........................................ 17,301
Changchun Jinyanhui:
RMB’000
Property, plant and equipment ........................................ 9 9 0
Deferred tax assets ............................................... 1 0
Other non-current assets ............................................ 3
Inventories ................................................... 1,964
Trade and other receivables .......................................... 9 4 5
Prepayments ................................................... 1,354
Cash and cash equivalents ........................................... 4 1 9
Trade and other payables ........................................... (2,457)
Contract liabilities ............................................... (1,316)
Other current liabilities ............................................ (332)
Non-controlling interests ........................................... (98)
Total identifiable net assets acquired ..................................... 1,482
Non-controlling interests (45%) ....................................... 6 6 7
Consideration in cash paid .......................................... 16,060
Goodwill arising on acquisition ........................................ 15,245
APPENDIX I ACCOUNTANTS’ REPORT
– I-45 –


--- page 406 ---
Taiyuan Jixiangyan:
RMB’000
Inventories ................................................... 2,000
Trade and other receivables .......................................... 7 9 8
Prepayments ................................................... 1,317
Cash and cash equivalents ........................................... 1,859
Trade and other payables ........................................... (3,149)
Contract liabilities ............................................... (43)
Total identifiable net assets acquired ..................................... 2,782
Non-controlling interests (45%) ....................................... 1,252
Consideration in cash paid .......................................... 12,540
Goodwill arising on acquisition ........................................ 1 1,010
Goodwill is mainly attributable to the sales talent of Beijing Tianfeiyan, Harbin Jinyanhui, Changchun Jinyanhui and Taiyuan
Jixiangyan’s work force and the synergies expected to be achieved from integrating Beijing Tianfeiyan, Harbin Jinyanhui, Changchun
Jinyanhui and Taiyuan Jixiangyan into the Group’s existing sales channel. Non-controlling interests recognised at the acquisition date
were measured by reference to the non-controlling interests’ proportionate share of the acquiree’s identifiable net assets.
15 INVESTMENTS IN SUBSIDIARIES
The carrying amounts of investments in subsidiaries of the Company is listed below:
As at 31 December As at 31 May
2020 2021 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000
Investments in subsidiaries ............ 96,461 188,060 188,694 189,761
Further details of the principal subsidiaries of the Group are set out in note 1.
The subsidiaries of the Group do not have material non-controlling interest.
16 INTEREST IN AN ASSOCIATE
Directors of the Company are of the view that the associate is not a material associate for the Group and it was disposed on
28 June 2021.
17 OTHER NON-CURRENT ASSETS
Other non-current assets mainly represent prepayments for purchases of property, plant and equipment.
18 FINANCIAL ASSETS MEASURED AT FAIR V ALUE THROUGH PROFIT OR LOSS
The Group
As at 31 December As at 31 May
2020 2021 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000
Wealth management products ........... 46,225 – 4,996 –
The Company
As at 31 December As at 31 May
2020 2021 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000
Wealth management products ........... 10,068 – 4,996 –
The amount represents investments in wealth management products issued by reputable financial institutions in the PRC.
There are no fixed or determinable returns of these wealth management products.
APPENDIX I ACCOUNTANTS’ REPORT
– I-46 –


--- page 407 ---
19 INVENTORIES
The Group
As at 31 December As at 31 May
2020 2021 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000
Inventories
Raw materials .................... 174,103 163,851 125,926 187,748
Work in progress .................. 41,092 33,360 36,467 17,608
Finished goods ................... 42,071 65,189 81,504 34,881
Goods in transit ................... 6,739 4,743 13,295 9,183
Packaging ...................... 12,981 12,498 14,370 10,832
Right to recover returned goods ......... 5 9 1 0 1 2 3 3 1 0 2
277,045 279,742 271,795 260,354
The Company
As at 31 December As at 31 May
2020 2021 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000
Goods in transit ................... 5,894 711 4,381 3,006
(a) The analysis of the amount of inventories recognised as an expense and included in profit or loss is as follows:
Y ear ended 31 December Five months ended 31 May
2020 2021 2022 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(unaudited)
Carrying amount of inventories sold . 658,791 701,766 761,495 303,362 339,264
Carrying amount of inventories
recognised as research and
development expenses ........ 10,165 8,207 7,860 2,290 2,784
Write-down of inventories ....... 2,539 1,843 1,880 729 685
671,495 711,816 771,235 306,381 342,733
20 TRADE RECEIV ABLES, OTHER RECEIV ABLES AND PREPAYMENTS
(a) Trade receivables and other receivables
The Group
As at 31 December As at 31 May
2020 2021 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000
Trade receivables, net of loss allowance
– third parties .................... 23,340 38,442 62,834 58,223
– related parties ................... 1 3 5–––
Deposits ....................... 6,157 9,416 9,282 10,683
Amounts due from related parties (note 33) . . 1,827 1,015 1,900 1,900
V A T recoverable .................. 27,905 14,769 13,956 16,723
Government grants receivables ......... 10,067 22,242 – –
Current tax recoverable .............. – – – 6,003
Other receivables .................. 1,106 1,699 1,487 1,738
70,537 87,583 89,459 95,270
APPENDIX I ACCOUNTANTS’ REPORT
– I-47 –


--- page 408 ---
The Company
As at 31 December As at 31 May
2020 2021 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000
Trade receivables, net of loss allowance
– third parties .................... – 1 8 6 6 8 5 4 6 5
– related parties ................... 1 3 5 – – –
Deposits ....................... 4 0 0 1,571 1,638 1,922
Amounts due from related parties ........ – – 1,900 1,900
V A T recoverable .................. 4,320 4,822 5,174 5,692
Government grants receivables .......... 9,922 22,225 – –
Current tax recoverable .............. – – – 5,554
Other receivables .................. 2 7 2 2 5 8 2 9 2 4 1 9
15,049 29,062 9,689 15,952
As at 31 December 2020, 2021 and 2022 and 31 May 2023, deposits of RMB4,031,000, RMB5,234,000, RMB5,769,000 and
RMB6,802,000 of the Group were expected to be recovered or recognised as expense after more than one year. All of the other trade
and other receivables are expected to be recovered or recognised as expense within one year.
Ageing analysis
As at 31 December 2020, 2021 and 2022 and 31 May 2023, the ageing analysis of trade receivable (which are included in
trade and other receivables), based on the invoice date and net of loss allowance, is as follows:
The Group
As at 31 December As at 31 May
2020 2021 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000
Current (not past due) ............... 21,275 38,038 62,643 58,220
Less than 3 months past due ........... 2,200 404 191 3
23,475 38,442 62,834 58,223
The Company
As at 31 December As at 31 May
2020 2021 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000
Current (not past due) ............... 1 3 5 1 8 6 6 8 5 4 6 5
Trade debtors are due within 30 to 90 days from the date of billing. Further details on the Group’s credit policy and credit
risk arising from trade debtors are set out in note 31(a).
(b) Prepayments
Prepayments mainly represent prepayments for purchase of raw materials and prepayments for selling and distribution
expenses.
As at 31 December 2020, 2021 and 2022 and 31 May 2023, the prepayments of the Company include prepayments for
purchase of finished goods from subsidiaries amounted to RMB73,725,000, RMB48,353,000, RMB47,144,000 and RMB79,970,000,
respectively.
APPENDIX I ACCOUNTANTS’ REPORT
– I-48 –


--- page 409 ---
21 CASH AND CASH EQUIV ALENTS AND OTHER CASH FLOW INFORMATION
(a) Cash and cash equivalents comprise:
The Group
As at 31 December As at 31 May
2020 2021 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000
Cash at bank and on hand ............. 143,239 163,503 338,398 180,425
Cash balances with payment platforms ..... 7,334 5,992 12,420 6,978
Cash and cash equivalents ............. 150,573 169,495 350,818 187,403
The Company
As at 31 December As at 31 May
2020 2021 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000
Cash at bank and on hand ............. 45,475 62,024 162,122 40,381
Cash balances with payment platforms ..... 5 8 6 1 0 2 5 5 1 0 9
Cash and cash equivalents ............. 46,061 62,126 162,177 40,490
Cash balances with payment platforms represents cash balances kept with third party payment platforms, which can be
withdrawn on demand.
As at 31 December 2020, 2021 and 2022 and 31 May 2023, all cash and cash equivalents were situated in Mainland China.
Remittance of funds out of Mainland China is subject to relevant rules and regulations of foreign exchange control.
(b) Restricted bank deposits
As at 31 December 2020, 2021 and 2022 and 31 May 2023, RMB1,202,000, RMB2,000,000, RMB1,600,000 and
RMB8,000,000 have been placed with a bank in a designated account in relation to guarantee for the customs duties.
APPENDIX I ACCOUNTANTS’ REPORT
– I-49 –


--- page 410 ---
(c) Reconciliation of profit before taxation to cash generated from operations:
Y ear ended 31 December Five months ended 31 May
Note 2020 2021 2022 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(unaudited)
Profit before taxation ........ 159,826 230,173 264,566 107,851 129,528
Adjustments for:
Depreciation ............ 6(c) 18,297 28,142 36,302 14,761 16,069
Amortisation of intangible
assets .............. 6(c) 458 272 540 189 257
Finance costs ........... 6(a) 4,882 3,337 1,636 764 857
Interest income .......... (3,994) (1,492) – – –
Share of profits less losses of
an associate ........... 2 1 4 ––––
Loss/(gain) on disposal of
property, plant and
equipment ............ 5 29 (159) 60 (52) (52)
Gain on financial assets
measured at fair value
through profit or loss ..... 5 (1,128) (2,329) (1,455) (480) (1,169)
Gain on disposal of investment
in a subsidiary ......... 5 – – (380) – –
Gain on disposal of interests in
an associate ........... 5 – (33) – – –
Equity-settled share-based
payment expenses ....... 6(b) 438 21,813 5,253 2,189 2,189
Impairment loss on trade and
other receivables ........ 6(c) 852 2,098 2,040 2,144 64
COVID-19-related rent
concessions received ...... 11(b) (535) (334) (473) (46) –
Changes in working capital:
(Increase)/decrease in inventories . (181,665) 7,579 7,947 57,206 11,441
(Increase)/decrease in trade
receivables, other receivables
and prepayments ......... (26,655) (37,669) 3,693 33,212 7,545
(Increase)/decrease in restricted
bank deposits ........... (1,202) (798) 400 400 (6,400)
Increase/(decrease) in trade and
other payables ........... 45,997 (28,160) 32,191 (60,284) (65,668)
Increase/(decrease) in contract
liabilities .............. 47,479 29,258 36,254 (6,828) (19,371)
Increase/(decrease) in other
current liabilities ......... 5,751 1,716 5,377 (1,198) (3,708)
Cash generated from operations . . 69,044 253,414 393,951 149,828 71,582
APPENDIX I ACCOUNTANTS’ REPORT
– I-50 –


--- page 411 ---
(d) Reconciliation of liabilities arising from financing activities
The table below details changes in the Group’s liabilities from financing activities, including both cash and non-cash changes.
Liabilities arising from financing activities are liabilities for which cash flows were, or future cash flows will be, classified in the
Group’s consolidated cash flow statement as cash flows from financing activities.
Bank loans Lease liabilities Total
RMB’000 RMB’000 RMB’000
(Note 25) (Note 26)
At 1 January 2020 ........................ 9 2 15,989 16,081------------ ------------ ------------
Changes from financing cash flows:
Proceeds from new bank loans .................. 161,275 – 161,275
Repayment of bank loans ..................... (87,141) – (87,141)
Capital element of lease rentals paid ............... – (6,484) (6,484)
Interest element of lease rentals paid .............. – (784) (784)
Interest and other borrowing costs paid ............. (3,630) – (3,630)
Total changes from financing cash flows ............ 70,504 (7,268) 63,236------------ ------------ ------------
Other changes:
Increase in lease liabilities from entering into new leases
during the year .......................... – 6,520 6,520
COVID-19-related rent concessions received (note 11(b)) . . – (535) (535)
Interest expenses (note 6(a)) ................... 4,098 784 4,882
Total other changes ......................... 4,098 6,769 10,867------------
------------ ------------
At 31 December 2020 ....................... 74,694 15,490 90,184
Bank loans Lease liabilities
Amount due to
non-controlling
interests Total
RMB’000 RMB’000 RMB’000 RMB’000
(Note 25) (Note 26) (Note 23)
At 1 January 2021 ................ 74,694 15,490 – 90,184----------- ----------- ----------- -----------
Changes from financing cash flows:
Proceeds from new bank loans .......... 55,371 – – 55,371
Repayment of bank loans ............. (129,597) – – (129,597)
Capital element of lease rentals paid ....... – (13,809) – (13,809)
Interest element of lease rentals paid ...... – (1,411) – (1,411)
Interest and other borrowing costs paid ..... (2,394) – – (2,394)
Dividends to non-controlling interests of
subsidiaries .................... – – (560) (560)
Total changes from financing cash flows .... (76,620) (15,220) (560) (92,400)----------- ----------- ----------- -----------
Other changes:
Increase in lease liabilities from entering into
new leases during the year ........... – 30,696 – 30,696
Early termination of lease liabilities ....... – (585) – (585)
COVID-19-related rent concessions received
(note 11(b)) .................... – (334) – (334)
Interest expenses (note 6(a)) ........... 1,926 1,411 – 3,337
Acquisition of subsidiaries ............ – 1,233 – 1,233
Dividends to non-controlling interests of
subsidiaries .................... – – 5 6 0 5 6 0
Total other changes ................. 1,926 32,421 560 34,907----------- ----------- ----------- -----------
At 31 December 2021 ............... – 32,691 – 32,691
APPENDIX I ACCOUNTANTS’ REPORT
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--- page 412 ---
Bank loans Lease liabilities
Amount due to
non-controlling
interests Total
RMB’000 RMB’000 RMB’000 RMB’000
(Note 25) (Note 26) (Note 23)
At 1 January 2022 ................ – 32,691 – 32,691----------- ----------- ----------- -----------
Changes from financing cash flows:
Proceeds from new bank loans .......... 12,183 – – 12,183
Repayment of bank loans ............. (12,183) – – (12,183)
Capital element of lease rentals paid ....... – (16,838) – (16,838)
Interest element of lease rentals paid ...... – (1,621) – (1,621)
Interest and other borrowing costs paid ..... (15) – – (15)
Dividends to non-controlling interests of
subsidiaries .................... – – (4,058) (4,058)
Total changes from financing cash flows .... (15) (18,459) (4,058) (22,532)----------- ----------- ----------- -----------
Other changes:
Increase in lease liabilities from entering into
new leases during the year ........... – 16,255 – 16,255
Early termination of lease liabilities ....... – (4,714) – (4,714)
COVID-19-related rent concessions received
(note 11(b)) .................... – (473) – (473)
Interest expenses (note 6(a)) ........... 1 5 1,621 – 1,636
Dividends to non-controlling interests of
subsidiaries .................... – – 1 1,258 11,258
Total other changes ................. 1 5 12,689 11,258 23,962----------- ----------- ----------- -----------
At 31 December 2022 ............... – 26,921 7,200 34,121
(unaudited) Bank loans Lease liabilities
Amount due to
non-controlling
interests Total
RMB’000 RMB’000 RMB’000 RMB’000
(Note 25) (Note 26) (Note 23)
At 1 January 2022 ................ – 32,691 – 32,691----------- ----------- ----------- -----------
Changes from financing cash flows:
Proceeds from new bank loans .......... 12,183 – – 12,183
Repayment of bank loans ............. (12,183) – – (12,183)
Capital element of lease rentals paid ....... – (7,378) – (7,378)
Interest element of lease rentals paid ...... – (749) – (749)
Interest and other borrowing costs paid ..... (15) – – (15)
Dividends to non-controlling interests of
subsidiaries .................... – – (3,330) (3,330)
Total changes from financing cash flows .... (15) (8,127) (3,330) (11,472)----------- ----------- ----------- -----------
Other changes:
Increase in lease liabilities from entering into
new leases during the period .......... – 6,439 – 6,439
Early termination of lease liabilities ....... – (1,570) – (1,570)
COVID-19-related rent concessions received
(note 11(b)) .................... – (46) – (46)
Interest expenses (note 6(a)) ........... 1 5 7 4 9 – 7 6 4
Dividends to non-controlling interests of
subsidiaries .................... – – 3,330 3,330
Total other changes ................. 1 5 5,572 3,330 8,917----------- ----------- ----------- -----------
At 31 May 2022 .................. – 30,136 – 30,136
APPENDIX I ACCOUNTANTS’ REPORT
– I-52 –


--- page 413 ---
Lease liabilities
Amount due to non-
controlling interests Total
RMB’000 RMB’000 RMB’000
(Note 26) (Note 23)
At 1 January 2023 ........................ 26,921 7,200 34,121------------ ------------ ------------
Changes from financing cash flows:
Capital element of lease rentals paid ............... (6,515) – (6,515)
Interest element of lease rentals paid .............. (857) – (857)
Dividends to non-controlling interests of subsidiaries ..... – (7,200) (7,200)
Total changes from financing cash flows ............ (7,372) (7,200) (14,572)------------ ------------ ------------
Other changes:
Increase in lease liabilities from entering into new leases
during the period ......................... 20,378 – 20,378
Early termination of lease liabilities ............... (4,616) – (4,616)
Interest expenses (note 6(a)) ................... 8 5 7 – 8 5 7
Total other changes ......................... 16,619 – 16,619------------ ------------ ------------
At 31 May 2023 .......................... 36,168 – 36,168
(e) Total cash outflow for leases
Amounts included in the cash flow statement for leases comprise the following, which are related to lease rentals paid:
Y ear ended 31 December Five months ended 31 May
2020 2021 2022 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(unaudited)
Within operating cash flows ...... 4,464 6,576 7,828 3,285 4,062
Within financing cash flows ...... 7,268 15,220 18,459 8,127 7,372
11,732 21,796 26,287 11,412 11,434
(f) Net cash outflow arising from the acquisitions of subsidiaries
The recognised amounts of assets acquired and liabilities at the date of acquisition of the subsidiary comprise the following:
RMB’000
Property, plant and equipment (note 11) ................................... 6,222
Goodwill (note 13) ............................................... 75,165
Deferred tax assets (note 29(b)) ....................................... 1 7 7
Other non-current assets ............................................ 3
Inventories and other contract costs ..................................... 10,276
Trade and other receivables .......................................... 6,455
Prepayments ................................................... 6,598
Cash and cash equivalents ........................................... 5,823
Trade and other payables ........................................... (15,307)
Contract liabilities ............................................... (7,447)
Lease liabilities (note 21(d)) ......................................... (1,233)
Other current liabilities ............................................ (3,332)
Non-controlling interests ........................................... (3,760)
Total consideration paid in cash ....................................... 79,640
Less: cash of subsidiaries acquired ...................................... (5,823)
73,817
22 AMOUNTS DUE FROM/TO SUBSIDIARIES
The amounts due from/to subsidiaries were unsecured, interest-free, repayable on demand and non-trade in nature.
APPENDIX I ACCOUNTANTS’ REPORT
– I-53 –


--- page 414 ---
23 TRADE AND OTHER PAYABLES
The Group
As at 31 December As at 31 May
2020 2021 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000
Trade payables ................... 44,240 62,467 64,087 46,223
Receipts in advance ................ 51,989 24,929 22,035 12,562
Salary and welfare payables ............ 39,872 43,900 53,210 34,816
Amount due to non-controlling interests ..... – – 7,200 –
Other payables and accruals ............ 17,984 23,050 25,442 39,723
Financial liabilities measured at amortised
cost ........................ 154,085 154,346 171,974 133,324
Other tax payables ................. 22,174 11,766 18,222 11,694
Refund liabilities:
– arising from right of return ........... 1 1 3 1 9 2 4 7 8 2 1 7
– arising from sales rebates ............ 37,327 38,490 48,999 21,570
213,699 204,794 239,673 166,805
The Company
As at 31 December As at 31 May
2020 2021 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000
Trade payables ................... 5 7 9 1,204 1,790 1,674
Receipts in advance ................ 51,989 24,929 22,035 12,562
Salary and welfare payables ............ 15,716 10,996 12,422 7,056
Other payables and accruals ............ 15,666 19,705 21,995 35,574
Financial liabilities measured at
amortised cost .................. 83,950 56,834 58,242 56,866
Other tax payables ................. 3,360 2,142 5,061 1,080
Refund liabilities arising from sales rebates . . 29,887 25,797 35,983 16,042
117,197 84,773 99,286 73,988
All trade and other payables are expected to be settled or recognised as income within one year or are repayable on demand.
As of the end of the reporting period, the ageing analysis of trade payables (which are included in trade and other payables),
based on the invoice date, is as follows:
The Group
As at 31 December As at 31 May
2020 2021 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000
Within 3 months .................. 42,968 59,969 63,301 45,323
Over 3 months but within 6 months ....... 2 6 1 3 2 2 0 4 6 7 5
Over 6 months but within 9 months ....... – 9 1 3 1 3 9
Over 9 months but within 1 year ......... 7 8 5 – – 4 4
Over 1 year but within 2 years .......... 4 6 1 2,357 569 42
44,240 62,467 64,087 46,223
The Company
As at 31 December As at 31 May
2020 2021 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000
Within 3 months .................. 5 7 9 1,204 1,790 1,328
Over 3 months but within 6 months ....... – – – 3 3 7
Over 6 months but within 9 months ....... – – – 9
579 1,204 1,790 1,674
APPENDIX I ACCOUNTANTS’ REPORT
– I-54 –


--- page 415 ---
24 CONTRACT LIABILITIES
The Group
As at 31 December As at 31 May
2020 2021 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000
Receipts in advance ................ 101,750 137,684 175,291 153,328
Unredeemed credits ................ 3 3 4 1,105 1,159 3,751
102,084 138,789 176,450 157,079
The Company
As at 31 December As at 31 May
2020 2021 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000
Receipts in advance ................ 30,991 47,885 52,779 30,919
Unredeemed credits ................ 3 3 4 1,098 1,003 3,542
31,325 48,983 53,782 34,461
Contract liabilities mainly represents the advance payments (exclude output V A T) from customers, for which the underlying
goods are yet to be provided. The output V A T contained in the advance payments has been classified under other current liabilities.
Movement in contract liabilities
The Group
As at 31 December As at 31 May
2020 2021 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000
Balance at 1 January ................ 54,605 102,084 138,789 176,450
Decrease in contract liabilities as a result of
recognising revenue during the year/period
that was included in the contract liabilities
at the beginning of the year/period ...... (50,175) (100,060) (134,255) (143,433)
Increase in contract liabilities as a result of
receiving advances from customers during
the year/period .................. 97,654 136,765 171,916 124,062
Balance at 31 December/31 May ......... 102,084 138,789 176,450 157,079
The Company
As at 31 December As at 31 May
2020 2021 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000
Balance at 1 January ................ 27,140 31,325 48,983 53,782
Decrease in contract liabilities as a result of
recognising revenue during the year/period
that was included in the contract liabilities
at the beginning of the year/period ...... (17,872) (27,314) (39,344) (32,235)
Increase in contract liabilities as a result of
receiving advances from customers during
the year/period .................. 22,057 44,972 44,143 12,914
Balance at 31 December/31 May ......... 31,325 48,983 53,782 34,461
Most of the contract liabilities are expected to be recognised as income within one year.
APPENDIX I ACCOUNTANTS’ REPORT
– I-55 –


--- page 416 ---
25 BANK LOANS
(a) The analysis of the repayment schedule of bank loans is as follows:
As at 31 December As at 31 May
2020 2021 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000
Within 1 year or on demand ........... 66,097 – – –----------- ----------- ----------- -----------
After 1 year but within 2 years .......... 1,011 – – –
After 2 years but within 5 years ......... 7,586 – – –
8,597 – – –----------- ----------- ----------- -----------
74,694 – – –
(b) Assets pledged as security for bank loans
At 31 December 2020, the bank loans were secured as follows:
As at 31 December As at 31 May
2020 2021 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000
Short-term bank loans
– guaranteed .................... 35,870 – – –
– secured and guaranteed ............. 30,227 – – –
Long-term bank loans
– guaranteed .................... 8,597 – – –
74,694 – – –
As at 31 December 2020, bank loans of RMB29,990,000 were secured by property, plant and equipment of the Group with
an aggregate value of RMB14,724,000. All of the bank loans as at 31 December 2020 were guaranteed by related parties (note 33).
26 LEASE LIABILITIES
At 31 December 2020, 2021 and 2022 and 31 May 2023, the lease liabilities were repayable as follows:
The Group
As at 31 December As at 31 May
2020 2021 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000
Within 1 year .................... 7,697 15,644 15,657 15,250----------- ----------- ----------- -----------
After 1 year but within 2 years .......... 3,006 10,106 7,970 9,203
After 2 years but within 5 years ......... 3,328 6,428 3,294 10,091
After 5 years .................... 1,459 513 – 1,624
7,793 17,047 11,264 20,918----------- ----------- ----------- -----------
15,490 32,691 26,921 36,168
The Company
As at 31 December As at 31 May
2020 2021 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000
Within 1 year .................... 5 6 3 2,004 1,387 885----------- ----------- ----------- -----------
After 1 year but within 2 years .......... 2 8 3 1,720 642 837
After 2 years but within 5 years ......... 2 3 1 9 2 5 4 2 4 1 9
514 2,645 684 1,256----------- ----------- ----------- -----------
1,077 4,649 2,071 2,141
APPENDIX I ACCOUNTANTS’ REPORT
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--- page 417 ---
27 EMPLOYEE RETIREMENT BENEFITS
Defined contribution retirement plan
As stipulated by the regulations of the PRC, the Group participates in various defined contribution retirement plans organised
by municipal and provincial governments for its employees. The Group is required to make contributions to the retirement plans at
12% – 19% of the salaries, bonuses and certain allowances of the employees. A member of the plan is entitled to a pension equal
to a fixed proportion of the salary prevailing at the member’s retirement date. The Group has no other material obligation for the
payment of pension benefits associated with these plans beyond the annual contributions described above.
28 EQUITY SETTLED SHARE-BASED TRANSACTIONS
(a) Employee Incentive Scheme
The Group has adopted an employee incentive scheme on 26 December 2020 (the “Employee Incentive Scheme”). The
purpose is to provide incentives and rewards to eligible participants for their contribution or potential contribution to continue
leading the future success of the Group. In connection with the Employee Incentive Scheme, Xiamen Jinyan Tengfei Equity
Investment Partnership (Limited Partnership) (“Jinyan Tengfei LP”) has been established in the PRC as employee incentive platform.
Eligible participants as approved by the Company may subscribe for the limited partnership interests in Jinyan Tengfei LP
(“Restricted Shares”). The Restricted Shares shall be entitled to all the economic interests relating to their respective Restricted
Shares, except that the Restricted Shares shall be subject to certain transfer and disposal restrictions. The transfer and disposal
restrictions will be released upon the completion of the vesting period as mentioned below.
The Company has power to govern the relevant activities of Jinyan Tengfei LP and can derive benefits from the contributions
of the eligible employees who are awarded with the shares under the Employee Incentive Scheme, the directors of the Company
consider that it is appropriate to consolidate Jinyan Tengfei LP .
Fair value of Restricted Shares is measured with reference to the price of a transaction of the Company’s share capital
completed in a short period of time before the Restricted Shares granted. Service conditions attached to the arrangements were not
taken into account in measuring fair value.
On 26 December 2020, 43 employees were granted 1,642,000 Restricted Shares pursuant to the Employee Incentive Scheme
at a subscription price of RMB12 per share. All Restricted Shares granted were subscribed and will be vested at the date of 36 months
from the date of grant or the date of completion of a qualified listing, whichever is later.
Movements in the number of Restricted Shares granted to employees are as follows:
2020 2021 2022 31 May 2023
Number of
restricted
shares
Weighted
average fair
value
Number of
restricted
shares
Weighted
average fair
value
Number of
restricted
shares
Weighted
average fair
value
Number of
restricted
shares
Weighted
average fair
value
RMB RMB RMB RMB
Outstanding at
January 1 ...... – N A 1,642,000 18 1,642,000 18 1,642,000 18
Subscribed during the
year/period ..... 1,642,000 18 – NA – NA – NA
Outstanding at
December 31/
3 1 M a y....... 1,642,000 18 1,642,000 18 1,642,000 18 1,642,000 18
(b) In order to provide incentives and rewards to Ms. Xue Fengying for her contribution to continue leading the future success
of the Group, the Company entered into a capital increase agreement with Ms. Xue Fengying on 21 June 2021, pursuant to
which Ms. Xue Fengying agreed to subscribe for 1,725,000 shares of the Company at a price of RMB12 per share and all of
these shares will be vested immediately at the date of insurance. Fair value of each share was RMB18, measured using the
Recent Transaction Method.
APPENDIX I ACCOUNTANTS’ REPORT
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--- page 418 ---
29 INCOME TAX IN THE CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(a) Current taxation in the consolidated statements of financial position represents:
The Group
As at 31 December As at 31 May
2020 2021 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000
PRC corporate income tax payable ........ 16,391 47,133 38,091 7,224
(b) Deferred tax assets and liabilities recognised:
(i) Movement of each component of deferred tax assets and liabilities
The components of deferred tax (assets)/liabilities recognised in the consolidated statements of financial position and
the movements during the year/period are as follows:
Credit loss
allowance
Unrealised
inter-group
profit
Promotion and
advertising
expenses
Accumulated
tax losses
Depreciation
charge of
right-of-use
asset and
interest on
lease liabilities Accruals
Depreciation
allowances in
excess of the
related
depreciation Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Deferred tax arising from:
At 1 January 2020 ...... (371) (1,058) (1,931) (1,434) (124) (503) 2,107 (3,314)
(Credited)/charged to profit or
loss ........... (398) (1,116) 1,931 1,227 (90) (475) 695 1,774
At 31 December 2020 and
1 January 2021 ...... (769) (2,174) – (207) (214) (978) 2,802 (1,540)
Acquisition of a subsidiary
(note 14) ......... – – – – (177) – – (177)
(Credited)/charged to profit or
loss ........... (430) (1,786) (8,509) (894) 243 (418) (517) (12,311)
At 31 December 2021 and
1 January 2022 ...... (1,199) (3,960) (8,509) (1,101) (148) (1,396) 2,285 (14,028)
(Credited)/charged to profit or
loss ........... (197) (613) (18,044) (224) (156) (583) (350) (20,167)
At 31 December 2022 and
1 January 2023 ...... (1,396) (4,573) (26,553) (1,325) (304) (1,979) 1,935 (34,195)
Charged/(credited) to profit or
loss ........... 4 2 0 1,848 4,205 199 48 (504) (832) 5,384
At 31 May 2023 ...... (976) (2,725) (22,348) (1,126) (256) (2,483) 1,103 (28,811)
(ii) Reconciliation to the consolidated statements of financial position
As at 31 December As at 31 May
2020 2021 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000
Net deferred tax asset recognised in the
consolidated statements of financial
position .................. (4,342) (16,313) (36,130) (29,914)
Net deferred tax liability recognised in
the consolidated statements of
financial position ............ 2,802 2,285 1,935 1,103
(1,540) (14,028) (34,195) (28,811)
(c) Deferred tax assets not recognised
In accordance with the accounting policy set out in note 2(s), the Group has not recognised deferred tax assets in respect of
cumulative tax losses of RMB66,000, RMB574,000, RMB242,000 and RMB162,000 as at 31 December 2020, 2021 and 2022 and
31 May 2023 as it is not probable that future taxable profits against which the losses can be utilised will be available in the relevant
tax jurisdiction and entity. The tax losses expire within 5 years under current tax legislation.
APPENDIX I ACCOUNTANTS’ REPORT
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--- page 419 ---
30 CAPITAL, RESERVES AND DIVIDENDS
(a) Movements in components of equity
The reconciliation between the opening and closing balances of each component of the Group’s consolidated equity is set out
in the consolidated statements of changes in equity. Details of the changes in the Company’s individual components of equity are
set out below:
Company
Note
Paid-in
capital
Share
capital
Capital
reserve
Share
premium
Share-based
payment
reserve
Statutory
reserve
Retained
profits/
(Accumulated
losses) Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Balance at 1 January 2020 . . 83,333 – 64,327 – – 9,977 50,142 207,779
Changes in equity for 2020:
Profit and total comprehensive
income for the year ..... – – – – – – 76,231 76,231
Appropriation to statutory
reserve ............. 30(d)(iii) – – – – – 464 (464) –
Conversion to a joint stock
limited liability company . . 30(c) (83,333) 83,333 (66,925) 100,845 – (10,441) (23,479) –
Equity settled share-based
transactions .......... 28(a) – – – – 438 – – 438
Capital injection from equity
shareholders .......... 30(d)(i) – – 2,598 – – – – 2,598
Dividends declared ....... 30(b) – – – – – – (120,000) (120,000)
Balance at 31 December
2020 .............. – 83,333 – 100,845 438 – (17,570) 167,046
Note
Share
capital
Share
premium
Share-based
payment
reserve
Statutory
reserve
(Accumulated
losses)/
Retained
profits Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Balance at 1 January 2021 .... 83,333 100,845 438 – (17,570) 167,046------- ------ - -------- ------- -- -------- -------
Changes in equity for 2021:
Profit and total comprehensive
income for the year ....... – – – – 133,833 133,833
Issuance of new shares ....... 30(c) 3,367 37,033 – – – 40,400
Equity settled share-based
transactions ............ 28(a) – 16,560 5,253 – – 21,813
Appropriation to statutory
reserve ............... 30(d)(iii) – – – 13,136 (13,136) –
Dividends declared ......... 30(b) – – – – (100,000) (100,000)
Balance at 31 December 2021 . . 86,700 154,438 5,691 13,136 3,127 263,092
Note
Share
capital
Share
premium
Share-based
payment
reserve
Statutory
reserve
Retained
profits Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Balance at 1 January 2022 .... 86,700 154,438 5,691 13,136 3,127 263,092-------- -------- -------- -------- -------- --------
Changes in equity for 2022:
Profit and total comprehensive
income for the year ........ – – – – 275,657 275,657
Equity settled share-based
transactions ............ 28(a) – – 5,253 – – 5,253
Appropriation to statutory
reserve ............... 30(d)(iii) – – – 27,615 (27,615) –
Dividends declared ......... 30(b) – – – – (80,000) (80,000)
Balance at 31 December 2022 . . 86,700 154,438 10,944 40,751 171,169 464,002
APPENDIX I ACCOUNTANTS’ REPORT
– I-59 –


--- page 420 ---
(unaudited) Note
Share
capital
Share
premium
Share-based
payment
reserve
Statutory
reserve
Retained
profits Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Balance at 1 January 2022 .... 86,700 154,438 5,691 13,136 3,127 263,092-------- -------- -------- -------- -------- --------
Changes in equity for the five
months ended 31 May 2022:
Profit and total comprehensive
income for the period ...... – – – – 1 12,295 112,295
Equity settled share-based
transactions ............ 28(a) – – 2,189 – – 2,189
Dividends declared ......... 30(b) – – – – (80,000) (80,000)
Balance at 31 May 2022 ...... 86,700 154,438 7,880 13,136 35,422 297,576
Note
Share
capital
Share
premium
Share-based
payment
reserve
Statutory
reserve
Retained
profits Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Balance at 1 January 2023 .... 86,700 154,438 10,944 40,751 171,169 464,002-------- -------- -------- -------- -------- --------
Changes in equity for the five
months ended 31 May 2023:
Profit and total comprehensive
income for the period ...... – – – – 6,075 6,075
Equity settled share-based
transactions ............ 28(a) – – 2,189 – – 2,189
Dividends declared ......... 30(b) – – – – (160,000) (160,000)
Balance at 31 May 2023 ...... 86,700 154,438 13,133 40,751 17,244 312,266
(b) Dividends
During the years ended 31 December 2020, 2021 and 2022 and the five months ended 31 May 2022 and 2023, the Company
declared dividends of RMB120,000,000 (RMB1.44 per share), RMB100,000,000 (RMB1.15 per share), RMB80,000,000 (RMB0.92
per share), RMB80,000,000 (RMB0.92 per share), and RMB160,000,000 (RMB1.85 per share), respectively to its shareholders.
(c) Paid-in capital and share capital
Note
No. of ordinary
shares issued and
fully paid Paid-in capital Share capital
’000 RMB’000 RMB’000
At 1 January 2020 ..................... – 83,333 –
Issue of ordinary shares upon conversion into a joint
stock limited liability company ............. i 83,333 (83,333) 83,333
At 31 December 2020 ................... 83,333 – 83,333
Issuance of new shares ................... ii 3,367 – 3,367
At 31 December 2021 and 2022 and 31 May 2023 . . 86,700 – 86,700
Notes:
(i) Pursuant to the shareholders’ resolutions and the promoters’ agreement dated 10 December 2020, the shareholders of
the Company agreed to convert the Company into a joint stock limited liability company. The net assets of the
Company as of the conversion base date, which is 31 October 2020, including paid-in capital, capital reserve, statutory
reserve and retained profits were converted into 83,333,000 ordinary shares at RMB1.00 each. The excess of the net
assets converted over the nominal value of the ordinary shares was credited to the Company’s share premium. Upon
the completion of registration with the Xiamen Administration for Industry and Commerce on 23 December 2020, the
Company was converted into a joint stock limited liability company under PRC Company Law, and renamed from
Xiamen Y anzhiwu Biological Engineering Co., Ltd. to Xiamen Y an Palace Bioengineering Co., Ltd. (the former name
of Xiamen Y an Palace Bird’s Nest Industry Co., Ltd.).
(ii) On 26 December 2020, pursuant to a resolution of shareholders’ meeting, the Company and Jinyan Tengfei LP entered
into a capital injection agreement. Jinyan Tengfei LP injected cash of RMB19,700,000 into the Company, and share
capital and share premium increased by RMB1,642,000 and RMB18,058,000, respectively. The consideration was fully
paid in cash on 8 February 2021.
APPENDIX I ACCOUNTANTS’ REPORT
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On 21 June 2021, pursuant to a resolution of shareholders’ meeting, the Company and Xue Fengying entered into a
capital injection agreement, Xue Fengying injected cash of RMB20,700,000 into the Company, and share capital and
share premium increased by RMB1,725,000 and RMB18,975,000, respectively. The consideration was fully paid in
cash on 28 June 2021.
The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per
share at meetings of the Company. All ordinary shares rank equally with regard to the Company’s residual assets.
(d) Nature and purpose of reserves
(i) Capital reserve and share premium
The capital reserve of the Group represents the share premium contributed by the shareholders of the Company before
its conversion into a joint stock limited liability company in December 2020.
The share premium of the Group represents the share premium contributed by the shareholders of the Company after
its conversion into a joint stock limited liability company in December 2020.
(ii) Share-based payment reserve
The share-based payment reserve comprises the portion of difference between the fair value of shares granted and the
consideration paid by the employees of the Group that has been recognised in accordance with the accounting policy adopted
for equity settled share-based payments in note 2(r)(ii).
(iii) Statutory reserve
Pursuant to the Articles of Association of the Group’s PRC companies and relevant statutory regulations,
appropriations to the statutory reserve fund were made at 10% of profit after tax determined in accordance with accounting
rules and regulations of the PRC until the reserve balance reaches 50% of the registered capital. This reserve fund can be
utilised in setting off accumulated losses or increasing capital of the PRC companies provided that the balance after such
conversion is not less than 25% of their registered capital, and is non-distributable other than in liquidation.
(e) Capital management
The Group’s primary objectives when managing capital are to safeguard the Group’s ability to continue as a going concern,
so that it can continue to provide returns for shareholders and benefits for other stakeholders, by pricing products and services
commensurately with the level of risk and by securing access to finance at a reasonable cost.
The Group actively and regularly reviews and manages its capital structure to maintain a balance between the higher
shareholder returns that might be possible with higher levels of borrowings and the advantages and security afforded by a sound
capital position, and makes adjustments to the capital structure in light of changes in economic conditions.
31 FINANCIAL RISK MANAGEMENT AND FAIR V ALUES OF FINANCIAL INSTRUMENTS
Exposure to credit, liquidity and interest rate risks arises in the normal course of the Group’s business. The Group’s exposure
to these risks and the financial risk management policies and practices used by the Group to manage these risks are described below.
(a) Credit risk
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in a financial loss to the
Group. The Group’s credit risk is primarily attributable to trade receivables. The Group’s exposure to credit risk arising from cash
and cash equivalents, restricted bank deposits and financial assets measured at fair value through profit or loss is limited because
the counterparties are banks and financial institutions for which the Group considers to represent low credit risk.
The Group does not provide any guarantees which would expose the Group to credit risk.
Trade receivables
The Group has established a credit risk management policy under which individual credit evaluations are performed
on all customers requiring credit over a certain amount. These evaluations focus on the customer’s past history of making
payments when due and current ability to pay, and take into account information specific to the customer as well as pertaining
to the economic environment in which the customer operates. Trade receivables are due within 30 to 90 days from the date
of billing. Debtors with balances that are more than 3 months past due are requested to settle all outstanding balances before
any further credit is granted. Normally, the Group does not obtain collateral from customers.
The Group has no significant concentration of credit risk in industries or countries in which the customers operate.
Significant concentrations of credit risk primarily arise when the Group has significant exposure to individual customers. At
31 December 2020, 2021 and 2022 and 31 May 2023, 17.9%, 51.6%, 81.7% and 83.6% of the total trade receivables was due
from the Group’s largest customer respectively, and 64.7%, 59.0%, 85.5% and 88.6% of the total trade receivables,
respectively, was due from the Group’s five largest customers.
APPENDIX I ACCOUNTANTS’ REPORT
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The Group measures loss allowances for trade receivables at an amount equal to lifetime ECLs, which is calculated
using a provision matrix. As the Group’s historical credit loss experience indicate significantly different loss patterns for
different type of customer, the loss allowance based on past due status is not distinguished among the Group’s different
customer types.
The following table provides information about the Group’s exposure to credit risk and ECLs for trade receivables:
As at 31 December 2020
Expected loss rate
Gross carrying
amount Loss allowance
RMB’000 RMB’000
Current (not past due) ................... 2.4% 21,799 524
Less than 3 months past due ............... 5.1% 2,319 119
Past due over 3 months .................. 100.0% 319 319
24,437 962
As at 31 December 2021
Expected loss rate
Gross carrying
amount Loss allowance
RMB’000 RMB’000
Current (not past due) ................... 2.6% 39,054 1,016
Less than 3 months past due ............... 17.6% 490 86
Past due over 3 months .................. 100.0% 199 199
39,743 1,301
As at 31 December 2022
Expected loss rate
Gross carrying
amount Loss allowance
RMB’000 RMB’000
Current (not past due) ................... 3.8% 65,124 2,482
Less than 3 months past due ............... 17.6% 233 41
Past due over 3 months .................. 100.0% 1,597 1,597
Subtotal ........................... 66,954 4,120
As at 31 May 2023
Expected loss rate
Gross carrying
amount Loss allowance
RMB’000 RMB’000
Current (not past due) ................... 4.1% 60,696 2,476
Less than 3 months past due ............... 25.0% 4 1
Past due over 3 months .................. 100.0% 1,524 1,524
Subtotal ........................... 62,224 4,001
Expected loss rates are based on actual loss experience over the recent past years. These rates are adjusted to reflect
differences between economic conditions during the period over which the historic data has been collected, current conditions
and the Group’s view of economic conditions over the expected lives of the receivables.
Movement in the loss allowance account in respect of trade receivables during Relevant Periods is as follows:
As at 31 December As at 31 May
2020 2021 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000
Balance at 1 January ............ 7 4 0 9 6 2 1,301 4,120
Impairment losses recognised ....... 2 2 2 3 3 9 2,819 –
Impairment losses reversed ........ – – – ( 1 1 9 )
Balance at 31 December/31 May ..... 9 6 2 1,301 4,120 4,001
APPENDIX I ACCOUNTANTS’ REPORT
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(b) Liquidity risk
The treasury function is centrally managed by the Group, which includes the short-term investment of cash surpluses and the
raising of funds to cover expected cash demands. The Group’s policy is to regularly monitor its liquidity requirements and its
compliance with lending covenants, to ensure that it maintains sufficient reserves of cash and adequate committed lines of funding
from major financial institutions to meet its liquidity requirements in the short and longer term.
The following tables show the remaining contractual maturities at the end of each reporting period of the Group’s financial
liabilities, which are based on contractual undiscounted cash flows (including interest payments computed using contractual rates
or, if floating, based on rates current at the end of the reporting period) and the earliest date the Group can be required to pay:
As at 31 December 2020
Contractual undiscounted cash out flow
Within 1 year
or on demand
More than
1 year but less
than 2 years
More than
2 years but less
than 5 years
More than
5 years Total
Carrying
amount on
consolidated
statements of
financial
position
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Bank loans ............. 66,421 1,067 7,585 – 75,073 74,694
Trade and other payables ..... 154,085 – – – 154,085 154,085
Lease liabilities ........... 8,305 3,325 3,778 1,510 16,918 15,490
228,811 4,392 11,363 1,510 246,076 244,269
As at 31 December 2021
Contractual undiscounted cash out flow
Within 1 year
or on demand
More than
1 year but less
than 2 years
More than
2 years but less
than 5 years
More than
5 years Total
Carrying
amount on
consolidated
statements of
financial
position
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Trade and other payables ..... 154,346 – – – 154,346 154,346
Lease liabilities ........... 17,018 10,729 6,808 516 35,071 32,691
171,364 10,729 6,808 516 189,417 187,037
As at 31 December 2022
Contractual undiscounted cash out flow
Within 1 year or
on demand
More than
1 year but less
than 2 years
More than
2 years but less
than 5 years Total
Carrying amount
on consolidated
statements of
financial position
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Trade and other payables .......... 171,974 – – 171,974 171,974
Lease liabilities ............... 16,898 8,312 3,474 28,684 26,921
188,872 8,312 3,474 200,658 198,895
As at 31 May 2023
Contractual undiscounted cash out flow
Within 1 year
or on demand
More than
1 year but less
than 2 years
More than
2 years but less
than 5 years
More than
5 years Total
Carrying
amount on
consolidated
statements of
financial
position
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Trade and other payables ..... 133,324 – – – 133,324 133,324
Lease liabilities ........... 17,637 10,810 11,119 1,637 41,203 36,168
150,961 10,810 11,119 1,637 174,527 169,492
APPENDIX I ACCOUNTANTS’ REPORT
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(c) Interest rate risk
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes
in market interest rates. The Group’s interest rate risk arises primarily from restricted bank deposits, cash at banks, bank loans and
lease liabilities. Interest-bearing financial instruments at variable rates and at fixed rates expose the Group to cash flow interest rate
risk and fair value interest rate risk, respectively. The Group’s interest rate risk profile as monitored by management is set out in
(i) below.
(i) Interest rate risk profile
The following table, as reported to the management of the Group, details the interest rate risk profile of the Group’s
bank loans and lease liabilities at the end of each reporting period:
As at 31 December As at 31 May
Note 2020 2021 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000
Fixed rate instruments:
Restricted bank deposits ...... 21(b) 1,202 2,000 1,600 8,000
Lease liabilities ........... 26 15,490 32,691 26,921 36,168
Bank loans ............. 25 74,69 4–––
91,386 34,691 28,521 44,168
Variable rate instruments:
Cash at bank and on hand ..... 21(a) 143,239 163,503 338,398 180,425
Cash balances with payment
platforms ............. 21(a) 7,334 5,992 12,420 6,978
150,573 169,495 350,818 187,403
(ii) Sensitivity analysis
At 31 December 2020, 2021 and 2022 and 31 May 2023, it is estimated that a general increase/decrease of 25 basis
points in interest rates, with all other variables held constant, would have increased/decreased the Group’s profit after tax and
retained profits by approximately RMB278,000, RMB324,000, RMB655,000 and RMB154,000 respectively.
The sensitivity analysis above indicates the instantaneous change in the Group’s profit after tax (and retained profits)
that would arise assuming that the change in interest rates had occurred at the end of the reporting period and had been applied
to re-measure those financial instruments held by the Group which expose the Group to fair value interest rate risk at the end
of the reporting period. In respect of the exposure to cash flow interest rate risk arising from floating rate non-derivative
instruments held by the Group at the end of the reporting period, the impact on the Group’s profit after tax (and retained
profits) is estimated as an annualised impact on interest expense or income of such a change in interest rates.
(d) Fair value measurement
(i) Financial assets and liabilities measured at fair value
Fair value hierarchy
The following table presents the fair value of the Group’s financial instruments measured at the end of the reporting
period on a recurring basis, categorised into the three-level fair value hierarchy as defined in IFRS 13, Fair value
measurement . The level into which a fair value measurement is classified is determined with reference to the observability
and significance of the inputs used in the valuation technique as follows:
 Level 1 valuations: Fair value measured using only Level 1 inputs i.e. unadjusted quoted prices in active
markets for identical assets or liabilities at the measurement date
 Level 2 valuations: Fair value measured using Level 2 inputs i.e. observable inputs which fail to meet Level 1,
and not using significant unobservable inputs. Unobservable inputs are inputs for which market data are not
available.
 Level 3 valuations: Fair value measured using significant unobservable inputs
APPENDIX I ACCOUNTANTS’ REPORT
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Fair value at
31 December 2020
Fair value measurements as at 31 December 2020 categorised into
Level 1 Level 2 Level 3
RMB’000 RMB’000 RMB’000 RMB’000
Recurring fair value
measurements
Asset:
Wealth management products . . . 46,225 – 46,225 –
Fair value at
31 December 2021
Fair value measurements as at 31 December 2021 categorised into
Level 1 Level 2 Level 3
RMB’000 RMB’000 RMB’000 RMB’000
Recurring fair value
measurements
Assets:
Wealth management products . . . ––––
Fair value at
31 December 2022
Fair value measurements as at 31 December 2022 categorised into
Level 1 Level 2 Level 3
RMB’000 RMB’000 RMB’000 RMB’000
Recurring fair value
measurements
Assets:
Wealth management products . . . 4,996 – 4,996 –
Fair value at
31 May 2023
Fair value measurements as at 31 May 2023 categorised into
Level 1 Level 2 Level 3
RMB’000 RMB’000 RMB’000 RMB’000
Recurring fair value
measurements
Assets:
Wealth management products . . . ––––
During the years ended 31 December 2020, 2021 and 2022 and the five months ended 31 May 2023, there were no
transfers between Level 1 and Level 2, or transfers into or out of Level 3. The Group’s policy is to recognise transfers between
levels of fair value hierarchy as at the end of the reporting period in which they occur.
V aluation techniques and inputs used in Level 2 fair value measurements
The fair value of wealth management products in Level 2 is determined by discounting the estimated future cash flows
at risky rate, which is the benchmark interest rate plus the risk premium as at the end of the reporting period.
(ii) Fair value of financial assets and liabilities carried at other than fair value
The carrying amounts of the Group’s financial instruments carried at amortised cost were not materially different from
their fair values as at 31 December 2020, 2021 and 2022 and 31 May 2023.
32 COMMITMENTS
Commitments outstanding at 31 December 2020, 2021 and 2022 and 31 May 2023 not provided for in the financial statements
were as follows:
As at 31 December As at 31 May
2020 2021 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000
Contracted for new short-term leases ...... 1,749 3,809 3,327 4,332
APPENDIX I ACCOUNTANTS’ REPORT
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33 MATERIAL RELATED PARTY TRANSACTIONS
The Group entered into the following material related party transactions during the Relevant Periods.
Name of related parties Relationship
Beijing Zhongshi Hongyun Advertising Co., Ltd.
(ʮ̡)*
Entity controlled by a director of the Group
Beijing Guangyao Tianrun Advertising Co., Ltd.
(ʮ̡)*
Entity controlled by a director of the Group
Beijing Zhongda Baichengtang Biotechnology Co., Ltd.
(ʮ̡)*
Entity controlled by one of the Controlling Shareholders
Shanxi Y anbaolai Trading Co., Ltd. (ࠢ
ʮ̡)* (note (a))
Entity controlled by one of the Controlling Shareholders
Harbin Y anzhiwu Trading Co., Ltd. (ਠ൱
ʮ̡)* (note (b))
Entity controlled by one of the Controlling Shareholders
Changchun Changshengrong Trade Co., Ltd. (ସ
ʮ̡)* (note (c))
Entity controlled by one of the Controlling Shareholders
Tianjin Union Y utai Trading Co., Ltd. (̹Υᑌ༃इਠ
ʮ̡)*
Entity significantly influenced by one of the Controlling
Shareholders
Shanghai Y anbao Food Co., Ltd. (ʮ̡)* Associate of the Company before 28 June 2021
Xiamen Suntama Industrial Development Co., Ltd. (̹
ʮ̡)*
One of the Controlling Shareholders
* The English translation of the companies’ names are for reference only. The official names of these companies are in
Chinese. The English translations are for reference only.
(a) This entity was deregistered on 4 July 2022.
(b) This entity was deregistered on 15 February 2022.
(c) This entity was deregistered on 15 November 2022.
(a) Key management personnel remuneration
Remuneration for key management personnel of the Group, including amounts paid to the Company’s directors and
supervisors as disclosed in note 8 and certain of the highest paid employees as disclosed in note 9, is as follows:
Y ear ended 31 December Five months ended 31 May
2020 2021 2022 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(unaudited)
Salaries, wages and other benefits . . 16,586 17,276 17,920 6,297 6,917
Contributions to defined contribution
retirement plan ............ 4 3 2 1 0 3 5 4 1 4 0 1 5 1
Equity-settled share-based payment
expenses ............... 1 4 0 1,666 1,778 693 740
16,769 19,152 20,052 7,130 7,808
Total remuneration is included in “staff costs” (see note 6(b)).
APPENDIX I ACCOUNTANTS’ REPORT
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(b) Other transactions with related parties
Y ear ended 31 December Five months ended 31 May
2020 2021 2022 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(unaudited)
Trade in nature:
Advertising services received
– Entities controlled by a director of the
Group ................... 61,475 53,514 60,298 22,220 14,915
Sales of bird’s nest products
– Entities controlled by one of the
Controlling Shareholders ......... 74,520 50,24 9–––
– Entity significantly influenced by one
of the Controlling Shareholders ..... 15,547 19,989 20,447 8,017 6,735
– Associate of the Company ........ 8,476 11,86 2–––
Non-trade in nature:
Interest income from entrusted loans
– One of the Controlling Shareholders . . 3,994 1,49 2–––
Bank loans guaranteed by
– certain Controlling Shareholders .... 74,69 4––––
(c) Balances with related parties
As at 31 December As at 31 May
2020 2021 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000
Trade in nature:
Prepayments
– Entities controlled by a director of the Group . 2,926 13,456 6,336 1,661
Other receivables included in trade and other
receivables
– Entities controlled by a director of the Group . 1,827 1,015 1,900 1,900
Other payables included in trade and other
payables
– Entities controlled by a director of the Group . 900 – – –
Contract liabilities
– Entities controlled by one of the Controlling
Shareholders .................... 13,931 6 – –
34 IMMEDIATE AND ULTIMATE CONTROLLING PARTY
The directors of the Company consider the immediate holding party of the Company as at 31 December 2020, 2021 and 2022
and 31 May 2023 were Xiamen Suntama Industrial Development Co., Ltd., Zheng Wenbin and Li Y ouquan, and the ultimate
controlling party of the Company as at 31 December 2020, 2021 and 2022 and 31 May 2023 were Huang Jian, Zheng Wenbin and
Li Y ouquan.
35 POSSIBLE IMPACT OF AMENDMENTS, NEW STANDARDS AND INTERPRETATIONS ISSUED BUT NOT YET
EFFECTIVE FOR ACCOUNTING PERIOD BEGINNING ON 1 JANUARY 2023
Up to the date of issue of the Historical Financial Information, the IASB has issued a number of new or amended standards,
which are not yet effective for the accounting period beginning on 1 January 2023 and which have not been adopted in the Historical
Financial Information. These developments include the following which may be relevant to the Group.
Effective for accounting periods
beginning on or after
Amendments to IAS 1, Classification of Liabilities as Current or Non-current 1 January 2024
Amendments to IAS 1, Non-current Liabilities with Covenants 1 January 2024
Amendments to IFRS 16, Lease Liability in a Sale and Leaseback 1 January 2024
Amendments to IAS 7 and IFRS 7, Supplier Finance Arrangements 1 January 2024
Amendments to IFRS 10 and IAS 28, Sale or contribution of assets between an investor
and its associate or joint venture
To be decided
The Group is in the process of making an assessment of what the impact of these developments is expected to be in the period
of initial application. So far it has concluded that the adoption of them is unlikely to have a significant impact on the consolidated
financial statements.
APPENDIX I ACCOUNTANTS’ REPORT
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36 SUBSEQUENT EVENTS AFTER THE REPORTING PERIOD
As approved by the Company’s shareholders’ general meeting on 25 May 2023, immediately upon the listing of the Company,
one share of RMB1.0 will each subdivide into five shares of RMB0.2 each.
In November 2023, the Group entered into an eight-year lease in respect of certain leasehold properties from a third party as
manufacturing facilities. The amount of rent payable (excluding V A T tax) by the Group under the lease is between RMB3,742,000
to RMB4,248,000 per quarter. At the commencement date of the lease, the Group recognised a right-of-use asset and a lease liability
of RMB100,008,000.
SUBSEQUENT FINANCIAL STATEMENTS
No audited financial statements have been prepared by the Company or any of its subsidiaries in
respect of any period subsequent to 31 May 2023.
APPENDIX I ACCOUNTANTS’ REPORT
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The information set forth in this appendix does not form part of the Accountants’ Report prepared
by KPMG, Certified Public Accountants, Hong Kong, the Company’ s reporting accountants as set forth in
Appendix I to this prospectus, and is included herein for illustrative purpose only.
The unaudited pro forma financial information should be read in conjunction with the section headed
“Financial Information” in this prospectus and the Accountants’ Report set out in Appendix I to this
prospectus.
A. UNAUDITED PRO FORMA STATEMENT OF ADJUSTED CONSOLIDATED NET
TANGIBLE ASSETS
The following unaudited pro forma statement of adjusted consolidated net tangible assets of the
Group is prepared in accordance with paragraph 4.29 of the Listing Rules and is set out below to illustrate
the effect of the Global Offering on the consolidated net tangible assets of the Group attributable to equity
shareholders of the Company as if the Global Offering had taken place on 31 May 2023.
This unaudited pro forma statement of adjusted consolidated net tangible assets has been prepared
for illustrative purposes only and, because of its hypothetical nature, it may not provide a true picture of
the financial position of the Group had the Global Offering been completed as at 31 May 2023 or at any
future dates.
Consolidated net
tangible assets
of the Group
attributable
to equity
shareholders of
the Company as
at 31 May 2023 (1)
Estimated
net proceeds
from the
Global
Offering (2)
Unaudited pro
forma adjusted
consolidated net
tangible assets
attributable
to equity
shareholders of
the Company as
at 31 May 2023
Unaudited pro forma
adjusted consolidated net
tangible assets attributable
to equity shareholders of
the Company per Share (3)
RMB’000 RMB’000 RMB’000 RMB HK$
Based on an Offer Price
of HK$8.80 per
H Share ............ 315,460 224,774 540,234 1.16 1.26
Based on an Offer Price
of HK$11.00 per
H Share ............ 315,460 286,941 602,401 1.29 1.41
Notes:
(1) The consolidated net tangible assets of the Group attributable to equity shareholders of the Company as at 31 May 2023
is arrived at after deducting intangible assets of RMB1,018,000 and goodwill of RMB75,165,000 from the total equity
attributable to equity shareholders of the Company of RMB391,643,000 as at 31 May 2023, as shown in the
Accountants’ Report as set out in Appendix I to this prospectus.
(2) The estimated net proceeds from the Global Offering are based on the indicative Offer Price of HK$8.80 and HK$11.00
per H Share, being the low end price and high end price of the indicative Offer Price range respectively, and 32,000,000
H Shares expected to be issued under the Global Offering, after deduction of the underwriting commissions and other
listing related expenses payable by the Company (excluding the listing expenses charged to profit or loss during the
Track Record Period), and takes no account of any shares that may be issued upon exercise of the Over-Allotment
Option or any shares which may be granted under the Shares Purchase Scheme. For illustrative purpose, the estimated
net proceeds have been converted from Hong Kong dollar into Renminbi at the exchange rate of HK$1.09 to RMB1.
No representation is made that the Hong Kong dollar amounts have been, could have been or may be converted to
Renminbi, or vice versa, at the rate or at any other rates or at all.
(3) The unaudited pro forma adjusted consolidated net tangible assets of the Group attributable to equity shareholders of
the Company per Share is arrived at after the adjustments referred to the preceding paragraphs and on the basis of
465,500,000 Shares in issue immediately following completion of the Global Offering and sub-division, assuming that
the Global Offering and sub-division have been completed on 31 May 2023, but does not take into account of any
shares that may be issued upon exercise of the Over-Allotment Option or any share which may be granted under the
Shares Purchase Scheme. For illustrative purpose, the unaudited pro forma adjusted consolidated net tangible assets
of the Group attributable to equity shareholders of the Company per Share are converted from Renminbi into Hong
Kong dollar at exchange rate of HK$1.09 to RMB1. No representation is made that the Renminbi amounts have been,
could have been, or may be converted to Hong Kong dollar, or vice versa, at the rate of any other rates at all.
(4) No adjustment has been made to reflect any trading result or other transactions of the Group entered into subsequent
to 31 May 2023.
APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION
– II-1 –


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B. REPORT ON THE UNAUDITED PRO FORMA FINANCIAL INFORMATION
The following is the text of a report received from the reporting accountants, KPMG, Certified Public
Accountants, Hong Kong, in respect of the Group’ s pro forma financial information for the purpose of
incorporation in this prospectus.
INDEPENDENT REPORTING ACCOUNTANTS’ ASSURANCE REPORT ON THE
COMPILATION OF PRO FORMA FINANCIAL INFORMATION
TO THE DIRECTORS OFʮ̡ XIAMEN YAN PALACE BIRD’S NEST
INDUSTRY CO., LTD. (FORMERLY KNOWN ASʮ̡ XIAMEN YAN
PALACE BIOENGINEERING CO., LTD.)
We have completed our assurance engagement to report on the compilation of pro forma financial
information ofʮ̡ Xiamen Y an Palace Bird’s Nest Industry Co., Ltd.
(formerly known asʮ̡ Xiamen Y an Palace Bioengineering Co., Ltd.) (the
“Company ”) and its subsidiaries (collectively the “ Group ”) by the directors of the Company (the
“Directors ”) for illustrative purposes only. The unaudited pro forma financial information consists of the
unaudited pro forma statement of adjusted consolidated net tangible assets as at 31 May 2023 and related
notes as set out in Part A of Appendix II to the prospectus dated 30 November 2023 (the “ Prospectus ”)
issued by the Company. The applicable criteria on the basis of which the Directors have compiled the pro
forma financial information are described in Part A of Appendix II to the Prospectus.
The pro forma financial information has been compiled by the Directors to illustrate the impact of
the proposed offering of the ordinary shares of the Company (the “ Global Offering ”) on the Group’s
financial position as at 31 May 2023 as if the Global Offering had taken place at 31 May 2023. As part
of this process, information about the Group’s financial position as at 31 May 2023 has been extracted by
the Directors from the Group’s historical financial information included in the Accountants’ Report as set
out in Appendix I to the Prospectus.
Directors’ Responsibilities for the Pro Forma Financial Information
The Directors are responsible for compiling the pro forma financial information in accordance with
paragraph 4.29 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong
Limited (the “ Listing Rules ”) and with reference to Accounting Guideline 7 “Preparation of Pro Forma
Financial Information for Inclusion in Investment Circulars” (“ AG 7 ”) issued by the Hong Kong Institute
of Certified Public Accountants (“ HKICPA ”).
Our Independence and Quality Management
We have complied with the independence and other ethical requirements of the Code of Ethics for
Professional Accountants issued by the HKICPA, which is founded on fundamental principles of integrity,
objectivity, professional competence and due care, confidentiality and professional behaviour.
The firm applies Hong Kong Standard on Quality Management 1 “Quality Management for Firms
that Perform Audits or Reviews of Financial Statements, or Other Assurance or Related Services
Engagements”, which requires the firm to design, implement and operate a system of quality management
including policies or procedures regarding compliance with ethical requirements, professional standards
and applicable legal and regulatory requirements.
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Reporting Accountants’ Responsibilities
Our responsibility is to express an opinion, as required by paragraph 4.29(7) of the Listing Rules,
on the pro forma financial information and to report our opinion to you. We do not accept any
responsibility for any reports previously given by us on any financial information used in the compilation
of the pro forma financial information beyond that owed to those to whom those reports were addressed
by us at the dates of their issue.
We conducted our engagement in accordance with Hong Kong Standard on Assurance Engagements
(“HKSAE ”) 3420 “Assurance Engagements to Report on the Compilation of Pro Forma Financial
Information Included in a Prospectus” issued by the HKICPA. This standard requires that the reporting
accountants plan and perform procedures to obtain reasonable assurance about whether the Directors have
compiled the pro forma financial information in accordance with paragraph 4.29 of the Listing Rules, and
with reference to AG 7 issued by the HKICPA.
For purpose of this engagement, we are not responsible for updating or reissuing any reports or
opinions on any historical financial information used in compiling the pro forma financial information, nor
have we, in the course of this engagement, performed an audit or review of the financial information used
in compiling the pro forma financial information.
The purpose of pro forma financial information included in an investment circular is solely to
illustrate the impact of a significant event or transaction on unadjusted financial information of the Group
as if the event had occurred or the transaction had been undertaken at an earlier date selected for purposes
of the illustration. Accordingly, we do not provide any assurance that the actual outcome of events or
transactions as at 31 May 2023 would have been as presented.
A reasonable assurance engagement to report on whether the pro forma financial information has
been properly compiled on the basis of the applicable criteria involves performing procedures to assess
whether the applicable criteria used by the Directors in the compilation of the pro forma financial
information provide a reasonable basis for presenting the significant effects directly attributable to the
event or transaction, and to obtain sufficient appropriate evidence about whether:
 the related pro forma adjustments give appropriate effect to those criteria; and
 the pro forma financial information reflects the proper application of those adjustments to the
unadjusted financial information.
The procedures selected depend on the reporting accountants’ judgement, having regard to the
reporting accountants’ understanding of the nature of the Group, the event or transaction in respect of
which the pro forma financial information has been compiled, and other relevant engagement
circumstances.
The engagement also involves evaluating the overall presentation of the pro forma financial
information.
We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
Our procedures on the pro forma financial information have not been carried out in accordance with
attestation standards or other standards and practices generally accepted in the United States of America,
auditing standards of the Public Company Accounting Oversight Board (United States) or any overseas
standards and accordingly should not be relied upon as if they had been carried out in accordance with
those standards and practices.
We make no comments regarding the reasonableness of the amount of net proceeds from the issuance
of the Company’s shares, the application of those net proceeds, or whether such use will actually take
place as described in the section headed “Future Plans and Use of Proceeds” in the Prospectus.
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Opinion
In our opinion:
(a) the pro forma financial information has been properly compiled on the basis stated;
(b) such basis is consistent with the accounting policies of the Group, and
(c) the adjustments are appropriate for the purposes of the pro forma financial information as
disclosed pursuant to paragraph 4.29(1) of the Listing Rules.
KPMG
Certified Public Accountants
Hong Kong
30 November 2023
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SUMMARY OF THE ARTICLES OF ASSOCIATION
This Appendix contains a summary of the Company’s Articles of Association, the objective of which
is to provide potential investors with an overview of our Articles of Association. As the information
contained below is in summary form, it does not contain all the information that may be important to
potential investors.
The Articles of Association and relevant amendments thereto were adopted or ratified by the
Shareholders in Shareholders’ general meetings in accordance with applicable laws and regulations,
including the PRC Company Law, the Securities Law of the PRC, the Guidance on Articles of Association
of Listed Company, the Hong Kong Listing Rules and other relevant regulations, and will become effective
on the date that the Company’s H Shares are listed on the Hong Kong Stock Exchange.
GENERAL PROVISIONS
The Articles of Association regulate our Company’s organization and conduct guidance and is
binding on our Company, the Shareholders, Directors, Supervisors and senior management. Subject to no
violation of the relevant provisions of the Articles of Association, Shareholders may sue Shareholders;
Shareholders may sue the Directors, Supervisors, General Manager and other senior management;
Shareholders may sue our Company, and our Company may sue Shareholders, Directors, Supervisors,
General Manager or other senior management.
SHARES
Issuance of Shares
The Shares of the Company take the form of share certificates.
The Shares of the Company shall be issued in accordance with the principles of open, fairness and
justice, and each share in the same class shall rank pari passu. For the same class of shares issued at the
same time, each share shall be issued on the same conditions and at the same price. All entities or
individuals subscribing for the shares shall pay the same price for each share.
After completing the necessary procedures stipulated in the Trial Measures and other relevant laws,
laws and normative documents, the Company may issue shares to domestic investors and overseas
investors.
For the purpose of the preceding paragraph, overseas investors shall refer to investors from foreign
countries and Hong Kong, Macao or Taiwan region who subscribe for shares issued by our Company;
domestic investors shall refer to investors within the territory of the PRC apart from above-mentioned
region who subscribe for shares issued by our Company.
Increase, Reduction and Repurchase of Shares
Increase of Shares
According to the operation and development needs of the Company, subject to the applicable laws
and regulations, the Company may increase the registered capital by the following ways upon approval by
separate resolution of the Shareholders’ general meeting:
i. public issuance of shares;
ii. non-public issuance of shares;
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iii. offering of bonus shares to existing shareholders;
iv. capitalization of common reserve fund;
v. other means stipulated by laws and administrative regulations as well as regulatory documents
or approved by the securities regulatory authority of the place where the Company’s shares are
listed and the Hong Kong Stock Exchange.
Reduction of Shares
The Company may reduce its registered capital. The reduction in the registered capital shall be made
in accordance with the procedures set out in the PRC Company Law, other relevant regulations and the
Articles of Association.
The Company must prepare a balance sheet and an inventory of assets when it reduces its registered
capital.
The Company shall notify its creditors within ten days from the date of the Company’s resolution
to reduce registered capital being passed and shall publish an announcement within thirty days from the
date of such resolution being passed. A creditor has the right to require the Company to repay its debts
or to provide a corresponding guarantee for such debts within thirty days from the date of receipt of the
relevant notice or, in the case of a creditor who did not receive such notice, within forty-five days from
the date of the announcement. The Company’s registered capital shall not, after the reduction in the
registered capital, be less than the minimum amount prescribed by law.
Repurchase of Shares
The Company shall not purchase its shares. However, provided that it does not violate the laws,
regulations, the regulations of the securities regulatory authority where the Company’s shares are listed
and the provisions of the Hong Kong Listing Rules and these Articles of Association, one of the following
circumstances shall apply:
(a) reducing the Company’s registered capital;
(b) merging with other companies holding our Shares;
(c) using the Shares as an employee stock ownership plan or equity incentive plan;
(d) purchasing its Shares from Shareholders who have voted against the resolutions on the merger
or division of the Company at a Shareholders’ general meeting upon their request;
(e) use of shares for conversion of convertible corporate bonds issued by the Company;
(f) necessary for the Company to maintain its value and protect the interests of the shareholders;
or
(g) other circumstances stipulated by laws, administrative regulations, departmental rules,
regulatory documents, regulations of the securities regulatory authorities where the Company’s
shares are listed and the Hong Kong Listing Rules .
The Company may repurchase its Shares through open centralized trading or other ways recognized
by laws, administrative regulations and regulatory documents, the Hong Kong Listing Rules and the
securities regulatory authorities where the Company’s shares are listed. If the share purchase is made
under any of the circumstances stipulated in (c), (e) or (f) aforementioned, it shall be conducted by way
of open centralized trading.
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An approval shall be obtained from the Shareholders’ general meeting when the Company is to
repurchase its own Shares under the circumstances (a) and (b) set out above. In case of the circumstances
stipulated in (c), (e) and (f) above, a resolution of the Company’s Board of Directors shall be passed by
a two-thirds majority of Directors attending the meeting in accordance with the provisions of the Articles
of Association or the authorization of the Shareholders’ general meeting.
After the Company has repurchased its own shares in accordance with the preceding provision, the
shares so repurchased shall be canceled within ten days from the date of purchase (under the circumstances
set out in (a)), or shall be transferred or canceled within six months (under the circumstances set out in
(b) and (d)). The shares of the Company repurchased by the Company under the circumstances set out in
(c), (e) and (f) above shall not exceed ten percent of the total issued shares of the Company, and shall be
transferred or canceled within three years.
Where laws, administrative regulations, departmental rules, the securities regulatory authorities
where the Company’s shares are listed and the Hong Kong Listing Rules have other provisions on the
financial treatment involved in the foregoing share repurchase, those provisions shall prevail.
Transfer of Shares
Shares in the Company may be transferred in accordance with the law. Unless otherwise specified
by laws, administrative regulations, departmental rules, regulatory documents, the securities regulatory
authorities where the Company’s shares are listed and Hong Kong Stock Exchange, the Shares of the
Company may be transferred freely without any lien attached. The transfer of H Shares shall be registered
in the shares registrar in Hong Kong entrusted by the Company.
All fully paid H Shares may be freely transferred in accordance with the Company’s Articles of
Association. However, the Board of Directors may refuse to recognize any documents for the transfer of
H Shares without stating any reasons unless the conditions stipulated below are met:
(a) transfers and other documents relating to or affecting the ownership of any shares shall be
registered and a fee shall be payable to the Company for such registration at the rate of fee
prescribed in the Hong Kong Listing Rules , which fee shall not exceed the maximum fee
prescribed from time to time in the Hong Kong Listing Rules ;
(b) transfer documents are only in relation to H Shares;
(c) the stamp duty (as stipulated by Hong Kong law) in relation to transfer documents has been
duly paid;
(d) relevant share certificate(s) and any other evidence which the Board of Directors may
reasonably require to show that the transferor has the right to transfer the Shares have been
provided;
(e) If the shares are to be transferred to joint holders, the number of joint holders shall not exceed
four;
(f) the Shares do not have any lien attached, and
(g) no transfer of any share shall be made to an infant or to a person of unsound mind or under
other legal disability.
If the Company refuses to register the transfer of Shares, the Company shall give one copy of the
notice to the transferor and the transferee to refuse the registration of the transfer within two months from
the date of the formal application for transfer. All transfer documents shall be kept at the legal address of
the Company or such address as may be designated by the Board of Directors from time to time.
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The shares in the Company held by the Company’s promoters shall not be transferred within one year
from the date of establishment of the Company. The shares that have been issued before the Company
publicly offers shares shall not be transferred within one year from the date when the shares in the
Company get listed and traded in the stock exchange concerned.
The directors, supervisors and senior executives of the Company shall declare to the Company the
shares (including the preferred shares) in the Company they hold and the changes thereof. During the term
of office, the shares transferred by any of the aforesaid persons each year shall not exceed 25% of the total
shares of the same type in the Company he/she holds. The shares in the Company held by any of the
aforesaid persons shall not be transferred within one year from the date when the shares in the Company
get listed and traded in the stock exchange concerned. Any of the abovesaid persons shall not transfer the
shares in the Company held by him/her within six months after his/her departure.
If the securities regulatory authority of the place where the company’s shares are listed stipulates
other restrictions on the transfer of overseas listed foreign shares, the relevant regulations shall be
complied with at the same time.
Where the Shareholders holding five percent or more of the Company, Directors, Supervisors and
senior management of the Company and sell or other securities of equity nature of the Company within
a period of six months after the acquisition of the or other securities of equity nature of the Company, or
repurchase shares or other securities of equity nature of the Company within six months after sales of the
shares, any proceeds arising therefrom shall belong to the Company, and the Board of the Company shall
withdraw such gains for the benefit of the Company. However, an exception shall be made where a
securities company holds 5% or more of its own shares as a result of purchasing the remaining shares after
the sole sale of shares or any other circumstance prescribed by the Relevant regulatory authorities.
Pledge of Shares
The Company shall not accept its Shares as the subject matter of a pledge.
Financial Assistance for Acquisition of the Company’s shares
Neither the Company nor any of its subsidiaries shall, by means of donation, advancement,
guarantee, compensation, loan or other means, provide any financial aids to any person purchasing or
intending to purchase shares in the Company.
SHAREHOLDERS AND SHAREHOLDERS’ GENERAL MEETINGS
Register of Shareholders
The Company shall set up a register of shareholders based on the certificates provided by the
securities registration agency. Unless there is proof to the contrary, the register of Shareholders shall be
sufficient evidence to the holding of the Shares of the Company by a Shareholder.
The register of shareholders registers the following matters, or the registration of shareholders in
accordance with the laws, administrative regulations, departmental rules and the Hong Kong Listing Rules :
(i) the name, address (domicile), occupation or nature of each Shareholder;
(ii) the class and number of Shares held by each Shareholder;
(iii) the amount paid or payable in respect to the Shares held by each Shareholder;
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(iv) the serial numbers of the Shares held by each Shareholder;
(v) the date on which each Shareholder was registered as a Shareholder; and
(vi) the date on which each Shareholder ceased to be a Shareholder.
Subject to the Articles of Association and other applicable regulations, once the Shares of the
Company are transferred, the name of the transferee shall be listed in the register of Shareholders as the
holder of the said Shares.
The Company may, in accordance with the understanding and agreements between the securities
regulatory authority of the State Council and overseas securities regulatory authorities, maintain its
register of Shareholders of overseas-listed foreign shares outside China and entrust an overseas agent to
maintain such register. The original copy of the register of Shareholders of overseas-listed foreign shares
listed on the Hong Kong Stock Exchange shall be maintained in Hong Kong.
The Company shall maintain a duplicate of the register of Shareholders of overseas-listed foreign
shares at the Company’s corporate domicile. The appointed overseas agent shall ensure the consistency
between the original copy and the duplicate of the register of Shareholders of overseas-listed foreign
shares at all times. If there is any inconsistency between the original copy and the duplicate of the register
of Shareholders of overseas-listed foreign shares, the original copy shall prevail.
Our Company must keep a complete register of Shareholders. The register of Shareholders shall
include the following:
(i) register of shareholders kept at our domicile other than those specified in (ii) and (iii) below;
(ii) register of the holders of our overseas listed foreign shares kept at the location of the stock
exchange where such shares are listed; and
(iii) register of shareholders kept in other locations according to the decision of the Board of
Directors as required for the listing of the shares.
Different parts of the Shareholders’ register shall not overlap. The transfer of Shares registered in a
certain part of the register of Shareholders shall not be registered elsewhere in the register of Shareholders
as long as the shares remain registered. Any alteration or rectification to any part of the register of
Shareholders shall be made in accordance with the laws in the place where such part of the register of
Shareholders is maintained.
If any person whose name appears in the register of Shareholders or requests to register his or her
name (title) in the register of Shareholders loses his or her share certificates (that is, “original share
certificates”), he or she may apply to our Company to reissue new share certificates for those shares. In
the event a holder of unlisted shares applies to our Company for a reissue after losing the share certificates,
the matter shall be dealt with pursuant to related provisions of the Company Law. In the even t a H share
shareholder applies to our Company for a reissue after losing the share certificates, the matter may be dealt
with pursuant to the laws, regulations, listing rules of the stock exchange where the original register of
H share shareholder is kept, or other related provisions.
If a H shareholder loses share certificates and applies to our Company for a replacement issue, the
share certificates shall be issued in compliance with the following requirements:
(i) the applicant shall submit the application in the standard format designated by our Company
and attach a notary certificate or legal declaration. The contents of the notary certificate or
legal declaration shall include the reason for the applicant’s request, circumstances and
evidence of loss of share certificates, as well as a statement that nobody else may request to
be registered as a shareholder with respect to the pertinent shares;
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(ii) before coming to a decision to issue new share certificates, our Company has not received any
statement in which any person other than the applicant requests to be registered as the
shareholder with respect to the shares;
(iii) if our Company decides to issue new share certificates to the applicant, we shall publish an
announcement in an eligible newspaper designated by the Board of Directors indicating that we
plan to reissue new share certificates. The announcement period shall be 90 days and the
announcement shall be published at least once every 30 days;
(iv) before publishing the announcement indicating that we plan to reissue new share certificates,
our Company shall submit a copy of the announcement to be published to the stock exchange
on which the shares are listed and may publish the announcement after receiving a reply from
the stock exchange confirming that the announcement has been displayed at the stock
exchange. The period of displaying the announcement at the stock exchange is 90 days. If the
registered shareholders of the related shares do not approve the application for reissue of new
share certificates, our Company shall mail the copy of the announcement to be repeatedly
published to the Shareholders;
(v) in the event that nobody raises any objection to the reissue of new share certificates to our
Company, upon expiration of the 90-day display period of the announcement specified in (iii)
and (iv) above, the new share certificates may be reissued according to the application made
by the applicant;
(vi) when re-issuing new share certificates according to the Articles of Association, our Company
shall immediately cancel the original share certificates and register the cancelation and
replacement issue on the register of shareholders;
(vii) all expenses incurred by our Company from the cancelation of the original share certificates
and replacement issue of the new share certificates shall be borne by the applicant. Before the
applicant has provided reasonable security, our Company shall have the right to refuse to take
any action.
Shareholders
A shareholder shall enjoy rights and assume obligations according to the class and number of shares
held by that shareholder. Shareholders holding the same class of shares shall enjoy the same rights and
assume the same obligations.
Holders of the ordinary shares of the Company shall be entitled to the following rights:
 to receive dividends and other distributions in proportion to the shares they hold;
 to file a petition according to laws, to convene, hold and attend the Shareholders’ general
meetings either in person or by proxy and exercise their corresponding voting right;
 to supervise, present suggestions on or make inquiries about the business operations of the
Company;
 to transfer, donate or pledge their shares in accordance with laws, administrative regulations,
the relevant regulations of the securities regulatory authority where the Company’s Shares are
listed and the Articles of Association;
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 to obtain relevant information in accordance with the Articles of Association, including:
1. receiving a copy of the Articles of Association after payment of cost;
2. being entitled to inspect for free and copy after payment of reasonable fee:
(1) all parts of the register of Shareholders;
(2) personal data of Directors, Supervisors, General Manager and other senior
management of the Company, including:
(a) present and former name and alias;
(b) principal address (domicile);
(c) nationality;
(d) primary and all other part-time occupations and duties;
(e) identification documents and the number thereof;
(3) report of the status of the Company’s issued share capital;
(4) report of the total par value, quantity, the highest and lowest price of each class of
shares repurchased by the Company from the last fiscal year and the total amount
paid by the Company for this purpose;
(5) the special resolution of the general meeting of the Company;
(6) the latest audited financial statements of the Company, and the reports of the Board,
auditors and the Board of Supervisors;
(7) a copy of the latest annual report filed with the Administration of Industry and
Commerce or other competent authorities;
(8) counterfoils of corporate bonds, resolutions of the Board meetings, resolutions of
meetings of the Board of Supervisors; and
(9) minutes of the general meeting of shareholders.
The Company shall publish the documents in items (3) to (7) of the aforementioned point
2 and other applicable documents on the websites of the Hong Kong Stock Exchange and
the company in accordance with the requirements of the Hong Kong Listing Rules. The
Company shall keep items (1) and (9) of the above-mentioned point 2 at the designated
address in Hong Kong for free inspection by the public and shareholders (the minutes of
the general meeting of shareholders are only available for shareholders to inspect and
copy after paying a reasonable fee).
The Hong Kong branch register of shareholders must be open to inspection by
shareholders, but a company may be allowed to suspend the register of shareholders on
terms equivalent to section 632 of the Companies Ordinance (Chapter 622 of the Laws of
Hong Kong), i.e. a company may, by notice, close its register of shareholders or that part
of the register relating to shareholders holding any class of shares for one or more
periods, provided that the aggregate period of closure shall not exceed 30 days in total in
any one year.
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Subject to compliance with applicable laws, administrative regulations and securities
regulatory rules of the place where the company’s shares are listed, the Company may
refuse to provide if the content to be consulted and copied involves the Company’s
business secrets and inside information or the personal privacy of relevant personnel.
 to participate in the distribution of the remaining properties of the Company in proportion to
their shareholdings in the event of the termination or liquidation of the Company;
 to request the Company to purchase their Shares for the Shareholders who object to the
Company’s resolution on merger or division made by the Shareholders’ general meetings;
 to enjoy other rights stipulated by laws, administrative regulations, regulatory documents, the
securities regulatory authority of the place where the company’s shares are listed, the Hong
Kong Listing Rules and the Articles of Association.
In the event that any resolution of the Shareholders’ general meeting or resolution of the Board of
Directors violates laws or administrative regulations, the Shareholder is entitled to request the People’s
Court to deem it as invalid. In the event that the convening procedure or voting method of the
Shareholders’ general meeting or meeting of the Board of Directors violates any of laws, administrative
regulations or the Articles of Association, or any resolution of which violates the Articles of Association,
the Shareholder is entitled to request the People’s Court to overturn the resolution within 60 days upon
the resolution was adopted.
Where the Company incurs loss as a result of violation of the laws, administrative regulations or the
Articles of Association by Directors and senior management in the course of performing their duties, the
Shareholders individually or jointly holding 1% or more of the Shares of the Company for over 180
consecutive days shall have the rights to request in writing to the Board of Supervisors to initiate legal
proceedings in the People’s Court. Where the Company incurs loss as a result of violation of the laws,
administrative regulations or the Articles of Association by the Supervisors in the course of performing
their duties, the Shareholders individually or jointly holding 1% or more of the Shares of the Company
for over 180 consecutive days shall have the rights to request in writing to the Board to initiate legal
proceedings in the People’s Court.
In the event that the Board of Supervisors or the Board of Directors refuse to file an action upon
receipt of the Shareholders’ written request specified in the preceding paragraph, or fail to file an action
within 30 days upon receipt thereof, or in the event that the failure to immediately file an action in an
emergency case will cause irreparable damage to the interests of our Company, the Shareholder(s)
specified in the preceding paragraph may, in their own name, directly file an action to the People’s Court
for the interest of our Company.
In the event of any other person infringes upon the legitimate rights and interests of our Company
and causes losses thereto, the Shareholder(s) specified in the Articles of Association may file an action
with the competent People’s Court pursuant to the provisions of the preceding two paragraphs.
In the event of a Director or senior management violates laws, administrative regulations or our
Company’s Articles of Association, thereby damaging the interests of the Shareholder(s), the
Shareholder(s) may file an action with the competent People’s Court.
Shareholder(s) of the Company shall assume the following obligations:
 to abide by the laws, administrative regulations and the Articles of Association;
 to pay subscription monies according to the number of shares subscribed and the method of
subscription;
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 to be liable to the company to the extent of the shares they hold;
 not to withdraw the shares after the Company’s approval and registration unless required by the
laws, administrative regulations and departmental rules;
 not to abuse their shareholders’ rights to jeopardize the interests of the Company or other
shareholders, and not to abuse the status of the Company as an independent legal entity and the
limited liability of shareholders to jeopardize the interests of any creditors of the Company;
 other obligations imposed by the laws, administrative regulations, the Hong Kong Listing Rules
and the Articles of Association.
Where any shareholder of the Company abuses the shareholders’ rights and incur losses to the
Company or other shareholders, such shareholder shall be liable for the damages. Where shareholders of
the Company abuse the Company’s status as an independent legal entity and the limited liability of
shareholders for the purposes of evading debts, thereby materially impairing the interests of the creditors
of the Company, such shareholders shall be jointly and severally liable for the debts owed by the Company.
Restrictions on Rights of Controlling Shareholders
The controlling shareholders and actual controllers of the Company shall not take advantage of their
associated relationship to damage the Company’s interests. Any loss caused to the Company as a result of
such violation shall be compensated.
The controlling shareholders and actual controllers of the Company are obliged to act in good faith
to the Company and the general public company shareholders. The controlling shareholders shall exercise
their rights as capital contributors in strict accordance with the law and shall not impair the lawful rights
and interests of the Company or of the general public company shareholders by means of the distribution
of profits, reorganization of assets, external investment, misappropriation of assets, loan, or guaranty, nor
shall he make use of his controlling position to impair the interests of the Company or of the general public
company shareholders.
Notice of the Shareholders’ General Meeting
A Shareholders’ general meeting shall either be an annual general meeting or an extraordinary
general meeting. The annual Shareholders’ general meeting shall be convened once a year and be held
within six months of the end of the previous fiscal year.
The Company shall convene an extraordinary general meeting within two months from the
occurrence of any of the following circumstances:
(i) when the number of Directors is less than the statutory minimum number stipulated in the
Company Law or two-thirds of the number specified in the Articles of Association;
(ii) when the unrecovered losses of the Company amount to one-third of the total paid-in share
capital;
(iii) when the Shareholders with 10% or more share certificates with voting rights issued by our
Company separately or jointly request in writing;
(iv) when the Board of Directors considers it necessary;
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(v) when it is proposed to hold by the Board of Supervisors;
(vi) any other circumstances stipulated by laws, administrative regulations, departmental rules, the
securities regulatory authority of the place where the company’s shares are listed, the Hong
Kong Listing Rules and the Articles of Association.
The convener of the general meeting shall notify the shareholders by written notice announcement
twenty-one days prior to the annual general meeting, and the extraordinary general meeting shall notify
the shareholders by written notice announcement fifteen days prior to the meeting. The notice shall be
accompanied by the form of proxy, which shall provide the option of voting for and against all resolutions
to be proposed at the meeting. In determining the commencement date and the period, the Company shall
not include the date convening the meeting.
The notice of a Shareholders’ general meeting shall include the following details:
(i) the time, venue and duration of the meeting;
(ii) the matters and proposals submitted to be deliberated at the meeting;
(iii) a prominent written statement that all common shareholders (including holders of preference
shares with resumed voting rights) are entitled to attend the shareholders’ general meeting and
may appoint a proxy in writing to attend and vote at the meeting. The proxy is not required to
be a shareholder of the Company necessarily;
(iv) the date of record for determining those shareholders who are entitled to attend the general
meeting;
(v) the name and telephone number of the permanent contact person concerning meeting matters;
(vi) the time and procedure for voting through internet or other means;
(vii) any other matters stipulated by laws, administrative regulations, regulatory documents, the
securities regulatory authority of the place where the company’s shares are listed and the Hong
Kong Listing Rules .
The specific details of all proposals shall be adequately and fully disclosed in the notice and
supplementary notice of the shareholders’ general meeting. Where matters to be discussed requires
opinions of independent directors, the opinions and reasons of independent directors shall be disclosed
when the notice or supplementary notice of shareholders’ general meeting is issued.
The interval between date of registration of shareholdings and the meeting shall not be more than 7
business days. The date of registration of shareholdings cannot be changed once determined.
If the notice issued by the Company is made by way of an announcement in compliance with laws,
administrative regulations, departmental rules and regulatory rules of the place where the Company’s
securities are listed, all relevant persons (including all shareholders of unlisted shares, shareholders of
unlisted foreign shares and shareholders of overseas listed foreign shares) shall be deemed to have
received the notice upon the announcement.
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In respect of the manner in which the Company provides or sends corporate communications to H
Shareholders as required by the Hong Kong Listing Rules, subject to compliance with laws, administrative
regulations, departmental rules and regulations and the securities regulatory rules of the place where the
Company’s shares are listed and the Articles of Association, corporate communications may be provided
or sent to H Shareholders through the Company’s designated and/or the website of the Hong Kong Stock
Exchange or through electronic means.
Proxies
Any shareholder who is entitled to attend and vote at Shareholders’ general meeting has the right to
appoint one or more persons (who may not necessarily be shareholders) as his or her shareholder proxy
to attend and vote at the meeting on his or her behalf. The power of attorney issued by a shareholder to
appoint another person to attend a general meeting shall contain the following information:
(i) the name of the proxy;
(ii) whether he/she has the right to vote;
(iii) instructions to vote for, against or abstain from voting on each matter to be considered on the
agenda of the shareholders’ meeting, respectively;
(iv) the date of issuance and expiration date of the proxy;
(v) the signature (or seal) of the principal. If the principal is a shareholder of a legal entity, the seal
of the legal entity shall be affixed. If the principal is a shareholder of a partnership, the seal
of the partnership shall be affixed.
The power of attorney shall specify whether the proxy could vote at his or her own discretion if the
shareholder does not provide specific instructions.
If the power of attorney is signed by another person authorized by the appointer, the power of
attorney or other authorization documents authorized to be signed must be verified by a notary. The power
of attorney or other instrument verified by the notary must be deposited together with the power of
attorney at the domicile of the Company or other location designated at the notice convening the meeting.
A legal person shareholder should attend the meeting by its legal representatives or persons authorized by
its board of directors or other decision-making authorities. A partnership should attend the meeting by its
managing partner or the appointed representative of the managing partner or the person authorized by the
resolution of the partners’ meeting or other decision-making body. The power of attorney must be
deposited at the domicile of the Company or other location designated in the notice convening the meeting
no later than 24 hours before the meeting at which the power of attorney is put to vote is convened or 24
hours before the designated time.
Power of the Meeting and Matters to be Resolved
The Shareholders’ general meeting is the authority of the Company and shall exercise the following
powers according to the laws:
(i) to decide the Company’s operational directions and investment plans;
(ii) to elect and replace Directors and Supervisors who are not staff representatives and to
determine matters relating to the remuneration of the Directors and Supervisors;
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(iii) to consider and approve the reports of the Board;
(iv) to consider and approve the reports of the Board of Supervisors;
(v) to consider and approve the Company’s annual financial budgets and final accounts;
(vi) to consider and approve the Company’s profit distribution plan and plan for recovery of losses;
(vii) to make resolutions on increase or reduction of the Company’s registered capital;
(viii) to make resolution on the issuance of corporate bonds;
(ix) to make resolutions on the merger, demerger, dissolution, liquidation or change of corporate
form of the Company;
(x) to amend the Articles of Association;
(xi) to make resolutions on the issue of appointment and dismissal of accounting firms;
(xii) to consider and approve the guarantee issues as prescribed in the Articles of Association;
(xiii) to consider matters in which the Company’s purchase or sale of significant assets within one
year exceeds thirty percent of the company’s latest audited total assets;
(xiv) to consider and approve matters relating to the change of purpose of raised fund;
(xv) to consider the share incentive plan and employee shareholding scheme;
(xvi) to consider matters relating to the acquisition of shares of the Company that shall be considered
by the general meeting of shareholders as provided for by laws and regulations, the regulatory
rules of the place where the shares of the Company are listed and the Articles of Association;
(xvii) to consider matters of connected transactions that shall be considered by the general meeting
of shareholders as stipulated by laws and regulations, the regulatory rules of the place where
the shares of the Company are listed and the Articles of Association;
(xviii) to Consideration of other matters that shall be decided by the general meeting of shareholders
as provided by laws, administrative regulations, departmental rules and regulations or the
Articles of Association;
(xix) other matters required by the securities regulatory rules of the place where the shares of the
Company are listed, the Hong Kong Listing Rules or other applicable laws and regulations.
V oting and Resolutions of Shareholders’ General Meetings
Resolutions of a Shareholders’ general meeting shall be divided into ordinary resolutions and special
resolutions.
Ordinary resolutions shall be passed by votes representing more than half of the voting rights held
by Shareholders (including proxies thereof) attending the Shareholders’ general meeting. Special
resolutions shall be passed by votes representing not less than two-thirds of voting rights held by
Shareholders (including proxies thereof) attending the Shareholders’ general meeting.
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The following issues shall be approved by way of ordinary resolutions at a Shareholders’ general
meeting:
(i) work report of the Board of Directors and the Board of Supervisors;
(ii) plans of earnings distribution and loss make-up schemes;
(iii) appointment or dismissal of the members of the Board of Directors and the Board of
Supervisors, and their remuneration and payment methods;
(iv) annual preliminary financial budgets, final account reports of the Company;
(v) annual report of our Company;
(vi) appointment or dismissal of accounting firms by the Company;
(vii) matters other than those prescribed by law, administrative regulations, the regulatory
authorities of the place where the Company’s securities are listed, the Hong Kong Listing Rules
or these Articles of Association which shall be passed by special resolution.
The following issues shall be approved by way of special resolutions at a Shareholders’ general
meeting:
(i) increase or reduction in the share capital of the Company;
(ii) any division, split, merger, dissolution, liquidation or change in the form of the Company;
(iii) any amendment to the Company’s Articles of Association;
(iv) any purchase or sale of major assets or any provision of guarantee within any one year in an
amount in excess of 30% of the Company’s total assets as audited in the latest period;
(v) any equity incentive scheme;
(vi) any other matter to be identified by an ordinary resolution of the shareholders’ general meeting
as having a significant impact on the Company that shall be passed by a special resolution of
the shareholders’ general meeting;
(vii) other matters required by law, administrative regulations, the regulatory authority of the place
where the company’s securities are listed, the Hong Kong Listing Rules or the Articles of
Association to be passed by special resolution.
Shareholders (including their proxies) exercise voting power at the Shareholders’ general meeting
with respect to the number of voting shares represented by them, and each share has one vote. When voting
at a Shareholders’ general meeting, Shareholders (including their proxies) who are entitled to two or more
votes are not required to vote against or in favor with all of their votes.
Where material issues affecting the interests of minority investors are being considered at the
Shareholders’ general meeting, the votes by minority investors shall be counted separately. The separate
counting results shall be publicly disclosed in a timely manner.
The shares held by the Company do not have voting power, and such shares are not counted in the
total number of voting shares upon attendance at a Shareholders’ general meeting.
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When a related transaction is considered at a Shareholders’ general meeting, the related shareholders
who has a material interest in the relevant connected transaction or arrangement shall not vote, and the
voting shares represented by them shall not be counted in the total number of valid voting shares. The
announcement of the resolution made at the Shareholders’ general meeting shall adequately disclose
information relating to voting by non-related shareholders.
Other than the cumulative voting system, the Shareholders’ general meeting shall vote on all
proposals one by one. For different proposals on the same matter, voting shall be proceeded according to
the time order of these proposals. Other than special reasons such as force majeure which results in the
interruption of the meeting or makes it impossible to come to a resolution, the Shareholders’ general
meeting shall not put aside the proposals or withhold from voting.
Shareholders’ general meeting adopt vote by registered ballot, unless the chairman of the meeting
decides on the principle of good faith to allow resolutions purely related to procedures or administrative
matters to be voted by shows of hands. When voting at a Shareholders’ general meeting, Shareholders
(including their proxies) who are entitled to two or more votes are not required to vote against or in favor
with all of their votes.
When Shareholders’ general meeting is voting on any proposals, lawyers, Shareholders’
representatives and Supervisors’ representatives shall be jointly responsible for vote counting and
scrutinizing, and the voting results shall be announced in the meeting and recorded in the minutes.
DIRECTORS AND THE BOARD OF DIRECTORS
Directors
Any natural person may not serve as a director of the Company if he/she:
(i) has no civil capacity or has limited civil capacity;
(ii) has been subject to criminal penalties due to corruption, bribery, embezzlement or
misappropriation of property or sabotaging the socialist market economic order, or has been
deprived of his/her political rights due to any crime conviction, where no more than five years
have elapsed since the date of completion of the execution of such penalty or deprivation;
(iii) has served as a former director, the factory chief, or the manager of a company or enterprise
bankrupt or liquidated, and was held personally liable for the bankruptcy, and three years have
not elapsed since the date of completion of the bankruptcy or liquidation of such company or
enterprise;
(iv) has served as the legal representative of a company or enterprise whose business license was
revoked or which is ordered to close down due to any violation of law, and was held personally
liable for the revocation, and three years have not elapsed since the date of;
(v) has defaulted on a personal debt in a significant amount;
(vi) has been banned from entering the securities market by the relevant regulatory authority and
the period has not elapsed; or
(vii) is banned from doing so as prescribed by laws, administrative regulations, departmental rules,
regulatory authorities of the place where the Company’s securities are listed or the Hong Kong
Listing Rules .
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If a director is elected or appointed in violation of the provisions of the preceding paragraph, such
election, appointment or employment shall be null and void. The Company shall dismiss a director from
office if the circumstances of this Article arise during his or her term of office.
Directors shall be elected or replaced by the Shareholders’ general meetings. The General Meeting
of Shareholders may, subject to the provisions of relevant laws and administrative regulations, by ordinary
resolution remove any Director whose term of office has not expired (provided that any claim for damages
by such Director pursuant to any contract shall not be affected thereby). The term of office of a Director
shall be three years. Upon the expiration of the term of office, a Director shall be eligible to offer himself
for re-election and reappointment.
The term of office of a Director shall commence from the date on which the said Director assumes
office to the expiry of the current session of the Board. If the term of office of a Director expires but
re-election is not made correspondingly on a timely basis, resulting in less than a quorum of the Board of
Directors, the original director shall still perform his or her duties as a director in accordance with the
laws, administrative regulations, departmental rules and regulations and the Articles of Association until
the re-elected director assumes office.
A Director shall comply with the laws, administrative regulations, the regulatory rules of the place
where the Company’s securities are listed and the Articles of Association and has the following fiduciary
obligations to the Company:
(i) not to exploit his/her position to accept bribes or to obtain other illegal income, and not to
expropriate the Company’s property;
(ii) not to misappropriate the Company’s funds;
(iii) not to open any account in his own name or in other’s own name for the deposit of the
Company’s assets or funds;
(iv) not to violate the provisions of the Articles of Association by lending the Company’s funds to
others or using the Company’s assets to provide guarantee for others without the consent of the
Shareholders’ general meeting or the Board;
(v) not to enter into a contract or transaction with the Company in violation of the provisions of
the Articles of Association or without the consent of the Shareholders’ general meeting;
(vi) not to use their position to obtain business opportunities which should be available to the
Company for themselves or others, or to run his/her own or others’ business which is similar
to the Company’s business without the consent of the Shareholders’ general meeting;
(vii) not to accept commissions in connection with the Company’s transactions;
(viii) not to disclose the secrets of the Company without consent;
(ix) not to use their connections to harm the interests of the Company;
(x) to be bound by other fiduciary obligations stipulated by the laws, administrative regulations,
departmental rules, listing rules of the stock exchange of the place where the Company’s shares
are listed and the Articles of Association.
Any gain arising from the breach of the preceding paragraphs by the Director shall belong to the
Company. He/she shall be liable for compensation for any loss of the Company arising therefrom.
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A director shall comply with the laws, administrative regulations, departmental rules, the regulatory
rules of the place where the Company’s securities are listed and the Articles of Association and shall
diligently perform the following obligations to the Company:
(i) to exercise prudently, conscientiously and diligently the rights granted by the Company to
ensure the Company’s commercial acts in compliance with the State laws, administrative
regulations, departmental rules and the requirements of economic policies of China and that its
commercial activities are within the scope stipulated in the business license;
(ii) to treat all Shareholders equally;
(iii) to understand the business operation and management of the Company in a timely manner;
(iv) to sign written confirmation on regular reports of the Company and to ensure the integrity,
accuracy and completeness of the information disclosed by the Company;
(v) to provide relevant conditions and information to the Board of Supervisors truthfully and shall
not intervene the performance of the Board of Supervisors or Supervisors of their functions and
powers;
(vi) to perform other obligations of diligence stipulated by the laws, administrative regulations,
departmental rules, the Hong Kong listing rules and the Articles of Association.
If any Director fails to attend in person or appoint other Directors as his/her representative to attend
meetings of the Board for two consecutive times, such Director shall be deemed as unable to perform his
duties, and the Board shall propose to replace such Director at the Shareholders’ general meeting.
A director may submit his/her resignation before the expiry of his/her term of office. Where a
director resigns, he/she shall submit a written resignation report to the board of directors. The board of
directors shall disclose the relevant information within two days.
When a director’s resignation becomes effective or his or her term of office expires, he or she shall
complete all procedures for transfer to the Board of Directors. His or her obligation to keep the Company’s
trade secrets confidential shall remain in effect after the end of his or her term of office until such secrets
become public information.
No Director shall act in his/her own name for the Company or the Board without authorization by
the Board or unless otherwise provided in the Article of Association. Where a Director acts in his/her own
name in a situation where a third party may reasonably believe that such director is acting for the Company
or the Board, such Director shall declare in advance his/her stance and identity.
The Board of Directors
The Company shall have a board accountable to the Shareholders’ general meeting. The Board shall
consist of nine Directors, and have a chairman. Independent non-executive Directors should account for
at least one-third of the number of the Directors of the Board, and consist of no less than three members.
The Board shall perform the following duties:
(i) to convene Shareholders’ general meetings and report to Shareholders’ general meetings;
(ii) to implement the resolutions of the Shareholders’ general meetings;
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(iii) to determine business operation plans and investment plans of the Company;
(iv) to formulate annual preliminary and final financial budgets of the Company;
(v) to formulate the profit distribution plans and plans for recovery of losses of the Company;
(vi) to formulate plans of the Company regarding increase or reduction of the registered capital,
issuance of bonds or other securities and listing;
(vii) to formulate plans for major acquisitions of our Company, the purchase of Shares of our
Company, merger, division, dissolution or change in the form of our Company;
(viii) to determine such matters as our Company’s external investment, purchase or sale of assets,
asset pledge, external guarantee, entrusting wealth management, connected transaction and
external donation within the scope authorized by the Shareholders’ general meeting and the
Articles of Association;
(ix) to decide on the setup of the Company’s internal management organization;
(x) to determine appointment or dismissal of the Company’s General Manager and secretary to the
Board of Directors and other senior management as well as determine their remuneration
matters and disciplinary matters and, based on the nominations of the General Manager, to
appoint or dismiss vice general manager, financial controller and other senior management and
to determine their remuneration, rewards and punishments;
(xi) to formulate the basic management systems of the Company;
(xii) to formulate plans for any amendments to the Articles of Association;
(xiii) to manage the disclosure of information of the Company;
(xiv) to propose at the Shareholders’ general meeting the appointment or replacement of the
accounting firm that performs audits for our Company;
(xv) to receive the work report of the General Manager of the Company and examine on the General
Manager’s work;
(xvi) formulation and implementation of the Company’s equity incentive plan;
(xvii) other duties and powers that should be exercised by the Board stipulated by the laws,
administrative regulations, departmental rules, listing rules of the stock exchange of the place
where the Company’s Shares are listed or the Articles of Association.
The above resolutions adopted by the Board of Directors, except items (vi), (vii) and (xii) which
must be approved by not less than a two-thirds vote of the Directors, may be approved by more than half
of the votes by the Directors.
The Board shall make an explanation at the Shareholders’ general meeting for the non-standard audit
opinions on the financial report of the Company issued by the certified public accountant.
The Board shall formulate the rules of procedures of the Board meeting to ensure the implementation
of resolutions of the Shareholders’ general meeting, enhance the working efficiency and ensure the
scientific decision making.
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The Board of Directors shall hold regular meetings, and regular meetings of the Board of Directors
shall be held at least four times a year, approximately once a quarter, convened by the Chairman of the
Board of Directors, with written notice to all Directors and Supervisors and, if necessary, to the General
Manager and other senior management, fourteen days prior to the meeting.
Meetings of the Board shall be held in the presence of a majority of the Directors. Except as
otherwise provided in the Articles of Association, resolutions made by the Board of Directors shall be
adopted by a majority of all Directors. V oting on resolutions of the Board shall be conducted on a
one-person-one-vote basis.
A Director who is connected to the enterprises involved in a resolution of the meeting of the Board
shall neither exercise his/her voting rights nor exercise another Director’s voting rights as a proxy. Such
meeting of the Board shall be held only when more than half of the disinterested Directors, and the
resolution of the meeting of the Board shall be approved by more than half of such disinterested Directors.
In case of less than three disinterested Directors present at the meeting, such matter shall be submitted to
the Shareholders’ general meeting for deliberation.
A Director shall attend the meeting of the Board in person. If a Director is unable to attend a meeting
of the Board, he/she may appoint another Director by a written power of attorney to attend on his/her
behalf. Such a power of attorney shall specify the name of the proxy, the matters for entrustment, the scope
of authorization and validity period, and shall be signed or sealed by the principal. A director who attends
a meeting on behalf of a director shall exercise the rights of a director within the scope of the
authorization. A director who is not present at a meeting of the Board of Directors and who does not attend
by proxy shall be deemed to have abstained from voting at such meeting.
THE GENERAL MANAGER AND OTHER SENIOR EXECUTIVES
The Company shall have one general manager, who shall be appointed or dismissed by the board of
directors. The Company has a number of senior management personnel, who are appointed or dismissed
by the Board of Directors. The general manager, deputy general manager, secretary of the board of
directors, head of finance and other management personnel other than the securities representative
appointed by the board of directors are senior management personnel of the Company.
The provisions of the Articles of Association regarding the circumstances under which a director may
not serve as a director shall also apply to the general manager and other senior management. The
provisions of the Articles of Association concerning the duties of fidelity and diligence of directors shall
also apply to the general manager and other senior management personnel.
The term of office of the general manager is three years and may be renewed upon reappointment.
The General Manager of the Company shall be responsible to the Board and exercise the following
functions and powers:
(i) to be in charge of the Company’s production operation and management, to organize the
implementation of the board’s resolutions and to report his/her work to the board of directors;
(ii) to organize the implementation of the Company’s annual operating plans and investment
programs;
(iii) to draft the plan for establishing the Company’s internal management body;
(iv) to develop the Company’s basic management system;
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(v) to develop the Company’s specific rules;
(vi) to suggests to the board of directors on the appointment or removal of any deputy manager and
the financial controller;
(vii) to appoint or dismiss officers other than those to be appointed or dismissed by the board of
directors; and
(viii) to exercises any other duties authority granted by the Articles of Association and the board of
directors.
General Manager of the Company shall attend meetings of the Board of the Directors.
The Company shall have a secretary to the board of directors, who shall be responsible for, among
others, the preparation of general meetings and board meeting, the retention of documents, the
management of shareholders’ information and the disclosure of information.
The senior executives of the Company shall faithfully perform their duties and act in the best
interests of the Company and all shareholders. Where any senior executive fails to perform his/her duties
faithfully or breaches his/her obligation of good faith, and thereby causes damage to the Company’s
interests or the shareholders of public shares, he/she shall be liable for compensation according to the law.
SUPERVISORS AND THE BOARD OF SUPERVISORS
Supervisors
The circumstances regarding disqualification for the position of director of the Articles of
Association shall also apply to supervisors. No director, general manager and any other senior executive
may concurrently serve as a supervisor.
Supervisors shall comply with laws, administrative regulations and the Articles of Association, and
shall bear the obligations of loyalty and diligence to the Company. They shall not take any bribe or other
illegal gains by taking advantage of their authority, nor shall they misappropriate company property.
The term of office of a supervisor shall be three years. Upon expiration of a supervisor’s term of
office, the supervisor may serve another term of office if re-elected. Where a new supervisor has not yet
been elected upon the expiration of a supervisor’s term of office, or the number of supervisors on the board
falls below the quorum due to the resignation of a supervisor during his/her term of office, the said
supervisor shall continue to perform his/her duties in accordance with laws, administrative regulations and
the Articles of Association before the newly elected supervisor takes his/her office.
No supervisor may take advantage of his/her connected relationships to damage the Company’s
interests and, where any loss is incurred as a result of any such violation, shall be liable for compensation.
The Board of Supervisors
The Company shall have a Board of Supervisors. The Board of Supervisors shall consist of three
supervisors, including a chairman. The chairman of the Board of Supervisors shall be elected and
dismissed by a majority of all supervisors. The board of supervisors shall be composed of shareholder
representatives and Company staff representatives. The number of staff representatives shall be no less
than one third of all supervisors.
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The Board of Supervisors shall exercises the following powers:
(i) to review the periodical reports of the Company prepared by the Board and to provide
comments in writing;
(ii) to inspect the financial position of the Company;
(iii) to supervise the performance of the Directors and senior management and to advise the
dismissal of any Directors or senior management who violate the laws, administrative
regulations, the Articles of Association or resolutions of the Shareholders’ general meetings;
(iv) to demand rectification of the Directors and senior management where their conducts are
detrimental to the interests of the Company;
(v) to propose to convene an extraordinary general meeting and to convene and preside over the
Shareholders’ general meeting if the Board fails to do so as required by the Company Law;
(vi) to submit proposals at a Shareholders’ general meeting;
(vii) to institute proceedings against directors and senior management in accordance with the
provisions of the Company Law;
(viii) to investigate if there is any abnormal condition of the Company’s operation; and if necessary,
to engage on accounting firm, law firm or other professional institution to assist in its works
at the expenses of the Company; and
(ix) other powers granted by laws, administrative regulations, departmental rules and regulations,
the listing rules of the place where the Company’s shares are listed or the Articles of
Association.
The meetings of the Supervisory Board are divided into regular meetings and ad hoc meetings.
Regular meetings of the Supervisory Board are held at least once every six months. Supervisors may
propose to convene a temporary meeting of the Supervisory Committee. Notice of regular and temporary
meetings of the Supervisory Board shall be sent to all Supervisors 10 days and 5 days in advance
respectively.
FINANCIAL AND ACCOUNTING SYSTEMS, PROFIT DISTRIBUTION AND AUDIT
Finance and Accounting Systems
The Company shall establish its financial and accounting systems in accordance with the laws,
administrative regulations and the requirements of the relevant governmental authorities.
The Company’s accounting year is based on the calendar year system. The Company shall prepare
a financial accounting report at the end of each fiscal year, which shall be audited by an accounting firm
in accordance with the law. The financial accounting report shall be prepared in accordance with the
provisions of relevant laws, administrative regulations and departmental regulations.
The Company publishes two results announcements per fiscal year, that is, within 60 days after the
end of the first six months of each fiscal year, and within three months after the end of the fiscal year.
Where the above announcement is otherwise provided by relevant laws, administrative regulations, the
securities regulatory authority of the place where the company’s shares are listed and the Hong Kong Stock
Exchange, those provisions shall prevail.
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The Company shall not keep accounts other than those required by laws. The assets of the Company
shall not be kept under the name of any individuals.
Reserves
In the distribution of the profit after tax of the year, 10% of the profit shall be contributed to statutory
reserve of the Company. When the aggregate statutory reserve of the Company has reached 50% or more
of the registered capital, the Company may cease to make further contribution.
Where the statutory reserve is insufficient to recover the losses for the previous year, the losses shall
be made up by the profits of that year before contributing to the statutory reserves as stipulated above.
Subject to the resolution of Shareholders’ general meeting, the Company may also appropriate funds
to discretionary surplus reserve from profit after tax upon the appropriate of fund to statutory reserve.
The Company may distribute profits after tax in accordance with the proportion of shareholdings
after making up for losses and making allocations to reserves, except where the distribution is not
proportionate according to laws and regulations, the regulatory rules of the place where the company’s
securities are listed, the Hong Kong Listing Rules or the Articles of Association.
If the Shareholders’ general meeting violates the above provisions and profits are distributed to the
Shareholders before the Company making up for losses and making allocations to the statutory reserve,
the profits distributed in violation of the provisions shall be returned to our Company by such
Shareholders.
The shares held by our Company itself shall not be subject to profit distribution.
Our Company’s reserves must be used only for offsetting losses of our Company, expanding the scale
of business and operations or for conversion into capital to increase our capital, but the capital reserve
shall not be used to offset losses of our Company.
Where the statutory reserve converses into capital, the remaining statutory reserve shall not be less
than 25% of the registered capital of our Company before such conversion.
Dividends and Other Methods of Profit Distribution
The Company may distribute dividends in cash, in Shares or in combination of cash and Shares.
The payment of cash dividends and other payments by the Company to the shareholders of domestic
shares shall be paid in Renminbi. The payment of cash dividends and other payments by the Company to
shareholders of unlisted foreign shares shall be denominated and declared in RMB and paid in foreign
currencies. Cash dividends and other payments by the Company to shareholders of overseas listed shares
are denominated and declared in RMB and paid in Hong Kong dollars. The foreign currency required for
the payment of cash dividends and other payments by the Company to shareholders of overseas listed
shares shall be handled in accordance with the relevant national regulations on foreign exchange
management.
Internal Audits
The Company shall adopt an internal audit system and designate auditors to supervise the internal
audits of incomes and expenses as well as the business activities of the Company.
APPENDIX III SUMMARY OF ARTICLES OF ASSOCIATION OF THE COMPANY
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The internal audit system of the Company and the duties of auditors shall come into effect upon the
approval of the Board of Directors. The person in charge of audits shall be accountable to and report to
the Board of Directors.
Appointment of Accounting Firm
The Company shall engage an accounting firm that meets the requirements of laws and regulations
and the regulatory rules of the place where the Company’s securities are listed and has a good reputation
to conduct the audit of accounting statements, verification of net assets and other related consulting
services for a period of one year, which may be renewed.
The hiring, dismissal or non-renewal of the accounting firm by the Company must be decided by the
general meeting of shareholders. The remuneration of an accounting firm shall be determined by the
Shareholders’ general meeting.
A prior 20 days in advance notice shall be given to the accounting firm if the Company decides to
remove such accounting firm or not to renew the appointment. The accounting firm shall be entitled to
make representations when the resolution regarding the removal of the accounting firm is voted at the
Shareholders’ general meeting.
If the position of an appointed accounting firm is vacant, the Board of Directors may appoint an
accounting firm and determine its remuneration before the start of Shareholders’ general meeting,
provided that such appointment shall be confirmed by the next Shareholders’ general meeting. However,
if during the vacant period, our Company has other incumbent accounting firm, such accounting firm may
still perform.
If the accounting firm resigns, it shall explain to the shareholders’ meeting whether the Company has
any improper circumstances.
MERGERS, DIVISIONS, CAPITAL INCREASES AND REDUCTIONS, DISSOLUTIONS AND
LIQUIDATIONS
Mergers, Divisions, Capital Increases and Reductions
Companies may be merged by way of absorption or by consolidation. In a merger of companies, all
parties to the merger shall conclude a merger agreement and prepare their respective balance sheets and
checklists of assets. The companies shall, within ten days of adopting the merger resolution, notify their
creditors and make an announcement within 30 days. The creditors may, within 30 days of the receipt of
the notice or within 45 days as of the issuance of the announcement if they do not receive the notice,
require the Company to pay off debts or provide corresponding security.
Where a company is divided, its assets shall be divided accordingly. Where a company is divided,
a balance sheet and a checklist of assets shall be prepared. The Company shall notify the creditors within
ten days of the date when the division resolution is made and make an announcement within 30 days.
Where a Company needs to reduce its registered capital, a balance sheet and a checklist of assets
must be prepared. The Company shall notify its creditors within ten days of making the resolution to
reduce its registered capital and shall make an announcement within 30 days. The creditors shall, within
thirty days of the receipt of the notice or within 45 days of the issuance of the announcement if they do
not receive the notice, require the Company to pay off debts or to provide corresponding security.
APPENDIX III SUMMARY OF ARTICLES OF ASSOCIATION OF THE COMPANY
– III-22 –


--- page 455 ---
The Company’s registered capital shall not be lower than the statutory minimum level required by
law after capital reduction.
Where a Company increases or reduces its registered capital, it shall go through registration
amendments with the company registration authority in accordance with the law.
Dissolutions and Liquidations
The Company shall be dissolved for the following reasons:
(i) the expiration of the business period or other reasons for dissolution specified in the Articles
of Association;
(ii) the shareholders’ general meeting adopts a resolution to dissolve the Company;
(iii) dissolution is required due to the merger or division of the Company;
(iv) the Company’s business license is revoked, or it is ordered to close down or wind up in
accordance with the laws;
(v) where the Company gets into serious trouble in operation and management and its continuation
may cause substantial loss in Shareholders’ interests, and no solution can be found through any
other channel, Shareholders holding more than 10% of the total voting rights of the Company
may request the People’s Court to dissolve the Company.
The voluntary dissolution of the Company shall be adopted by a special resolution of the general
meeting of shareholders. If otherwise agreed by laws, regulations or regulatory rules of the place where
the Company’s securities are listed, the agreement shall be observed at the same time.
Upon the occurrence of the first situation described above, the Company may continue to exist by
amending the Articles of Association. Amendments to the Articles of Association in accordance with the
provisions of the preceding paragraph shall be approved by more than two-thirds of the voting rights held
by the shareholders attending the general meeting.
If the Company is being dissolved under the first, second, fourth or fifth circumstance described
above, a liquidation group shall be set up within 15 days from the date of the cause of dissolution occurred
to carry out the liquidation. The liquidation group consists of the personnel determined by the Directors
or by the Shareholders’ general meeting. If a liquidation group is not set up within the specified period,
the creditors may apply to the People’s Court for appointment of relevant persons to form a liquidation
group to carry out the liquidation.
The liquidation group shall perform the following duties during the liquidation:
(i) to check the assets of the Company and prepare a balance sheet and an inventory of assets;
(ii) to notify the creditors by notice or announcement;
(iii) to deal with the outstanding affairs of the Company connected with the liquidation;
(iv) to settle outstanding taxes as well as taxes arising in the course of liquidation;
(v) to settle all creditors’ rights and debts;
APPENDIX III SUMMARY OF ARTICLES OF ASSOCIATION OF THE COMPANY
– III-23 –


--- page 456 ---
(vi) to dispose of the remaining assets of the Company after the settlement of debts;
(vii) to represent the Company in any civil proceedings.
The liquidation group shall notify the creditors within 10 days from the date of its establishment and
make public announcement within 60 days of its establishment. Creditors shall report their claims to the
liquidation group within 30 days after receipt of the notice, or within 45 days from the date of the
announcement if they do not receive the notice.
Creditors shall provide explanation for the relevant particulars and evidence of the claims upon
declaration of such claims. The liquidation group shall register the creditors’ claims. During the period for
declaration of claims the liquidation group shall not make any repayment to creditors.
After checking the assets of the Company and preparing a balance sheet and an inventory of assets,
the liquidation group shall formulate a liquidation plan for the confirmation of Shareholders’ general
meetings or the People’s Court.
The remaining assets of the Company, after payment of liquidation expenses, wages, social insurance
contribution and statutory compensation, and taxes and debts of the Company, shall be distributed to
Shareholders according to the proportion of their shareholdings.
During the liquidation period, the Company shall continue to exist but shall not carry out any
business activities not relating to liquidation. The assets of the Company shall not be distributed to
shareholders before the settlement of debts in accordance with the preceding paragraph.
If the liquidation group, after checking the assets of the Company and preparing a balance sheet and
an inventory of assets, discovers that the Company’s assets are insufficient to settle its debts, it shall
immediately apply to the People’s Court for a declaration of bankruptcy. After our Company is declared
bankrupt by ruling of the people’s court, the liquidation group shall hand over the liquidation matters to
the People’s Court.
Upon completion of liquidation, the liquidation group shall prepare a liquidation report, report it to
the general meeting of shareholders or the people’s court for confirmation, and submit it to the Company
registration authority to apply for deregistration of the Company and announce the termination of the
Company.
AMENDMENTS OF THE ARTICLES OF ASSOCIATION
In any of the following circumstances, our Company shall amend the Articles of Association:
(i) if upon amendments to the Company Law, administrative regulations, departmental rules,
regulatory documents or listing rules of the stock exchange of the place where the Company’s
Shares are listed, any terms contained in the Articles of Association become inconsistent with
the provisions abovementioned;
(ii) a change in our Company causes inconsistency with those contained in the Articles of
Association; or
(iii) a resolution being passed by the Shareholders’ general meeting to amend our Articles of
Association.
APPENDIX III SUMMARY OF ARTICLES OF ASSOCIATION OF THE COMPANY
– III-24 –


--- page 457 ---
Amending the Articles of Association shall be in accordance with the following procedures:
(i) the Board of Directors shall first adopt a resolution to amend the Articles of Association and
draw up a proposal for amending the Articles of Association;
(ii) the Board of Directors shall convene a general meeting of shareholders to vote on the proposal
to amend the Articles of Association by the general meeting;
(iii) the shareholders’ meeting adopts the amendment to the Articles of Association by special
resolution;
(iv) the Company files the amended Articles of Association with the competent market supervision
and management authorities of the Company.
Where the amendments to the Articles of Association passed by the Shareholders’ general meetings
need the examination and approval of the competent authorities, these amendments shall be submitted
hereto for approval. Where the amendment of the Articles of Association involves registration, it shall be
necessary to carry out the lawfully prescribed procedures for registration change.
APPENDIX III SUMMARY OF ARTICLES OF ASSOCIATION OF THE COMPANY
– III-25 –


--- page 458 ---
A. FURTHER INFORMATION ABOUT OUR COMPANY
1. Incorporation
The predecessor of our Company was incorporated under the laws of the PRC as a limited liability
company on October 31, 2014 and named as Xiamen Y an Palace Biological Engineering Development Co.,
Ltd. (ʮ̡). On December 23, 2020, for the purpose of our initial listing, we
were converted from a limited liability company into a joint stock limited liability company in accordance
with applicable PRC laws and regulations under the name of Xiamen Y an Palace Bioengineering Co., Ltd.
(ʮ̡). In November 2023, we were renamed as Xiamen Y an Palace Bird’s
Nest Industry Co., Ltd. (ʮ̡). Our registered address is at Unit 4, Unit 102,
No. 3, Xiangming Road, Xiamen Torch High-tech Zone (Xiang’an) Industrial Zone, Xiamen City, Fujian
Province, the PRC. A summary of our Articles is set out in “Appendix III—Summary of Articles of
Association of the Company” to this prospectus. As at the date of this prospectus, our Company’s head
office is located at 22/F Caizihui, No. 188 Qianpu Road, Siming District, Xiamen City, Fujian Province,
the PRC.
Our Company has established a principal place of business in Hong Kong at 5/F, Manulife Place, 348
Kwun Tong Road, Kowloon, Hong Kong, and was registered with the Registrar of Companies in Hong
Kong as a non-Hong Kong company under Part 16 of the Companies Ordinance on July 7, 2023.
Ms. Leung Kwan Wai, one of our joint company secretaries, has been appointed as our authorized
representatives for the acceptance of service of process and notices in Hong Kong. Her address for
acceptance of service of process is 5/F, Manulife Place, 348 Kwun Tong Road, Kowloon, Hong Kong.
The Company has applied for the Conversion of Unlisted Shares into H Shares, which involves
296,919,300 Unlisted Shares. The Conversion of Unlisted Shares into H shares has been registered with
the CSRC on September 25, 2023 and is still subject to approval by the Stock Exchange.
As the Company was incorporated in the PRC, its operations are subject to the relevant laws and
regulations of the PRC. A summary of the Articles of Association and the relevant aspects of laws and
regulations of the PRC is set out in Appendix III and “Regulatory Overview” section, respectively, to this
prospectus.
2. Changes in Share Capital of Our Company
The following sets forth changes in our share capital within two years immediately preceding the
date of this document.
(1) On June 21, 2021, the registered capital of our Company was increased from RMB84.98 million
to RMB86.70 million by way of capital injection.
(2) As approved by our Shareholders’ general meeting on May 25, 2023, immediately upon the
Listing, one Share of RMB1 will each subdivide into five Shares of RMB0.2 each. After the Share
Subdivision, the number of our issued Shares was 433,500,000.
Upon completion of the Global Offering and Conversion of Unlisted Shares into H Shares, the
registered share capital of our Company will increase to (i) RMB93,100,000, comprising 328,919,300 H
Shares and 136,580,700 Unlisted Shares, assuming the Over-Allotment Option is not exercised; and (ii)
RMB94,060,000 comprising 333,719,300 H shares and 136,580,700 Unlisted Shares, assuming the
Over-Allotment Option is exercised.
Save as disclosed above and in “—4. Resolutions of Our Shareholders in Relation to the Global
Offering” herein, there has been no alteration in our share capital and no redemption, repurchase or sale
of any of our share capital since our incorporation.
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-1 –


--- page 459 ---
3. Changes in the Share Capital of Our Subsidiary
A summary of the corporate information and the particulars of our principal subsidiaries are set out
in Note 1 to the Accountant’s Report as set out in Appendix I to this prospectus.
The following sets out the changes in the share capital of our subsidiaries within the two years
immediately preceding the date of this prospectus:
(a) Beijing Shengzhiyan Trading Co., Ltd. (ʮ̡)
On January 20, 2022, Beijing Shengzhiyan Trading Co., Ltd. was incorporated with an
authorized share capital of RMB500,000.
(b) Beijing Yixin Trading Co., Ltd. (ʮ̡)
On August 16, 2022, Beijing Yixin Trading Co., Ltd. was incorporated with an authorized share
capital of RMB5,000,000.
On October 11, 2022, the share capital of Beijing Yixin Trading Co., Ltd. was decreased from
RMB5,000,000 to RMB500,000.
(c) Changchun Jinyange Trading Co., Ltd. (ʮ̡)
On March 9, 2022, Changchun Jinyange Trading Co., Ltd. was incorporated with an authorized
share capital of RMB300,000.
(d) Taiyuan Mingyan Trading Co., Ltd. (ʮ̡)
On August 25, 2022, Taiyuan Mingyan Trading Co., Ltd. was incorporated with an authorized
share capital of RMB1,000,000.
(e) Harbin Zunyan Trading Co., Ltd. (ʮ̡)
On April 23, 2023, Harbin Zunyan Trading Co., Ltd. was incorporated with an authorized share
capital of RMB500,000.
(f) Changchun Yuyanfu Trading Co., Ltd. (ʮ̡)
On April 12, 2023, Changchun Y uyanfu Trading Co., Ltd. was incorporated with an authorized
share capital of RMB300,000.
(g) Taiyuan Shengyan Trading Co., Ltd. (ʮ̡)
On October 20, 2023, Taiyuan Shengyan Trading Co., Ltd. was incorporated with an authorized
share capital of RMB1,000,000.
(h) Xiamen Yan Palace Silon Biotechnology Co., Ltd. (ʮ̡)
On October 26, 2023, Xiamen Y an Palace Silon Biotechnology Co., Ltd. was incorporated with
an authorized share capital of RMB100,000,000.
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-2 –


--- page 460 ---
Save as disclosed above, there has been no alteration in the share capital of any of the principal
operating entities of the Company within the two years immediately preceding the date of this prospectus.
4. Resolutions of Our Shareholders in Relation to the Global Offering
At the extraordinary general meeting of the Shareholders held on May 25, 2023, the following
resolutions, among other things, were duly passed:
(a) subject to the relevant regulatory approval and registration, the sub-division of the Shares with
nominal value of RMB1.0 each on the basis of 1:5, after which, the nominal value of the Shares
will be RMB0.2 each and the number of Shares will be 433,500,000;
(b) the issue by the Company of H shares with a nominal value of RMB0.2 each and such H Shares
be listed on the Stock Exchange;
(c) the number of H Shares to be issued shall be up to 25% of the number of total issued Shares
upon the completion of the Global Offering, assuming no exercise of the Over-allotment
Option, and the grant of the Over-allotment Option in respect of no more than 15% of the
number of H Shares issued pursuant to the Global Offering;
(d) subject to the filing with CSRC is completed, upon completion of the Global Offering,
296,919,300 Unlisted Shares will be converted into H Shares on a one-for-one basis;
(e) authorization of the Board or its authorized individual to handle all matters relating to, among
other things, the Global Offering, the issue and the Listing; and
(f) subject to the completion of the Global Offering, the conditional adoption of the revised
Articles of Association, which shall become effective on the Listing Date; and the authorization
of the Board to amend the Articles of Association in accordance with relevant laws and
regulations and upon the request from the Stock Exchange and relevant PRC regulatory
authorities.
B. FURTHER INFORMATION ABOUT OUR BUSINESS
1. Summary of Material Contracts
The following contracts (not being contracts entered into in the ordinary course of business) have been
entered into by us within the two years preceding the date of this prospectus and are or may be material:
(a) the cornerstone investment agreement dated November 23, 2023 entered into among our
Company, PT. Anugerah Citra Walet Indonesia, China International Capital Corporation Hong
Kong Securities Limited, GF Capital (Hong Kong) Limited and GF Securities (Hong Kong)
Brokerage Limited, details of which are set out in the section headed “Cornerstone Investors”
in this prospectus;
(b) the cornerstone investment agreement dated November 27, 2023 entered into among our
Company, PT Niaga Cakrawala Sukses, China International Capital Corporation Hong Kong
Securities Limited, GF Capital (Hong Kong) Limited and GF Securities (Hong Kong)
Brokerage Limited, details of which are set out in the section headed “Cornerstone Investors”
in this prospectus;
(c) the cornerstone investment agreement dated November 26, 2023 entered into among our
Company, PT Esta Indonesia, China International Capital Corporation Hong Kong Securities
Limited, GF Capital (Hong Kong) Limited and GF Securities (Hong Kong) Brokerage Limited,
details of which are set out in the section headed “Cornerstone Investors” in this prospectus;
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-3 –


--- page 461 ---
(d) the cornerstone investment agreement dated November 28, 2023 entered into among our
Company, V alue Partners Hong Kong Limited, China International Capital Corporation Hong
Kong Securities Limited, GF Capital (Hong Kong) Limited and GF Securities (Hong Kong)
Brokerage Limited, details of which are set out in the section headed “Cornerstone Investors”
in this prospectus;
(e) the cornerstone investment agreement dated November 28, 2023 entered into among our
Company, V alue Partners Limited, China International Capital Corporation Hong Kong
Securities Limited, GF Capital (Hong Kong) Limited and GF Securities (Hong Kong)
Brokerage Limited, details of which are set out in the section headed “Cornerstone Investors”
in this prospectus;
(f) the cornerstone investment agreement dated November 27, 2023 entered into among our
Company, WU Chen ( юೠ), China International Capital Corporation Hong Kong Securities
Limited, GF Capital (Hong Kong) Limited, GF Securities (Hong Kong) Brokerage Limited and
V aluable Capital Limited (ʮ̡), details of which are set out in the section
headed “Cornerstone Investors” in this prospectus;
(g) the cornerstone investment agreement dated November 27, 2023 entered into among our
Company, WONG Sing Kwong Cyrus ( රϓΈ), China International Capital Corporation Hong
Kong Securities Limited, GF Capital (Hong Kong) Limited and GF Securities (Hong Kong)
Brokerage Limited, details of which are set out in the section headed “Cornerstone Investors”
in this prospectus; and
(h) the underwriting agreement dated November 29, 2023 relating to the Hong Kong Public Offering
entered into by our Company, China International Capital Corporation Hong Kong Securities
Limited, GF Capital (Hong Kong) Limited, GF Securities (Hong Kong) Brokerage Limited, Hong
Kong Underwriters, HUANG Jian, ZHENG Wenbin, LI Y ouquan, XUE Fengying, Xiamen
Shuangdanma Industrial Development Co., Ltd. (ʮ̡) and Xiamen
Jinyan Tengfei Equity Investment Partnership (Limited Partnership) (ᛆҳ༟Υ
ྫΆุ(Υྫ)), as further described in “Underwriting—Underwriting Arrangements and
Expenses—Hong Kong Public Offering”.
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-4 –


--- page 462 ---
2. Intellectual Property Rights of Our Group
(a) Trademarks
(i) Registered Trademarks
As of the Latest Practicable Date, we had registered the following trademarks which we
consider to be or may be material to our business:
No. Trademark
Place of
Registration
Registration
No.
Registration
Owner Class Expiry Date
1
 PRC 60924741 The Company 30 2032.05.13
2
 PRC 59740377 The Company 29 2032.06.27
3
 PRC 58995800 The Company 30 2032.03.06
4
 PRC 58276334 The Company 29 2032.02.27
5
 PRC 58276322 The Company 30 2032.03.06
6
 PRC 53280763 The Company 30 2031.12.20
7
 PRC 38314709 The Company 30 2030.03.27
8
 PRC 38292869 The Company 30 2030.01.13
9
 PRC 38121422 The Company 3 2030.02.27
10
 PRC 38121404 The Company 29 2030.02.06
11
 PRC 38119941 The Company 32 2031.03.06
12
 PRC 38119897 The Company 30 2031.06.06
13
 PRC 38118834 The Company 32 2030.02.06
14
 PRC 38117080 The Company 3 2030.04.20
15
 PRC 38108364 The Company 32 2030.04.20
16
 PRC 38107129 The Company 29 2031.04.27
17
 PRC 38107117 The Company 29 2031.03.06
18
 PRC 38105458 The Company 30 2030.02.20
19
 PRC 38099866 The Company 30 2030.06.20
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-5 –


--- page 463 ---
No. Trademark
Place of
Registration
Registration
No.
Registration
Owner Class Expiry Date
20
 PRC 35388910 The Company 3 2029.10.20
21
 PRC 34218697 The Company 30 2029.06.20
22
 PRC 34218543 The Company 29 2029.09.06
23
 PRC 26465917 The Company 29 2029.01.20
24
 PRC 26465890 The Company 30 2028.12.06
25
 PRC 26463057 The Company 30 2029.01.20
26
 PRC 26457735 The Company 29 2028.10.06
27
 PRC 20728783 The Company 32 2027.09.13
28
 PRC 20728677 The Company 32 2027.09.13
29
 PRC 20381266 The Company 32 2027.08.06
30
 PRC 19219707 The Company 3 2027.04.13
31
 PRC 19219574 The Company 3 2027.06.20
32
 PRC 17869893 The Company 32 2026.12.27
33
 PRC 17869743 The Company 32 2026.12.27
34
 PRC 16738916 The Company 30 2026.06.06
35
 PRC 16738819 The Company 29 2026.06.06
36
 PRC 16738775 The Company 29 2026.06.06
37
 PRC 16285420 The Company 32 2026.04.20
38
 PRC 14676945 The Company 29 2025.06.20
39
 PRC 14676927 The Company 29 2025.06.20
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-6 –


--- page 464 ---
No. Trademark
Place of
Registration
Registration
No.
Registration
Owner Class Expiry Date
40
 PRC 14676912 The Company 30 2025.06.20
41
 PRC 14676896 The Company 30 2025.06.20
42
 PRC 14676876 The Company 30 2025.06.20
43
 PRC 14676765 The Company 29 2025.06.20
44
 PRC 11241617 The Company 30 2033.12.13
45
 PRC 11241517 The Company 29 2033.12.13
46
 PRC 5554880 The Company 3 2029.10.20
47
 PRC 5164671 The Company 32 2029.03.20
48
 PRC 4678286 The Company 29 2028.03.06
49
 PRC 3311492 The Company 30 2033.12.20
50
 PRC 62770652 The Company 3 2032.08.13
51
 Hong Kong 303151782 The Company 29 and
30
2024.09.28
52
 Hong Kong 303151647 The Company 29 and
30
2024.09.28
53
 Hong Kong 303151764 The Company 29, 30
and 35
2024.09.28
(ii) Trademark under application
As of the Latest Practicable Date, we had not applied for the registration of the trademark
which we consider to be or maybe material to our business.
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-7 –


--- page 465 ---
(b) Patents
Registered patents
As of the Latest Practicable Date, we were the registered owner of and had the right to
use the following patents which we consider to be or may be material to our business:
No. Patent Patentee
Place of
Registration Patent Number
Application
Date
Expiry
Date
1 A kind of production
method of instant stewed
bird’s nest without
picking and soaking ( ɓ
͛
ج)
Y an Sinong PRC ZL201410393347.7 2014.08.12 2034.08.11
2 A kind of preparation
method of instant bird’s
nest soft can (࠮
ج)
Y an Sinong PRC ZL201410393800.4 2014.08.12 2034.08.11
3 A method for identifying
the authenticity of bird’s
nest using LC-Q-TOF
combined with statistical
analysis ( ɓ၇л͜LC-Q-
TOFᛡйዲ
ج)
Y an Sinong PRC ZL201410766745.9 2014.12.12 2034.12.12
4 Bowl (Instant Bird’s Nest
Bowl XMSN-108-2)
(ມ(ዲ၊ມ
XMSN-108-2))
Y an Sinong PRC ZL201530502373.4 2015.12.04 2030.12.03
5 A kind of sealing cover of
bowl swallow container
and the bowl swallow
container matched with
it (ɹႊ
ኜ)
Y an Sinong PRC ZL202121927944.5 2021.08.17 2031.08.16
6 Packaging bottle (original
design of fresh stewed
bird’s nest) ( ̍ༀଧ(ᒻዮ
ࠇ))
Y an Sinong PRC ZL202130553631.7 2021.08.24 2036.08.23
7 A kind of food processing
technology of packaging
container with easy tear-
off lid (ᅣႊ̍ༀ
̋ʈʈᖵ)
Y an Sinong PRC ZL202111218644.4 2021.10.20 2041.10.19
8 A continuous multi-stage
linkage supercritical
drying device ( ɓ၇ஹᚃ
৻ᐇༀ
ໄ)
Y an Sinong PRC ZL202220955597.5 2022.04.24 2032.04.23
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-8 –


--- page 466 ---
No. Patent Patentee
Place of
Registration Patent Number
Application
Date
Expiry
Date
9 A 360° all-round
microwave radio
frequency sterilization
device for fresh stewed
bird’s nest ( ɓ၇ᒻዮዲ
ٙ360°᎖
૨ഽༀໄ)
Y an Sinong PRC ZL202221008704.X 2022.04.24 2032.04.23
10 Packaging lining
(environmentally
friendly and degradable
fresh stewed bird’s nest
packaging design) ( ̍ༀ
ʫᛖ(ᒻዮ
ࠇ))
Y an Sinong PRC ZL202230613382.0 2022.09.16 2037.09.15
11 Packaging lining
(environmentally
friendly and degradable
fresh stewed bird’s nest
packaging design) ( ̍ༀ
ʫᛖ(ᒻዮ
ࠇ))
Y an Sinong PRC ZL202230613381.6 2022.09.16 2037.09.15
12 A home-style dried bird’s
nest stew process ( ɓ၇
ό৻ዲ၊ዮ೎ʈᖵ)
Y an Sinong PRC ZL202111049947.8 2021.09.08 2041.09.07
13 Processing method of
instant rock sugar bird’s
nest product (࠮
̋ʈ˙
ج)
Y an Sinong PRC ZL202111050007.0 2021.09.08 2041.09.07
14 Bird’s nest automation
weighing process ( ɓ၇
ዲ၊Іਗʷ၈ඎʈᖵ)
Y an Sinong PRC ZL202110227265.5 2021.03.01 2041.02.28
15 Instant bird’s nest powder
for brewing and its
preparation method ( ɓ
ዲ၊४ʿՉ
ج)
Y an Sinong PRC ZL202010911895.X 2020.09.02 2040.09.01
16 High sialic acid instant
bird’s nest product and
its sterilization and
preparation method ( ɓ
ۜ
ج)
Y an Sinong PRC ZL202010344982.1 2020.04.27 2040.04.26
17 Application of bird’s nest
in the preparation of
drugs for the treatment
of ulcerative colitis ( ዲ
ഐ໑
Ꮠ͜)
Y an Sinong PRC ZL202110362817.3 2021.04.02 2041.04.01
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-9 –


--- page 467 ---
Pending Patents
As of the Latest Practicable Date, we had applied for the registration of the following
patents which we consider to be or may be material to our business:
No. Patent Title Applicant
Place of
Registration Applicant Number
Application
Date
1 Detection model construction and
non-destructive testing method
of dried bird’s nest based on
near-infrared spectroscopy
technology (̮ΈᗅҦ
ۨ
ج)
Y an Sinong PRC CN202310142372.7 2023.02.21
2 Preparation method and
application of bird’s nest
peptide with cell repair and
high moisturizing whitening
effects (ࡌߤ
ዲ၊㹻
ʿᏐ͜)
Y an Sinong PRC CN202211398048.3 2022.11.09
3 Evaluation method for the
suitability of instant bird’s nest
storage conditions based on
SPME.GC.MS/MS (׵
SPME.GC.MS/MSዲ၊
ج)
Y an Sinong PRC CN202211149417.5 2022.09.21
4 Rapid assessment method for the
suitability of instant bird’s nest
storage conditions based on
flavor substance analysis ( ɓ၇
࠮
Ҟ஺൙П
ج)
Y an Sinong PRC CN202211307184.7 2022.10.24
5 Automatic selective device and
method for bird’s nest based
on visual recognition
technology (ൖᙂᗆй
ༀໄʿ˙
ج)
Y an Sinong PRC CN202210698456.4 2022.06.20
6 Steam jet sealing device ( ɓ၇ႋ
ɹༀໄ)
Y an Sinong PRC CN202210802925.2 2022.07.07
7 Preparation method of bird’s nest
standard material for detecting
nitrite in bird’s nest (׵
ዲ၊ᅺ
ج)
Y an Sinong and
Xiamen Customs
Technology Center
(ऎᗫҦஔʕ
ː)
PRC CN202210703504.4 2022.06.21
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-10 –


--- page 468 ---
No. Patent Title Applicant
Place of
Registration Applicant Number
Application
Date
8 Preparation method of bird’s nest
standard material for detection
(Ⴁ
ج)
Y an Sinong and
Xiamen Customs
Technology Center
(ऎᗫҦஔʕ
ː)
PRC CN202210704823.7 2022.06.21
9 Application of small molecule
bird’s nest peptide for
prevention and improvement of
skin inflammation (ཫԣe
ʃʱɿዲ၊㹻
Ꮠ͜)
Y an Sinong PRC CN202210414117.9 2022.04.20
10 Sensory quality evaluation
method for high-quality bowl-
packaged bird’s nest (ۜ
ሯ൙ᄆ˙
ج)
Y an Sinong PRC CN202210249530.4 2022.03.14
11 Supercritical drying bird’s nest
instant soluble powder and its
preparation method ( ɓ၇൴ᑗ
৻ᐇዲ၊ɹ๓४ʿՉႡ௪˙
ج)
Y an Sinong PRC CN202111368632.X 2021.11.18
12 Small molecule bird’s nest
bubble water with beauty and
nourishing effects and its
preparation method ( ɓ၇ՈϞ
ʃʱɿዲ၊ं
ج)
Y an Sinong PRC CN202111444485.X 2021.11.30
13 Bird’s nest oral quick-dissolving
film and its preparation
method ( ዲ၊ɹഢ஺๓ᇫʿՉ
ج)
Y an Sinong PRC CN202111397343.2 2021.11.23
14 Intelligent automatic soaking
device for bird’s nest ( ɓ၇ዲ
ༀໄ)
Y an Sinong PRC CN202 111174486.7 2021.10.09
15 Automatic pre-processing device
for bird’s nest and its method
(ஈଣༀໄʿ
ج)
Y an Sinong PRC CN202111078640.0 2021.09.15
16 Instant bird’s nest product
suitable for middle.aged and
elderly consumption and its
preparation method ( ɓ၇ቇΥ
ʿ
ج)
Y an Sinong PRC CN202 111142687.9 2021.09.28
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-11 –


--- page 469 ---
No. Patent Title Applicant
Place of
Registration Applicant Number
Application
Date
17 Ultrahigh performance liquid
chromatography-tandem mass
spectrometry method for
determination of amino acids
in bird’s nest (ٙ
Ѝᗅ-֛
ج)
Y an Sinong PRC CN202111222555.7 2021.10.20
18 Fresh stewed beverage order
management method ( ɓ၇ᒻዮ
ج)
The Company PRC CN202110868218.9 2021.07.30
19 Whitening active small molecule
bird’s nest peptide and its
preparation method (ͣ
ʃʱɿዲ၊㹻ʿՉႡ௪˙
ج)
Y an Sinong PRC CN202110938306.1 2021.08.16
20 Instant bird’s nest product
suitable for pregnant women
consumption and its
preparation method ( ɓ၇ቇΥ
ʿՉ
ج)
Y an Sinong PRC CN202110762816.8 2021.07.06
21 Method and application for
improving sensory quality of
instant bird’s nest product ( ɓ
ሯ
ၾᏐ͜)
Y an Sinong PRC CN202011053987.5 2020.09.29
22 Bird’s nest concentrate and its
preparation method and
application ( ɓ၇ዲ၊ዢᐵ૰ʿ
ၾᏐ͜)
Y an Sinong PRC CN202010940669.4 2020.09.09
(c) Copyrights
Registered copyrights
As of the Latest Practicable Date, we were the registered owner of and had the right to
use the following copyrights which we consider to be or may be material to our business:
No. Name
Copyright
Owner
Place of
Registration Registration No.
Date of
Registration
Date of
Publication
1 Rock Sugar Bird’s
Nest Gift Box ( ዲʘ
Ώጟዲ၊ᓿଷ)
The Company PRC Minzuo Registration-
2018-F-00066891 ( სЪ
೮ο-2018-F-00066891)
2018.09.30 2017.07.20
2 Silky and Rich Logo
(കዢᅺႦLogo)
The Company PRC Minzuo Registration-
2018-F-00083978 ( სЪ
೮ο-2018-F-00083978)
2018.11.20 2017.08.10
3 Goddess of Bird’s Nest
(ዲ၊ɾग़)
The Company PRC Guozuo Registration-
2021-F-00074666 ( ਷Ъ
೮ο-2021-F-00074666)
2021.03.31 2019.12.05
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-12 –


--- page 470 ---
No. Name
Copyright
Owner
Place of
Registration Registration No.
Date of
Registration
Date of
Publication
4 Classic Bowl Bird’s
Nest (Upgraded
V ersion) ( ມዲ຾Պಛ
(و))
The Company PRC Guozuo Registration-
2021-F-00159563 ( ਷Ъ
೮ο-2021-F-00159563)
2021.07.14 2017.08.10
5 Premium Bowl Bird’s
Nest ( యԮಛມዲ)
The Company PRC Guozuo Registration-
2021-F-00249739 ( ਷Ъ
೮ο-2021-F-00249739)
2021.10.29 2014.04.30
6 Y an Bioinformatics
Platform v0.0.0.1
(̨̻
v0.0.0.1)
The Company PRC 2018SR041076 2021.03.23 2017.09.04
7 Intelligent Coding
System for
Production Line v1.0
(ପᇞ౽ঐረᇁӻ୕
v1.0)
The Company PRC 2021SR0539979 2021.04.14 2020.12.01
8 Mobile Intelligent
Cashier System v1.0
(˓ዚ୅ਗ౽ঐϗვ
ӻ୕v1.0)
The Company PRC 2021SR0960403 2021.06.29 2020.12.01
9 Fresh Stew Self-
Service Modification
Cycle Program v1.0
(ҷ඄ಂ
ʃ೻ҏv1.0)
The Company PRC 2021SR0960404 2021.06.29 2020.12.01
10 Y anzhiwu e-commerce
CRM member
management system
v1.0 (ཥਠ
CRM၍ଣӻ୕
v1.0)
The Company PRC 2023SR0385007 2023.03.23 2022.07.01
(d) Domain Names
As of the Latest Practicable Date, we have registered the following domain name that we
consider to be or may be material to our business:
No. Domain Name Registrant Expiry Date
1. yanzhiwu.com the Company 2024.10.20
Save as disclosed above, as of the Latest Practicable Date, there were no other trade or service
marks, patents, intellectual or industrial property rights which were material in relation to our
business.
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-13 –


--- page 471 ---
C. FURTHER INFORMATION ABOUT OUR DIRECTORS, SUPERVISORS AND
SUBSTANTIAL SHAREHOLDERS
1. Particulars of Directors’ and Supervisors’ Service Contracts and Letters of Appointment
(a) Executive Directors
Each of Mr. Huang, Mr. Zheng, Mr. Li and Huang Danyan, being our executive Directors, has
entered into a service contract with our Company on November 28, 2023. The service contracts may
be renewed in accordance with the Articles and the applicable laws, rules and regulations.
(b) Non-executive Director and Independent non-executive Directors
Each of Liu Zhen and Wang Y along, being our non-executive Directors, Xiao Wei, Chen Aihua
and Lam Yiu Por, being our independent non-executive Directors, has entered into a letter of
appointment with our Company on November 28, 2023. The letters of appointment may be renewed
in accordance with the Articles and the applicable laws, rules and regulations.
(c) Supervisors
Each of Zhang Ning, Zheng Feng and Wei Wei, being our Supervisors, has entered into a
service contract with our Company on November 28, 2023. The service contracts may be renewed
in accordance with the Articles and the applicable laws, rules and regulations.
2. Remuneration of Directors and Supervisors
The aggregate remuneration (including fees, salaries, contribution to pension schemes, housing
allowances, other allowances and benefits-in-kind and discretionary bonuses) paid to our Directors and
Supervisors for the three years ended December 31, 2020, 2021, 2022 and the five months ended May 31,
2023, were approximately RMB10.1 million, RMB10.7 million, RMB11.8 million and RMB4.9 million,
respectively.
Based on the arrangements in force as of the Latest Practicable Date, it is estimated that the total
remuneration paid to the Directors and Supervisors for the year ending December 31, 2023 will be
approximately RMB13.0 million.
During the Track Record Period, no remuneration was paid by us to, or receivable by, our Directors,
Supervisors or the five highest paid individuals as an inducement to join or upon joining our Company.
No compensation was paid by us to, or receivable by, our Directors, former Directors, Supervisors, former
Supervisors or the five highest-paid individuals for each of the Track Record Period for the loss of any
office in connection with the management of the affairs of any members of our Group. Furthermore, none
of the Directors or Supervisors had waived agreed to waive any emoluments during the same periods.
Save as disclosed above, no other payments have been made or are payable in respect of the three
years ended December 31, 2020, 2021 and 2022 and the five months ended May 31, 2023, by any member
of our Group to any of our Directors.
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-14 –


--- page 472 ---
3. Disclosure of interests
Disclosure of interests of Directors, Supervisors and chief executive of our Company
Immediately following the completion of the Global Offering and the Conversion of Unlisted Shares
into H Shares (assuming the Over-allotment Option is not exercised), the interest or short position of our
Directors, Supervisors or chief executives of our Company in the Shares, underlying Shares and
debentures of our Company or its associated corporations (within the meaning of Part XV of the SFO)
which will be required to be notified to our Company and the Hong Kong Stock Exchange pursuant to
Divisions 7 and 8 of Part XV of the SFO (including interest or short positions which they were 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 entered in the register referred to therein, or which will be required, pursuant to the Model
Code for Securities Transactions by Directors of Listed Issuers as set out in Appendix 10 to the Listing
Rules, to be notified to our Company and the Hong Kong Stock Exchange, once the Shares are listed will
be as follows:
(i) Interests in our Company
Name of
Shareholder Nature of interest
Description of
Shares
Shares held immediately following the completion of
the Global Offering and Conversion of Unlisted Shares
into H Shares (assuming the Over-allotment Option is
not exercised)
Number of
Shares (1)
Percentage of
shareholding in
our Unlisted
Shares/H Shares
Percentage of
shareholding in
our total issued
share capital (7)
Mr. Huang ..... Beneficial owner Unlisted Shares — — —
H Shares 4,335,000 1.32% 0.93%
Interest held jointly with
another person (2)
Unlisted Shares 33,261,090 24.35% 7.15%
H Shares 41,886,095 12.73% 9.00%
Interest in a controlled
corporation (3)
Unlisted Shares 45,892,780 33.60% 9.86%
H Shares 45,892,780 13.95% 9.86%
Interest in a controlled
corporation (4)
Unlisted Shares — — —
H Shares 8,208,320 2.50% 1.76%
Mr. Zheng ..... Beneficial owner Unlisted Shares 16,636,520 12.18% 3.57%
H Shares 16,636,520 5.06% 3.57%
Interest held jointly with
another person (2)
Unlisted Shares 62,517,350 45.77% 13.43%
H Shares 75,060,675 22.82% 1.62%
Interest of spouse (5) Unlisted Shares — — —
H Shares 8,625,000 2.62% 1.85%
M r . L i ....... Beneficial owner Unlisted Shares 16,624,570 12.17% 3.57%
H Shares 16,624,575 5.05% 3.57%
Interest held jointly with
another person (2)
Unlisted Shares 62,529,300 45.78% 13.43%
H Shares 83,697,620 25.45% 17.98%
Liu Zhen ( ᄎቤ) . . Beneficial owner Unlisted Shares — — —
H Shares 12,020,475 3.65% 2.58%
Interest in a controlled
corporation (6)
Unlisted Shares 30,000,000 21.97% 6.44%
H Shares 30,000,000 9.12% 6.44%
Wang Y along
(ˮԭᎲ).....
Interest in a controlled
corporation (7)
Unlisted Shares — — —
H Shares 38,857,460 11.81% 8.35%
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-15 –


--- page 473 ---
(1) All interests stated are long positions.
(2) See “History, Development and Corporate Structure—Concert Party Arrangement” for more information.
(3) Xiamen Suntama is controlled by Mr. Huang as of the Latest Practicable Date. Mr. Huang is therefore deemed to be
interested in the Shares held by Xiamen Suntama under the SFO.
(4) As of the Latest Practicable Date, Mr. Huang was the sole general partner of Jinyan Tengfei LP . Mr. Huang is deemed
to be interested in the Shares in which Jinyan Tengfei LP is interested in.
(5) Ms. Xue is the spouse of Mr. Zheng. Accordingly, Mr. Zheng is deemed to be interested in the same number of Shares
of Ms. Xue is interested in for the purpose of the SFO.
(6) Xiamen Guangyao Tianxiang Investment Co., Ltd. is the sole general partner of Guangyao Tianxiang and is therefore
deemed to be interest in the Shares held by Guangyao Tianxiang LP under the SFO. LIU Zhen held approximately 80%
of the limited partnership interests of Guangyao Tianxiang LP and controls Xiamen Guangyao Tianxiang Investment.
Co., Ltd. as of the Latest Practicable Date. LIU Zhen is therefore deemed to be interested in the Shares held by
Guangyao Tianxiang LP under the SFO.
(7) W ANG Y along held approximately 45% of Beijing Y anshi Investment Management Center Limited Partnership ( ̏ԯ
ೋͩҳ༟၍ଣʕː(Υྫ)) as of the Latest Practicable Date, which is the general partner of Hongyan Investment
LP . W ANG Y along is therefore deemed to be interested in the Shares held by Hongyan Investment LP under the SFO.
(8) The number of Shares were presented based on the assumption that the Share Subdivision is completed.
Disclosure of interests of substantial shareholders
Save as disclosed in the section headed “Substantial Shareholders” in this prospectus, our Directors
are not aware of any other person who will, immediately following the completion of the Global Offering
and Conversion of Unlisted Shares into H Shares have an interest or short position in the Shares or the
underlying Shares which are required to be disclosed to our Company and the Stock Exchange under the
provisions of Division 2 and 3 of Part XV of the SFO, or directly or indirectly, be interested in 10% of
more of the nominal value of any class of share capital carrying the rights to vote in all circumstances at
the general meetings of our Company.
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-16 –


--- page 474 ---
4. Agency Fees or Commissions Received
Save as disclosed in the section headed “Underwriting” in this prospectus, no commissions,
discounts, brokerages or other special terms were granted within the two years preceding the date of this
prospectus in connection with the issue or sale of any capital or security of any member of our Group.
5. Disclaimers
(a) save as disclosed in the sections headed “Substantial Shareholders” and “—C. Further
Information about our Directors, Supervisors and Substantial Shareholders—3. Disclosure of
interests—Disclosure of interests of Directors, Supervisors and chief executive of our
Company”, none of our Directors, Supervisors or the chief executive of our Company has any
interest or short position in the Shares, underlying Shares or debentures of our Company or any
of its associated corporation (within the meaning of the SFO) which will have to be notified
to our Company and the Hong Kong Stock Exchange pursuant to Divisions 7 and 8 of Part XV
of the SFO or which will be required, pursuant to section 352 of the SFO, to be entered in the
register referred to therein, or which will be required to be notified to our Company and the
Hong Kong Stock Exchange pursuant to the Model Code for Securities Transactions by
Directors of Listed Issuers once the H Shares are listed;
(b) none of our Directors, Supervisors or any of the experts referred to under paragraph headed “D.
Other Information—11. Qualification of Experts” in this appendix has any direct or indirect
interest in the promotion of our Company, or in any assets which have within the two years
immediately preceding the date of this prospectus been acquired or disposed of by or leased to
any member of our Group, or are proposed to be acquired or disposed of by or leased to any
member of our Group;
(c) save as disclosed in the section headed “Connected Transactions”, none of our Directors or
Supervisors is materially interested in any contract or arrangement subsisting at the date of this
prospectus which is significant in relation to the business of our Group;
(d) save as disclosed in the sections headed “Directors, Supervisors and Senior
Management—Compensation of Directors, Supervisors and Senior Management” and “—C.
Further Information about our Directors, Supervisors and Substantial
Shareholders—1. Particulars of Directors’ and Supervisors’ Service Contracts and Letters of
Appointment”, none of our Directors or Supervisors has any existing or proposed service
contracts with any member of our Group (excluding contracts expiring or determinable by the
employer within one year without payment of compensation (other than statutory
compensation));
(e) save as disclosed in the sections headed “Substantial Shareholders” and “—C. Further
Information about our Directors, Supervisors and Substantial Shareholders—3. Disclosure of
interests—Disclosure of interests of Directors, Supervisors and chief executive of our
Company”, so far as is known to our Directors, Supervisors or the chief executive of our
Company, no person (not being a Director, Supervisors or chief executive of our Company)
will, immediately following the completion of the Global Offering and Conversion of Unlisted
Shares into H Shares, have an interest or short position in the Shares or underlying Shares of
our Company which would fall to be disclosed to our Company under the provisions of
Divisions 2 and 3 of Part XV of SFO or be interested, directly or indirectly, in 10% or more
of the nominal value of any class of share capital carrying rights to vote in all circumstances
at general meetings of any member of our Group; and
(f) save as disclosed in the sections headed “Business—Our Customers—Major Customers” and
“Business—Raw Materials, Packaging Materials and Suppliers—Our Suppliers—Major
Suppliers”, none of our Directors, Supervisors or their respective close associates (as defined
under the Listing Rules) or our Shareholders who are interested in more than 5% of the issued
share capital of our Company has any interest in the five largest customers or the five largest
suppliers of our Group.
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-17 –


--- page 475 ---
6. Employee Incentive Scheme
The following is a summary of the principal terms of the employee incentive scheme (“Employee
Incentive Scheme”) approved and adopted by our Company on December 26, 2020 for the purpose of
attracting and retaining talents for our Group. Under the Employee Incentive Scheme, eligible participants
as approved by the Company may subscribe for the limited partnership interests in Jinyan Tengfei LP
(“Restricted Shares”), our employee incentive platform. As of the Latest Practicable Date, Jinyan Tengfei
LP held an aggregate of 8,208,320 Unlisted Shares (assuming the Share Subdivision is completed and the
nominal value is RMB0.20 each), representing approximately 1.89% of our total issued Shares. The
incentive Shares under the Employee Incentive Scheme are existing Shares of the Company and does not
involve the grant of options by our Company to subscribe for new Shares.
(a) Purpose
The purpose of the Employee Incentive Scheme is to attract and retain talents for our Group.
The Employee Incentive Scheme fosters shared interests between shareholders of our Company and
our management team, thereby furthering our Company’s focus on long-term development.
(b) Eligible participants
Eligible participants must be formal employee of the Company and shall be core management
personnel and technical backbones who work in key positions of the Company or its subsidiaries
with a direct or relatively material impact on the company’s operating performance and sustainable
development. Eligible participants need to meet the following criteria (1) senior management; (2)
department managers with one year working experience; or (3) department deputy managers with 10
years working experience.
(c) Scheme administration
A management committee has been authorized to act as the scheme administrator to manage the
scheme and the related shareholding platform, including but not limited to, formulating and
amending detailed implementation documents for the scheme, managing the daily operation of the
scheme and related shares, approving the exit and share transfer, determining and explaining terms
of the scheme and related matters thereunder and other work as otherwise authorized by the
Company. The management committee shall consist of eight members including one team leader who
is the chairman of the Company, three deputy team leaders who are the Company’s vice chairman,
general manager, and chairman of the board of Supervisors, and four team members who are the
Company’s chief financial officer, board secretary, human resources director and manager of the
legal department.
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-18 –


--- page 476 ---
(d) Number of Shares Subject to the Employee Incentive Scheme
A total number of 8,208,320 Shares (assuming the Share Subdivision is completed and the
nominal value is RMB0.20 each) underlying the Employee Incentive Scheme were issued to Jinyan
Tengfei LP for the purpose of the Employee Incentive Scheme, representing approximately 1.89% of
the total issued share capital of the Company immediately prior to the completion of the Global
Offering and approximately 1.76% of the total issued share capital of the Company immediately
following the completion of the Global Offering and the Conversion of Unlisted Shares into H Shares
(assuming that the Over Allotment is not exercised). As of the Latest Practicable Date, all Shares
subject to the Employee Incentive Scheme have been granted to and subscribed by 43 Participants,
and no further Shares will be granted under such scheme following the Listing. All such Unlisted
Shares will be converted into H Shares, subject to relevant regulatory approval and registration.
(e) Rights and Restrictions Attached to the Restricted Shares
The Company shall establish a limited partnership entity as an employee shareholding platform
to hold and manage the Shares under the scheme. The general partner of such entity shall be the
person representing and responsible for the management of such entity, including exercising the
voting rights attached to the Shares held by Jinyan Tengfei LP , and the limited partners shall not
participate in the management. Accordingly, the Company established Jinyan Tengfei LP as the
employee shareholding platform, the general partner of which is Mr. Huang and the limited partners
of which are grantees under the scheme.
All the grantee, shall be entitled to all the economic interests relating to their respective
Restricted Shares, except that the Restricted Shares shall be subject to certain transfer and disposal
restrictions, including: (i) the completion of a qualified listing; (ii) the expiry of the lock-up period
as required by the CSRC (where applicable); and (iii) 36 months commencing from the date of
implementation of the scheme. In addition, each grantee who is Director, Supervisor or senior
management of the Company shall retain at least 10% of the total Shares subscribed by him/her
under the scheme during his/her term of employment, to avoid short selling and control the risk.
In the event that the corresponding employment contract or consultancy agreement of the
grantee is terminated due to retirement, disability, death or other similar reasons that are considered
by the management committee as not adversely affect the Group prior to the expiry of relevant
lock-up period of the Restricted Shares or the listing, whichever is earlier, such Restricted Shares
shall be unconditionally sold to other limited partners or third parties designated by the scheme
administrator at the price calculated based on the following calculation methods, whichever is higher
and after deducting the taxes and administrative expenses accrued per share: (a) the actual grant price
+ interest calculated on the bank deposit rate for the same period; (b) the most recent and valid fair
value assessed.
In the event that the relevant grantees conduct material malfeasance, violate the lock-up
requirements, take action materially adversely affect the Group or conduct competitive business
without the approval of the Company, such Restricted Shares shall be unconditionally sold to other
limited partners or third parties designated by the scheme administrator at the price calculated based
on the following calculation methods, whichever is lower and deducting the taxes and administrative
expenses accrued per share: (a) the actual subscription price paid by such grantee; or (b) the most
recent and valid fair value assessed.
In the other events, the sales price shall be determined with reference to the principal above and
such shall not be higher than the price calculated based on the following calculation methods,
whichever is higher and deducting the taxes and administrative expenses accrued per share: (a) the
actual subscription price paid by such grantee plus interests of commercial banks in the same period;
or (b) the most recent and valid fair value assessed or the market trading price.
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-19 –


--- page 477 ---
(f) Details of the Awards granted
Below is the list of the grantees under the Employee Incentive Scheme that are entitled to the
Restricted Shares as of the Latest Practicable Date :
Name Address
Position held
in our Group Date of Grant
Number of
Shares
underlying the
Employee
Incentive
Scheme (1)(2)
Approximate percentage of
shareholding immediately
following the completion of the
Global Offering and the
Conversion of Unlisted
Shares into H Shares
Assuming the
Over-allotment
Option is not
exercised
Assuming the
Over-allotment
Option is fully
exercised
Directors, Supervisors, Senior Management and Other Connected Persons
Weng Huizhen
(ࠊ)
Room 2803, No. 188
Jiahe Road,
Siming District,
Xiamen City,
Fujian Province,
the PRC
Deputy general
manager
December 26,
2020
425,191 0.09% 0.09%
Chen Zhigao
(௓қ৷)
Room 202, No. 71,
Xiangxiu Li,
Siming District,
Xiamen City,
Fujian Province,
the PRC
Chief financial
officer
December 26,
2020
425,191 0.09% 0.09%
Huang Danyan
(රʗᜮ)
Room 104, No. 311,
Lianqian West
Road, Siming
District, Xiamen
City, Fujian
Province, the PRC
Executive
Director and
deputy
general
manager
December 26,
2020
425,191 0.09% 0.09%
Li Liangjie
(؏)
No. 124, Gukeng
Village, Jinpi
Village Committee,
Y aoshan Town,
Nanxiong City,
Guangdong
Province, the PRC
Deputy general
manager
December 26,
2020
425,191 0.09% 0.09%
Fan Qunyan
(໊ᜮ)
Room 701, No. 41,
Xiangwuliuli,
Xindian Town,
Xiang’an District,
Xiamen City,
Fujian Province,
the PRC
Deputy general
manager
December 26,
2020
425,191 0.09% 0.09%
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-20 –


--- page 478 ---
Name Address
Position held
in our Group Date of Grant
Number of
Shares
underlying the
Employee
Incentive
Scheme (1)(2)
Approximate percentage of
shareholding immediately
following the completion of the
Global Offering and the
Conversion of Unlisted
Shares into H Shares
Assuming the
Over-allotment
Option is not
exercised
Assuming the
Over-allotment
Option is fully
exercised
Wei Wei ( ᕧ③) No. 94, Houputong
Erli Huli District,
Xiamen City,
Fujian Province,
the PRC
Supervisor December 26,
2020
299,604 0.06% 0.06%
Zhang Ning
(ੵྐྵ)
No. 299, Xiang Xi
Road, Ma Xiang
Town, Xiang’an
District, Xiamen
City, Fujian
Province, the PRC
Supervisor December 26,
2020
174,837 0.04% 0.04%
Xiong Ting
(ဤణ)
Room 706, No. 18,
Meiren New
Village, Siming
District, Xiamen
City, Fujian
Province, the PRC
Board secretary
and joint
company
Secretary
December 26,
2020
174,837 0.04% 0.04%
Mr. Huang Room 1201, No.
297-1, Jiahe Road,
Siming District,
Xiamen City,
Fujian Province,
the PRC
Executive
Director and
chairman of
the Board of
Directors
December 26,
2020
3,283 0.001% 0.001%
Subtotal 2,778,516 0.60% 0.59%
Other Grantees
34 grantees 22/F, Caizihui
No. 188,
Qianpu Road,
Siming District,
Xiamen City,
Fujian Province,
the PRC
Employees December 26,
2020
5,429,804 1.17% 1.16%
Notes:
(1) For illustrating the indirect interests of grantees in our Company, the number of Shares are presented and calculated
by multiplying their respective percentage of limited partnership interests in Jinyan Tengfei LP by the total number of
Shares held by Jinyan Tengfei LP , and assuming the Share Subdivision is completed.
(2) All the Unlisted Shares held by Jinyan Tengfei LP will be converted into H Shares, subject to the relevant regulatory
approvals and registration.
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-21 –


--- page 479 ---
All the Restricted Shares granted under the Employee Incentive Scheme are subject to certain
transfer and disposal restrictions set out above. No grant of Restricted Shares under the Employee
Incentive Scheme will cause any dilution of the shareholding of our Shareholders after the Listing.
D. OTHER INFORMATION
1. Estate Duty
We have been advised that no material liability for estate duty under PRC law is likely to fall upon
the Group.
2. Litigation
During the Track Record Period and up to the Latest Practicable Date, so far as our Directors are
aware, no litigation or claim of material importance (to our Group’s financial condition or results of
operation) is pending or threatened against any member of our Group.
3. Joint Sponsors
The Joint Sponsors have made an application on our behalf to the Listing Committee of the Hong
Kong Stock Exchange for the listing of, and permission to deal in, the H Shares in issue and to be issued
as mentioned in this prospectus. All necessary arrangements have been made enabling the H Shares to be
admitted into CCASS.
The Joint Sponsors satisfy the independence criteria applicable to sponsors as set out in Rule 3A.07
of the Listing Rules. The sponsor fee payable to the Joint Sponsors in connection with the Listing payable
by our Company is US$1.05 million in aggregate.
4. Compliance Advisor
Our Company has appointed Ping An of China Capital (Hong Kong) Company Limited as our
compliance advisor in compliance with Rule 3A.19 of the Listing Rules.
5. Preliminary Expenses
As of the Latest Practicable Date, our Company has not incurred material preliminary expenses.
6. Promoters
The promoters of our Company are Xiamen Suntama, Guangyao Tianxiang LP , Xiamen Jinyanlai LP ,
Hongyan Investment LP , Mr. Zheng, Fu Y u ( ˹๬), Mr. Li, Y angming Kangyi LP , Zeng Huanrong ( ಀ๰
࢙Liu Zhen ( ᄎቤ), Huang Jincheng ( රආϓ), Huang Wenxiao ( ර˖ʃ), Shi Tao (ᏹ), Torch
Investment, Tianyi Tongchuang LP , Jinjun Hongyan LP , Zhang Qing (ڡWu Junjie (௫) and Xiao
Wen ( ӽත).
Within the two years immediately preceding the date of this prospectus, no cash, securities or other
benefit have been paid, allotted or given or have been proposed to be paid, allotted or given to the above
promoters in connection with the Global Offering or related transactions in this prospectus within the two
years immediately preceding the date of this prospectus.
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-22 –


--- page 480 ---
7. Consents of Experts
Each of the experts as referred to in “—11. Qualification of Experts” in this appendix has given and
has not withdrawn its consent to the issue of this prospectus with the inclusion of its view, report and/or
letter and/or legal opinion (as the case may be) and references to its name included herein in the form and
context in which it respectively appears.
Save as disclosed in the section headed “Underwriting” in this prospectus, none of the experts named
above has any shareholding interest in our Company or any of our subsidiaries or the right (whether legally
enforceable or not) to subscribe for or to nominate persons to subscribe for securities in our Company or
any of our subsidiaries.
8. Binding Effect
This prospectus shall have the effect, if an application is made in pursuance hereof, of rendering all
persons concerned bound by all of the provisions (other than the penal provisions) of sections 44A and 44B
of the Companies (Winding Up and Miscellaneous Provisions) Ordinance so far as applicable.
9. Bilingual Prospectus
The English language and Chinese language versions of this prospectus are being published
separately in reliance on the exemption provided in section 4 of the Companies Ordinance (Exemption of
Companies and Prospectuses from Compliance with Provisions) Notice (Chapter 32L of the Laws of Hong
Kong).
10. Taxation of Holders of H Shares
(a) Hong Kong
The sale, purchase and transfer of H Shares is subject to Hong Kong stamp duty if such sale,
purchase and transfer is effected on the H Share register of members of our Company, including in
circumstances where such transaction is effected on the Hong Kong Stock Exchange. The current rate
of Hong Kong stamp duty for such sale, purchase and transfer is HK$2.00 for every HK$1,000 (or
part thereof) of the consideration or, if higher, the fair value of the H Shares being sold or
transferred.
(b) Consultation with Professional Advisors
Intending holders of the H Shares are recommended to consult their professional advisors if
they are in any doubt as to the taxation implications of subscribing for, purchasing, holding or
disposing of or dealing in the H Shares. It is emphasized that none of our Company, our Directors,
Supervisors or the other parties involved in the Global Offering will accept responsibility for any tax
effect on, or liabilities of, holders of H Shares resulting from their subscription for, purchase, holding
or disposal of or dealing in the H Shares or exercise of any rights attaching to them.
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-23 –


--- page 481 ---
11. Qualification of Experts
The following are the qualifications of the experts who have given opinion or advice which are
contained in this prospectus:
Name Qualifications
China International Capital Corporation Hong
Kong Securities Limited
A licensed corporation to conduct Type 1
(dealing in securities), Type 2 (dealing in
futures contracts), Type 4 (advising on
securities), Type 5 (advising on futures
contracts) and Type 6 (advising on corporate
finance) of the regulated activities under the
SFO
GF Capital (Hong Kong) Limited A licenced corporation to conduct Type 6
(advising on corporate finance) regulated
activity as defined under the SFO
Hylands Law Firm PRC Legal Advisors
Frost & Sullivan (Beijing) Inc., Shanghai
Branch Co.
Industry consultant
KPMG Certified Public Accountants
Public Interest Entity Auditor registered in
accordance with the Accounting and
Financial Reporting Council Ordinance
12. Miscellaneous
(a) within the two years immediately preceding the date of this prospectus:
(i) save as disclosed in the section headed “History, Development and Corporate Structure”
in this prospectus, no share or loan capital of our Company or any of our subsidiaries had
been issued or agreed to be issued or proposed to be fully or partly paid either for cash
or a consideration other than cash;
(ii) save as disclosed in the section headed “Underwriting” in this prospectus, no
commissions, discounts, brokerages or other special terms had been granted or agreed to
be granted in connection with the issue or sale of any share or loan capital of our
Company or any of our subsidiaries;
(iii) save as disclosed in the section headed “Underwriting” in this prospectus, no commission
had been paid or payable for subscription, agreeing to subscribe, procuring subscription
or agreeing to procure subscription of any share in our Company or any of our
subsidiaries;
(b) save as disclosed in the section headed “History, Development and Corporate Structure” in this
prospectus, no share or loan capital of our Company or any of our subsidiaries had been under
option or agreed conditionally or unconditionally to be put under option;
(c) there are no founder, management or deferred shares, convertible debt securities nor any
debentures in our Company or any of our subsidiaries;
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-24 –


--- page 482 ---
(d) save as disclosed in the section headed “Underwriting” in this prospectus, none of the persons
named in the sub-paragraph headed “D. Other Information—11. Qualification of Experts” in
this appendix is interested beneficially or otherwise in any shares of any member of our Group
or has any right or option (whether legally enforceable or not) to subscribe for or nominate
persons to subscribe for any securities in any member of our Group;
(e) our Directors confirm that there has been no material adverse change in the financial or trading
position of our Group since May 31, 2023 (being the date to which the latest audited
consolidated financial statements of our Group were made up);
(f) there has not been any interruption in the business of our Group which may have or has had
a significant effect on the financial position of our Group in the 12 months preceding the date
of this prospectus; and
(g) no company within our Group is listed on any stock exchange or traded on any trading system
and at present, and our Group is not seeking or proposing to seek any listing of, or permission
to deal in, the share or loan capital of our Company on any other stock exchange; and there is
no arrangement under which future dividends are waived or agreed to be waived.
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-25 –


--- page 483 ---
1. DOCUMENTS DELIVERED TO THE REGISTRAR OF COMPANIES
The documents attached to a copy of this prospectus and delivered to the Registrar of Companies in
Hong Kong for registration were:
(a) a copy of each of the material contracts referred to in the section headed “Statutory and General
Information—B. Further Information about Our Business—1. Summary of Material Contracts”
in Appendix IV to this prospectus; and
(b) the written consents referred to in the sub-section headed “Statutory and General Information
—D. Other Information—7. Consents of Experts” in Appendix IV to this prospectus.
2. DOCUMENTS A V AILABLE ON DISPLAY
Copies of the following documents will be available on display on the website of the Stock Exchange
at www.hkexnews.hk and our website at http://www.yanzhiwu.com during a period of 14 days from the
date of this prospectus:
(a) the Articles of Association of the Company;
(b) the Accountants’ Report prepared by KPMG, the text of which is set out in Appendix I to this
prospectus;
(c) the audited consolidated financial statements of our Company for the three years ended
December 31, 2022 and the five months ended May 31, 2023;
(d) the report from KPMG on the unaudited pro forma financial information, the text of which is
set out in Appendix II to this prospectus;
(e) the PRC legal opinion issued by Hylands Law Firm, our PRC Legal Advisor, in respect of
certain aspects of our Group;
(f) the material contracts referred to in the section headed “Statutory and General Information—B.
Further Information about Our Business—1. Summary of Material Contracts” in Appendix IV
to this prospectus;
(g) the written consents referred to in the section headed “Statutory and General Information—D.
Other Information—7. Consents of Experts” in Appendix IV to this prospectus;
(h) the service contracts and the letters of appointment referred to in the sub-section headed
“Statutory and General Information—C. Further Information about Our Directors, Supervisors
and Substantial Shareholders—1. Particulars of Directors’ and Supervisors’ Service Contracts
and Letters of Appointment” in Appendix IV to this prospectus;
(i) F&S Report;
(j) the PRC Company Law and the PRC Securities Law together with their unofficial English
translations; and
(k) the terms of the employee incentive scheme adopted on December 26, 2020.
APPENDIX V DOCUMENTS DELIVERED TO THE REGISTRAR OF
COMPANIES IN HONG KONG AND A V AILABLE ON DISPLAY
– V-1 –


--- page 484 ---
(A joint stock company incorporated in the People’s Republic of China with limited liability)
Stock Code: 1497
GLOBAL
OFFERING
廈門燕之屋燕窩產業股份有限公司
Xiamen Yan Palace Bird's Nest Industry Co., Ltd.
廈門燕之屋燕窩產業股份有限公司
Xiamen Yan Palace Bird's Nest Industry Co., Ltd.
Joint Sponsors
Overall Coordinators, Joint Global Coordinators, Joint Bookrunners and Joint Lead Managers
Joint Global Coordinator, Joint Bookrunner and Joint Lead Manager
