--- page 1 ---
SHARE OFFER
Fujing Holdings Co., Limited
(Incorporated in the Cayman Islands with limited liability)
Stock Code: 2497
ʮ̡
Joint Overall Coordinators, Joint Global Coordinators,
Joint Bookrunners and Joint Lead Managers
Sole Sponsor
Joint Global Coordinators, Joint Bookrunners and Joint Lead Managers
1SPKFDU0SHBOJD@*10@$PWFS@&/(@.BS@@'BDUPSZ5FTUQEG


--- page 2 ---
If you are in any doubt about any of the contents of this prospectus, you should seek independent professional advice.
Fujing Holdings Co., Limited
富 景 中 國 控 股 有 限 公 司
(Incorporated in the Cayman Islands with limited liability)
SHARE OFFER
Total Number of Offer Shares : 100,000,000 Shares (subject to the Over-allotment Option)
Number of Placing Shares : 90,000,000 Shares (subject to reallocation and the
Over-allotment Option)
Number of Public Offer Shares : 10,000,000 Shares (subject to reallocation)
Offer Price : Not more than HK$1.28 per Offer Share and not less than
HK$1.08 per Offer 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 in Hong Kong dollars and
subject to refund)
Nominal value : US$0.01 per Share
Stock code : 2497
Sole Sponsor
Joint Overall Coordinators, Joint Global Coordinators, Joint Bookrunners and Joint Lead Managers
Joint Global Coordinator, Joint Bookrunner and Joint Lead Manager
Joint Bookrunners and Joint Lead Managers
Joint Lead Managers
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 arisin g from or in reliance upon the whole or any part of the
contents of this prospectus.
A copy of this prospectus, having attached thereto the documents specified in the section headed ‘‘Documents Delivered to the Registrar of Companies in Hong Kong and Available on Display’’ in
Appendix VII to this prospectus, has been registered by the Registrar of Companies in Hong Kong as required by section 342C of the Companies (Winding Up and Miscellaneous Provisions) Ordinance
(Chapter 32 of the Laws of Hong Kong). The Securities and Futures Commission of Hong Kong and the Registrar of Companies in Hong Kong take no responsibil ity for the contents of this prospectus
or any other documents referred to above.
The Offer Price is expected to be determined by the Price Determination Agreement between the Joint Overall Coordinators and the Joint Global Coordin ators (for themselves and on behalf of the
Underwriters) and our Company on or before Tuesday, 26 March 2024. The Offer P rice will be not more than HK$1.28 per Offer Share and will be not less than H K$1.08 per Offer Share. Investors
applying for the Public Offer Shares may be required to pay, on application (subject to application channels), the maximum offer price of HK$1.28 for e ach 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 is lo wer than HK$1.28 per Offer Share.
If (i) there is any change to the offer size due to the changes in (a) the number of Offer Shares initially offered in the Share Offer (other than described in this prospectus) or (b) the Offer Price outside the
indicative Offer Price range as stated in this prospectus; and/or (ii) if our Company becomes aware of any material adverse change after the issue of th is prospectus and before the commencement of
dealing in our Shares on the Stock Exchange as prescribed under Rule 11.13 of the Listing Rules, we are required to cancel the Share Offer and relaunch th e offer with a supplemental prospectus or a
new prospectus giving investors at least 3 business days to consider the new information.
If, for any reason, the Offer Price is not agreed between the Joint Overall Coordinators and the Joint Global Coordinators (for themselves and on behal f of the Underwriters) and our Company on or
before Tuesday, 26 March 2024, the Share Offer will not become unconditional and will lapse immediately.
Prior to making an investment decision, prospective investors should carefully consider all of the information set out in this prospectus, includin g the risk factors set out in the section headed ‘‘Risk Factors’’ in
this prospectus.
Prospective investors of the Public Offer Shares should note that the obligations of the Public Offer Underwriters under the Public Offer Underwriti ng Agreement to subscribe, and to procure
subscribers to subscribe for, the Public Offer Shares, are subject to termination by the Joint Overall Coordinators and the Joint Global Coordinator s (for themselves and on behalf of the Public Offer
Underwriters) if certain events shall occur prior to 8 : 00 a.m. (Hong Kong time) on the Listing Date. Further details of the terms of such provisions are set out in the section headed ‘‘Underwriting’’ in
this prospectus.
ATTENTION
We have adopted a fully electronic application process for the Public Offer. We will not provide printed copies of this prospectus to the public in rela tion to the Public Offer.
This prospectus is available at the website of the Hong Kong Stock Exchange at www.hkexnews.hk and the website of our Company at http://fujingnongye. com. If you require a printed copy of this
prospectus, you may download and print from the website addresses above.
20 March 2024
IMPORTANT


--- page 3 ---
IMPORTANT NOTICE TO INVESTORS:
FULLY ELECTRONIC APPLICATION PROCESS
We have adopted a fully electronic application process for the Public Offer. We will not
provide printed copies of this prospectus to the public in relation to the Public Offer.
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://fujingnongye.com. If you require a printed copy of this prospectus, you may download
and print from the website addresses above.
To apply for the Public Offer Shares, you may:
(1) apply online through the HK eIPO White Form service in 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 )o ra t
www.hkeipo.hk;
(2) apply online via HKSCC EIPO Channel:
Your 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.
If you have any question about the application online via the HK eIPO White Form
Service for the Public Offer Shares, you may call the enquiry hotline of our Hong Kong
Branch Share Registrar, Tricor Investor Services Limited at (852) 3907 7333 on the
following dates:
Wednesday, 20 March 2024 — 9 : 00 a.m. to 6 : 00 p.m.
Thursday, 21 March 2024 — 9 : 00 a.m. to 6 : 00 p.m.
Friday, 22 March 2024 — 9 : 00 a.m. to 6 : 00 p.m.
Monday, 25 March 2024 — 9 : 00 a.m. to 12 : 00 noon
EXPECTED TIMETABLE (NOTE 1)
–i–


--- page 4 ---
We will not provide any physical channels to accept any application for the Public
Offer Shares by the public. The contents of the electronic version of this prospectus are
identical to the printed prospectus as regist ered 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 prospectu s is available online at the website addresses
above.
Please refer to the section headed ‘‘How to Apply for Public Offer Shares’’ in this
prospectus for further details of the procedures through which you can apply for the Public
Offer Shares electronically.
Your application must be for a minimum of 2,000 Public Offer Shares and in one of the
numbers set out in the table. You are required to pay the amount next to the number you
select. You must pay the respective maximum amount payable on application in full upon
application for Public 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.
Maximum Offer Price per share: HK$1.28
No. of Public Offer
Shares applied for
Amount payable on
application
No. of Public Offer
Shares applied for
Amount payable on
application
HK$ HK$
2,000 2,585.81 200,000 258,581.75
4,000 5,171.64 300,000 387,872.65
6,000 7,757.45 400,000 517,163.52
8,000 10,343.28 500,000 646,454.40
10,000 12,929.09 600,000 775,745.28
12,000 15,514.90 700,000 905,036.15
14,000 18,100.72 800,000 1,034,327.05
16,000 20,686.54 900,000 1,163,617.92
18,000 23,272.35 1,000,000 1,292,908.80
20,000 25,858.18 1,500,000 1,939,363.20
30,000 38,787.27 2,000,000 2,585,817.60
40,000 51,716.35 2,500,000 3,232,272.00
50,000 64,645.45 3,000,000 3,878,726.40
60,000 77,574.53 3,500,000 4,525,180.80
70,000 90,503.61 4,000,000 5,171,635.20
80,000 103,432.70 4,500,000 5,818,089.60
90,000 116,361.79 5,000,000* 6,464,544.00
100,000 129,290.88
* Maximum number of Public Offer Shares you may apply for.
No application for any other number of Public Offer Shares will be considered and any
such application is liable to be rejected.
EXPECTED TIMETABLE (NOTE 1)
–i i–


--- page 5 ---
If there is any change in the following expe cted timetable of the Share Offer, we will
issue an announcement on the respective websites of our Company at
http://fujingnongye.com and the Stock Exchange at www.hkexnews.com.hk .
P u b l i cO f f e rc o m m e n c e s ................ 9 : 0 0a . m .o nW e d n e s d a y ,2 0M a r c h 2024
Latest time to complete elect ronic applications under
HK eIPO White Form service through (Note 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 : 3 0a . m .o nM o n d a y ,2 5M a r c h 2024
Application lists open
(Note 3) ............... 1 1 : 4 5a . m .o nM o n d a y ,2 5M a r c h 2024
Latest time for giving electronic application instructions
to HKSCC (Note 4) ....................1 2 : 0 0n o o no nM o n d a y ,2 5M a r c h 2024
Latest time to complete payments for HK eIPO White
Form applications by effecting internet banking
t r a n s f e r ( s )o rP P Sp a y m e n tt r a n s f e r ( s ) ......1 2 : 0 0n o o no nM o n d a y ,2 5M a r c h2024
If you are instructing your broker or custodian who is a HKSCC Participant to give
electronic application instructions via HKSCC’s FINI system to apply for the Public 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 of the
Public Offer close (Note 3) ...............1 2 : 0 0n o o no nM o n d a y ,2 5M a r c h 2024
Expected Price Determination Date (Note 5) ............... T u e s d a y ,2 6M a r c h2024
Announcement of the final Offer Price, the indications
of the level of interest in the Placing, the level of
applications in respect of the Public Offer and the
basis of allocation of the Public Offer Shares under
the Public Offer to be published at the websites of
the Stock Exchange at www.hkexnews.hk and our
Company at http://fujingnongye.com on or before
(Note 6) .....................................W e d n e s d a y ,2 7M a r c h 2024
Results of allocations in the Public Offer (with
successful applicants’ identification document
numbers, where appropriate) to be available through
a variety of channels as described in the section
headed ‘‘How to Apply for Public Offer Shares’’ in
t h i sp r o s p e c t u sf r o m ...........................W e d n e s d a y ,2 7M a r c h 2024
EXPECTED TIMETABLE (NOTE 1)
– iii –


--- page 6 ---
Results of allocations in the Public Offer will be
available at www.tricor.com.hk/ipo/result
(alternatively: www.hkeipo.hk/IPOResult )o r
available at ‘‘IPO Results’’ function in the
IPO App ....................................W e d n e s d a y ,2 7M a r c h 2024
Despatch of Share certificates/Deposit of shares
certificate into CCASS in respect of wholly or
partially successful applications pursuant to the
Public Offer on or before
(Notes 7 & 8) ...............W e d n e s d a y ,2 7M a r c h 2024
Despatch of HK eIPO White Form e-Auto Refund
payment instructions/refund cheques in respect of
wholly successful (if applicable) or wholly or
partially unsuccessful app lications pursuant to the
P u b l i cO f f e ro no rb e f o r e
(Notes 9 & 10) ................. T h u r s d a y ,2 8M a r c h 2024
Dealings in Shares on the Main Board of the Stock
E x c h a n g et oc o m m e n c ea t ............... 9 : 0 0a . m .o nT h u r s d a y ,2 8M a r c h 2024
Notes:
(1) All times refer to Hong Kong local time. Detail s of the structure and conditions of the Share Offer,
including its conditions, are set out in the section heade d ‘‘Structure and Conditions of the Share Offer’’ in
this prospectus. If there is any change in this expected timetable, an announcement will be published on
the website of our Company at http://fujingnongye.com and the website of the Stock Exchange at
www.hkexnews.hk .
(2) You will not be permitted to submit your application through the designated website at www.hkeipo.hk or
the IPO App 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 designated website or the IPO
App 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 t he last day for submitting applications, when the
application lists close.
(3) If there is a ‘‘black’’ rainstorm warning or a tr opical cyclone warning signal number 8 or above or
‘‘Extreme Conditions’’ in force in Hong Kong at any time between 9 : 00 a.m. and 12 : 00 noon on Monday,
25 March 2024, the application lis ts will not open and close on that day. Further information is set out in
the paragraph headed ‘‘How to Apply for Public Offer Shares — E. Severe Weather Arrangements’’ in this
prospectus. If the application lists do not open and close on Monday, 25 March 2024, the dates mentioned
in this section of the prospectus may be affected. A press announcement will be made by us in such event.
(4) Applicants who apply for Public Offer Shares by giving electronic application instructions to HKSCC
should refer to the paragraph headed ‘‘How to Apply f or Public Offer Shares — A. Application for Public
Offer Shares — 2. Application Channels’’ in this prospectus for details.
(5) The Price Determination Date, being the date on whi ch the Offer Price is to be determined, is expected to
be on or before Tuesday, 26 March 2024. If, for any reason, the Offer Price is not agreed between the Joint
Overall Coordinators and the Joint Global Coordinators (for themselves and on behalf of the
Underwriters) and our Company by Tuesday, 26 March 2024, the Share Offer will not proceed and will
lapse immediately.
(6) None of the website or any information containe d on that website forms part of this prospectus.
EXPECTED TIMETABLE (NOTE 1)
–i v–


--- page 7 ---
(7) Applicants who apply through the HK eIPO White Form service for 1,000,000 or more Public Offer Shares
and have provided all information required in their ap plication that they may collect Share certificates (if
applicable) in person may do so from our Hong Kong Branch 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
Thursday, 28 March 2024 or any other date notified by u s as the date of despatch of Share certificates/e-
Auto Refund payment instructions/refund cheques. Applicants being individuals who are eligible for
personal collection must not authorise any other p erson to make their collection on their behalf.
Applicants being corporations who a re eligible personal collection mus t attend by sending their authorised
representatives each bearing a letter of authorisatio n from his corporation stamped with the corporation’s
chop. Both individuals and authorised representatives (if applicable) must produce, at the time of
collection, evidence of identity acceptable to our H ong Kong Branch Share Registrar, Tricor Investor
Services Limited. Applicants who have applied through the HKSCC EIPO channel may not collect their
Share certificates, which will be deposited into CCASS for the credit of their designated HKSCC
Participant’s stock accounts, as appropriate. Uncoll ected Share certificates will be despatched by ordinary
post at the applicant’s own risk to the address spe cified in the relevant application. For further
information, applicants should refer to the parag raph headed ‘‘How to Apply for Public Offer Shares —
D. Despatch/Collection of Share certificates and re fund of application monies’’ in this prospectus.
(8) Share certificates for the Public Offer Shares wil l become valid evidence of title at 8 : 00 a.m. on Thursday,
28 March 2024, provided that (i) the Public Offer has become unconditional in all respects; and (ii) neither
of the Underwriting Agreements has been terminated in accordance with its terms. Investors who trade
Shares on the basis of publicly available allocation details before the receipt of share certificates or before
the share certificates becoming valid do so entirely at their own risk.
(9) e-Auto Refund payment instructions/refund cheques will be issued in respect of wholly or partially
unsuccessful applications pursuant to the Public Offer and also in respect of wholly or partially successful
applications in the event that the final Offer Pri ce is less than the price payable per Offer Share on
application. Part of the applicant’s Hong Kong id entity card number or passport number, or, if the
application is made by joint applicants, part of the Hong Kong identity card number or passport number
of the first-named applicant, provided by the applicant(s) may be printed on the refund cheque, if any.
Such data would also be transferred to a third party f or refund purposes. Banks may require verification
of an applicant’s Hong Kong identity card number or p assport number before cashing the refund cheque.
Inaccurate completion of an applicant’s Hong Kong identity card number or passport number may lead to
delay in encashment of, or may invalidate, the refund cheque.
Applicants who apply through the HK eIPO White Form service and paid their applications monies
through single bank account may have refund monies (if any) despatched to their application payment
bank account, in the form of e-Auto Refund paymen t instructions. Applicants who apply through the HK
eIPO White Form service and paid their application monies through multiple bank accounts may have
refund monies (if any) despatched to the address as s pecified in their application instructions to the HK
eIPO White Form Service Provider, in the form of refund cheques, by ordinary post at their own risk.
(10) Applicants who apply for Public Offer Shares via HK eIPO White Form should refer to the paragraph
headed ‘‘How to Apply for Public Offer Shares — D. Despatch/Collection of Share certificates and
Refund of Application Monies’’ in this prospectus.
Particulars of the structure and conditions of the Share Offer, including the conditions
thereto, are set out in the section headed ‘‘Structure and Conditions of the Share Offer’’ in
this prospectus. Details relating to how to apply for the Public Offer Shares are set out in
the section headed ‘‘How to Apply for Public Offer Shares’’ in this prospectus.
EXPECTED TIMETABLE (NOTE 1)
–v–


--- page 8 ---
IMPORTANT NOTICE TO INVESTORS
This prospectus is issued by our Company solely in connection with the Public Offer
and does not constitute an offer to sell or a solicitation of an offer to buy any security other
than the Public Offer Shares offered by this prospectus pursuant to the Public Offer. This
prospectus may not be used for the purpose of, 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 or the distribution of this prospectus in any jurisdiction
other than Hong Kong.
You should rely only on the information contained in this prospectus to make your
investment decision. We have not authorised 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 authorised by us, the
Sole Sponsor, the Joint Overall Coordinators and the Joint Global Coordinators, the Joint
Bookrunners, the Joint Lead Managers, the Capital Market Intermediaries, any of the
Underwriters, any of their respective directors, officers, representatives or advisors or any
other person involved in the Share Offer. Information contained on our website, located at
http:
//fujingnongye.com , does not form part of this prospectus.
Page
EXPECTED TIMETABLE ...................................................... i
CONTENTS .................................................................... v i
SUMMARY ..................................................................... 1
DEFINITIONS .................................................................. 2 0
GLOSSARY OF TECHNICAL TERMS ........................................ 3 3
FORWARD-LOOKING STATEMENTS ........................................ 3 4
RISK FACTORS ................................................................ 3 6
WAIVERS FROM STRICT COMPLIANCE WITH THE LISTING RULES
AND EXEMPTION FROM STRICT COMPLIANCE WITH THE
COMPANIES (WINDING UP AND MISCELLANEOUS
PROVISIONS) ORDINANCE ................................................ 6 2
INFORMATION ABOUT THIS PROSPECTUS AND THE SHARE OFFER .. 6 8
DIRECTORS AND PARTIES INVOLVED IN THE SHARE OFFER .......... 7 2
CORPORATE INFORMATION ................................................ 7 9
INDUSTRY OVERVIEW ....................................................... 8 1
CONTENTS
–v i–


--- page 9 ---
Page
REGULATORY OVERVIEW ................................................... 9 7
HISTORY, REORGANISATION AND CORPORATE STRUCTURE .......... 1 2 2
BUSINESS ...................................................................... 1 4 9
RELATIONSHIP WITH CONT ROLLING SHAREHOLDERS ................. 2 7 7
CONTINUING CONNEC TED TRANSACTIONS .............................. 2 8 5
DIRECTORS AND SENIOR MANAGEMENT ................................. 2 8 7
SUBSTANTIAL SHAREHOLDERS ............................................ 3 0 3
SHARE CAPITAL .............................................................. 3 0 5
FINANCIAL INFORMATION .................................................. 3 0 8
F U T U R EP L A N SA N DU S EO FP R O C E E D S.................................. 3 6 8
UNDERWRITING .............................................................. 3 7 4
STRUCTURE AND CONDITIONS OF THE SHARE OFFER ................. 3 8 6
HOW TO APPLY FOR PUBLIC OFFER SHARES ............................ 3 9 7
APPENDIX I — ACCOUNTANTS’ REPORT ............................... I - 1
APPENDIX II — UNAUDITED PRO FORMA
FINANCIAL INFORMATION ........................... I I - 1
APPENDIX III — UNAUDITED PRELIMINARY FINANCIAL
INFORMATION FOR THE YEAR ENDED
31 DECEMBER 2023 ...................................... III-1
APPENDIX IV — PROPERTY VALUATION REPORT ...................... I V - 1
APPENDIX V — SUMMARY OF THE CONSTITUTION OF
THE COMPANY AND CAYMAN ISLANDS
COMPANY LAW ........................................ V - 1
APPENDIX VI — STATUTORY AND GENERAL INFORMATION ......... V I - 1
APPENDIX VII — DOCUMENTS DELIVERED TO THE REGISTRAR
OF COMPANIES IN HONG KONG AND
AVAILABLE ON DISPLAY ............................. V I I - 1
CONTENTS
–v i i–


--- page 10 ---
This summary aims to give you an overview of the information contained in 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 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 the section headed ‘‘Risk Factors’’ in this
prospectus. You should read that section carefully in full before you decide to invest in the
Offer Shares.
OVERVIEW
We are the largest producer of potted vegetable produce in Shandong province, with a
market share of 14.8% in terms of sales revenue in Shandong province in 2022. With a sales
revenue of RMB126.7 million, ou r Group accounted for approxim ately 3.1% of total sales
revenue of potted vegetable producers and less than 0.01% of total sales revenue of
vegetable producers in China in 2022.
In 2022, Shandong province, the largest potted vegetable producing province in the
PRC contributed approximately 20.3% and 1 9.0% in terms of the total sales volume and
the total sales revenue of potted vegetable produce of the PRC, respectively. China’s
vegetable produce market and potted vegetable produce market are both highly fragmented
with around one million to two million veget able producers and thousands of potted
vegetable producers, respecti vely. Potted vegetable produce is a small segment of the
vegetable market as a whole which is predominantly cultivated under traditional in-ground
method. Total sales revenue of potted vegetable produce accounted for less than 0.1% of
total sales revenue of vegetable produce in China in 2022.
Major benefits of using in-pot cultivation o ver traditional in-ground cultivation and
hydroponic cultivation method are set out below:
Cultivation method Traditional in-ground
cultivation
Hydroponic cultivation In-pot cultivation
Output rate per year Two yields to six yields
due to the negative
effects of continous
cropping
Six yields to ten yields
due to the negative
effects of continous
cropping
Ten yields to 14 yields as
not affected by continous
cropping
Product freshness Fresh for 3-5 days Fresh for 3-5 days Alive and fresh for 10-14
days
With the use of greenhouses, single-use substrates and not being affected by the
negative effects of continuous cropping (e.g. th e reduction of micronutrients and minerals,
distortion of soil microenvironment and the accumulation of pathogenic substances in the
soil), vegetable producers using the in-pot cultivation method will generally achieve high
productivity. For further details, please refer to the paragraph headed ‘‘Industry Overview
— Different kinds of vegetable produce in China and Shandong Province’’ and the section
headed ‘‘Business’’ of this prospectus.
SUMMARY
–1–


--- page 11 ---
We sold our products primarily in Shandong province since 2012. In view of the
growing business opportunities, we extended our geographical coverage to Xi’an, Shaanxi
province and Dalian, Liaoning province in 2019. As at the Latest Practicable Date, we had
three cultivation facilities in operation fo r cultivating our potted vegetable produce,
namely, (i) Laixi Facility; (ii) Xi’an Facility ; and (iii) Dalian Facility which, in aggregate,
covers a land area of approximately 431,605 sq.m. and we had 140 greenhouses operating in
our cultivation facilities with a total gross floor area of 155,401 sq.m. For ensuring the
quality and to meet the relevant safety requirements, all of our potted vegetable produce are
grown in greenhouses in our cult ivation facilities. We had been accredited with Certificate
of Pollution-free Agricultural Products* ( 無公害農產品證書) issued by Qingdao
Agricultural Rural Bureau* ( 青島市農業農村局) in respect of the potted vegetable
produce cultivated at our Laixi Facility.
During the Track Record Period, our products were marketed under our brand ‘‘ 富景
農業’’ which included 29 potted vegetable produce species. Among them, crown daisy,
rapeseed, Frise ´e, Indian lettuce, pak choi, lettuce, Chinese celery and tatsoi were our
principal products offered in the market during the Track Record Period. In line with the
industry practice, we engage subcontractors to handle simple labour work under our
management and supervision at our cultivatio n facilities and sell our potted vegetable
produce primarily through a network of distributors in the PRC which then on-sell our
products to over 1,000 end-user customers in Shandong, Liaoning and Shaanxi provinces in
the PRC. Our Group is responsible for maintaining our cultivation facilities, performing
quality control, monitoring vegetable’s growth progress, monitoring and/or adjusting
environment parameters, and developing and formulating the organic substrates that best
suit our potted vegetable produce.
Our revenue grew by approximately 4% from FY2020 to FY2022 and underperformed
the market as the revenue growth of potted vegetable produce in Shandong province was
approximately 14% during the same period. Notwithstanding the increase in our revenue by
approximately 28% between FY2020 and FY2021, our business was materially affected in
FY2022 by the temporary suspension of busine ss activities of our Laixi Facility as a result
of the resurgence of COVID-19 cases in Shandong province between March 2022 to April
2022, leading to decline of revenue by approximately 18.2% between FY2021 and FY2022.
The impact caused by COVID-19 in Qingdao area where our Laixi Facility situated, is more
severe than other areas in Shandong province, such as Shouguang and Qingzhou where
most of our peers are located, thus we underperformed the potted vegetable produce market
in China and Shandong province in terms of the revenue growth.
During the Track Record Period, our aver age selling price per pot of our potted
vegetable produce remained unchanged at RMB15.1, as we decided to stabilise the selling
price of our products during the Track Record Period after considering the uncertainties to
the vegetable sales market and the business environment in the PRC brought by the
COVID-19 epidemic from 2020 to 2022.
SUMMARY
–2–


--- page 12 ---
Revenue
The following table sets forth a breakdown of our revenue, sales volume and average selling price by our geographical location
and cultivation facilities during the Track Record Period:
Year ended 31 December Nine months ended 30 September
2020 2021 2022 2022 2023
Revenue
% of total
revenue
Sales
volume
Average
selling price Revenue
% of total
revenue
Sales
volume
Average
selling price Revenue
%o ft o t a l
revenue
Sales
volume
Average
selling price Revenue
% of total
revenue
Sales
volume
Average
selling price Revenue
%o ft o t a l
revenue
Sales
volume
Average
selling price
RMB’000 (’000 pots) (RMB) RMB’000 (’000 pots) (RMB) RMB’000 (’000 pots) (RMB) RMB’000 (’000 pots) (RMB) RMB’000 (’000 pots) (RMB)
(Note) (Note) (Note) (unaudited) (unaudited) (Note) (Note)
Shandong province
Laixi Facility 105,737 87.1 7,045 15.0 141,291 91.2 9,419 15.0 114,468 90.3 7,631 15.0 80,127 90.4 5,342 15.0 111,058 91.6 7,404 15.0
Shaanxi province
Xi’an Facility 8,704 7.2 543 16.0 6,206 4.0 388 16.0 5,316 4.2 332 16.0 3,932 4.4 246 16.0 4,517 3.7 282 16.0
Liaoning province
Dalian Facility 6,964 5.7 434 16.0 7,449 4.8 466 16.0 6,910 5.5 432 16.0 4,567 5.2 285 16.0 5,719 4.7 358 16.0
Total/overall 121,405 100.0 8,022 15.1 154,946 100.0 10,273 15.1 126,6 94 100.0 8,395 15.1 88,626 100.0 5,873 15.1 121,294 100.0 8,044 15.1
Note: Average selling price represents total revenue divided by sales volume for the respective period.
SUMMARY
–3–


--- page 13 ---
Cost of sales
The following table sets forth a breakdown of our major cost of sales for the periods
indicated:
Year ended 31 December Nine months ended 30 September
2020 2021 2022 2022 2023
RMB’000
%o fc o s t
of sales RMB’000
%o fc o s t
of sales RMB’000
%o fc o s t
of sales RMB’000
%o fc o s t
of sales RMB’000
%o fc o s t
of sales
(unaudited)
Raw materials 33,366 49.1 42,718 47.9 34,986 47.2 24,545 46.0 33,080 47.7
Subcontracting labour cost 28,285 41.6 37, 168 41.7 30,315 40.9 21,238 39.9 28,999 41.8
Cultivation overheads 4,177 6.2 6,113 6.8 5,503 7.4 4,137 7.8 4,706 6.8
Biological assets fair value
adjustments 2,119 3.1 3,174 3.6 3,351 4.5 3,351 6.3 2,532 3.7
Total 67,947 100.0 89,173 100.0 74,155 100. 0 53,271 100.0 69,317 100.0
COMPETITIVE STRENGTHS
We believe our market position are derived from the following key competitive
strengths: (i) with our brand recognition and product quality, we are in a leading position in
the potted vegetable produce industry in Shandong province; (ii) we have a well-established
distribution network acros s Shandong province; (iii) we ha ve an experienced management
team with a proven track record to lead our development; (iv) our potted vegetable
cultivation method ensures high productiv ity as compared with traditional in-ground
cultivation method; and (v) the higher requirements and upfront investment costs in
cultivation of potted vegetable produce in gr eenhouses differentiate us from traditional
players in the vegetable produce industry. For details, please refer to the paragraph headed
‘‘Business — Our competitive strengths’’.
BUSINESS STRATEGIES
We intend to achieve sustainable growth in sales and profit and further strengthen our
leading position in the potted vegetable produce industry in the PRC by implementing the
following strategies: (i) to expand our cultivation capacity; (ii) to establish a new cultivation
facility in new geographical market; (iii) to set up a designated organic substrates
preparation facility; and (iv) to strengthen o ur operational efficiency through upgrade of
our information technology system. For de tails, please refer to the paragraph headed
‘‘Business — Our business strategies’’.
OUR CUSTOMERS, DISTRIBUTION AND SALES NETWORK
We sell our potted vegetable produce primarily through a network of distributors in
the PRC in line with industry practice. Our distributors then on-sell our products to over
1,000 end-user customers in Shandong, Liaoning and Shaanxi provinces in the PRC during
the Track Record Period, the majority of which are hotels and restaurants. These hotels and
SUMMARY
–4–


--- page 14 ---
restaurants end-user customers sell both trad itional vegetable produce and potted vegetable
produce. However, majority of the potted vegetable produce sold by them was supplied by
us.
In FY2020, FY2021, FY2022 and 9M2023, sales to our five largest customers in each
year/period accounted for approximately 56.1%, 66.3%, 67.3% and 68.1%, respectively, of
our total revenue while sales to our largest customer in each year/period accounted for
approximately 15.3%, 16.3%, 16.5% and 16.7%, of our total revenue, respectively. As at 31
December 2020, 31 December 2021, 31 December 2022 and 30 September 2023, we had 12
distributors. In FY2020, FY2021, FY2022 and 9M2023, sales to our distributors (which
were all based in the PRC) amounted to RMB 121.0 million, RMB154.9 million, RMB126.7
million and RMB121.3 million, respectively, re presenting approximately 99.7%, 100.0%,
100.0% and 100.0% of our revenue during the same periods, respectively.
For details, please refer to the paragraph he aded ‘‘Business — Distribution and sales
network’’.
OUR CULTIVATION PROCESS
We cultivate our vegetable produce in pots which contain our specially formulated
organic substrates. Such organic substrates are made primarily from raw materials such as
cow manure, fungi residue and peanut shells that are proportioned, mixed and processed
through high-temperature fermentation. Compared to vegetable produce grown in open
fields, using such organic substrates enables our potted vegetable produce to be cultivated
with ideal nutrients for healthy growth, and prevents the risks of contamination and
pollution. We apply an industrial cultivation method to produce our potted vegetable
produce. Such cultivation method requires the use of enclosed greenhouses together with
the application of our horticultural know-how and equipment in connection with pest
control, heat preservation, ventilation and/or shading of sunlight in order to create an
appropriate and ideal microclimate environment for the growth of our potted vegetable
produce. The entire cultivation process of potted vegetable produce commencing from
procurement of raw materials to delivery of our products takes approximately 40 days to 50
days, depending on the species of vegetable produce cultivated and the season of
cultivation. For details, please refer to the p aragraph headed ‘‘Business — Cultivation of
our potted vegetable produce — Cultivation process’’.
RAW MATERIALS, SUPPLIE RS AND SUBCONTRACTORS
Raw materials
Our raw materials primarily include (i) components of organic substrates such as cow
manure, fungi residue and peanut shells; (ii) seeds; and (iii) fertilisers (such as foliar
fertilisers) and biopesticides (such as matrine). We typically enter into purchase agreement
frameworks with our suppliers on an annual basis to facilitate our continuous procurement
of raw materials.
In such purchase agreement frameworks, we generally set forth basic terms including
type, specifications, minimum quantity, unit price and quality requirements of the raw
materials, delivery arrangement, payment method, credit terms and remedies upon breach.
SUMMARY
–5–


--- page 15 ---
Our purchasing strategies also helped us keep our raw material cost stable at a
reasonable level in spite of the increasing price trend of raw materials in general. We made
more purchases and kept more inventories since FY2021 and have continued to do so in
9M2023 also to reduce the risk of supply interruption after years of the pandemic from 2020
to 2022, with intermittent lockdowns in various regions.
Our suppliers
In FY2020, FY2021, FY2022 and 9M2023, purchases from our largest supplier and
our five largest suppliers in each year/period accounted for approximately 70.3%, 62.9%,
50.8% and 40.6%, and approximately 94.3%, 99.7%, 99.7% and 98.7% respectively, of our
total purchases. Our purchase from our five l argest suppliers increased by approximately
RMB9.4 million (or 26.6%) from approxi mately RMB35.3 million in FY2020 to
approximately RMB44.7 million in FY2021. Such increase was mainly due to the
increase in our cultivation capacity and actual cultivation output in the corresponding
period. Our purchase from our five largest su ppliers decreased by a pproximately RMB4.9
million (or 11.0%) from approximately RMB44.7 million in FY2021 to approximately
RMB39.8 million in FY2022. Such decrease was m ainly due to the adverse impact of the
COVID-19 epidemic which lowered our cultivation output during FY2022 as further
discussed on page 17 to page 18 of this prospectus. Our purchases from our five largest
suppliers increased by approximately RMB3.2 million (or 10.8%) from approximately
RMB29.6 million in 9M2022 to approximately RMB32.8 million in 9M2023. This was
mainly due to the increase in our actual cultivation output in the corresponding period. For
details, please refer to the paragraph headed ‘ ‘Business — Raw materials, suppliers and
subcontractors — Suppliers’’.
Our subcontractors
We engage Independent Third Parties subcontractors by entering into standard labour
subcontracting agreements for performing simple labour work such as watering, sowing and
transporting in the cultivation process under our management and supervision at our
cultivation facilities. Our Directors believe that adopting such arrangement would provide
us with more flexibility in management, reduce our administrative workload and allow us to
manage effectively our cultivation process and meet our demand for workforce in a timely
manner to cope with our recent expansion. It also allows our experienced staff to focus on
the quality control procedures to uphold the quality of our products and conduct testing for
the refinement of our current cultivation m ethods and techniques which are our core
competitive advantages, and focus less on performing simple labour work. In FY2020,
FY2021, FY2022 and 9M2023, we have engaged seven, five, five and four subcontractors
and our subcontracting labour cost amounted to approximately RMB28.3 million,
RMB37.2 million, RMB30.3 million and RMB29.0 million, which represents
approximately 41.6%, 41.7%, 40.9% and 41.8% of our total cost of sales for the same
period, respectively. For details, please refer to the paragraph headed ‘‘Business — Raw
materials, suppliers and subcontractors — Subcontractors’’.
SUMMARY
–6–


--- page 16 ---
SHAREHOLDERS’ INFORMATION
Our controlling shareholders
Immediately following completion of the C apitalisation Issue and the Share Offer
(assuming the Over-allotment Option is not exercised and without taking into account any
Shares which may be issued and allotted upon the exercise of any options and/or awards
granted under the Share Scheme), Wider International will own approximately 53.4% of the
entire issued share capital of our Company. Mr. Zhang, being the sole beneficial owner of
the entire issued share capital of Wider International, is indirectly holding approximately
53.4% of the entire issued share capital of our Company. Accordingly, Mr. Zhang and
Wider International will be our Controllin g Shareholders upon Listing. For details
regarding our Controlling Shareholders, please refer to the section headed ‘‘Substantial
Shareholders’’ in this prospectus.
Pre-IPO investments
Ms. Geng Qi Mr. Li Changbai Mr. Cui Wei Mr. Xie Xing
Approximate percentage
of shareholding in our
Company upon Listing
(Note)
15.0% 3.6% 2.0% 0.8%Note: Without taking into account any Shares which may be issued upon exercise of the Over-allotment
Option or any option and/or award which may be granted under the Share Scheme.
For details of the said pre-IPO investments, please refer to the paragraphs headed
‘‘History, Reorganisation and Corporate Structure — Reorganisation — 4. Pre-IPO
investments by Ms. Geng Qi, Mr. Li Changbai and Mr. Cui Wei’’ and ‘‘History,
Reorganisation and Corporate Structure — Reorganisation — 6. Pre-IPO investment by
Mr. Xie Xing and conversion of Fujing Agriculture into a sino-foreign equity joint venture
enterprise’’ in this prospectus.
RISK FACTORS
O u rb u s i n e s si ss u b j e c tt oan u m b e ro fr i s k sand potential investors are advised to read
the entire section headed ‘‘Risk Factors’’ be fore making any investment decision in the
Offer Shares. Some of the major risk we fa ce include, among others, (i) we derive a
significant portion of our revenue from our five largest customers. Any change in our
relationships with them may adversely affect our business, financial conditions and results
of operations; (ii) we may encounter difficulties in expanding our distribution and sales
network into new regions, which may limit our growth prospects; and (iii) our operations
are principally based in Shandong province, and we are susceptible to the development in
the economic conditions and business environment in this region.
SUMMARY
–7–


--- page 17 ---
KEY OPERATIONAL AND FINANCIAL DATA
The tables below are summaries of our consolidated results for the Track Record
Period which were extracted from the Accountants’ Report as set out in Appendix I to this
prospectus.
Summary of consolidated statements of profit or loss
Year ended
31 December
Nine months ended
30 September
2020 2021 2022 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(unaudited)
Revenue 121,405 154,946 126,694 88,626 121,294
Cost of sales (67,947) (89,173) (74,155) (53,271) (69,317)
Gross profit 53,458 65,773 52,539 35,355 51,977
Profit from operation 44,961 48,200 32,712 20,389 41,779
Finance costs (1,183) (897) (900) (688) (662)
Profit before tax 43,778 47,303 31,812 19,701 41,117
I n c o m e t a x e x p e n s e —————
Profit for the year/period 43,778 47,303 31,812 19,701 41,117
Our revenue has grown from approximately RMB121.4 million in FY2020 to
approximately RMB154.9 million in FY2021 due to our increase in cultivation capacity.
Our revenue dropped from approximately RMB154.9 million in FY2021 to RMB126.7
million in FY2022 mainly due to the effect of CO VID-19 as further discussed on page 17 to
page 18 of this prospectus. Operation of Laixi Facility, our largest cultivation base, was
suspended for more than one month between March and April 2022. Our revenue increased
from approximately RMB88.6 million in 9M202 2 to approximately RMB121.3 million in
9M2023 as our business operation was no longer affected by COVID-19 epidemic in
9M2023.
SUMMARY
–8–


--- page 18 ---
Our gross profit increased from approximately RMB53.5 million in FY2020 to
approximately RMB65.8 million in FY2021, prima rily attributable to the increase in the
sales volume of our potted vegetable produce. Our gross profit decreased from
approximately RMB65.8 million in FY202 1 to approximately RMB52.5 million in
FY2022, mainly due to the effect of COVID-19 as further discussed on page 17 to page
18 of this prospectus. Our gross profit increased from approximately RMB35.4 million in
9M2022 to approximately RMB52.0 million in 9M2023, which was in line with the increase
in sales volume of our potted vegetable produce.
We incurred Listing expenses of approximately RMB4.1 million, RMB7.6 million,
RMB5.7 million and RMB6.0 million f or FY2020, FY2021, FY2022 and 9M2023,
respectively.
Our net profit increased from approximately RMB43.8 million in FY2020 to
approximately RMB47.3 million in FY2021, which was primarily due to the increase of
our revenue as a result of our increase in cult ivation capacity during the corresponding
period. As a result of the resurgence of the COVID-19 epidemic in March 2022 and the
temporary suspension of our cultivation facilities as further discussed on page 17 to page 18
of this prospectus, our net profit decrea sed from approximately RMB47.3 million in
FY2021 to approximately RMB31.8 million in FY2022. We recorded a net profit of
approximately RMB41.1 million in 9M2023, compared to a net profit of approximately
RMB19.7 million in 9M2022, which was primar ily due to the increase in our revenue as a
result of our increase in the volume of our actual cultivation output during the
corresponding period as our business operation was no longer affected by COVID-19
epidemic in 9M2023.
For more details, please refer to the paragraph headed ‘‘Financial Information —
Description of selected statements of profit or loss items — Gross profit’’ and ‘‘Financial
Information — Description of selected statements of profit or loss items — Profit for the
year’’ in this prospectus.
Summary of consolidated statements of financial position
As at 31 December
As at
30 September
2020 2021 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000
Non-current assets 197,875 201,476 190,894 205,309
Current Assets 50,576 88,617 140,712 164,888
Current liabilities 32,771 27,423 37,453 35,163
Net current assets 17,805 61,194 103,259 129,725
Non-current liabilities 4,367 4,053 3,727 3,497
Net assets 211,313 258,617 290,426 331,537
Our net current assets increased from approximately RMB17.8 million as at 31
December 2020 to approximately RMB61.2 m illion as at 31 December 2021, which was
primarily attributable to (i) the increase in our trade receivables by approximately
RMB15.5 million; (ii) the increase in our ba nk and cash balances by approximately
SUMMARY
–9–


--- page 19 ---
RMB16.0 million; and (iii) the increase in our prepayments and other receivables by
approximately RMB6.0 million in the correspon ding period. Our net current assets further
increased to approximately RMB103.3 millio n as at 31 December 2022, which was primarily
attributable to the increase in our bank an d cash balances by approximately RMB48.1
million in the corresponding period. Our net current assets further increased to
approximately RMB129.7 million as at 3 0 September 2023, which was primarily
attributable to the increase in our bank an d cash balances by approximately RMB18.5
million in the corresponding period.
Our net assets increased from approximately RMB211.3 million as at 31 December
2020 to approximately RMB258.6 million as at 31 December 2021, which was primarily
attributable to the addition of our profit and total comprehensive income of approximately
RMB47.3 million in FY2021. Our net assets furt her increased to approximately RMB290.4
million as at 31 December 2022, which was primarily attributable to the addition of our
profit and total comprehensive income of a pproximately RMB31.8 million generated in
FY2022. Our net assets further increased to approximately RMB331.5 million as at 30
September 2023, which was primarily attributable to the addition of our profit and total
comprehensive income of approximate ly RMB41.1 million generated in 9M2023.
For more details, please refer to the paragraph headed ‘‘Financial Information —
Current assets and current liabilities’’ i n this prospectus and the section headed
‘‘Consolidated statements of changes in equity’’ in the Accountants’ Report as set out in
Appendix I to this prospectus.
Summary of consolidated statements of cash flows
Year ended
31 December
Nine months ended
30 September
2020 2021 2022 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(unaudited)
Net cash generated from
operating activities 51,612 33,818 50,235 42,959 42,200
Net cash used in investing
activities (55,222) (16,812) (1,091) (1,091) (22,965)
Net cash generated from/(used
in) financing activities 5,495 (1,012) (1,025) (770) (719)
Cash and cash equivalents at
end of year/period 6,968 22,963 71,079 64,058 89,595
Our net cash generated from operating activities remained positive during the Track
Record Period. We recorded a net cash ge nerated from operating activities of
approximately RMB51.6 million in FY2020 main ly because we shortened the credit terms
offered to our major distributors in FY2019 and FY2020. We recorded a net cash generated
from operating activities of approximately RMB33.8 million in FY2021 mainly because of
our operating profit before working capital changes of approximately RMB59.0 million as
partially offset by the increase in trade receivables of approximately RMB15.6 million. We
SUMMARY
–1 0–


--- page 20 ---
recorded a net cash generated from operating activities of approximately RMB50.2 million
in FY2022, mainly because of our operating profit before working capital changes of
approximately RMB49.9 million and the increase in trade payables of approximately
RMB10.2 million and partially offset by the incre ase in trade receivables of approximately
RMB7.0 million. We recorded a net cash generated from operating activities of
approximately RMB42.2 million in 9M2023, mainly because of our operating profit
before working capital changes of approxima tely RMB49.5 million as partially offset by the
increase in trade receivables of approximately RMB4.9 million.
Our net cash used in investing activities decreased from approximately RMB55.2
million in FY2020 to approximately RMB16.8 million in FY2021, which was primarily due
to the renovation of the office premises and other maintenance and improvement works in
our Laixi Facility. Our net cash used in invest ing activities decreased to approximately
RMB1.1 million in FY2022, which was primarily due to the fact that we have completed
most of the renovation, maintenance and impr ovement works in our Laixi Facility before
FY2022. Our net cash used in investing activ ities increased to approximately RMB23.0
million in 9M2023, which was primarily due to payments of approximately RMB12.2
million for the renovation of our Laixi Land and Buildings for Investment Purpose
conducted during the same period.
For more details, please refer to the paragraph headed ‘‘Financial Information —
Liquidity and capital resources — Cash flow’’ in this prospectus.
Financial ratios
As at/For the year ended 31 December
As at/For the
nine months
ended
30 September
2020 2021 2022 2023
Profitability Ratios
Gross profit margin (Note 1) 44.0% 42.4% 41.5% 42.9%
N e tp r o f i tm a r g i n(Note 2) 36.1% 30.5% 25.1% 33.9%
Return on assets (Notes 3&4) 17.6% 16.3% 9.6% 11.1% (Note 4)
Return on equity (Notes 4&5) 20.7% 18.3% 11.0% 12.4% (Note 4)
Liquidity Ratios
Current ratio
(Note 6) 1 . 5t i m e s 3 . 2t i m e s 3 . 8t i m e s 4 . 7t i m e s
Quick ratio (Note 7) 1 . 5t i m e s 3 . 2t i m e s 3 . 7t i m e s 4 . 7t i m e s
Solvency Ratios
Interest coverage ratio (Note 8) 38.0 times 53.7 times 36.3 times 63.1 times
Gearing Ratio (Note 9) 9.8% 8.0% 7.1% 6.2%
Notes:
1. The gross profit margin represents the gross profit divided by the revenue for the respective year/period
multiplied by 100%. For details, please refer to th e paragraphs headed ‘‘Financial Information —
Description of selected statements of profit or loss it ems — Gross profit’’ and ‘‘Financial Information —
Key Financial Ratios — Gross profit margin’’ in this prospectus.
SUMMARY
–1 1–


--- page 21 ---
2. The net profit margin represents the net profit di vided by the revenue for the respective year/period
multiplied by 100%.
3. Return on assets represents net profit divided by to tal assets as at the respective year end and multiplied
by 100%.
4. Return on equity and return on assets are calculated on a full year basis except for 9M2023.
5. Return on equity represents net profit divided by total equity as at the respective year end and multiplied
by 100%.
6. Current ratio represents total current assets divided b y total current liabilities as at the respective year/
period end.
7. Quick ratio represents total current assets less inventories divided by total current liabilities as at the
respective year/period end.
8. Interest coverage ratio represents profit before income tax and interest expenses divided by interest
expenses for the respective year/period end.
9. Gearing ratio represents the total interest-bearing de bt including borrowings and lease liabilities divided
by total equity as at the respective y ear/period end multiplied by 100%.
Our gross profit margin decreased from 44.0% in FY2020 to approximately 42.4% in
FY2021 mainly because of the increase in cu ltivation overheads from approximately
RMB4.2 million for FY2020 to RMB6.1 millio n for FY2021 which a re predominantly
depreciation charges. Our gross profit margin decreased from approximately 42.4% in
FY2021 to approximately 41.5% in FY2022 mainly because our revenue decreased by
approximately 18.2% due to the temporary sus pension of our cultivation facilities in
FY2022, yet our cultivation overheads remain at a similar level. Our gross profit margin
increased from approximately 39.9% in 9M202 2 to approximately 42.9% in 9M2023 mainly
because of the increase in revenue from the sale of our potted vegetable produce.
Our net profit margin decreased fro m approximately 36.1% in FY2020 to
approximately 30.5% in FY2021 primarily resu lted from increase in our Listing expenses
in the corresponding period. Our net profit margin decreased from approximately 30.5% in
FY2021 to approximately 25.1% in FY2022 primarily due to the temporary adverse impact
of the COVID-19 epidemic which seriously af fected our Laixi Facility and Dalian Facility
during FY2022. Our net profit margin increased from approximately 22.2% in 9M2022 to
approximately 33.9% in 9M2023 as our business operation was no longer affected by
COVID-19 epidemic in 9M2023.
For more details, please refer to the paragraph headed ‘‘Financial Information — Key
financial ratios’’ in this prospectus.
Biological assets
Our biological assets consist of potted veg etable produce stated at fair value less
estimated cost to sell. The fair value has been assessed by Savills, our independent qualified
professional valuers. We recognise the fair value gain or loss of our potted vegetable
produce in ‘‘changes in fair value of biological assets’’ at the end of each period. Cost
approach is adopted for the newly planted potted vegetable produce, and market approach
is adopted for mature potted vegetable produce since observable biological transformation
has taken place. Please refer to the paragraph h eaded ‘‘Financial Information — Analysis of
selected statement of financial position items — Biological assets’’ in this prospectus for
details.
SUMMARY
–1 2–


--- page 22 ---
The following table sets forth the value of our biological assets as at the dates
indicated:
At 31 December
At 30
September
2020 2021 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000
Value of biological assets
At 1 January 6,724 9,395 9,781 8,371
Increase due to plantation 67,444 86,208 74,798 66,523
Decrease due to sales (65,828) (85,999) (70,804) (66,785)
Biological assets fair value adjustments 1,055 177 (5,404) 767
At 31 December/30 September 9,395 9,781 8,371 8,876
According to our Group’s accounting policies, (i) a biological asset shall be measured
at the end of each reporting period at its fair value less costs to sell, except where the fair
value cannot be measured reliably; and (ii) agri cultural produce harvested from an entity’s
biological assets shall be measured at its fair value less costs to sell at the point of harvest.
The resultant changes in the fair value betw een each reporting period are charged to
‘‘biological assets fair value adjustments’’ as gain or loss. As the potted vegetable produce
w a ss o l di np o t s ,t h ep o t t e dv e g e t a b l ew a ss o ld while still fresh and living and has not been
harvested upon sales, there is no need to revalue potted vegetable produce upon sales. While
the Group’s biological asset at the end of each reporting period is measured at its fair value
less costs to sell, there is no changes in fair va lue recognised for potted vegetables that are
planted and sold within the same financial period.
In FY2022, the biological assets fair value adjustments includes unsold vegetable
produce of approximately RMB4.6 million as a re sult of the temporary suspension of our
facilities due to the outbreak of COVID-19 epidemic.
Taxation
According to Article 27 of the EIT Law and Article 86 of the Regulations of Enterprise
Income Tax Law, enterprise income from agriculture, forestry, husbandry and fishery
projects may be reduced or exempted from ta xation. Pursuant to the abovementioned
provisions and with the approval of Dianbu Branch of the State Taxation Bureau of Laixi
City, Fujing Agriculture’s enterprise in come from agriculture has been exempted from
taxation for the period from 1 May 2010 to 1 May 2050. Therefore, we did not have any
income tax expense and our effective tax rate remained to be nil throughout the Track
Record Period. For details of the relevant laws and regulations, please refer to the
paragraph headed ‘‘Regulatory Overview — Laws and regulations relating to taxation’’ in
this prospectus.
SUMMARY
–1 3–


--- page 23 ---
Dividends and dividend policy
No dividend had been declared or paid by the companies now comprising the Group
during the Track Record Period. Going forward, we will re-evaluate our dividend policy in
light of our financial position and the prevailing economic climate. The determination to
pay dividends will be based upon our earnings, cash flow, financial condition, capital
requirements, statutory fund reserve requirements and any other conditions that our
Directors deem relevant. The payment of divid ends may also be limited by legal restrictions
and by financing agreements that we may enter into in the future. Our Company does not
intend to adopt fixed dividend policy specify ing a dividend payout ratio after Listing. The
declaration, payment and amount of dividends will be subject to our discretion. Our
historical dividends may not be indicative of the amount of our future dividends. For
details, please refer to the paragraph headed ‘‘Financial Information — Dividend policy’’.
LISTING EXPENSES
Our total estimated Listing expenses primarily consist of our estimated underwriting
commissions for the Share Offer in addition to our professional fees paid in relation to the
Share Offer. Assuming the Over-allotment Option is not exercised and assuming an Offer
Price of HK$1.18, being the mid-point of our indicative price range for the Share Offering,
our total Listing expenses is estimated to be approximately RMB54.8 million (equivalent to
approximately HK$60.4 million), representing approximately 51.2% of the gross proceeds
from the Share Offer. The Listing expenses comprise (i) underwriting-related expenses of
approximately RMB6.4 million (equivalent to HK$7.1 million); (ii) non-underwriting-
related expenses of RMB48.4 million (equiva lent to HK$53.3 million), including (a) fees
and expenses of legal advisers and reporti ng accountants of approximately RMB25.1
million (equivalent to HK$27.7 million); and (b) other non-underwriting-related fees and
expenses of approximately RMB23.3 million (equivalent to HK$25.6 million). Our Listing
expenses of approximately RMB14.3 million (equivalent to appr oximately HK$15.8
million) is directly attributable to the issue of the Offer Shares in the Share Offer which
was and is expected to be accounted for as a deduction from equity in accordance with
relevant accounting standards. Our remaining Listing expenses of approximately RMB40.5
million (equivalent to approximately HK$44.6 million) were or are expected to be charged
as expenses to our consolidated statements of profit or loss and other comprehensive
income, of which approximately RMB5.3 m illion (equivalent to approximately HK$5.8
million), approximately RMB4.1 million (equi valent to approximately HK$4.4 million),
approximately RMB7.6 million (equivalen t to approximately HK$8.4 million),
approximately RMB5.7 million (equivalent to approximately HK$6.3 million) and
approximately RMB6.0 million (equivalent to approximately HK$6.6 million) was
charged for before the Track Record Pe riod, FY2020, FY2021, FY2022 and 9M2023
respectively, while the balance of approximately RMB11.8 million (equivalent to
approximately HK$13.1 million) is expected to be charged in the remaining months in
the year ended 31 December 2023 and year e nding 31 December 2024. Our above total
estimated Listing expenses are the latest practicable estimates for reference only. The final
amount to be recognised may differ from these estimates.
SUMMARY
–1 4–


--- page 24 ---
UNAUDITED PRELIMINARY FINANCIAL INFORMATION FOR THE YEAR ENDED
31 DECEMBER 2023
The unaudited preliminary financial information as of and for the year ended 31
December 2023 as set out in Appendix III to this prospectus has been agreed with the
Reporting Accountants following their work under Practice Note 730 (Revised) ‘‘Guidance
for Auditors Regarding Preliminary Announcements of Annual Results’’ issued by the
Hong Kong Institute of Certified Public Accountants. For details, see Appendix III to this
prospectus.
F U T U R EP L A N SA N DU S EO FP R O C E E D S
Assuming that the Over-allotment Option i s not exercised at all, based on the Offer
Price of HK$1.18 per Offer Share, being the mid -point of the proposed Offer Price range of
HK$1.28 to HK$1.08 per Offer Share, the net proceeds of the Share Offer, after deduction
of underwriting fees and other expenses payable by our Company in relation to the Share
Offer, are estimated to be HK$57.6 million (equivalent to approximately RMB52.3 million).
Our Company currently intends to use the net proceeds from the Share Offer as follows:
For the period
from the Latest
Practicable Date to
31 December 2024
For the
period from
1 January 2025
to
31 December
2025
For the
period from
1 January 2026
to
31 December
2026 Total
Approximate
%o ft h et o t a l
net proceeds
(RMB’million) (RMB’million) (RMB’million) (RMB’million)
Expansion of our cultivation capacity
— Improvement and expansion of
cultivation facilities at existing
geographical markets 17.5 10.1 1.5 29.1 55.7
— Establishing new cultivation facilities in
new geographical markets 9.1 2.3 — 11.4 21.8
Setting up a dedicated organic substrates
production facility 7.4 — — 7.4 14.1
Strengthening our operating efficiency through
upgrade of information technology system 4.4 — — 4.4 8.4
Total 38.4 12.4 1.5 52.3 100.0
For details of how we intend to implement th e proceeds raised from Listing, please
refer to the section headed ‘‘Future Plans and Use of Proceeds’’ and the paragraph headed
‘‘Business — Our business strategies’’ in this prospectus.
SUMMARY
–1 5–


--- page 25 ---
SHARE OFFER STATISTICS
B a s e do nt h eO f f e r
Price of HK$1.08
per Share
B a s e do nt h eO f f e r
Price of HK$1.28
per Share
Market capitalisation of our Shares (Note 1) HK$540 million HK$640 million
Unaudited pro forma adjusted consolidated net
tangible assets attributable to the equity
holders of the Company per Share (Note 2) HK$0.89 HK$0.93
Notes:
1. The calculation of market capitalisation is based on 500,000,000 Shares expected to be in issue
immediately after completion of the Share Offer a nd the Capitalisation Issue but without taking into
account any Shares which may be issued pursuant to the exercise of the Over-allotment Option and the
Share Scheme.
2. The unaudited pro forma adjusted consolidated net tangible assets attributable to the equity holders of
our Company per Share is calculated based on 500,000,000 Shares in issue immediately following the
completion of the Capitalisation Issue and the proposed Share Offer assuming the proposed Share Offer
had been completed on 30 September 2023 and no exercise of the Over-allotment Option or any options
and/or awards may be granted under the Share Scheme and no Shares may be allotted, issued or
repurchased by the Company pursuant to the general m andates for the allotment and issue or repurchase
of Shares referred to in Appendix VI to this prospectus or otherwise.
SUMMARY
–1 6–


--- page 26 ---
IMPACT OF THE OUTBREAK OF COVID-19 EPIDEMIC
China was hit by the outbreak of COVID-19 epidemic since January 2020 until the end
of 2022. The outbreak of the COVID-19 disease had prompted the PRC government to
place many provinces into lockdown at various time during this period, stipulate measures
aiming at reducing mobilities and close non-esse ntial businesses which affected our business
to different extent. In early 2020, government policies were issued to require that during the
prevention and control of outbreak of COVID-19, normal supply of agricultural production
materials shall be ensured.
During the Track Record Period, outbreaks of COVID-19 epidemic affected the
operation of our cultivation facilities. The follo wing table sets forth the several outbreaks of
COVID-19 epidemic which affected the operation of our cultivation facilities during the
Track Record Period:
Affected period and duration: Facilities and markets being
affected by the COVID-19
epidemic:
Direct loss of potted vegetable produce
and the estimated loss of potential sales
revenue during the lockdown:
1. February 2020 to March 2020
(approximately one month)
Laixi Facility and
Shandong province market
N/A (Note 1)
2. 22 December 2020 to 15 January
2021 (approximately 24 days)
Dalian Facility and
Liaoning province market
Direct loss of unsold vegetable
produce: approximately 15,000 pots
Estimated direct loss of potential sales
revenue: approximately RMB0.2
million (Note 2)
3. 23 December 2021 to 24 January
2022 (approximately one
month)
Xi’an Facility and
Shaanxi province market
Direct loss of unsold vegetable
produce: approximately 9,000 pots
Estimated direct loss of potential sales
revenue: approximately RMB0.1
million (Note 3)
4. 5 March 2022 to 10 April 2022
(approximately one month)
Laixi Facility and
Shandong province market
Direct loss of unsold vegetable
produce: approximately 549,000 pots
Estimated direct loss of potential sales
revenue: approximately RMB8.2
million (Note 4)
5. 14 March 2022 to 10 April 2022
(approximately one month)
Dalian Facility and
Liaoning province market
Direct loss of unsold vegetable
produce: approximately 8,000 pots
Estimated direct loss of potential sales
revenue: approximately RMB0.1
million (Note 2)
SUMMARY
–1 7–


--- page 27 ---
Notes:
1. The lockdown and travel restrictions were main ly imposed in the Qingdao city. Our Laixi Facility,
which is located in suburban area was still in opera tion. Our distributors sold our potted vegetable
produce to residents in local residential estates t hrough property management companies, thus there
was no direct loss of potted vegetable produce and sales revenue.
2. The estimated loss of potential sales revenue is calculated based on the average selling price of our
potted vegetable produce in Liaoning province of approximately RMB16.0 per pot in FY2020,
FY2021 and FY2022.
3. The estimated loss of potential sales revenue is calculated based on the average selling price of our
potted vegetable produce in Shaanxi province of approximately RMB16.0 per pot in FY2021 and
FY2022.
4. The estimated loss of potential sales revenue is calculated based on the average selling price of our
potted vegetable produce in Shandong province of approximately RMB15.0 per pot in FY2022.
In particular, the series of lockdown measures in Dalian and various areas in Shandong
province due to the COVID-19 epidemic in 2022 has temporary adverse impact on our
business in FY2022. Our revenue derived from Laixi Facility and the Dalian Facility has
dropped by approximately RMB26.8 million and RMB0.5 million, or 19.0% and 7.2%
between FY2021 and FY2022 respectively. Such lockdowns have more serious impact on
our business and financial performance than lockdown in prior years as (i) the lockdown
affected our Laixi Facility and Shandong pr ovince market which accounts for most of our
revenue, (ii) distributors were not allowed to pick up potted vegetable produce from us and
no sales took place during the lockdown result ing in direct loss of approximately 557,000
pots of unsold vegetable produce and estimated direct loss of potential sales revenue of
approximately RMB8.3 million, and (iii) the COV ID-19 epidemic was particularly serious
in Shandong province and it took several months for our overall sales to pickup and
gradually resume to normal level due to the prolonged lockdown. For details of each of the
outbreaks, please refer to the paragraph headed ‘‘Business — Impact of the outbreak of
COVID-19 epidemic’’ in this prospectus.
The PRC government has substantially lifte d its COVID-19 prevention and control
policies since December 2022 and our busine ss continued to recover in 2023 as our business
operation was no longer affected by the epidemic. We recorded a revenue of approximately
RMB121.3 million for the nine months ended 30 September 2023, which slightly exceeded
the revenue of approximately RMB117.2 million for the nine months ended 30 September
2021. Our Directors are of the view that it is un likely that the COVID-19 epidemic will have
a material adverse impact on our business going forward. Our Directors confirmed that
there was no material adverse impact on our operation, our sales to our customers, our
suppliers and our subcontractors in relation to our business due to the epidemic during the
Track Record Period and up to the Latest Practicable Date.
However, there is no assurance that there will not be any direct or indirect adverse
impact on our business, financial condition and results of operations arising from any effect
on the PRC economy or other parts of the world as a result of the continuance of the
COVID-19 outbreak. For details, please refer to the paragraph headed ‘‘Risk Factors —
Risks relating to our business — The outbreak of COVID-19 has caused, and may continue
to cause, damage to the economy and as a result may adversely affect our business, financial
condition and results of operations’’ in this prospectus.
SUMMARY
–1 8–


--- page 28 ---
RECENT DEVELOPMENT AND NO MATERIAL ADVERSE CHANGE
Subsequent to the Track Record Period and up to the Latest Practicable Date, there
had not been any material changes to our principal business. Our Directors confirm that, up
to the date of this prospectus, there has been no material adverse change in our financial
and trading position since 30 September 2023 and there has been no event since 30
September 2023 which would materially affect the information shown in the Accountants’
Report as set out in Appendix I to this prospectus. The PRC government has substantially
lifted its COVID-19 prevention and control policies since December 2022, our business
continued to recover from the impact of COVID-19 outbreak in 2023. The total number of
potted vegetable produce sold by the Group in creased from approximately 5.9 million pots
for the nine months ended 30 September 2022, to approximately 8.0 million pots for the
nine months ended 30 September 2023. This in crease indicates a strong recovery by the
Group from the adverse impact of the COVID-19 epidemic outbreak in 2022. Furthermore,
it demonstrates a robust market demand for the Group’s potted vegetable produce,
surpassing even the performance of 2021 when approximately 1.9 million pots were sold
during the same period. In addition, for the 9M2023, the utilisation rate of our Laixi
Facility, Xi’an Facility and Dalian Facility was approximately 91.3%, 68.8% and 58.5%,
respectively, while the overall utilisatio n rate of our three cultivation facilities is
approximately 88.1%, which has returned to the FY2020 and FY2021 level.
OTHER INFORMATION
Regulatory Developments on Overseas Listing
On 17 February 2023, the CSRC formally released the Trial Administrative Measures
of Overseas Securities Offering an d Listing by Domestic Companies 《境內企業境外發行證
券和上市管理試行辦法》(the ‘‘Trial Overseas Listing Measures ’’) and five filing guidelines,
which became effective on 31 March 2023. Where an issuer submits an application for initial
public offering for overseas offering or listing directly or indirectly, such issuer must file
with the CSRC within three business days after such application is submitted.
We had completed the filing procedures with the CSRC for the Listing on 23 October
2023. Please refer to the paragraph headed ‘‘Regulatory Overview — Regulations relating to
overseas listing’’ for further details.
NEEQ listing and delisting
In November 2015, the shares in Fujing Agriculture were first listed on the NEEQ. On
21 January 2019, Fujing Agriculture’s shareholders resolved to voluntarily delist Fujing
Agriculture’s shares from NEEQ (the ‘‘ NEEQ Delisting’’). On 15 May 2019, Fujing
Agriculture received regulatory approval for the NEEQ Delisting. On 22 May 2019, the
shares in Fujing Agriculture ceased to be qu o t e do nt h eN E E Q .T h eN E E QD e l i s t i n gw a sa
commercial and strategic decision made by Fujing Agriculture’s directors, based on the
desire to attain greater access to internation al investors and markets by listing on the Stock
Exchange. Please refer to the section headed ‘‘History, Reorganisation and Corporate
Structure’’ for further details.
SUMMARY
–1 9–


--- page 29 ---
In this prospectus, unless the context otherwise requires, the following expressions have
the following meanings. Certain other terms ar e explained in the section headed ‘‘Glossary of
Technical Terms’’ in this prospectus.
‘‘affiliate(s)’’ any other person(s), d irectly or indirectly, controlling or
controlled by or under direct or indirect common control with
such specified person
‘‘AFRC’’ Accounting and Financial Reporting Council
‘‘Agricultural Adviser’’ Professor Cui Dejie ( 崔德杰), a professor of Qingdao
Agricultural University, who is the agricultural adviser of our
Company
‘‘Articles of
Association’’ or
‘‘Articles’’
the amended and restated articles of association of our Company
conditionally adopted on 11 March 2024, which will become
effective upon Listing, a summary of which is contained in
Appendix V to this prospectus, as amended from time to time
‘‘associate(s)’’ has the meaning as described thereto under the Listing Rules
‘‘Beauty Sources’’ Beauty Sources Holdings Limited ( 美源控股有限公司), a
company incorporated in the BVI on 24 May 2019 as a BVI
business company which is wholly-owned by Ms. Geng Qi ( 耿琦)
‘‘BMI Appraisals’’ BMI Appraisals Limited, the property valuer
‘‘Board’’ our board of Directors
‘‘Business Day(s)’’ any day(s) (other than Saturday(s), Sunday(s) or public
holiday(s)) in Hong Kong on which banks in Hong Kong are
open generally for normal banking business to the public
‘‘BVI’’ the British Virgin Islands
‘‘CAGR’’ compound annual growth rate
‘‘Capitalisation Issue’’ the issue of 399,858, 586 Shares to be made upon capitalisation of
certain sums standing to the credit of the share premium account
of our Company as referred to in the paragraph headed ‘‘A.
Further information about our Company and our subsidiaries —
4. Written Resolutions of our Shareholders passed on 16
November 2023 and 11 March 2024’’ in Appendix VI to this
prospectus
DEFINITIONS
–2 0–


--- page 30 ---
‘‘Capital Market
Intermediary(ies)’’ or
‘‘CMIs’’
the capital market intermediaries participating in the Share
Offer, namely CMBC Securities, Grande Capital, Cinda
International Capital Limited, BOCOM International Securities
Limited, ABCI Capital Limit ed, ABCI Securities Company
Limited, CCB International Capital Limited, ICBC
International Securities Limited, Haitong International
Securities Company Limited, Zhongtai International Securities
Limited, China Galaxy International Securities (Hong Kong)
Co., Limited, Eddid Securities and Futures Limited, Alliance
Capital Partners Limited, Cai tong International Securities
Company Limited, Ruibang Securities Limited, Victory
Securities Company Limited, Patrons Securities Limited, Fosun
International Securities Limited, SBI China Capital Financial
Services Limited and Sheng Yuan Securities Limited
‘‘Caring Plentiful’’ Caring Plentiful Holdings Limited ( 嘉沃控股有限公司), a
company incorporated in the BVI on 24 May 2019 as a BVI
business company which is wholly-owned by Mr. Cui Wei ( 崔偉)
‘‘CCASS’’ the Central Clearing and Settlement System established and
operated by HKSCC
‘‘Chengyang Facility’’ our cultivation facility in Chengyang District, Qingdao,
Shandong Province, the PRC, which our Group ceased to
operate after 31 December 2019
‘‘Circular 37’’ the Notice of the SAFE on Relevant Issues concerning Foreign
Exchange Administration relati ng to Domestic Residents Offshore
Investment and Financing and R ound-trip Investment through
Special Purpose Vehicles ( 國家外匯管理局關於境內居民通過特殊
目的公司境外投融資及返程投資外匯管理有關問題的通知)
‘‘China’’ or ‘‘PRC’’ the People’s Republic of China, excluding, except the context
otherwise requires and for the purposes in this prospectus, Hong
Kong, the Macau Special Administrative Region of the PRC and
Taiwan
‘‘CMBC Securities’’ CMBC Securities Co mpany Limited, a licensed corporation to
carry out type 1 (dealing in securities) and type 4 (advising on
securities) regulated activities as defined under the SFO
‘‘Companies Act’’ the Companies Act (As Revised) of the Cayman Islands
‘‘Companies
Ordinance’’
the Companies Ordinance (Chapter 622 of the Laws of Hong
Kong) effective from 3 March 2014, as amended, supplemented
or otherwise modified from time to time
DEFINITIONS
–2 1–


--- page 31 ---
‘‘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’’, ‘‘us’’ or
‘‘we’’
Fujing Holdings Co., Limited ( 富景中國控股有限公司,f o r m e r l y
known as ‘‘ 富景控股有限公司’’), an exempted company
incorporated in the Cayman Islands under the Companies Act
with limited liability on 23 July 2019
‘‘connected person(s)’’ has the meaning ascribed thereto under the Listing Rules
‘‘Controlling
Shareholder(s)’’
has the meaning ascribed thereto under the Listing Rules and
unless the context requires otherwise, collectively refers to Mr.
Zhang and Wider International
‘‘Corporate Governance
Code’’
the Corporate Governance Code as set out in Appendix C1 to the
Listing Rules
‘‘COVID-19’’ a newly identified coronavirus known to cause contagious
respiratory illness
‘‘CSRC’’ the China Securiti es Regulatory Commission ( 中國證券監督管理
委員會)
‘‘Dalian Facility’’ our cultivation facilit y in Jinzhou District, Dalian, Liaoning
Province, the PRC, of approximately 20,000 sq.m.
‘‘Deed of Indemnity’’ the deed of indemnity dated 14 March 2024 entered into by our
Controlling Shareholders in favour of our Company (on its own
behalf and as the trustee of its subsidiaries), details of which are
set out in the paragraph headed ‘‘E. Other information — 2. Tax
and other indemnities’’ in Appendix VI to this prospectus
‘‘Deed of Non-
competition’’
the deed of non-competition dated 14 March 2024 entered into
by our Controlling Shareholder s in favour of our Company (on
its own behalf and as the trustee of its subsidiaries), details of
which are set out in the paragraph headed ‘‘Relationship with
Controlling Shareholders — Deed of non-competition’’ in this
prospectus
‘‘Designated Bank’’ HKSCC Particip ant’s Designated Bank under FINI
‘‘Director(s)’’ or ‘‘our
Directors’’
t h ed i r e c t o r ( s )o fo u rC o m p a n yo ra n yo n eo ft h e m
‘‘EIT’’ enterprise income tax
DEFINITIONS
–2 2–


--- page 32 ---
‘‘EIT Law’’ the Enterprise Income Tax Law of the PRC ( 中華人民共和國企業
所得稅法) which came into effect on 1 January 2008, as amended,
supplemented or otherwise modified from time to time
‘‘Exchange
Participant(s)’’
a person: (a) who, in accordance with the Listing Rules, may
trade on or through the Stock Exchange; and (b) whose name is
entered in a list, register or roll kept by the Stock Exchange as a
person who may trade on or through the Stock Exchange
‘‘Extreme Conditions’’ extreme conditions caused by a super typhoon as announced by
the government of Hong Kong
‘‘FINI’’ ‘‘Fast Interface for New Issuance’’, an online platform operated
by HKSCC that is mandatory for admission to trading and,
where applicable, the collectio n and processing of specified
i n f o r m a t i o no ns u b s c r i p t i o ni na n dsettlement for all new listings
‘‘Frost & Sullivan’’ Frost & Sullivan (Beijing) Inc., Shanghai Branch Co., an
independent market research and consulting company
‘‘Fujing Agriculture’’ Qingdao Fujing Agriculture Development Company Limited*
(青島富景農業開發有限公司), formerly known as Qingdao
Fujing Agriculture Ecological Development Limited Liability
Company* ( 青島富景農業生態開發有限公司), a limited liability
company established in the PRC on 4 December 2006 and an
indirect wholly-owned subsidiary of our Company
‘‘Fujing Holdings
(HK)’’
Fujing Holdings (Hong Kong) Co., Limited ( 富景控股（香港）有
限公司), a company limited by shares incorporated under the
laws of Hong Kong on 9 October 2019 and an indirect wholly-
owned subsidiary of our Company
‘‘FY2019’’ the financial year ended 31 December 2019
‘‘FY2020’’ the financial year ended 31 December 2020
‘‘FY2021’’ the financial year ended 31 December 2021
‘‘FY2022’’ the financial year ended 31 December 2022
‘‘FY2023’’ the financial year ended 31 December 2023
‘‘F&S Report’’ a market research report in respect of the vegetable and potted
vegetable produce market in China issued by Frost & Sullivan
and commissioned by our Group
DEFINITIONS
–2 3–


--- page 33 ---
‘‘General Rules of
HKSCC’’
the terms and conditions regulating the use of HKSCC’s services,
as may be amended or modified from time to time and where the
context so permits, shall include the HKSCC Operational
Procedures
‘‘Glory Team’’ Glory Team International Group Limited ( 匯榮國際集團有限公
司), a company incorporated in the BVI on 8 August 2019 as a
BVI business company which is a direct wholly-owned subsidiary
of our Company
‘‘Grande Capital’’ or
‘‘Sole Sponsor’’
Grande Capital Limited, a licen sed corporation to carry out
Type 1 (dealing in securities) an d Type 6 (advising on corporate
finance) regulated activities under the SFO, being the Sole
Sponsor to the Listing
‘‘Great Winner’’ Great Winner Investment Holdings Limited ( 宏勝投資控股有限
公司), a company incorporated in the BVI on 2 January 2020 as a
BVI business company
‘‘Group’’, ‘‘our Group’’,
‘‘us’’ or ‘‘we’’
our Company, its subsidiaries or any of them, or, where the
context so requires, in respect of the period before our Company
became the holding company of its present subsidiaries, our
Company’s current subsidiaries or the business operated by such
subsidiaries or their predecessors (as the case may be)
‘‘HK eIPO White Form ’’ the application of the Public Offer Shares to be issued in the
applicant’s own name by submitting applications online through
the designated website at www.hkeipo.hk or the IPO App
‘‘HK eIPO White Form
Service Provider’’
the HK eIPO White Form service provider designated by our
Company, as specified on the designated website at
www.hkeipo.hk or the IPO App
‘‘HKFRSs’’ the Hong Kong Financial Reporting Standards issued by the
Hong Kong Institute of Certified Public Accountants
‘‘HKSCC’’ Hong Kong Securities Clearing Company Limited, a wholly-
owned subsidiary of Hong Kong Exchanges and Clearing
Limited
‘‘HKSCC EIPO’’ the application for the Public Offer Shares to be issued in the
name of HKSCC Nominees and deposited directly into CCASS
to be credited to your 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 HKSCC Participant to give electronic application instructions
via HKSCC’s FINI system to apply for the Public Offer Shares
on your behalf
DEFINITIONS
–2 4–


--- page 34 ---
‘‘HKSCC Nominees’’ HKSCC Nominees Lim ited, a wholly-owned subsidiary of
HKSCC
‘‘HKSCC Operational
Procedures’’
the operational procedures of HKSCC, containing the practices,
procedures and administrative or other requirements relating to
HKSCC’s services and the operations and functions of CCASS,
FINI or any other platform, facility or system established,
operated and/or otherwise provided by or through HKSCC, as
from time to time in force
‘‘HKSCC Participant’’ a participant admitted to participate in CCASS as a direct
clearing participant, a general clearing participant or a custodian
participant
‘‘Hong Kong’’,
‘‘HKSAR’’ or ‘‘HK’’
the Hong Kong Special Administrative Region of the PRC
‘‘Hong Kong Branch
Share Registrar’’
Tricor Investor Services Limited, the branch share registrar and
transfer office of our Company in Hong Kong
‘‘Hong Kong dollars’’,
‘‘HK$’’ and ‘‘cents’’
Hong Kong dollar(s) and cent(s), respectively, the lawful
currency of Hong Kong
‘‘Independent Third
Party(ies)’’
person(s) or company(ies) which, to the best knowledge,
information and belief of our Directors having made all
reasonable enquiries, is/are not a connected person(s) (as
defined in the Listing Rules) of our Company
‘‘IPO App’’ the mobile application for HK eIPO White Form service which
can be downloaded by searching ‘‘ IPO App ’’ in App Store or
Google Play Store or downloaded at www.hkeipo.hk/IPOApp or
www.tricorglobal.com/IPOApp
‘‘Joint Bookrunners’’ CMBC Securities, Gra nde Capital, Cinda International Capital
Limited, BOCOM International Securities Limited, ABCI
Capital Limited, CCB International Capital Limited, ICBC
International Securities Limited, Haitong International
Securities Company Limited, Zhongtai International Securities
Limited, China Galaxy International Securities (Hong Kong)
Co., Limited, Eddid Securities and Futures Limited, Alliance
Capital Partners Limited, Cai tong International Securities
Company Limited and Ruibang Securities Limited
DEFINITIONS
–2 5–


--- page 35 ---
‘‘Joint Lead Managers’’ CMBC Securities, Gra nde Capital, Cinda International Capital
Limited, BOCOM International Securities Limited, ABCI
Securities Company Limited, CCB International Capital
Limited, ICBC International Securities Limited, Haitong
International Securities Company Limited, Zhongtai
International Securities Limited, China Galaxy International
Securities (Hong Kong) Co., Limited, Eddid Securities and
Futures Limited, Alliance Capital Partners Limited, Caitong
International Securities Company Limited, Ruibang Securities
Limited, Victory Securities Company Limited, Patrons Securities
Limited, Fosun International Securities Limited, SBI China
Capital Financial Services Limited and Sheng Yuan Securities
Limited
‘‘Joint Global
Coordinators’’
CMBC Securities, Grande Capital and Cinda International
Capital Limited
‘‘Joint Overall
Coordinators’’
CMBC Securities and Grande Capital
‘‘Laixi Facility’’ our cultivation facilit y in Laixi, Qingdao, Shandong Province,
the PRC, of approximately 398,272 sq.m.
‘‘Laixi Land Parcel A’’ the parcel of land with a site area of approximately 214,804 sq.m.
located at Rizhuang Town, Laixi, Qingdao that we owned the
land use rights certificate
‘‘Laixi Land Parcel B’’ the parcel of land with a site area of approximately 34,467 sq.m.
located at Rizhuang Town, Laixi, Qingdao that we leased from
the People’s Government of Rizhuang Town of Laixi ( 萊西市日
莊鎮人民政府)
‘‘Laixi Land Parcel C’’ the parcel of land with a site area of approximately 128,334 sq.m.
located at Rizhuang Town, Laixi, Qingdao that we obtained the
land use rights under the land res ervation agreement we entered
into with the People’s Government of Rizhuang Town of Laixi
(萊西市日莊鎮人民政府)
‘‘Laixi Land Parcels D’’ the four parcels of land with a total site area of approximately
76,667 sq.m. located at Rizhuang Town, Laixi, Qingdao that we
leased from the People’s Government of Rizhuang Town of Laixi
(萊西市日莊鎮人民政府)
‘‘Laixi Land Parcel E’’ the parcel of land with a site area of approximately 10,667 sq.m.
located at Maozhichang Village, Laixi, Qingdao that we leased
from an Independent Third Party
DEFINITIONS
–2 6–


--- page 36 ---
‘‘Land Reservation
Agreement’’
the land reservation agreement ( 土地預約協議) we entered into
with the People’s Government of Rizhuang Town of Laixi ( 萊西
市日莊鎮人民政府) on 17 June 2006 for, among others, the
reservation of a parcel of state-owned land located at Rizhuang
Town, Laixi, Qingdao for the purpose of agricultural and
ecological development for a period of 50 years
‘‘Latest Practicable
Date’’
11 March 2024, being the latest practicable date prior to the
printing of this prospectus for the purpose of ascertaining certain
information contained in this prospectus
‘‘Listing’’ the listing of our Shares on the Main Board of the Stock
Exchange
‘‘Listing Committee’’ the Listing Committee of the Stock Exchange
‘‘Listing Date’’ the date, expected to be on or about Thursday, 28 March 2024,
on which our Shares are listed and from which dealings therein
a r ep e r m i t t e dt ot a k ep l a c eo nt h eS t o c kE x c h a n g e
‘‘Listing Rules’’ The Rules Governing the Listing of Securities on the Stock
Exchange, 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 operated in
parallel with GEM of the Stock Exchange
‘‘Memorandum of
Association’’ or
‘‘Memorandum’’
the amended and restated memorandum of association of our
Company conditionally adopted on 11 March 2024, which will
become effective upon Listing, a summary of which is contained
in Appendix V to this prospectus, as amended from time to time
‘‘Mr. Zhang’’ Mr. Zhang Yonggang ( 張永剛), our chairman, executive
Director, chief executive officer and one of our Controlling
Shareholders
‘‘Ms. Zhang’’ Ms. Zhang Chunyan ( 張春燕), sister of Mr. Zhang
‘‘NEEQ’’ the National Equities Exchange and Quotations ( 全國中小企業股
份轉讓系統)
‘‘Offer Price’’ the final offer price per Offer Share (exclusive of brokerage of
1%, SFC transaction levy of 0.0027%, AFRC transaction levy of
0.00015% and Stock Exchange trading fee of 0.00565%) of not
more than HK$1.28 per Offer Share and not less than HK$1.08
per Offer Share at which the Offer Shares are to be offered under
the Share Offer, to be determined in the manner as set out in the
section headed ‘‘Structure and Conditions of the Share Offer’’ in
this prospectus
DEFINITIONS
–2 7–


--- page 37 ---
‘‘Offer Share(s)’’ collectively, the Pla cing Shares and the Public Offer Shares
‘‘Over-allotment
Option’’
the option expected to be granted by our Company to the Placing
Underwriters, exercisable by the Joint Overall Coordinators and
the Joint Global Coordinators (for themselves and on behalf of
the Placing Underwriters) subject to the terms and conditions of
the Placing Underwriting Agreement pursuant to which our
Company may be required to allot and issue up to an aggregate
of 15,000,000 additional Offer Shares (representing 15% of the
initial number of the Offer Shares) to cover over-allocations in
the Placing and/or to satisfy the obligation of the Stabilising
Manager to return securities borrowed under the Stock
Borrowing Agreement, particulars of which are set out in the
section headed ‘‘Structure and Conditions of the Share Offer’’ in
this prospectus
‘‘Placing’’ the conditional placing by the Placing Underwriter(s) on behalf
of our Company of the Placing Shares for cash at the Offer Price,
as further described under the section headed ‘‘Structure and
Conditions of the Share Offer’’ in this prospectus
‘‘Placing Shares’’ the 90,000,000 Shares (subject to reallocation and the Over-
allotment Option) being initially offered by our Company for
subscription under the Placing, as described under the section
headed ‘‘Structure and Conditions of the Share Offer’’ in this
prospectus
‘‘Placing
Underwriter(s)’’
the underwriter(s) which are expected to enter into the Placing
Underwriting Agreement to underwrite the Placing Shares
‘‘Placing Underwriting
Agreement’’
the underwriting agreement exp ected to be entered into on or
around Tuesday, 26 March 2024 by our Company, our executive
Directors, our Controlling Shareholders, the Sole Sponsor, the
Joint Overall Coordinators, the Joint Global Coordinators, the
Joint Bookrunners, the Joint Lead Managers, the Capital Market
Intermediaries and the Placing Underwriter(s) relating to the
Placing
‘‘PRC Legal Advisers’’ Hylands Law Firm (J inan), the legal advisers of our Company as
to the laws of the PRC
‘‘Price Determination
Agreement’’
the agreement to be entered into between our Company, the Joint
Overall Coordinators and the Joint Global Coordinators (for
themselves and on behalf of the Underwriters) on or about the
Price Determination Date to determine the Offer Price
‘‘Price Determination
Date’’
the date expected to be on or before Tuesday, 26 March 2024, on
which the Offer Price is fixed for the purpose of the Share Offer
DEFINITIONS
–2 8–


--- page 38 ---
‘‘Prosperity Plentiful
(BVI)’’
Prosperity Plentiful Holdings Limited (瑞 豐控股有限公司), a
company incorporated in the BVI on 16 May 2019 as a BVI
business company and a direct wholly-owned subsidiary of our
Company
‘‘Prosperity Plentiful
(HK)’’
Prosperity Plentiful Holdings (Hong Kong) Co., Limited ( 瑞豐控
股（香港）有限公司), a company incorporated in Hong Kong with
limited liability on 6 June 2019 and an indirect wholly-owned
subsidiary of our Company
‘‘Public Offer’’ the issue and offer of the Public Offer Shares for subscription in
Hong Kong at the Offer Price on and subject to the terms and
conditions described in this prospectus
‘‘Public Offer Shares’’ the 10,000,000 Shares (subject to reallocation) initially offered by
our Company for subscription in the Public Offer, as described
under the section headed ‘‘Structure and Conditions of the Share
Offer’’ in this prospectus
‘‘Public Offer
Underwriters’’
the underwriter(s) of the Public Offer, whose names are set out
under the paragraph headed ‘‘Underwriting — Underwriters —
Public Offer Underwriters’’ in this prospectus
‘‘Public Offer
Underwriting
Agreement’’
the underwriting agreement dated 18 March 2024 and entered
into by our Company, our executive Directors, our Controlling
Shareholders, the Sole Sponsor, the Joint Overall Coordinators,
the Joint Global Coordinators, the Joint Bookrunners, the Joint
Lead Managers, the Capital Market Intermediaries and the
Public Offer Underwriters relating to the Public Offer
‘‘QF Vegetables’’ Qingdao Fujing Veg etables and Fruits Company Limited* ( 青島
富景蔬果有限公司), a company incorporated in the PRC with
limited liability on 24 September 2011, which was a wholly-
owned subsidiary of Fujing Agriculture and was duly
deregistered on 20 December 2016
‘‘Regulation S’’ Regulation S under the US Securities Act
‘‘Relevant Persons’’ the Sole Sponsor, the Joint Overall Coordinators, the Joint
Global Coordinators, the Joint Bookrunners, the Joint Lead
Managers, the Capital Market Intermediaries, the Underwriters,
any of their or the Company’s re spective directors, officers,
employees, partners, agents, advisers and any other parties
involved in the Share Offer
DEFINITIONS
–2 9–


--- page 39 ---
‘‘Reorganisation’’ the reorganisation arrangements undergone by our Group in
preparation for Listing, details of which are set out in the
paragraph headed ‘‘History, Reorganisation and Corporate
Structure — Reorganisation’’ in this prospectus
‘‘Reporting
Accountants’’
Crowe (HK) CPA Limited and M cMillan Woods (Hong Kong)
CPA Limited, the reporting accountants of the Company
‘‘RMB’’ Renminbi, the lawful currency of the PRC
‘‘SAFE’’ the State Administration of Foreign Exchange of the PRC ( 中華
人民共和國國家外匯管理局)
‘‘SAIC’’ the State Administration for Industry and Commerce of the PRC
(中華人民共和國國家工商行政管理總局)
‘‘SAT’’ the State Administration of Taxation of the PRC ( 中華人民共和
國國家稅務總局)
‘‘Savills’’ Savills Valuat ion and Professional Services (China) Limited, our
biological assets valuer
‘‘SFC’’ the Securities and Futures Commission of Hong Kong
‘‘SFO’’ the Securities and Futures Ordinance (Chapter 571 of the Laws
of Hong Kong), as amended, supplemented or otherwise
modified from time to time
‘‘Share(s)’’ ordinary share(s) with nominal value of US$0.01 each in the
share capital of our Company
‘‘Shareholder(s)’’ or
‘‘our Shareholders’’
holder(s) of the Share(s)
‘‘Share Offer’’ the Public Offer and the Placing
‘‘Share Scheme’’ the share scheme conditionally adopted by our Company on 11
March 2024, the principal terms of which are summarised in the
paragraph headed ‘‘D. Share Scheme’’ in Appendix VI to this
prospectus
‘‘Stabilising Manager’’ CMBC Securities
‘‘Stock Borrowing
Agreement’’
the stock borrowing agreement which may be entered into
between the Stabilising Manager and Wider International
pursuant to which the Stabilising Manager may borrow up to
15,000,000 Shares from Wider International for the purpose of
covering any over-allocation under the Placing
DEFINITIONS
–3 0–


--- page 40 ---
‘‘Stock Exchange’’ The Stock Exchange of Hong Kong Limited
‘‘subsidiary(ies)’’ has the meaning ascribed thereto under the Listing Rules
‘‘Substantial
Shareholder(s)’’
has the meaning ascribed thereto under the Listing Rules
‘‘Supplemental
Agreement’’
the supplemental agreement we entered into with the People’s
Government of Rizhuang Town of Laixi ( 萊西市日莊鎮人民政
府) on 23 March 2020 which confirmed the use and occupation of
a parcel of state-owned land by our Group in accordance to the
Land Reservation Agreement
‘‘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
‘‘Track Record Period’’ the periods comprising FY2020, FY2021, FY2022 and 9M2023
‘‘Underwriter(s)’’ the Public Offer Underwriter(s) and the Placing Underwriter(s)
‘‘Underwriting
Agreements’’
the Public Offer Underwritin g Agreement and the Placing
Underwriting Agreement
‘‘United States’’ or
‘‘US’’
the United States of America
‘‘US dollars’’, ‘‘USD’’
or ‘‘US$’’
United States dollar(s), the lawful currency of the United States
‘‘US Securities Act’’ the United States Securities Act of 1933 (as amended from time
to time)
‘‘VAT’’ the PRC value-added tax
‘‘Vortex Festive’’ Vortex Festive Holdings Limited ( 豐順控股有限公司), a
company incorporated in the BVI on 24 May 2019 as a BVI
business company which is wholly-owned by Mr. Li Changbai
(李長柏)
‘‘Well Resourced’’ Well Resourced Holdings Limited ( 康源控股有限公司), a
company incorporated in the BVI on 24 May 2019 as a BVI
business company which is wholly-owned by Ms. Zhang
‘‘WeMall’’ WeMall ( 微商城), one of the largest e-commerce platform in
China
DEFINITIONS
–3 1–


--- page 41 ---
‘‘Wider International’’ Wider International Group Limited ( 匯得國際集團有限公司), a
company incorporated in the BVI on 24 May 2019 as a BVI
business company which is wholly-owned by Mr. Zhang. Wider
International is one of our Controlling Shareholders
‘‘Xi’an Facility’’ our cultivation facilit y in Gaoling District, Xi’an, Shaanxi
Province, the PRC, of approximately 13,333 sq.m.
‘‘Xinfujing’’ Qingdao Xinfujing Technology Company Limited* ( 青島鑫富景
科技有限公司), a company established in the PRC with limited
liability on 6 May 2020 and is directly wholly-owned by Fujing
Holdings (HK), and an indirect wholly-owned subsidiary of our
Company
‘‘Yuen Sang Tai’’ Yuen Sang Tai Holdings Limited ( 源生態控股有限公司), a
company incorporated in the BVI on 24 May 2019 as a BVI
business company
‘‘9M2022’’ the nine months ended 30 September 2022
‘‘9M2023’’ the nine months ended 30 September 2023
Unless otherwise expressly stated or the cont ext otherwise requires, in this prospectus,
. the terms ‘‘associate(s)’’, ‘‘close associate(s)’’, ‘‘connected person(s)’’, ‘‘core
connected person(s)’’, ‘‘connected transaction(s)’’, ‘‘subsidiary(ies)’’ and
‘‘substantial shareholder(s)’’ shall have the meanings ascribed to such terms in the
Listing Rules;
. all data in this prospectus is as of the Latest Practicable Date;
. certain amounts and percentage figures included in this prospectus have been subject
to rounding adjustments. Accordingly, figures shown as totals in certain tables may
not be an arithmetic aggregation of the figures preceding them; and
. if there is any inconsistency between the C hinese names of entities or enterprises
established in the PRC and their English translations, the Chinese names shall
prevail. The English translation of company or entity names in Chinese or another
language which are marked with ‘‘*’’ and the Chinese translation of company or
entity names in English which are marked with ‘‘*’’ are for identification purpose
only.
DEFINITIONS
–3 2–


--- page 42 ---
This glossary contains explanations of certain terms used in this prospectus in connection
with our Group and our business. The terms and their meanings may not correspond to
standard industry meanings or usage of these terms.
‘‘continuous cropping’’ the repeated and intensive growing of the same or similar plants
on the same land for extended periods of time, which has the
disadvantages of reduction of soil fertility and productivity of
the land
‘‘GB’’ Guobiao Standards ( 中華人民共和國國家標準), the Chinese
national standard issued by the Standardisation Administration
of China ( 國家標準化管理委員會) which constitute the basis for
product testing which products must undergo during the China
Compulsory Product Certification ( 中國強制性產品認證)
‘‘kg’’ kilogramme(s)
‘‘kWh’’ kilowatt hour
‘‘ISO’’ acronym for a series of quality management and quality
assurance standards published by the International
Organisation for Standardisation, a non-government
organisation based in Geneva, Switzerland, for assessing the
quality systems of business organisations
‘‘ISO9001’’ a standard and guideline relating to quality management
systems, and represents an international consensus on good
quality management practices. ISO9001 : 2015 is the current
version of ISO9001
‘‘ISO14001’’ a management system which addresses environmental
management through the identification and control of
environmental impact and constantly improvement of
environmental performance. ISO14001 : 2015 is the current
version of ISO14001
‘‘m
3’’ cubic meter
‘‘mu’’ an area unit used in China, equals to approximately 666.67 sq.m.
‘‘sq.ft.’’ square feet
‘‘sq.m.’’ or ‘‘m2’’ square metre
‘‘%’’ per cent.
GLOSSARY OF TECHNICAL TERMS
–3 3–


--- page 43 ---
This prospectus contains certain forward-looking statements and information relating
to us and our subsidiaries that are based on the beliefs of our management as well as
assumptions made by and information currently available to our management, as such they
are by their nature subject to significant risks and uncertainties. These forward-looking
statements include, without limitation, statements relating to:
. our business and operating strategies, plans, objectives and goals;
. the nature of, and potential for, future development of our business;
. various business opportunities that we may pursue;
. changes in competitive conditions a nd our ability to compete under these
conditions;
. changes to regulatory environment and general outlook in the industry and
markets in which we operate;
. our expectations with respect to our ability to acquire and maintain regulatory
qualifications required to operate our business;
. future developments, trends and conditions in the industry and markets in which
we operate;
. our future debt levels and capital needs;
. our financial conditions and performance; and
. our future dividend.
The words ‘‘aim’’, ‘‘anticipate’’, ‘‘believe’’, ‘‘can’’, ‘‘could’’, ‘‘expect’’, ‘‘going forward’’,
‘‘intend’’, ‘‘may’’, ‘‘might’’, ‘‘plan’’, ‘‘project’’, ‘‘seek’’, ‘‘should’’, ‘‘will’’, ‘‘would’’ and the
negative forms of these words with similar exp ressions, as they relate to us, are intended to
identify a number of these forward looking statements. These forward-looking statements
reflecting our current views with respect to future events are not a guarantee of future
performance and are subject to certain risks, uncertainties and assumptions, including the
risk factors described in the section headed ‘‘ Risk Factors’’ in this prospectus. One or more
of these risks or uncertainties may materialise.
Subject to the requirements of the Listing Rules, our Company does not have any
obligation and does not undertake to update or otherwise revise the forward-looking
statements in this prospectus, whether as a result of new information, future events or
developments or otherwise. As a result of these and other risks, uncertainties and
assumptions, the forward-looking events and circumstances discussed in this prospectus
might not occur in the way our Company expects, or at all. Hence, should one or more of
these risks or uncertainties materialise, or should underlying assumptions prove to be
incorrect, our financial condition may be adversely affected and may vary materially from
those described herein as anticipated, believed, estimated or expected. Accordingly, such
FORWARD-LOOKING STATEMENTS
–3 4–


--- page 44 ---
statements are not a guarantee of future performance and you should not place undue
reliance on such forward-looking information. All forward-looking statements in this
prospectus are qualified by reference to the cautionary statement set out in this section of
the prospectus.
In this prospectus, statements of or references to the intentions of our Company or
those of any of our Directors are made as at the date of this prospectus. Any such intentions
may change in light of future developments.
FORWARD-LOOKING STATEMENTS
–3 5–


--- page 45 ---
You should carefully consider all the information set forth in this prospectus, including
the risks described below, before making any investment in our Shares. The occurrence of
any of the following risks may have a material adverse effect on our business, financial
conditions, results of operations and future prospects. You should pay particular attention to
the fact that we are incorporated in the Cayman Islands and our business and operations are
conducted in the PRC and are governed by a legal and regulatory environment which in
certain aspects differs from that prevailing in other jurisdictions. For details regarding the
regulations of the PRC, please see the section headed ‘‘Regulatory Overview’’ in this
prospectus. The trading price of the Offer Shares could decline due to any of these risks, as
well as additional risks and uncertainties not presently known to us, and you may lose part
or all of your investment.
RISKS RELATING TO OUR BUSINESS
We derive a significant portion of our revenue from our five largest customers and any
decrease in or termination of our sales to any one of them may have a material adverse effect
on our business and financial conditions
There was notable concentration in our customer base during the Track Record
Period. In FY2020, FY2021, FY2022 and 9M2023 , the total revenue from our five largest
customers in each year/period amounted to approximately RMB68.1 million, RMB102.6
million, RMB85.1 million and RMB82.6 million, respectively, accounting for
approximately 56.1%, 66.3%, 67.3% and 68.1% of our total revenue, respectively, while
the total revenue from our largest customer in each year/period amounted to approximately
RMB18.6 million, RMB25.3 million, RMB20.9 million and RMB20.2 million, respectively,
accounting for approximately 15.3%, 16.3%, 16.5% and 16.7% of our total revenue,
respectively. These customers are expected to continue to account for a significant portion
of our total revenue in the future.
There are risks associated with having a small number of major distributors
contributing to a significant portion of our revenue. We cannot assure that we will be
able to maintain or improve our relationships with our major distributors, and we cannot
assure that we will be able to continue to supply our products to them at current levels on
similar terms, or at all. In addition, our busines s is materially affected by the businesses of
our major distributors, which depend to a sign ificant extent on their continuing ability to
sell to their own customers. Any deterioration in the businesses of our major distributors
could lead to a decline in their purchase from us or a change in our business relationships
with our major distributors. Our use of resources and management attention to continue
our business relationships with our major distributors and meet their purchase orders may
also reduce resources devoted to our other customers. Even if we manage to secure other
customers, it would take time and resources for us to develop our relationship with new
customers. If we cannot secure other custome rs, our business performance and financial
conditions may be adversely affected. If any of our major distributors substantially reduces
i t sp u r c h a s eo r d e r sw i t hu so rt e r m i n a t e si t sb u s i n e s sr e l a t i o n s h i pw i t hu s ,w em a yn o tb e
RISK FACTORS
–3 6–


--- page 46 ---
able to obtain orders from other existing customers or new customers to timely replace such
lost sales on comparable terms, or at all, in which case our business, results of operations,
financial conditions and prospects may be materially and adversely affected.
There is no assurance that we can continue to diversify the composition of our
customer base and attract other new customers. Should any of the risks above materialise,
our business and financial position could be adversely affected.
We rely on our distributors to sell our products. Any changes in our relationships with our
distributors may have a material and adverse effect on our sales, results of operations and
financial conditions
We rely on our distributors to sell our products. We sell our potted vegetable produce
primarily through our distributors, which then on-sell our potted vegetable produce to end-
user customers. During the Track Record Peri od, the sale to distributors represented
approximately 99.7%, 100.0%, 100.0% and 100.0% of our revenue, respectively. However,
the effectiveness of our distributors in se lling and distributing our products could be
affected by a number of factors and since we mainly sell and distribute our products
through distributors, if any of the following events occur, there may be fluctuations or
decline in our revenue which could have adverse effect on our business and financial
performance:
. reduction, delay or cancellation of orders from our distributors;
. inability to appoint or replace distributors in a timely manner upon the loss of one
or more of our distributors;
. failure to maintain relationship with our existing distributors or to renew our
distribution agreements with favourable terms;
. inability of our distributors to promote our products;
. failure of our distributors to distribute our products in a timely manner or in
accordance with the terms of our distribution agreement;
. failure of our distributors to distribute our products in accordance with the
applicable PRC laws and regulations;
. deterioration of relationship between our distributors and their customers; and
. deterioration of their own financial performance of our distributors.
We may not be able to maintain our competitiveness in the market, especially if our
existing or future competitors launch marke ting campaigns by offering more favourable
arrangements with their distributors. We cannot assure that we can maintain good
relationship with our distributors, in the e vent that we lose any of our distributors, our
business and financial performance may be adversely affected.
RISK FACTORS
–3 7–


--- page 47 ---
Any food safety problems could adversely affect our reputation, brand’s image, ability to sell
our products and financial performance
Some of our raw materials may contain harmful substances or chemicals of which we
are unaware of due to adulteration by our suppliers. Such harmful substances or chemical
may be absorbed by our potted vegetable produce and eventually be consumed by our
customers and cause health and food safety issue. The quality and quantity of our products
could be adversely affected if our raw materials are substandard, spoiled, contaminated or
tampered with. We cannot assure that our suppliers will not intentionally or inadvertently
contaminate our raw materials or provid e us with substandard raw materials.
Food safety problems may occur due to contamination or pollution during production,
transportation, distribution or under the possession of the hotels and restaurants end-user
customers before consumptions due to unknown reasons or for reasons that are out of our
control. While we have quality control measures in place to uphold the quality of our
products and raw materials, we cannot assure that we will be able to detect substandard or
defective products or raw materials in every circumstance. For further details of our quality
control measures on our products and raw materials, please refer to the paragraph headed
‘‘Business — Product safety and quality control’’ in this prospectus. In the event that we fail
to detect defective raw materials, the quality of our products could be adversely affected.
We may be required to recall our affected products and may subject to product liability
claims, adverse publicity, investigation or imposition of pen alties by relevant regulatory
authorities. Any food safety problem attributable thereto may adversely affect our
reputation, brand’s image, business and finan cial conditions. For further details on the
relevant laws and regulations applicable to the production of our potted vegetable produce,
please refer to the paragraphs headed ‘‘Regulatory Overview — Laws and Regulations
Relating to Safety of Agricultural Products — Agricultural Products Quality Safety Law’’
and ‘‘Regulatory Overview — Laws and regulations relating to safety of agricultural
products — Food Safety Law’’ in this prospectus.
Our business may be affected by fluctuations in the cost of raw materials for our potted
vegetable produce
One of the major operating costs for our business is the cost of raw materials for
cultivating our potted vegetable produce. Our raw materials primarily include (i)
components of organic substrates; (ii) seeds; and (iii) fertilisers and biopesticides. For
FY2020, FY2021, FY2022 and 9M2023, our raw ma terial cost accounted for approximately
49.1%, 47.9%, 47.2% and 47.7% of our total cost of sales, respectively. Any shortage in the
supply of, or any upsurge in demand for, such raw materials would lead to an increase in
their prices. There is no assurance that we will be able to anticipate and react to such price
fluctuations by adjusting the selling prices of our potted vegetable produce on a timely basis
or to pass on any increase in the cost of raw materials to our customers accordingly. In the
event that we are unable to anticipate and react to such price fluctuations, our profitability
may be adversely affected.
RISK FACTORS
–3 8–


--- page 48 ---
We are dependent on our major suppliers, and our business, financial conditions and results of
operations could be adversely affected if our relationships with these major suppliers are
terminated, interrupted, or modified in any way adverse to us
The key raw materials required for the cultivation of our products include (i)
components of organic substrates; (ii) seeds; and (iii) fertilisers and biopesticides. Our
success depends on our ability to maintain a good and continued relationship with our
major suppliers and our ability to purchase raw materials from such suppliers on favourable
terms. In FY2020, FY2021, FY2022 and 9M2023, the aggregate purchases from our five
largest suppliers in each year/period am ounted to approximately RMB35.3 million,
RMB44.7 million, RMB39.8 million and RMB32. 8 million, respectively, accounting for
approximately 94.3%, 99.7%, 99.7% and 98.7% of our total purchases, respectively, while
the purchases from our largest supplier in each year/period amounted to approximately
RMB26.4 million, RMB28.2 million, RMB20.3 million and RMB13.5 million respectively,
accounting for approximately 70.3%, 62.9%, 50.8% and 40.6% of our total purchases,
respectively. Please refer to the paragraph headed ‘‘Business — Raw materials, suppliers
and subcontractors’’ in this prospectus for further details of our major suppliers and
principal terms of our supply arrangement.
We cannot assure that our current suppliers will continue to supply raw materials to us
on terms acceptable to us, or that we will be able to establish new or extend current supplier
relationships to ensure a steady supply in a timely and cost-efficient manner. We cannot
assure that we will be able to seek satisfactory supplier, or our suppliers will be able to
supply the required raw materials to our satisfaction in a timely manner or that they will not
significantly increase the prices at the time of our purchases. If our relationships with our
major suppliers are terminated, interrupt ed, or modified in any way adverse to us, our
business, financial conditions and results of operations could be adversely affected. If we
are unable to secure supply, or if we cannot pass the increase in the cost of raw materials to
our customers, our cultivation or production cost, cultivation or production volume and
schedule, financial conditions and results of operations may be materially and adversely
affected.
In particular, we may face the following risk s that may have a significant adverse effect
on our operations, business and results of operations:
. there can be no assurance that we would be able to identify alternative suppliers
for replacement in a timely manner if any of our major suppliers were to
substantially reduce the amount of supplies to us or to cease business relationship
with us entirely;
. there may be material interruptions to our operations and business before we can
secure supply from other suppliers for the raw materials that we may need, and it
may take time for us to negotiate for purchase terms with the other suppliers; and
. even if we are able to purchase from other suppliers, there can be no assurance
that the provision of raw materials from such suppliers would be on terms and
conditions acceptable to us, and/or in sufficient quantity to meet our imminent
demands.
RISK FACTORS
–3 9–


--- page 49 ---
Changes in consumer tastes, perceptions and preferences may have a material and adverse
effect on our business, results of operations and financial conditions
The sale of our potted vegetable produce is subject to changes in consumer tastes,
perceptions and preferences. The level an d pattern of spending by the PRC consumers
depends on various factors which include the consumer tastes, perceptions and preferences,
consumer income, consumer confidence in the safety and quality of the potted vegetable
produce. Any changes in consumer tastes, perceptions and preferences, decrease in
consumer income or decline in consumer confidence in our produce may lead to
reduction of sale, which could have an adverse effect on our sales and profits.
Our continuous success depends on the po pularity of our potted vegetable produce,
our ability to sensibly predict on the change in c onsumer tastes, perceptions, preferences
and their spending habits and to flexibly adjust our marketing strategies to fit for the
changes from time to time. Shifts in consumer tastes, perceptions and preferences away
from our potted vegetable produce to our competitor’s potted vegetable produce or to other
kinds of food products may adversely affect our business. Consumers in the PRC are
increasingly conscious of agricultural product safety and quality and how their daily
consumption of foods would affect their health. If we are not able to effectively react to the
changes in consumer tastes, perceptions and preferences, the demand for our potted
vegetable produce may decline and our business and financial performance may be
adversely affected.
Our operations are principally based in Shandong province, and we are susceptible to trends
and developments in this region
A significant portion of our revenue is concentrated in Shandong province. For
FY2020, FY2021, FY2022 and 9M2023, approximately 87.1%, 91.2%, 90.3% and 91.6% of
our revenue was derived from Shandong prov ince, respectively. We expect that Shandong
province will remain to account for a significant portion of our operations in the near
future. Due to such concentration, any adverse development in economic conditions,
policies and regulations of local government or business environment in Shandong province
could materially and adversely affect our bus iness, financial position and results of
operations.
We may encounter difficulties in expanding our distribution and sales network into new
regions, which may limit our growth prospects and, in turn, have an adverse effect on our
business, financial conditions and results of operations
As part of our business strategy, we plan to expand our distribution and sales network
to grow our business. However, the success of our expansion plan is subject to, among
others, the following factors:
. the existence and availability of suitabl e regions and locations for expansion of
our distribution and sales network;
. our ability to negotiate favourable coop eration terms with our distributors;
. the availability of adequate management and financial resources;
RISK FACTORS
–4 0–


--- page 50 ---
. the availability of suitable distributors;
. competition from local competitors;
. our ability to hire, train and retain skilled personnel; and
. the adaptation of our logistics and other operational and management systems to
an expanded distribution and sales network.
Expanding into new geographical location involve uncertainties and challenges as we
may be less familiar with local regulatory practices and customs, customer preferences and
behaviour, the reliability of subcontractors, suppliers and business practices. There is no
guarantee that we will be successful in managing our growth and expansion into new region
and cities. Accordingly, we cannot assure th at we will be able to achieve our expansion
goals or effectively integrate any new distributors into our existing network. If we encounter
difficulties in expanding our distribution and sales network, our growth prospects may be
limited, which could in turn have an adverse effect on our business, financial conditions and
results of operations.
Our results of operations are subject to changes in fair value of biological assets, which are
subject to a few assumptions. Any increase in the selling prices of our biological assets will
increase both our sales revenue and changes in fair value of biological assets, and vice versa.
Since we are a company principally engaged in the cultivation and sales of potted
vegetable produce, a certain portion of our assets are biological assets. Our biological assets
comprise various kind of potted vegetable produce, including but not limited to crown
daisy, rapeseed and Frise ´e. Our historical results of operations had been affected by changes
in fair value of biological assets as a result of changes in fair value less cost to sell of our
potted vegetable produce, which are non-cash in nature. In FY2020, our results of
operations were positively affected by the gain arising from changes in fair value less cost to
sell of biological assets of approximately RMB3.2 million. In FY2021, our results of
operations were positively affected by the gain arising from fair value changes less cost to
sell of biological assets of approximately RMB3.4 million. In FY2022, our results of
operations were negatively affected by the loss from fair value changes less cost to sell of
biological assets of approx imately RMB2.1 million. In 9M2023, our results of operations
were positively affected by the gain arising from fair value changes less cost to sell of
biological assets of approximately RMB3.3 million. We expect that our results of operation
will continue to be affected by these changes in fair value of biological assets. For details on
the changes in fair value of biological assets, please refer to the paragraphs headed
‘‘Financial Information — Material accounting policy information, critical judgement and
key estimates’’, ‘‘Financial Information — Analysis of selected statement of financial
position items — Biological assets’’ and ‘‘Financial Information — Valuation of biological
assets’’ in this prospectus.
The fair values of our biological assets at each reporting date during the Track Record
Period were determined by an independent professional valuer and we intend to engage an
independent professional valuer to determine the fair values of our biological assets going
forward. The valuation of our biological assets during the Track Record Period by Savills
was performed by relying on the accuracy and r eliability of historical data of biological
RISK FACTORS
–4 1–


--- page 51 ---
assets such as quantity held, sales volume, selling prices and cost provided by us. Savills
also conducted market research, checked academic material and relied on our internal
control over inventory systems for the accuracy and reliability of these historical data.
Savills has relied on a number of assumption s in applying valuation methods (including
market and cost approaches). Please refer to the paragraph headed ‘‘Financial Information
— Valuation of biological assets — Key assumptions and inputs’’ in this prospectus for the
key assumptions and inputs for determining the fair value of our biological assets.
The fair value of our biological assets could be affected by, among others, the accuracy
of the assumptions including but not limited to, (i) the fluctuation in the market price of our
biological assets; (ii) the variation in the growth rate, maturity cycle and quality of our
biological assets; (iii) the stability and cont inuity of our business operation, management
and technical personnel; and (iv) the changes in the potted vegetable industry and/or
political, legal, technological, tax, fiscal or macroeconomic conditions of the PRC. The fair
value of our biological assets would be inaccurate if the assumptions relied on are
inaccurate. The valuation conducted by Sav ills, and the valuation to be conducted in the
future, are subject to the caveat that our independent professional valuer relied
substantially on the completeness, accuracy and reasonableness of the various
assumptions and other data provided by us in preparing the valuation report. As a result
of revaluations of our biological assets from period to period, our financial position and
results of operations may change significantly from period to period. In addition, any
increase or decrease in market prices for biolo gical assets will increase or reduce our profit,
and gains or losses arising from changes in fair value less cost to sell of biological assets,
which makes our profit more volatile and sus ceptible. We cannot assure that there will be
no significant deviation in the future. We cannot assure that the fair value gain on our
biological assets will not decrease in the future. Any decrease in the fair value gain of our
biological assets may have a material and adverse effect on our profitability, overall
financial conditions and results of operations. As a result, when evaluating our results of
operations and profitability, investors sho uld consider our profits and profit margins
without taking into account the effects of these changes in fair value of biological assets.
We are subject to the potential adverse consequences due to the title issue in relation to part of
the land at our Laixi Facility
We entered into the Land Reservation Agreement ( 土地預約協議)o n1 7J u n e2 0 0 6w i t h
the People’s Government of Rizhuang Town of Laixi ( 萊西市日莊鎮人民政府) for, among
others, reservation of a parcel of state-owned land for the purpose of agricultural and
ecological development for a period of 50 years and the People’s Government of Rizhuang
Town of Laixi should be responsible to complete the transfer procedure and procure the
issuance of the land use rights certificate to our Group according to the terms of the
agreement. However, instead of issuing the la nd use rights certificate to our Group, on 22
May 2013, the Municipal Government of Laixi ( 萊西市人民政府) issued the land use rights
certificate in respect of the relevant land to Qingdao Changyang Investment and
Development Co. Ltd.* ( 青島昌陽投資開發有限公司)( ‘ ‘Changyang Investment ’’), a
company wholly-owned by a subordinate department of the Municipal Government of
Laixi. As advised by our PRC Legal Advisers, the utilisation of state-owned allocated lands
should be approved by the relevant land department of the municipal government at the city
or county level (i.e. the Municipal Governmen to fL a i x ii n s t e a do ft h eP e o p l e ’ sG o v e r n m e n t
of Rizhuang Town of Laixi). If the said land is expropriated by the government due to the
RISK FACTORS
–4 2–


--- page 52 ---
title defect, our financial condition and business operation will be adversely affected. For
details of the title issue of the said land, please refer to the paragraph headed ‘‘Business —
Other property interests in relation to the Laixi Land Parcel C’’ in this prospectus.
We may be affected by the changes in or cessation of preferential tax treatment which may
have an adverse effect on our financial conditions and results of operations
Under the EIT Law, enterprises in the PRC are generally subject to a uniform 25%
EIT rate on their worldwide income. Our PRC subsidiary which is engaged in qualifying
agricultural business, which includes growi ng and selling of potted vegetable produce was
exempted from the EIT in the PRC during the Track Record Period under the EIT Law.
The EIT saved under the EIT Law were approximately RMB11.0 million, RMB11.8 million,
RMB8.0 million and RMB10.3 million for FY2020, FY2021, FY2022 and 9M2023,
respectively. There is no assurance that the preferential EIT treatment will continue to
apply to our subsidiaries. Any removal, loss, suspension or reduction of such preferential
tax treatment may have an adverse effect on our financial conditions and results of
operation.
The price of our potted vegetable produce may fluctuate, which may adversely affect our
profitability and result of operations
We are subject to business risks arising from the fluctuation of the price of our potted
vegetable produce resulting from the ever-changing market force of supply and demand.
External factors, such as environmental regulations, adverse weather conditions and
diseases, which we have little or no control may also greatly affect our potted vegetable
produce price. Throughout the Track Record Period, the average selling prices of our
potted vegetable produce per pot remained unchanged at RMB15.1. If the price of our
potted vegetable produce decreases, our revenue, profit and results of operations may be
adversely affected.
We are dependent on our contractual arrangements with Independent Third Parties in respect
of the cultivation of our potted vegetable produce
We entered into lease agreements with Independent Third Parties in respect of the
lands for our Xi’an Facility and Dalian Facility and part of the lands of our Laixi Facility.
We cannot assure that the resp ective Independent Third Parties would renew such lease
agreements with us upon expiry. If we are unable to secure new lease agreements on
commercially viable terms with the Independen t Third Parties for the cultivation facilities,
we may not be able to satisfy orders from our customers for our potted vegetable produce,
and accordingly, our business, financial conditions and results of operations may be
materially and adversely affected.
W ea l s oe n t e r e di n t ol a b o u rsubcontracting agreements ( 勞務外包合作協議書)w i t h
Independent Third Parties for performing si mple labour work such as watering, sowing and
transporting under our management and supervision. While our labour subcontracting
agreements are entered into in accordance with the Civil Code of the PRC, there is no
assurance that the Independent Third Parties will comply with the terms of the relevant
labour subcontracting agreements and provide the requisite labour services. There is also no
RISK FACTORS
–4 3–


--- page 53 ---
assurance that our labour subcontractors will be fully cooperative. In the event of such non-
compliance and we are not able to obtain the alternative labour services at competitive
prices or at all, our business, financial conditions and results of operations will be
materially and adversely affected.
We have limited control over the quality and performance of our labour subcontractors and
subcontracting labour force
To allow us to effectively manage our culti vation process and meet the demand for
workforce in a timely manner, we outsource our simple labour work to our labour
subcontractors. Nevertheless, as we have limited control over the quality and performance
and the availability of subcontracting labour force, if such subcontracting labour force is
not as experienced or capable as we had assessed and causes any food safety issue, we may
be exposed to potential litig ation claims from our customers. We may also be subject to
litigations relating to compliance with applic able laws and regulations of the PRC. If we
were found liable on such claims, we could be liable for significant damages and subject to
government sanctions. While we may initiate c laims for compensation against our labour
subcontractors for any liability arising from su bcontracting labour, there is no assurance
that our labour subcontractors will be financially capable of compensating us in full.
Further, there is no assurance that our claims will be settled in a speedy and efficient
manner. In such event, our business, reputation, financial condition and results of
operations could be materially and adversely affected.
We did not register ‘‘富 景农业’’ as a trademark in the PRC during the Track Record Period
and there is no assurance that the trademark application will be successful. Our ability to
compete may be hampered if our rights to our brand are infringed by third-parties or, on the
other hand, if we are alleged or found to have infringed the intellectual property rights of
others
During the Track Record Period, our products were marketed under our brand ‘‘ 富景
农业’’ and we did not register ‘‘ 富景农业’’ as a trademark in the PRC during the Track
Record Period. On 13 November 2023, we have submitted the application for trademark
‘‘富景农业’’ and ‘‘
’’ . However, there is no assurance that the application for the
trademarks will be successful. For details, please refer to the paragraph headed
‘‘Business — Know-how and intellectual property rights’’ in this prospectus.
In the event that our application is not successful, we may not be able to protect our
rights to our brand against other potted vegetable producers that use the same or similar
brand. Unauthorised use of our brand by unrelated third parties may damage our
reputation and brand. If the operations of third parties who used or imitated our brand
without our authorization result in adverse effects on consumers, we may be associated with
negative publicity as a result.
RISK FACTORS
–4 4–


--- page 54 ---
On the other hand, we cannot be certain that our brand will not be challenged by third
parties, whether with or without merit. Certai n unrelated third parties may own intellectual
property rights which may be considered to be similar to our brand. There is no assurance
that owners of similar trademarks will not inst itute litigation or other forms of proceedings
against us, whether with or without merit.
W em a yf r o mt i m et ot i m eb er e q u i r e dt oi nstitute or be involved in litigation,
arbitration or other forms of proceedings, including settlements, to enforce or defend our
rights to our brand, which would likely be time-consuming and expensive and would divert
our management’s time and attention regardless of their outcome. If any third party
infringes our rights to our brand or if we are alleged or found to have infringed the
intellectual property rights of others, it may m aterially and adversely affect our business,
financial condition and results of operations.
Any failure in maintaining effective internal controls over the compliance of national health
and safety standards may materially and adversely affect our business, results of operation and
brand’s image
Any failure to meet relevant government requirements or any instance of
contamination in operations resulting from our ineffective internal control could result in
fines, suspension of operations, and in more extreme cases, criminal proceedings against our
Company and our management. Moreover, neg ative publicity could be generated from
false, unfounded or nominal liability claims or r ecalls. Any of these failures or occurrences
could negatively affect our business and financial performance.
We are subject to the agricultural product quality and safety laws and regulations of
the PRC. Please refer to the section headed ‘‘Regulatory Overview’’ in this prospectus for
more information concerning the relevant agricultural product quality and safety laws and
regulations. In light of recent agricultural p roduct quality and safety concerns in the PRC,
there may be increasingly stringent enforcem ent of agricultural product quality and safety
rules and regulations and implementation of new agricultural product quality and safety
rules and regulations. In such event, our production and distribution cost may increase, and
we may be unable to pass these additional cost on to our customers.
We may fail to continuously develop new products or our new products may not be successful,
leading to a potential adverse effect on our business, results of operations and financial
conditions
The potted vegetable produce industry in the PRC is a highly fragmented industry with
a large number of players. In light of the fragm ented nature and volatile environment, we
will need to continuously develop and launch new products in order to respond to
consumers’ demand and maintain our competit iveness and market share. We cannot assure
that we will be able to continuously develop new products or our new products in the future
will attract sufficient consumer demand or gain sufficient market share to be profitable. In
addition, we cannot assure that our new products in the future will continue to be of high
quality. Failure to recover development, production and marketing cost of unsuccessful
new products or maintain the high quality of our new products in the future could adversely
affect our business, results of operations and financial conditions.
RISK FACTORS
–4 5–


--- page 55 ---
We are exposed to the credit risk of our distributors and end-user customers. If our
distributors or end-user customers default on t heir payments to us, our profitability, liquidity
and financial position may be materially and adversely affected
We are exposed to the credit risk of some of our distributors who are granted credit
terms of 60 days to 120 days and our end-user customers who are granted credit terms of
180 days. Should our customers experience cas h flow difficulties or face possibilities of
liquidation due to deterioration in their business performance or financial position, our
profitability, cash flow and financial position may be materially and adversely affected as
our customers may default on their payments to us. As at 31 December 2020, 31 December
2021, 31 December 2022 and 30 September 2023, our average trade receivables turnover
days were approximately 99.2 days, 93.0 days, 144.3 days and 126.1 days, respectively.
P l e a s er e f e rt ot h ep a r a g r a p hh e a d e d‘ ‘ B u s i ness — Payment terms and credit terms’’ in this
prospectus for details on our credit policy.
As at 31 December 2020, 31 December 2021, 31 December 2022 and 30 September
2023, the carrying amount of our trade receivables (net of allowance for doubtful debts)
were approximately RMB31.1 million, RMB46.6 million, RMB53.4 million and RMB58.4
million, respectively. We record ed an allowance for expected credit losses (‘‘ECL’’) of trade
receivables of approximately RMB0.1 million, RMB0.1 million and RMB0.2 million for the
years ended 31 December 2020, 2021 and 2022 respectively and a reversal of allowance for
ECL of approximately RMB0.1 million for 9M2023. In the event that any material portion
of such trade receivables becomes bad debt and cannot be collected by us, our operations
and financial conditions may be adversely affected. In addition, in the event that our trade
receivables could not be collected timely, we may need to finance our working capital
requirement by internal resources or borrowings, and any increase in interest rate may
adversely affect our financial positi on due to increase in finance cost.
Our business, reputation and brand’s image ma y be adversely affected by product liability
claims, consumer complaints or adverse publicity in relation to our products
We may be subject to product liability claims if our products are found to be unfit for
consumption. Our products may be rendered unfit for consumption due to contamination
and pollution, whether intentional or not, del ay in delivery, poor handling, poor condition
of storage facilities of suppliers or distributors, or unauthorised tampering by distributors
or third parties during the transit of products. The occurrence of such problems may result
in recalls of our products and significant damage to our brand reputation. We cannot assure
that our products will not be recalled and we will not receive any material complaints or
product liability claims from our customers in t he future. We may incur legal liabilities and
have to compensate consumers for any loss or damage they suffer in respect of valid
product liability claims and, in addition, we may also be subject to administrative or other
government sanctions or penalties. In addit ion, adverse publicity from these types of
concerns, whether valid or not, may discourage customers from purchasing our products. If
customers lose confidence in our brand, we may experience long term declines in our sales,
which may have an adverse effect on our business, results of operation and financial
conditions.
RISK FACTORS
–4 6–


--- page 56 ---
Our workers are subject to risks of serious injury caused by the use of production machinery
and equipment, which may result in a material and adverse effect on our business, results of
operations and financial conditions
We use machinery and equipment such as substrate crusher, excavator and bulldozer,
which are potentially dangerous in our operations. Any significant accident caused by the
use of such equipment or machinery could interrupt our operations and result in legal and
regulatory liabilities. We cannot guarantee tha t we will not encounter significant cost, legal
or regulatory liabilities as a result of persona l injury of our employees in the future. The
occupational injury insurance fund we pay for our employees in accordance with relevant
PRC labour laws may not sufficiently cover, or cover at all, losses and liabilities we may
encounter in respect of personal injury of our employees. Further, there is no assurance that
our labour subcontractors will not seek compensation or indemnification from our Group
for any injury suffered by their staff for any neg ligence or contractual liability against our
Group. Therefore, in such events, we may incur significant cost which could materially and
adversely affect our business, results of operations and financial conditions.
Our insurance may not sufficiently cover, or may not cover at all, losses and liabilities we may
encounter
We have purchased food safety insurance for our products and property insurance for
our owned greenhouse facilities. We have not maintained insurance for all of our properties
or fixed assets. The insufficiency of insuranc e coverage exposes us to risks associated with
our business, including damages, liabilitie s or losses we may incur in the course of our
business, which may be significant. Any uninsured occurrences of loss or damage to our
cultivation facilities and other properties or f ixed assets may result in the disruption of our
business operations, the incurrence of substantial cost by our Group and the diversion of
our resources, which may have a material and adverse effect on our business, financial
position and results of operations. If we are held responsible for any such damages,
liabilities or losses due to insufficiency or unavailability of insurance, there could be a
material adverse effect on our business, financial position and results of operations. Please
refer to the paragraph headed ‘‘Business — Insurance’’ in this prospectus for further details.
The occurrence of adverse weather conditions or natural disasters may materially and
adversely affect our business and financial performance
Our business operations and cultivation facilities are susceptible to adverse weather
conditions and natural disasters such as floods, typhoon, hailstorm, earthquakes and
environmental hazards. There is no assuranc e that our cultivation facilities or potted
vegetable produce would not be destroyed under adverse weather conditions or natural
disasters. Occurrence of any of the above events in or in close proximity to our cultivation
facilities, and/or the facilities of our supp liers from whom we purchase necessary raw
materials used in our production may interrupt our cultivation, or cause a reduction in our
production output or delay and/or increased cost in our procurement of raw materials. For
instance, the occurrence of a severe hailstorm in Qingdao in May 2020 damaged seven of
our greenhouses in our Laixi facility and led to around 33,000 damaged or unsellable pots
of vegetable produce (the estimated cost of wh ich was approximately RMB0.3 million) and
a loss of potential sales revenue of approx imately RMB0.5 million based on the average
selling price of our potted vegetable produce in Shandong province of approximately
RMB15.0 per pot in FY2020. It is estimated that the suspension further led to the drop of
the production volume of approximately 156,000 pots and a loss of potential sales revenue
of approximately RMB2.3 million based on the a verage selling price of our potted vegetable
RISK FACTORS
–4 7–


--- page 57 ---
produce in Shandong province of approximately RMB15.0 per pot in FY2020 during the
suspension. The occurrence of any circumstances above may have a material and adverse
effect on our business, prospects and financial performance.
Disruption of operations of our cultivation fac ilities may materially and adversely affect our
business operations and financial performance
Our ability to efficiently and stably cultivate potted vegetable produce at our
cultivation facilities is critical to our succe ss. As at the Latest Pra cticable Date, we had
established three cultivation facilities for cultivating our potted veg etable produce, namely
our (i) Laixi Facility; (ii) Xi’an Facility; and (iii) Dalian Facility.
Damage or disruption to our operations at ou r cultivation facilities can result from the
following factors, among others:
. utility supply disruptions, t errorism, strikes or other force majeure events;
. forced closure or suspension of our cultivation facilities;
. major disease outbreaks at or around our cultivation facilities;
. pollution of underground water resources;
. failure to comply with applicable regulations and quality assurance guidelines;
. labour disputes affecting our employees;
. accidents in any of our cultivation facilities, including major equipment failures or
fires, which may result in suspension of operations, property damage, severe
personal injuries or even fatalities; and
. other production or distribution problems, including limitations to production
capacity due to regulatory requirements, changes in the types of products
produced or physical limitations that could impact continuous supply.
We cannot assure that the events and factors mentioned above or any other events will
not occur and result in a material disruption to t he operations at our cultivation facilities in
the future. If we fail to take adequate steps to mitigate the likelihood or potential impact of
such events or factors, or to effectively res pond to such events or factors if they occur or
materialise, our business, results of operations and financial conditions may be materially
and adversely affected.
We are exposed to possible infringements of our intellectual property rights, or we could face
claims for infringement of the intellectual prope rty rights of others, which may materially and
adversely affect our sales, reputation, business operations and financial performance
We believe that our current intellectual property rights and those for which we have
pending applications provide protection to our business and are necessary for our
operations. There is no assurance that our intellectual property rights will not violated or be
infringed upon and that measures taken by us to protect our trademarks and patents are
adequate to prevent infringement, product imi tation and counterfeiting by others. In the
event that third parties infringe upon our intellectual property rights, we may face great
difficulties and costly litigation in order to fully protect our intell ectual property rights,
which may in turn affect our profitability. In the event that we are unsuccessful in policing
RISK FACTORS
–4 8–


--- page 58 ---
the violation of our intellectual property right s, the availability of counterfeit goods in the
market may affect consumers’ perception of our product quality and reduce the demand for
our products, which may adversely affect our brand reputation and financial performance.
Over the years, we have accumulated knowledge and experience in relation to the
cultivation method, process and organic substrate formula of cultivation materials of
potted vegetable produce which is part of our essential proprietary technical know-how.
Thus, effective protection of proprietary information and technical know-how in our
business operations is critical to our business. As certain of our proprietary information
and technical know-how are not patented, we are vulnerable to unauthorised disclosure of
such proprietary information to our competitors, which may adversely affect our business.
In addition, we may also be subject to claims or litigations in respect of infringement of
patents, trademarks or other intellectual property rights of others. These claims or
litigations could adversely affect our relationships with current or future customers, divert
management attention and resources and result in substantial expenses, thereby adversely
affecting our business, financial condition, results of operations and prospects.
Our future success depends on the continuing services of certain key personnel and our ability
to attract and retain talented personnel
Our continued success is significantly dependent on the continuing services of our
senior management and other key personnel and their expertise and experience. For more
details on our Directors and senior management, please refer to the section headed
‘‘Directors and Senior Management’’ in this prospectus. Our Directors and senior
management have extensive experience in the potted vegetable produce industry. For
instance, Mr. Zhang (being our founder and executive Director who founded our Group in
December 2006) and Mr. Pang Jinhong (being o ur executive Director who has joined our
Group since February 2013), have about 17 years and 11 years of management and
operational experiences in our Group respectively. If one or more of the members of our
senior management team are unable or unwilling to continue in their present positions, we
may not be able to replace them easily or at all, and our business may be disrupted and our
financial conditions and results of operations may be adversely affected.
Our future success is further dependent upon our ability to attract and retain personnel
who have the necessary experience and expertise. If we cannot recruit and retain the
employees necessary to maintain our opera tions, our capabilities may be limited which
could reduce our profitability and limit our ability to grow.
Cultivation and sales of our potted vegetable produce are subject to seasonality fluctuations
Cultivation and sales of our potted veget able produce are subject to seasonality
fluctuations. During the Track Record Period, we experienced seasonality fluctuations in
the cultivation of our potted vegetable produce due to weather conditions. According to our
experience, our potted vegetable produce hav e longer growth cycles in colder seasons. We
also experienced seasonality fluctuations in sales of our potted vegetable produce due to
customers’ purchase patterns. During the Track Record Period, we recorded higher revenue
from the sale of our potted vegetable produce i n the third quarter of the year due to increase
of demand in summer and autumn in line with the catering market as a result of growing
number of visitors in Qingdao. We also recorded lower revenue from the sale of our potted
RISK FACTORS
–4 9–


--- page 59 ---
vegetable produce in the first quarter of the year due to the closure of business of some of
the hotels and restaurants during the Chinese New Year holidays. For details of the
seasonality fluctuations, please refer to the p aragraph headed ‘‘Business — Distribution and
sales network — Seasonality’’ in this prospectus. Hence, our sales and operating results for
any particular period will not necessarily be indicative of our results for the full year or
future periods, and our interim result may no t proportionally reflect our annual results.
Risks relating to non-compliance with the PRC employee social welfare contribution
regulations could lead to the imposition of fines or penalties
Pursuant to the relevant PRC laws and regulations, employers in the PRC shall make
social insurance funds and housing provident funds contributions for their employees.
During the Track Record Period, we were not in full compliance with the applicable
contribution requirements for our employees in PRC. For details of our non-compliance
incidents, please refer to the paragraph headed ‘‘Business — Non-compliance’’ in this
prospectus.
Under the applicable PRC laws and regulations, the relevant social insurance and
housing provident fund authorities have discretion as to the manner and amount of
penalties to be imposed on our Group. While our PRC Legal Advisers advised that the risk
for our Group being penalised by the relevant social insurance and housing provident fund
authorities for our previous non-compliances is remote, there is no assurance that there will
not be any employee complaint or claim against us in respect of our failure to make full
contributions to the relevant social insuranc e fund or housing provident fund in the past.
There is also no assurance that we will not receive any order or notice from the PRC
authorities in relation to the non-complia nce incidents. In such case, we may incur
additional cost to comply with the laws and regulations and even be subject to fines or
penalties arising from above non-compliance, which may have an adverse effect on our
business, financial condition and results of operations.
The outbreak of COVID-19 has caused, and may continue to cause, damage to the economy
and as a result may adversely affect our business, financial condition and results of operations
T h eo u t b r e a ko fC O V I D - 1 9i nt h ee n do f2 0 1 9and the resurgence of COVID-19 cases
in early 2022 have already caused, and may co ntinue to cause, an adverse and prolonged
impact on both economic and social conditions in China, and the exacerbation, continuance
or reoccurrence of COVID-19 in China may interrupt our business operations.
The outbreak of the COVID-19 disease had prompted the PRC government to place
many provinces into lockdown, extend the Chinese New Year holidays, stipulate measures
aiming at reducing mobilities and close non-ess ential businesses which , to a certain extent,
affected our business.
Save as disclosed and as of the Latest Practicable Date, COVID-19 outbreak did not
have any material adverse impact on our overall business, financial condition or results of
operations. Please refer to the paragraphs headed ‘‘Business — Impact of the outbreak of
COVID-19 epidemic’’ and ‘‘Summary — Rec ent development and no material adverse
change’’ for further details of the impact of COVID-19 outbreak on our Group.
RISK FACTORS
–5 0–


--- page 60 ---
In order to prevent the COVID-19 epidemic, many countries issued travel advisories
restricting travels to affected areas (including China). Such policies have seriously
undermined the local and cross-border business activities in these areas. The effect
includes substantial decrease in the number of tourists, business exchange events and social
functions and the slackening of the economy in the affected countries and territories. The
global financial markets have experienced extreme volatilities and the risk of the world
headed into a recession has significantly incr eased. There is no assurance that there will not
be any direct or indirect adverse impact on our b usiness, financial condition and results of
operations arising from any effect on the PRC economy or other parts of the world as a
result of any outbreak, exacerbation, continuance or reoccurrence of COVID-19. There is
no assurance that the overall economic performance of the affected countries and territories
will improve shortly even after the containment of COVID-19 outbreak and the withdrawal
of such policies and recommendations by the governments of China and other countries and
thus our business could be materially and adversely affected. There is also no assurance that
our employees will not be infected , in which event the operations of our cultivation facilities
might need to be suspended and their staff might need to be quarantined. Furthermore,
there is no assurance that another major COVID-19 or other disease outbreak will not
happen in the future. If any of these events eventuate, our business, financial condition and
results of operations may be mate rially and adversely affected.
RISKS RELATING TO THE INDUSTRY WHICH WE OPERATE IN
We operate in a highly fragmented and competitive industry and may face increasing
competition, which may affect our market shares and profit margins
The potted vegetable produce industry we operate in is characterised as highly
fragmented with a large number of players and we compete with a number of existing PRC
domestic potted vegetable producers, as well as potential new entrants to the market. Some
of our competitors may have, in comparison to us, lower cost of operation, greater expertise
and more extensive technical capabilities, greater resources to invest in product
development and customer sup port, longer operating histories, greater pricing flexibility
and name recognition, larger customer bases a nd/or stronger technical and professional
teams. In addition, more specialised producers with greater financial resources may enter
our market in the future. Our ability to compete successfully in the industry depends on
various factors, including our reputation, brand’s image, high quality products and stable
relationships with our customers. We cannot assure that we will be able to compete
effectively against current and future competi tors. Intensified competition may result in
price reduction of our products, a decrease in our profit margins, loss of market share and
increased difficulty in market penetration, which may have a material adverse effect on our
business, prospects, financial conditions and results of operation.
If the potted vegetable produce market does not grow at a rate as we expect, or at all, or if we
fail to keep pace with consumer preferences and demands, our business, results of operation
and financial conditions may be adversely affected
Our growth depends, to a significant extent, on the continuous growth in the demand
for our potted vegetable produce. Any future reduced demand or economic downturn may
materially and adversely affect our sales and p rofitability. Furthermore, we are subject to
RISK FACTORS
–5 1–


--- page 61 ---
the changing consumer preferences and demands. If there is a change in market preference
or if we fail to keep pace with these changes, we may not be able to achieve the growth as
expected and our business and financial conditions may be adversely affected.
Consumer concerns about the safety and quality of our potted vegetable produce may adversely
affect the sales of our produce and our financial performance
Consumer demand may be affected by factors such as negative publicity resulting from
the publication of industry findings, research reports or health concerns concerning food
safety of products produced in the potted vegetable produce industry or the PRC in general,
given that the consumption of contaminated or spoiled food products may result in illness,
disease or, in extreme cases, death. Adverse publicity and news about the safety and quality
of domestically produced food products, and counterfeiting and imitation of food products
are not uncommon in the PRC. We cannot assure that our suppliers or distributors will be
in full compliance with all the relevant hygiene, health and safety standards. In case such
complaints and negative publicity occur in re spect of the potted vegetable industry or our
potted vegetable produce, regardless of their merits, we may suffer a loss of consumer
confidence, reduction in the demand for our products, and consequently our business
operations, financial performance and prospects may be adversely affected. We may also
not be able to handle the negative comments effectively and in a timely manner and
additional resources may be required to rebuild our reputation.
Change in existing agricultural product quality and safety laws may expose us to additional
cost for compliance and affect our business operations
As agricultural products are intended for direct human consumption, we are subject to
extensive governmental laws and regulations in relation to agricultural product quality and
safety in the PRC. For instance, the PRC agricultural product quality and safety laws set
out requirements in the following aspects to ensure that the quality of agricultural products
will comply with the protective requireme nts for human health and safety, namely (i)
quality safety standards for agricultural products; (ii) place of origin of the agricultural
products; (iii) production process of agricultural products; and (iv) packaging and
identification marks of agricultural products.
Failure to comply with the agricultural p roduct quality and safety laws in the PRC
may result in fines, suspension of sale, confiscation of the proceeds obtained from the sale
of the infringed products and, in more extreme cases, criminal proceedings against us and
our management. Any of these events will h ave an adverse impact on our production,
business, results of operations and financial conditions.
There is no assurance that the PRC government will not impose additional or stricter
laws or regulations on edible agricultural product quality and safety in the future, providing
for more comprehensive monitoring and regulation over edible agricultural product
producers and distributors in areas including, but not limited to, agricultural product
quality and safety and distribution, which may lead to an increase in our cost of complying
with such regulations. We may be unable to pass these additional cost on to our customers,
which may result in an adverse effect on our results of operations.
RISK FACTORS
–5 2–


--- page 62 ---
We are subject to environmental regulations an d may be exposed to liability and potential cost
for environmental compliance
Our operations are subject to national, provi ncial and local environmental laws, rules
and regulations which, among others, require manufacturers to conduct an environmental
impact assessment before engaging in certain construction projects. Any violation of these
regulations may result in warning, payment of damages, fines, restriction or suspension of
production or an order to halt production. There is no assurance that we will not incur
future obligations or material liabilities relating to environmental laws and regulations.
Further, the government may adopt more stringent environmental regulations and
there is no assurance that we will be in full comp liance with these regulatory requirements
at all times. Due to the possibility of unantic ipated regulatory developments, the amount
and timing of future environmental expenditures may vary substantially from those
currently anticipated. If there is any unanticipated change in environmental regulations, we
may be required to incur additional capital expenditures to, among others, install, replace,
upgrade or supplement our equipment relating to pollution control and the use, storage,
handling and disposal of hazardous materials and chemicals, or make operational changes
to limit any adverse impact, whether actual or potential, on the environment in order to
comply with new environmental protection l aws and regulations. If such cost becomes
prohibitively expensive, we may be forced to modify, curtail or cease certain aspects of our
business operations.
RISKS RELATING TO CONDUCTING BUSINESS IN CHINA
Changes in the PRC legal system may adversely affect our business and limit the legal
protection available to you
Our operating subsidiary and operations are mainly located in the PRC. Our business
in the PRC is subject to the PRC laws and regulations applicable to foreign investment in
the PRC. The PRC legal system is a civil law system based on written statutes. Unlike the
common law legal system, prior court decisions in a civil law system have little precedential
value and can only be used as a reference. Furthermore, PRC’s statutes are subject to
interpretation by legislative bodies, judicia l authorities and enforcement bodies, which
increase uncertainty. When the PRC governmen t started its economic reforms in 1978, it
began to build a comprehensive system of laws and regulations to regulate business
practices and the overall economic order of the country. The PRC has made significant
progress in the promulgation of laws and regu lations dealing with business and commercial
affairs of various participants of the economy , involving foreign investment, corporate
organisation and governance, commercial transactions, taxation and trade. Many of these
laws and regulations are relatively new and are subject to further implementation and
interpretation. There may also be new laws and regulations to cover new economic activities
in the PRC. We cannot predict future developments in the PRC legal system.
RISK FACTORS
–5 3–


--- page 63 ---
Our dividend income from our PRC subsidiaries may be subject to a higher rate of withholding
tax than that which we currently anticipate
The EIT Law and its implementation rules provide that PRC-sourced income of
foreign enterprises, such as dividends paid by a PRC subsidiary to its equity holders that are
non-PRC resident enterprises, will normally be subject to PRC withholding tax at a rate of
10%, unless any such foreign investor’s jurisdiction of incorporation has a tax treaty with
China that provides for a different withholding arrangement.
Pursuant to the Arrangement Between Mainland China and Hong Kong Special
Administrative Region for the Avoidance of Double Taxation and Prevention of Fiscal
Evasion with Respect to Taxes on Income ( 內地和香港特別行政區關於對所得避免雙重徵稅
和防止偷漏稅的安排), the withholding tax rate on dividends paid by our PRC subsidiary to
our Hong Kong subsidiary would generally be reduced to 5%, provided that our Hong
Kong subsidiary is a Hong Kong tax resident as well as the beneficial owner of the PRC-
sourced income, and our Hong Kong subsidiary directly holds 25% or more interests in our
PRC subsidiary. On 3 February 2018, the State Administration of Taxation issued the
Announcement on Certain Issues Concerning the Beneficial Owners in a Tax Agreement ( 關
於稅收協定中‘‘受益所有人’’有關問題的公告), also known as Circular 9, which provides
guidance for determining whether a resident of a contracting state is the ‘‘beneficial owner’’
of an item of income under China’s tax treaties and similar arrangements. According to
Circular 9, a beneficial owner generally must be engaged in substantive business activities
and an agent will not be regarded as a beneficial owner. Accordingly, if our Hong Kong
subsidiary is not regarded as the beneficial owner, there is no assurance that the reduced
withholding tax rate will be available in the future.
We may be treated as a PRC tax resident enterprise under the EIT law, which may result in
our PRC-sourced income, dividends payable by us to our foreign investors and gains on the
sale of our Shares being subject to PRC withholding taxes and may have a material adverse
effect on the value of your investment
Under the EIT Law and its implementation regulations, withholding tax at 10% will
normally apply to dividends payable to investors that are non-PRC resident enterprise by
PRC resident enterprise or on gain recognised by the non-PRC investors with respect to the
sale of shares of the PRC resident enterprise as such dividend or gain is derived from
sources within PRC. PRC withholding tax at a 20% rate may apply to dividends paid to and
any gain realised by non-resident individual shareholders. If we are deemed by the PRC tax
authorities as a PRC resident enterprise for tax purpose in the future, the dividends to be
distributed by our Company and the gain with respect to the sale of Shares of our Company
may be regarded as income from ‘‘sources within China’’ and be subject to PRC income tax,
unless such tax is reduced by an applicable i n c o m et a xt r e a t yb e t w e e nC h i n aa n dt h e
jurisdiction of the non-PRC investors. It is unclear whether non-PRC shareholders of our
Company would be able to claim the benefits of any tax treaties between their country of
tax residence and the PRC and if we are required under the EIT Law to withhold PRC
income tax on our dividends payable to our Shareholders, or if our Shareholders are
required to pay PRC income tax on the transfer of the shares, the returns on our
Shareholders’ investment in our Shares will be reduced.
RISK FACTORS
–5 4–


--- page 64 ---
We may not be able to obtain government grants, which are non-recurring in nature
For FY2020, FY2021, FY2022 and 9M2023, we received government grants of
approximately RMB3.6 million, RMB0.5 million, RMB0.2 million and RMB0.2 million,
respectively, which were recognised as our other income. Government grants are recognised
in the statement of financial position initia lly when there is reasonable assurance that the
grants will be received and that we will comply with the conditions attaching to them. The
government grants we received during the Track Record Period includes financial subsidies
in relation to agricultural development, greenin g purposes, subsidising the interest payment
of our borrowing in 2018 and supporting the listing of local enterprises provided by the
Municipal Government of Laixi in FY2020, which are dependent on the government’s
allocation. Moreover, since there can be changes in the laws, regulations and governmental
policies of the PRC, we face uncertainty relati ng to the availability of government grants
and we cannot guarantee that we will record such income of similar amount, or at all, in the
future. Any eliminations or alterations t o any of the incentives provided to us by the
governments would have an adverse effect on our financial performance and results of our
operations.
We may be subject to penalties (including restriction on our ability to inject capital into our
PRC subsidiary and our PRC subsidiary’s ability to distribute profits to us), which may have a
material adverse impact on our business and financial conditions, if our PRC resident
shareholders or beneficial owners fail to comply with relevant PRC foreign exchange
regulations
SAFE issued the Notice of the SAFE on Relevant Issues concerning Foreign Exchange
Administration relating to Domestic Residents offshore Investment and Financing and
Round-trip Investment through Special Purpose Vehicles ( 國家外匯管理局關於境內居民通
過特殊目的公司境外投融資及返程投資外匯管理有關問題的通知), or SAFE Circular No. 37,
which became effective on 4 July 2014. Circular No . 37 requires ‘‘PRC residents’’, including
PRC individuals and enterpris es, to register with SAFE or its local branches in relation to
their direct establishment or indirect control of an offshore special purpose vehicle. An
offshore special purpose vehicle is an offshore entity used for the purpose of overseas
investment and financing with such PRC residen ts’ legally owned assets or equity interests
in domestic enterprises or offshore assets or interests. In addition, such PRC residents must
update their foreign exchange registrations with SAFE when the offshore special purpose
vehicle undergoes material events relating to any change of basic information (including
change of such PRC citizens or residents, name a nd operation term), increases or decreases
in investment amount, share transfers or exchanges, or mergers or divisions.
On 13 February 2015, SAFE promulgated the Notice of the SAFE on Further
Simplifying and Improving Policies for the Foreign Exchange Administration of Direct
Investment ( 國家外匯管理局關於進一步簡化和改進直接投資外匯管理政策的通知),
 or
SAFE Circular No. 13, which came into effect on 1 June 2015, pursuant to which local
banks shall review and handle foreign exchange registration for overseas direct investment,
including the initial foreign exchange registration and amendment registration under SAFE
Circular No. 37, while the application for remedial registrations shall still be submitted to,
reviewed and handled by the relevant local branches of SAFE.
RISK FACTORS
–5 5–


--- page 65 ---
If any shareholder holding interest in an offshore special purpose vehicle, who is a
‘‘PRC resident’’ as determined by Circular N o. 37, fails to fulfil the required foreign
exchange registration with the local SAFE branches pursuant to Circular No. 37 and
Circular No. 13, the PRC subsidiaries of that offshore special purpose vehicle may be
prohibited from distributing their profits and dividends to their offshore parent company or
from carrying out other subsequent cross-border foreign exchange activities, and the
offshore special purpose vehicle may be restricted in its ability to contribute additional
capital to its PRC subsidiaries. Moreover, f ailure to comply with th e SAFE registration
requirements described above could result in liability under PRC laws for evasion of
applicable foreign exchange restrictions.
There remains uncertainty as to the interpretation and implementation of the latest
SAFE rules at practice level. Due to the inherent complexity in the implementation of the
regulatory requirements by the PRC authorit ies, such registration might not be always
practically available in all circumstances as pres cribed in those regulations. In addition, we
may not always be fully aware or informed of the identities of our beneficiaries who are
PRC nationals or entities, and may not be able to compel them to comply with SAFE
Circular No. 37 or other regulations. We cannot assure that all of our Shareholders or
beneficiaries will at all times comply with, or in the future make or obtain any applicable
registrations or approvals required by SAFE rules or other regulations. We cannot assure
that the SAFE or its local branches will not rel ease explicit requirements or interpret the
relevant PRC laws and regulations otherwis e. Failure by any such Shareholder to comply
with SAFE rules or other regulations may result in prohibition of the distribution of profits
and dividends to us by the PRC subsidiary or restrictions on the subsequent cross-border
foreign exchange activities of our PRC subsi diary and may also subject the relevant PRC
resident or entity to penalties under the PRC fo reign exchange administration regulations.
In addition, we may also be restricted in our ability to contribute additional capital to our
PRC subsidiary, which may adversely affect our business and have a material adverse effect
on our financial conditions.
We are subject to the PRC governmental control of currency conversion
The PRC government imposes controls on convertibility of RMB into foreign
currencies and remittance of currency out of the PRC in certain cases. Substantially, we
receive all of our revenues in RMB. Shortage s in availability of foreign currencies may
restrict the ability of our PRC subsidiary to remit sufficient foreign currencies to pay
dividends or other payments to us, or otherwise satisfy their foreign currency denominated
obligations, if any. Under the existing PRC foreign exchange regulations, payments of
certain current account items can be made in foreign currencies without prior approval
from the local SAFE branch by complying with certain procedural requirements. However,
approval from appropriate governmental authorities is required where RMB is to be
converted into foreign currency and remitted out of the PRC to pay capital expenses such as
repayment of bank borrowings denominated in foreign currencies. If we fail to fulfill the
requirements of the PRC foreign exchange control system, we may not be able to pay
dividends in foreign currencies to our Shareholders.
RISK FACTORS
–5 6–


--- page 66 ---
PRC regulations on loans provided by, and foreign direct investment by, an offshore holding
company to PRC entities may delay or prevent us from using the net proceeds from the Share
Offer to fund our business operations in the PRC
As an offshore entity, any capital contributions or loans that our Company makes to
our PRC subsidiary, including from the net proceeds from the Share Offer, are subject to
PRC regulations. For example, any of our loans to our PRC subsidiary cannot exceed the
difference between the total amount of investment our PRC subsidiary is approved to make
under relevant PRC laws and the registered ca pital of this PRC subsidiary (if applicable),
and such loans must be registered with a local branch of SAFE. We cannot assure that we
can obtain the required government approvals on a timely basis, or at all. If we fail to
obtain such approvals, our ability to use the proceeds from the Share Offer to fund our
operations in the PRC would be negatively affected, which would in turn materially and
adversely affect our liquidity and our ability to expand our business.
Our investors may experience difficulties in effecting service of process, enforcing foreign
judgements or bringing original actions in the PRC against us or our Directors or officers
We are a company incorporated under the laws of the Cayman Islands, but
substantially all of our operations and assets are located in the PRC. Most of our
Directors and officers reside in the PRC, and substantially all of their assets are located in
the PRC. As a result, it may be difficult or impossible for our investors to effect service of
process upon us or our Directors and officers.
Moreover, the PRC does not have treaties providing for the reciprocal recognition and
enforcement of judgements awarded by courts in the United States, the Cayman Islands and
most other western countries. As a result, re cognition and enforcement in the PRC of the
judgement of a court in any of these jurisdictions in relation to any matter not subject to a
binding arbitration provision may need additional procedures compared to the local
judgements. Furthermore, an original action may be brought in the PRC against us or our
Directors or officers only upon satisfaction of the conditions for institution of a cause of
action pursuant to the PRC Civil Procedure Law ( 中華人民共和國民事訴訟法). As a result
of the conditions set forth in the PRC Civil Procedure Law and the discretion of the PRC
courts to determine whether the conditions are s atisfied and whether to accept the action for
adjudication, whether our investors will be able to bring an original action in the PRC in
this fashion still need to be determined case by case.
RISKS RELATED TO THE SHARE OFFER
The shares of Fujing Agriculture, our principal operating subsidiary, were quoted on NEEQ
from 25 November 2015 to 22 May 2019, and the characteristics of NEEQ and the Hong Kong
share market may differ
The shares of Fujing Agriculture, our principal operating subsidiary, had been quoted
on the NEEQ from 25 November 2015 to 22 May 2019. On 22 May 2019, the shares of
Fujing Agriculture ceased to be quoted on the NEEQ. With different trading
characteristics, the Stock Exchange and the NEEQ have divergent trading volumes,
liquidity and investor bases, as well as different levels of retail and institutional investor
RISK FACTORS
–5 7–


--- page 67 ---
participation. As a result, the trading performance of the NEEQ may not be comparable to
that of the Stock Exchange. Due to the different characteristics of the Stock Exchange and
the NEEQ, the historical prices of the NEEQ may not be indicative of the performance of
our Shares. You should therefore not place undue reliance on our prior trading history on
the NEEQ when evaluating an investment in our Shares.
You should not place any reliance on the information published regarding to Fujing
Agriculture’s prior quotation on the NEEQ
As the shares of Fujing Agriculture were quoted on the NEEQ from 25 November 2015
to 22 May 2019, Fujing Agriculture was required to comply with the then PRC regulations
on periodic reports and other disclosures. Accordingly, Fujing Agriculture published its
relevant information on the NEEQ or other media designated by the CSRC. However, the
information published on the NEEQ was based on the regulatory requirements and market
practices of the PRC securities regulatory authorities and the financial information
published on the NEEQ was prepared based on accounting principles generally accepted in
the PRC which may be different from that applicable to the Share Offer. Therefore, such
published information does not form a part of this prospectus. As a result, prospective
investors in our Shares are reminded that, when making their investment decisions as to
whether to purchase our Shares, they should rely only on the financial, operating and other
information included in this prospectus. By applying for the Offer Shares, you will be
deemed to have agreed that you will not rely on any information other than that contained
in this prospectus and other formal announcements made by us regarding the Share Offer in
Hong Kong.
There has been no prior public market for our Shares and an active trading market for our
Shares may not develop or be sustained
Prior to the Share Offer, no public market for our Shares existed. Following the
completion of the Share Offer, the Stock Exchange will be the only market on which the
Shares will be publicly traded. We cannot assure that an active trading market for our
Shares will be developed or be sustained after the Share Offer. In addition, we cannot assure
that our Shares will be traded in the public market subsequent to the Share Offer at or
above the Offer Price. The Offer Price for the Shares is expected to be fixed by the Price
Determination Agreement, and may not be indicative of the market price of our Shares
following the completion of the Share Offer. If an active trading market for our Shares does
not develop or is not sustained after the Share Offer, the market price and liquidity of our
Shares could be materially and adversely affected.
The trading price and volume of our Shares may be volatile, which could result in substantial
loss to our investors
The trading price of our Shares may be volatile and could fluctuate widely in response
to factors beyond our control, including (i) variations in the level of liquidity of our Shares;
(ii) changes in securities analysts’ (if any) e stimates of our financial performance; (iii)
investors’ perceptions of our Group and the general investment environment; (iv) changes
in laws, regulations and taxation systems which affect our operations; and (v) the general
market conditions of the securities markets in Hong Kong. In particular, the trading price
RISK FACTORS
–5 8–


--- page 68 ---
performance of our competitors whose securities are listed on the Stock Exchange may
affect the trading price of our Shares. These broad market and industry factors may
significantly affect the market price and volatility of our Shares, regardless of our actual
operating performance.
In addition to market and industry factors, the price and trading volume of our Shares
may be highly volatile for specific business reasons. In particular, factors such as variations
in our revenue, or net income and cash flow, the success or failure of our efforts in
implementing business and growth strategies; our involvement in material litigation as well
as recruitment or departure of key personnel, could cause the market price of our Shares to
change unexpectedly. Any of these factors ma y result in large and sudden changes in the
volume and trading price of our Shares.
As there will be a gap of several days between the pricing and the trading of our Offer
Shares, holders of our Offer Shares are subject to the risk that the price of our Offer Shares
could fall during the period before trading of our Offer Shares begins. The Offer Price of
our Shares is expected to be determined on the Price Determination Date. However, our
Shares will not commence trading on the Stock Exchange until the Listing Date. As a result,
investors may not be able to sell or otherwise deal in our Shares during the period between
the Price Determination Date and the Listing Date.
Accordingly, holders of our Shares are subject to the risk that the price of our Shares
could fall before trading begins as a result of adverse market conditions or other adverse
developments that could occur between the time of sale and the time trading begins.
Our investors will experience immediate dilution and may experience further dilution if we
issue additional Shares in the future
We may need to raise additional funds due to changes in business conditions, or to
finance our future plans, whether in relation to our existing operations or any future
acquisitions. If additional funds are raised by way of issuing Shares or equity-linked
securities other than on a pro rata basis to our existing Shareholders, our existing
Shareholders’ shareholding may be reduced, the earnings per Share and the net tangible
asset value per Shares would diminish and/or s uch newly issued securities may have rights,
preferences and privileges superior to the Shares of our existing Shareholders.
Future disposal or perceived disposal of a substantial number of Shares of our existing
Shareholders in the public market could materia lly and adversely affect the prevailing market
price of our Shares
Disposal of substantial amounts of our Shares in the public market after the
completion of the Share Offer, or the perception of such disposal could adversely affect the
market price of our Shares and materially impa ir our future ability to raise capital through
offerings of our Shares. There is no assurance that our major Shareholders would not
dispose of their respective shareholdings, subject to the requirements of the Listing Rules.
Any significant disposal of our Shares by any o f the major Shareholders could materially
affect the prevailing market price of our Shares. In addition, these disposals may make it
RISK FACTORS
–5 9–


--- page 69 ---
more difficult for us to issue new Shares in the future at a time and price we deem
appropriate, thereby limiting our ability to r aise further capital. We cannot predict the
effect of any significant future disposal on the market price of our Shares.
Investors should read the entire prospectus and should not rely on any information contained in
press articles or other media coverage regarding us and the Share Offer
We strongly caution our investors not to rely on any information contained in press
articles or other media regarding us and the Share Offer. Prior to the publication of this
prospectus, there may be press and media coverage regarding the Share Offer and us. Such
press and media coverage may include references to certain information that does not
appear in this prospectus, including certain operating and financial information and
projections, valuations and other information. We have not authorised the disclosure of any
such information in the press or media and do not accept any responsibility for any such
press or media coverage or the accuracy or completeness of any such information or
publication.
We make no representation as to the appropriateness, accuracy, completeness or
reliability of any such information or publication. To the extent that any such information
is inconsistent or conflicts with the information contained in this prospectus, we disclaim
responsibility for it and our investors should not rely on such information.
Certain facts, forecast and other statistics in this prospectus obtained from government and
official sources have not been independently verified and may not be reliable
Certain facts, forecast and other statistics in this prospectus are derived from various
government and official resources. Our Directo rs cannot guarantee the quality or reliability
of such source of materials. We believe that the sources of the said information are
appropriate sources for such information and have taken reasonable care in extracting and
reproducing such information. 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. Nevertheless, such information h as not been independently verified by us, the
Sole Sponsor, the Joint Overall Coordinators, the Joint Global Coordinators, the
Underwriters or any of their respective affiliates or advisers and, therefore, we make no
representation as to the accuracy of such facts a nd statistics. Further, we cannot assure our
investors that such forecast and statistics are stated or compiled on the same basis or with
the same degree of accuracy as similar statistics presented elsewhere. In all cases, our
investors should consider carefully how much weight or importance should be attached to
or placed on such facts or statistics.
RISK FACTORS
–6 0–


--- page 70 ---
We established the mechanism of share incentives and may grant share option in the future.
Such share incentives and share option may result in increased share-based compensation
expenses and negatively impact our results of operations upon its implementation, and any
options granted under the Share Scheme may dilute the Shareholders’ equity interests.
On 11 March 2024, our Shareholders passed the written resolution and adopted the
Share Scheme. An option may be exercised in accordance with the terms of the Share
Scheme at any time after the date upon which the option is deemed to be granted and
accepted and prior to the expiry of 10 years from that date. The period during which an
option may be exercised will be determined by our Board in its absolute discretion, save that
no option may be exercised more than 10 years after it has been granted. No option may be
granted more than 10 years after the Listing Date. The maximum number of Shares in
respect of which options may be granted under the Share Scheme and under any other share
schemes of our Company must not in aggregate exceed 10% of the total number of Shares in
issue immediately following the completion o f the Share Offer. See ‘‘Statutory and General
Information-D. Share Scheme’’ in Appendix VI to this prospectus for details.
We believe the granting of share-based comp ensation is of significant importance to
our ability to motivate directors and employees to optimise their performance efficiency for
the benefit of our Group, and to attract and retain or otherwise maintain an on-going
business relationship with directors and employees whose contributions are or will be
beneficial to the long-term growth of our Group. We may grant share-based compensation
to employees in the future. As a result, our expenses associated with share-based
compensation may increase, which may have an adverse effect on our results of
operations. In addition, any grant of sh are-based awards will dilute existing
shareholders’ shareholding.
RISK FACTORS
–6 1–


--- page 71 ---
In preparation for Listing, we have sought and have been granted the following waiver
from strict compliance with the relevant provisions of the Listing Rules:
MANAGEMENT PRESENCE IN HONG KONG
Pursuant to Rule 8.12 of the Listing Rules, a new applicant applying for a primary
listing on the Stock Exchange must have sufficient management presence in Hong Kong,
which normally means that at least two executive Directors must be ordinarily resident in
Hong Kong. We do not have, and do not contemplate in the foreseeable future that we will
have sufficient management presence in Hong Kong for the purpose of satisfying the
requirement under Rule 8.12 of the Lis ting Rules for the following reasons:
(a) our core business operations are principally located, managed and conducted in
the PRC and substantially all of the assets of our Group, including our head
office, is situated in Laixi, Qingdao, Shandong Province. Our executive Directors
and members of the senior management of our Group are and will be expected to
principally reside in the PRC;
(b) it would be practically difficult and com mercially unnecessary for us to relocate
our executive Directors to Hong Kong or appoint additional executive Directors
who are ordinarily resident in Hong Kong. The appointment of new executive
Directors, who may not be familiar with the operations of our Group, to our
Board for the sole purpose of satisfying the requirements of Rule 8.12 of the
Listing Rules may not be in the best interest of our Group and our Shareholders
as a whole. In particular, they will not be able to fully understand the daily
operations of our core business or fully appreciate the circumstances surrounding
or affecting our core business operations and development from time to time, as
they will not be physically present in our operation and management base in the
PRC all the time. As such, such new executive Directors (if appointed) may not be
able to exercise their discretion on a fu lly informed basis, or make appropriate
business decisions or judgements that are most beneficial to our operations and
development; and
(c) each of our existing executive Directors has a vital role in our business and
operations and it is of paramount importance for them to remain to be physically
close to our operations in the PRC. Relocating any of our existing PRC-based
executive Directors to Hong Kong would require time to process the application
for residency in Hong Kong and such app lication will be burdensome and costly
for our Company and may not enable the relevant executive Directors to perform
their strategic roles in our Group. Sin ce such executive Directors, after the
relocation, will not be physically present at our operation and management base
in the PRC all the time, they may encounter the aforesaid management
difficulties.
WAIVERS FROM STRICT COMPLIANCE WITH THE LISTING RULES AND EXEMPTION FROM STRICT
COMPLIANCE WITH THE COMPANIES (WINDING UP AND MISCELLANEOUS PROVISIONS) ORDINANCE
–6 2–


--- page 72 ---
Accordingly, we have applied to the Stock Exchange for, and the Stock Exchange has
granted us, a waiver from strict compliance with Rule 8.12 of the Listing Rules. We will
ensure that there is an effective channel of co mmunication between the Stock Exchange and
us by implementing the following arrangements:
(a) We have appointed and will continue to maintain two authorised representatives,
namely Mr. Zhang, the chairman of our Board and an executive Director, and Mr.
Au Yeung Ming Yin Gordon, our company secretary, who is ordinarily resident in
Hong Kong, to serve as our authorised representatives. Each of our authorised
representatives will act as our principal channel of communication at all time with
the Stock Exchange, and will be readily contactable by the Stock Exchange via
phone, facsimile and/or email to deal promptly with enquiries in relation to our
Company from the Stock Exchange in short notice. Each of our authorised
representatives is authorised to commu nicate on behalf of our Company with the
Stock Exchange.
(b) Our Company will keep the Stock Exchange updated in respect of any change to
the contact details of our authorised representatives. Our Company will only
change the authorised representatives after notifying the Stock Exchange of such
change and the reasons and having made an appropriate replacement.
(c) Each of our authorised representatives has means for contacting all of our
Directors (including our independent non-executive Directors) promptly at all
times and when the Stock Exchange wishes to contact our Directors (including
our independent non-executive Directors) on any matters. All of our Directors
(including our independent non-executive Directors) who are not ordinarily
resident in Hong Kong possess or will be able to apply for valid travel documents
to visit Hong Kong and can meet with the Stock Exchange within a reasonable
period when required. To facilitate communication with the Stock Exchange, our
Directors (including our independent non-executive Directors) will provide to the
Stock Exchange and our authorised representatives their respective mobile phone
numbers, office phone numbers, fax numbers and email addresses. In the event
that any Director expects to travel or otherwise be out of office, he or she will
provide the phone number of the place of his or her accommodation to our
authorised representatives.
(d) We have appointed Grande Capital Limited as our compliance adviser in
compliance with Rule 3A.19 of the Listing Rules. Our compliance adviser will,
among other things and together with our au thorised representatives, provide us
with professional advice on continuing obligations under the Listing Rules and
act as additional channel of communication of our Company with the Stock
Exchange during the period from the Listing to the date on which our Company
complies with Rule 13.46 of the Listing Rule s in respect of our financial results for
the first full financial year immediately after the Listing. Our compliance adviser
WAIVERS FROM STRICT COMPLIANCE WITH THE LISTING RULES AND EXEMPTION FROM STRICT
COMPLIANCE WITH THE COMPANIES (WINDING UP AND MISCELLANEOUS PROVISIONS) ORDINANCE
–6 3–


--- page 73 ---
will be available to answer enquiries from the Stock Exchange and will act as the
principal channel of communication with the Stock Exchange when our
authorised representatives are not available.
(e) Meetings between the Stock Exchange and our Directors can be arranged through
our authorised representatives or our compliance adviser, or directly with our
Directors within a reasonable time. Our Company will inform the Stock Exchange
as soon as practicable in respect of any change in our authorised representatives
and/or our compliance adviser in accordance with the Listing Rules.
WAIVER FROM STRICT COMPLIANCE WITH RULE 4.04(1) OF THE LISTING
RULES AND EXEMPTION FROM STRICT COMPLIANCE WITH PARAGRAPH 27
OF PART I AND PARAGRAPH 31 OF PART II OF THE THIRD SCHEDULE TO THE
COMPANIES (WINDING UP AND MISCEL LANEOUS PROVISIONS) ORDINANCE
According to Rule 4.04(1) of the Listing Rules, the Accountants’ Report as set out in
Appendix I to this prospectus must include the consolidated results of our Group in respect
of each of the three financial years immediately preceding the issue of this prospectus or
such shorter period as may be acceptable to the Stock Exchange.
Section 342(1)(b) of the Companies (Winding Up and Miscellaneous Provisions)
Ordinance requires all prospectuses to include an accountants’ report which contains the
matters specified in the Third Schedule to the Companies (Winding Up and Miscellaneous
Provisions) Ordinance.
According to paragraph 27 of Part I of the Third Schedule to the Companies (Winding
Up and Miscellaneous Provisions) Ordinance , our Company is required to include in this
prospectus a statement as to the gross trading income or sales turnover (as may be
appropriate) of our Group for each of the three financial years immediately preceding the
issue of this prospectus including an explanation of the method used for the computation of
such income or turnover, and a reasonable bre akdown between the more important trading
activities.
According to paragraph 31 of Part II of the Third Schedule to the Companies
(Winding Up and Miscellaneous Provisions) Ordinance, our Company is required to
include in this prospectus a report by the auditors of our Company in respect of the profits
and losses and assets and liabilities of our Group for each of the three financial years
immediately preceding the issue of this prospectus.
Pursuant to section 342A of the Companies (Winding Up and Miscellaneous
Provisions) Ordinance, the SFC may issue, subject to such conditions (if any) as the SFC
thinks fit, a certificate of exemption from compliance with the relevant requirements under
the Companies (Winding Up and Miscellaneous Provisions) Ordinance if, having regard to
the circumstances, the SFC considers that the exemption will not prejudice the interests of
the investing public and compliance with any or all of such requirements would be
irrelevant or unduly burdensome, or is otherwise unnecessary or inappropriate.
WAIVERS FROM STRICT COMPLIANCE WITH THE LISTING RULES AND EXEMPTION FROM STRICT
COMPLIANCE WITH THE COMPANIES (WINDING UP AND MISCELLANEOUS PROVISIONS) ORDINANCE
–6 4–


--- page 74 ---
The Accountants’ Report for FY2020, FY2021, FY2022 and 9M2023 is set out in
Appendix I to this prospectus but does not include the consolidated results of our Group in
respect of the full year immediately preceding the proposed date of the Listing, being the
full year ended 31 December 2023. However, strict compliance with section 342(1)(b) in
relation to paragraph 27 of Part I and paragraph 31 of Part II of the Third Schedule to the
Companies (Winding Up and Miscellaneous Provisions) Ordinance and Rule 4.04(1) of the
Listing Rules would be unduly burdensome and the exemption would not prejudice the
interest of the investing public given the following reasons:
(a) there would not be sufficient time for our Group and the Reporting Accountants
to finalise the audited financial statements for the full year ended 31 December
2023 for inclusion in this prospectus, which shall be issued on or before 20 March
2024. If the financial information is required to be audited up to the full year
ended 31 December 2023, our Company and the Reporting Accountants would
have to undertake a substantial amount of work to prepare, update and finalise
the Accountants’ Report and this prospectus and the relevant sections of this
prospectus will need to be updated to cover such additional period, which will
lead to a delay in the listing timetable;
(b) our Company has included in this prospectus (a) the Accountants’ Report
covering FY2020, FY2021, FY2022 and 9 M2023; (b) the unaudited preliminary
financial information of our Group for the full year ended 31 December 2023 as
set out in Appendix III to this prospectus, which has been agreed with our
Reporting Accountants, following their work under Practice Note 730 (Revised)
‘‘Guidance for Auditors Regarding Preliminary Announcements of Annual
Results’’ issued by the Hong Kong Insti tute of Certified Public Accountants,
and a commentary on the results for the year as set out in Appendix III to this
prospectus, and such disclosure is no less than the content requirements for a
preliminary results announcement under Rule 13.49 of the Listing Rules; and (c)
the information regarding the recent development of our Group subsequent to the
Track Record Period and up to the Latest Practicable Date. As such, our
Company and the Sole Sponsor are of the view that information included in this
prospectus have already provided potential investors with adequate and
reasonably up-to-date information in the circumstances to form a view on the
track record and earnings trend of our Group. Our Directors and the Sole
Sponsor confirm that all information that is necessary for the potential investors
to make an informed assessment of the activities, assets and liabilities, financial
position, management and profitability of our Company has been included in this
prospectus. Our Directors believe that a waiver from strict compliance with Rule
4.04(1) of the Listing Rules and the exemption from strict compliance with section
342(1)(b) in relation to paragraph 27 of Part I and paragraph 31 of Part II of the
Third Schedule to the Companies (Winding Up and Miscellaneous Provisions)
Ordinance would not prejudice the interests of the investing public;
WAIVERS FROM STRICT COMPLIANCE WITH THE LISTING RULES AND EXEMPTION FROM STRICT
COMPLIANCE WITH THE COMPANIES (WINDING UP AND MISCELLANEOUS PROVISIONS) ORDINANCE
–6 5–


--- page 75 ---
(c) our Directors and the Sole Sponsor confirmed that, after performing sufficient
due diligence work up to the date of this prospectus, there has been no material
adverse change in our financial and tra ding positions or prospects since 30
September 2023 and there has been no event since 30 September 2023 which would
materially affect the information shown in the Accountants’ Report set out in
Appendix I to this prospectus, the unaudited pro forma information, the
unaudited preliminary financial information of our Group for the full year
ended 31 December 2023 as included in Appendix III to this prospectus and the
section headed ‘‘Financial Information’’ in this prospectus and other parts of this
prospectus; and
(d) our Company will comply with the requirements under Rules 13.46(2) of the
Listing Rules in respect of the publicat ion of its annual report. Our Company
currently expects to issue its annual report for the full year ended 31 December
2023 on or before 30 April 2024. In this regard, our Directors consider that our
Shareholders, the investing public as well as potential investors of our Company
will be kept informed of the financial results of our Group for the full year ended
31 December 2023.
In such circumstances, an application has been made to the Stock Exchange for, and
the Stock Exchange has granted to our Company, a waiver from strict compliance with Rule
4.04(1) of the Listing Rules, on the conditions that:
(a) this prospectus will be issued on or before 20 March 2024 and our Shares will be
listed on the Stock Exchange on or before 31 March 2024, i.e. within three months
after the latest financial year end;
(b) our Company will obtain a certificate of exemption from the SFC on compliance
with the requirements under section 342(1 )(b) in relation to paragraph 27 of Part I
and paragraph 31 of Part II of the Third Schedule to the Companies (Winding Up
and Miscellaneous Provisions) Ordinance; and
(c) this prospectus will include the preliminary unaudited financial information for
the full year ended 31 December 2023 and a commentary on the results for the
year. The financial information to be included in this prospectus must (a) follow
the same content requirements as for a preliminary results announcement under
Rule 13.49 of the Listing Rules; and (b) be agreed with the Reporting Accountants
following their review under Practice Note 730 (Revised) ‘‘Guidance for Auditors
Regarding Preliminary Announcements of Annual Results’’ issued by the Hong
Kong Institute of Certified Public Accountants.
Our Company confirms that we will not be in breach of our constitutional documents
or laws and regulations of the Cayman Islands, where our Company is incorporated, or
other regulatory requirements regarding our obligation to publish preliminary results
announcements.
WAIVERS FROM STRICT COMPLIANCE WITH THE LISTING RULES AND EXEMPTION FROM STRICT
COMPLIANCE WITH THE COMPANIES (WINDING UP AND MISCELLANEOUS PROVISIONS) ORDINANCE
–6 6–


--- page 76 ---
An application has also been made to the SFC for a certificate of exemption from strict
compliance with section 342(1)(b) in relation to paragraph 27 of Part I and paragraph 31 of
Part II of the Third Schedule to the Companies (Winding Up and Miscellaneous Provisions)
Ordinance and a certificate of exemption has been granted by the SFC under section 342A
of the Companies (Winding Up and Miscellaneous Provisions) Ordinance on the conditions
that:
(a) the particulars of the exemption are set out in this prospectus;
(b) this prospectus will be issued on or before 20 March 2024; and
(c) the Shares will be listed on the Stock Exchange on or before 31 March 2024 (i.e.
three months after the latest financial year end of our Company).
WAIVERS FROM STRICT COMPLIANCE WITH THE LISTING RULES AND EXEMPTION FROM STRICT
COMPLIANCE WITH THE COMPANIES (WINDING UP AND MISCELLANEOUS PROVISIONS) ORDINANCE
–6 7–


--- page 77 ---
DIRECTORS’ RESPONSIBILITY FOR THE CONTENTS OF THIS PROSPECTUS
AND THE SHARE OFFER
This prospectus, for which our Directors (including any proposed director who is
named as such in this Prospectus) collectivel y and individually accept full responsibility,
includes particulars given in complia nce 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
g i v i n gi n f o r m a t i o nw i t hr e g a r dt ou s .
Our Directors, having made all reasonable en quiries, confirm that to the best of their
knowledge and belief the information contained in this prospectus is accurate and complete
in all material aspects and not misleading or deceptive, and there are no other matters the
omission of which would make any statement herein or this prospectus misleading.
PUBLIC OFFER, UNDERWRITING AND INFORMATION ON THE SHARE OFFER
This prospectus is published solely in connection with the Public Offer, which forms
part of the Share Offer. For applicants under the Public Offer, this prospectus sets out the
terms and conditions of the Public Offer.
The 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 authorised to give any information in connection with
the Share Offer 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
authorised by us, the Sole Sponsor, the Joint Overall Coordinators, the Joint Global
Coordinators, the Joint Bookrunners, the Joint Lead Managers, the Capital Market
Intermediaries and the Underwriters, any of the ir respective directors, agents, employees or
advisers or any other party involved in the Share Offer.
The Listing is sponsored by the Sole Sponsor. The Public Offer is fully underwritten by
the Public Offer Underwriters under the terms of the Public Offer Underwriting Agreement
and is subject to us, the Joint Overall Coordinators and the Joint Global Coordinators (for
themselves and on behalf of the Underwriters) agreeing on the Offer Price. A Placing
Underwriting Agreement relating to the Placing is expected to be entered into on or around
Tuesday, 26 March 2024, subject to the Offer Price being agreed. The Share Offer is
managed by the Joint Overall Coordinators and the Joint Global Coordinators.
If, for any reason, the Offer Price is not agreed among us, the Joint Overall
Coordinators and the Joint Global Coordinators (for themselves and on behalf of the
Underwriters), the Share Offer will not proceed and will lapse. For full information about
the Underwriters and the underwriting arrangements, please refer to the section headed
‘‘Underwriting’’ in this prospectus.
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
INFORMATION ABOUT THIS PROSPECTUS AND THE SHARE OFFER
–6 8–


--- page 78 ---
a change in our affairs since the date of this prospectus or imply that the information
contained in this prospectus is correct as of any date subsequent to the date of this
prospectus.
PROCEDURE FOR APPLICATION FOR PUBLIC OFFER SHARES
The procedures for applying for Public Offer Shares are set out in the section headed
‘‘How to Apply for Public Offer Shares’’ in this prospectus.
STRUCTURE OF THE SHARE OFFER
Details of the structure of the Share Offer, in cluding its conditions, are set out in the
section headed ‘‘Structure and Conditions of the Share Offer’’ in this prospectus.
RESTRICTIONS ON OFFERS AND SALES OF SHARES
Each person acquiring the Public Offer Shares under the Public Offer will be required
to, or be deemed by his/her acquisition of Offe r Shares to, confirm that he/she 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 Offer Shares or the general
distribution of this prospectus in any jurisdiction other than in Hong Kong. Accordingly,
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 authorised or to any person to whom it is unlawful to make such an offer or invitation.
The distribution of this prospectus and the offering 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 jurisd ictions and pursuant to registration with or
authorisation by the relevant securities regula tory authorities or an exemption therefrom.
APPLICATION FOR LISTING OF OUR SHARES ON THE STOCK EXCHANGE
Application has been made to the Listing Committee for the listing of, and permission
to deal in, our Shares in issue and to be issued as mentioned in this prospectus pursuant to
the Share Offer (including (i) our Shares to b e issued pursuant to the Capitalisation Issue;
(ii) our Shares which may be issued pursuant to the exercise of the Over-allotment Option;
and (iii) our Shares which may fall to be issued upon the exercise of any options and/or
awards that may be granted under the Share Scheme).
Save as disclosed in this prospectus, no part of the share capital of our Company is
listed on or dealt in on any other stock exchange and no such listing or permission to list is
b e i n go ri sp r o p o s e dt ob es o u g h ti nt h ef u t u r e .
Under section 44B(1) of the Companies (Winding Up and Miscellaneous Provisions)
Ordinance, any allotment made in respect of an y application will be invalid if the listing of,
and permission to deal in, the Offer Shares on the Stock Exchange is refused before the
INFORMATION ABOUT THIS PROSPECTUS AND THE SHARE OFFER
–6 9–


--- page 79 ---
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 our
Company by the Stock Exchange.
COMMENCEMENT OF DEALINGS IN OUR SHARES
Assuming that the Public Offer becomes unconditional at or before 8 : 00 a.m. in Hong
Kong on Thursday, 28 March 2024, it is expected that dealings in our Shares on the Stock
Exchange will commence at 9 : 00 a.m. on Thursday, 28 March 2024. Our Shares will be
traded in board lots of 2,000 Shares each. The stock code of our Shares will be 2497.
PROFESSIONAL TAX ADVICE RECOMMENDED
You should consult your professional advisers if you are in any doubt as to the
taxation implications of subscribing for, pur chasing, holding or disposing of, or dealing in,
our Shares or exercising any rights attaching to our Shares. We emphasise that none of our
Company, the Joint Overall Coordinators, the Joint Global Coordinators, the Joint
Bookrunners, the Joint Lead Managers, the Capital Market Intermediaries, the Sole
Sponsor, the Underwriters, any of our or thei r respective directors, officers, employees,
agents, advisers or representatives or any other person involved in the Public Offer accepts
responsibility for any tax effects or liabilities resulting from your subscription, purchase,
holding or disposing of, or dealing in, our Shares or your exercise of any rights attaching to
our Shares.
HONG KONG BRANCH REGISTER AND STAMP DUTY
Our principal register of members will be main tained by our principal share registrar,
Conyers Trust Company (Cayman) Limited, i n the Cayman Islands, and our register of
members holding listed Shares will be maintained by our Hong Kong Branch Share
Registrar, Tricor Investor Services Limited, in Hong Kong.
All Offer Shares will be registered on the Hong Kong branch register of members of
our Company in Hong Kong. Dealings in our Shares registered in our Hong Kong share
register will be subject to stamp duty in Hong Kong. The current ad valorem rate of Hong
Kong stamp duty is 0.1% on the higher of the consideration for or the market value of our
Shares and it is charged on the purchaser on every purchase and on the vendor on every sale
of the Shares. In other words, a total stamp duty of 0.2% is currently payable on a typical
sale and purchase transaction involving our Shares. In addition, a fixed duty of HK$5 is
charged on each instrument of transfer (if required).
Unless determined otherwise by our Company, dividends payable in Hong Kong
dollars in respect of our Shares will be paid to our Shareholders listed on the Hong Kong
branch register of our Company, by ordinary post, at our Shareholders’ risk, to the
registered address of each Shareholder of our Company, or if joint Shareholders, to the
first-named therein in accordance with the Articles.
INFORMATION ABOUT THIS PROSPECTUS AND THE SHARE OFFER
–7 0–


--- page 80 ---
SHARES WILL BE ELIGIBLE FOR ADMISSION INTO CCASS
Subject to the granting of the listing of, and permission to deal in, our Shares on the
Stock Exchange and our compliance with the stock admission requirements of HKSCC, our
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 our 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.
Investors should seek the advice of their stockbroker or other professional advisor for
details of the settlement arrangements as such arrangements may affect their rights and
interests. All necessary arrangements have been made for our Shares to be admitted into
CCASS.
OTHERS
If there is any inconsistency between this prospectus and the Chinese translation of this
prospectus, this prospectus shall prevail. Name s of any laws and regulations, governmental
authorities, institutions, natural persons or other entities (including certain of our
subsidiaries) which have been translated into English and included in this prospectus and
for which no official English translation exists are unofficial translations for your reference
only.
Unless otherwise specified, amounts denominated in RMB and US$ have been
translated, for the purpose of illustration only, into HK dollars or US$ in this prospectus at
the following exchange rates: HK$1.00 :RMB0.90765. No representation is made that any
amount in RMB or US$ was or could have been or could be converted into HK$ or US$ at
such rates or any other exchange rates on such date or any other date.
Certain amounts and percentage figures included in this prospectus have been subject
to rounding adjustments. Accordingly, figures shown as totals in certain tables may not be
an arithmetic aggregation of the figures preceding them.
Unless otherwise specified, all references to any shareholdings in our Company assume
no exercise of the Over-allotment Option.
INFORMATION ABOUT THIS PROSPECTUS AND THE SHARE OFFER
–7 1–


--- page 81 ---
DIRECTORS
Name Address Nationality
Executive Directors
Mr. Zhang Yonggang ( 張永剛) Block 58, Seinepongfei Estate
No. 85 Beijing East Road
Laixi, Qingdao
Shandong Province
PRC
Chinese
Mr. Lyu Zhonghua ( 呂鐘華) R o o m4 0 1 ,U n i t2 ,B l o c k9
Yuyuan Fengjing Community
Chongqing Road
Laixi, Qingdao
Shandong Province
PRC
Chinese
Mr. Cui Wei ( 崔偉) R o o m1 0 1 ,U n i t6 ,B l o c k1
Dongcheng Meiyu Community
Weihai Central Road
Laixi, Qingdao
Shandong Province
PRC
Chinese
Ms. Guo Zeqing ( 郭澤清) A3-01-401 Shanghai Garden
No. 118 Shanghai Central Road
Laixi, Qingdao
Shandong Province
PRC
Chinese
M r .P a n gJ i n h o n g(逄金洪) Room 301, Unit 4, Block 13
Wenxinyuan
Huangdao East Road
Laixi, Qingdao
Shandong Province
PRC
Chinese
Independent non-executive Directors
Mr. Lam Chik Tong ( 林植棠)F l a t F , 1 8 / F , B l o c k 3
Park Island
Ma Wan, New Territories
Hong Kong
Chinese
DIRECTORS AND PARTIES INVOLVED IN THE SHARE OFFER
–7 2–


--- page 82 ---
Name Address Nationality
D r .L iJ u n l i a n g(李俊良) Room 101, Unit 2, Block 116
No. 287 Mingyang Road
Chengyang District, Qingdao
Shandong Province
PRC
Chinese
Ms. Chow Wai Mee May ( 周煒美)F l a t C , 5 3 / F
Tower 2, Sky Tower
38 Sung Wong Toi Road
Kowloon
Hong Kong
Chinese
For further information, please refer to the section headed ‘‘Directors and Senior
Management’’ in this prospectus.
PARTIES INVOLVED IN THE SHARE OFFER
Sole Sponsor Grande Capital Limited
Room 2701, 27/F
Tower 1, Admiralty Centre
18 Harcourt Road
Admiralty
Hong Kong
(a licensed corporation to carry out type 1 (dealing in
securities) and type 6 (advising on corporate finance)
regulated activity under the SFO)
Joint Overall Coordinators CMBC Securities Company Limited
45/F, One Exchange Square
8 Connaught Place
Central
Hong Kong
Grande Capital Limited
Room 2701, 27/F
Tower One, Admiralty Centre
18 Harcourt Road
Admiralty
Hong Kong
DIRECTORS AND PARTIES INVOLVED IN THE SHARE OFFER
–7 3–


--- page 83 ---
Joint Global Coordinators, Joint
Bookrunners and Joint Lead
Managers
CMBC Securities Company Limited
45/F, One Exchange Square
8 Connaught Place
Central
Hong Kong
Grande Capital Limited
Room 2701, 27/F
Tower One, Admiralty Centre
18 Harcourt Road
Admiralty
Hong Kong
Cinda International Capital Limited
45/F, COSCO Tower,
183 Queen’s Road Central,
Hong Kong
Joint Bookrunners,
Joint Lead Managers
and CMIs
BOCOM International Securities Limited
9/F, Man Yee Building,
68 Des Voeux Road Central,
Hong Kong
ABCI Capital Limited
(only as a Joint Bookrunner and CMI)
11/F, Agricultural Bank of China Tower,
50 Connaught Road Central,
Hong Kong
CCB International Capital Limited
12/F, CCB Tower,
3 Connaught Road Central,
Central, Hong Kong
ICBC International Securities Limited
37/F, ICBC Tower,
3 Garden Road,
Central, Hong Kong
Haitong International Securities Company Limited
2 2 / F ,L iP oC h u nC h a m b e r s ,
189 Des Voeux Road Central,
Hong Kong
DIRECTORS AND PARTIES INVOLVED IN THE SHARE OFFER
–7 4–


--- page 84 ---
Zhongtai International Securities Limited
1 9 / F ,L iP oC h u nC h a m b e r s ,
189 Des Voeux Road Central,
Hong Kong
China Galaxy International Securities (Hong Kong)
Co., Limited
20/F, Wing On Centre,
111 Connaught Road Central,
Central, Hong Kong
Eddid Securities and Futures Limited
21/F, CITIC Tower, 1 Tim Mei Avenue,
Central, Hong Kong
Alliance Capital Partners Limited
Unit 03, 7/F, Worldwide House,
19 Des Voeux Road Central, Hong Kong
Caitong International Securities Company Limited
Unit 2401–05, 24/F,
Grand Millennium Plaza,
181 Queen’s Road Central,
Hong Kong
Ruibang Securities Limited
9/F, Sang Woo Building, 227-228 Gloucester Road,
Wan Chai,
Hong Kong
Joint Lead Managers and CMIs ABCI Securities Company Limited
10/F, Agricultural Bank of China Tower,
50 Connaught Road Central,
Hong Kong
Victory Securities Company Limited
11th Floor,
Yardley Commercial Building,
3 Connaught Road West,
Sheung Wan, Hong Kong
DIRECTORS AND PARTIES INVOLVED IN THE SHARE OFFER
–7 5–


--- page 85 ---
Patrons Securities Limited
Unit 3214, 32/F., Cosco Tower,
183 Queen’s Road Central,
Sheung Wan, Hong Kong
Fosun International Securities Limited
Suit 2101-2105, Champion Tower,
3 Garden Road,
Central,
Hong Kong
SBI China Capital Financial Services Limited
4/F, Henley Building,
No.5 Queen’s Road Central,
Hong Kong
Sheng Yuan Securities Limited
Units 3208-9, 32/F,
Grand Millennium Plaza,
Cosco Tower,
No. 183 Queen’s Road Central,
Hong Kong
Legal advisers to our Company As to Hong Kong law:
Patrick Mak & Tse
Rooms 901–905, 9/F
Wing On Centre
111 Connaught Road Central
Central
Hong Kong
As to PRC law:
Hylands Law Firm (Jinan)
16/F, Building 5
A3 Zone, Hanyu ¨ Jingu
7000 East Jingshi Road
High-tech District
Jinan, Shandong Province
China
As to Cayman Islands law:
Conyers Dill & Pearman
29th Floor, One Exchange Square
8 Connaught Place
Central
Hong Kong
DIRECTORS AND PARTIES INVOLVED IN THE SHARE OFFER
–7 6–


--- page 86 ---
Legal advisers to the Sole Sponsor
and the Underwriters
As to Hong Kong law:
Hastings & Co.
5/F, Gloucester Tower
The Landmark
11 Pedder Street
Central
Hong Kong
As to PRC law:
J i aY u a nL a wO f f i c e s
45F, Media Finance Center,
Pengcheng 1st Road,
Futian District,
Shenzhen, China
Joint auditors and Reporting
Accountants
McMillan Woods (Hong Kong) CPA Limited
2 4 / F . ,S i uO nC e n t r e
188 Lockhart Road, Wan Chai
Hong Kong
Crowe (HK) CPA Limited
9/F, Leighton Centre
77 Leighton Road
Causeway Bay
Hong Kong
Industry consultant Frost & Sullivan (Beijing) Inc., Shanghai Branch Co.
2504 Wheelock Square
1717 Nanjing West Road
Shanghai 200040,
China
Agricultural adviser Professor Cui Dejie ( 崔德杰)
Qingdao Agricultural University
No. 700 Changcheng Road
Chengyang District, Qingdao
Shandong Province
PRC
Property valuer BMI Appraisals Limited
Suite 01–08, 27
th Floor, Shui On Centre
6–8 Harbour Road
Wan Chai
Hong Kong
DIRECTORS AND PARTIES INVOLVED IN THE SHARE OFFER
–7 7–


--- page 87 ---
Biological assets valuer Savills Valuation and Professional Services (China)
Limited
Suite 1208, Cityplaza One
1111 King’s Road
Taikoo Shing
Hong Kong
Receiving bank Bank of Ch ina (Hong Kong) Limited
1 Garden Road
Hong Kong
DIRECTORS AND PARTIES INVOLVED IN THE SHARE OFFER
–7 8–


--- page 88 ---
Registered office in the Cayman
Islands
Cricket Square
Hutchins Drive
PO Box 2681
Grand Cayman KY1-1111
Cayman Islands
Headquarter and principal place of
business in the PRC
Huanhu North Road South
Nanbu Village South, Rizhuang Town
Laixi, Qingdao, Shandong Province
PRC
Principal place of business in Hong
Kong registered under Part 16 of
the Companies Ordinance
Unit 16, 28/F
One Midtown
11 Hoi Shing Road
Tsuen Wan
Hong Kong
Company’s website www.fujingnongye.com
(Note: content on the website does not form part of
this prospectus)
Company secretary Mr. Au Yeung Ming Yin Gordon ( 歐陽銘賢)
(HKICPA)
Room 4, 1/F
Oi Wai House
Tsz Oi Court
Tsz Wan Shan
Kowloon, Hong Kong
Authorised representatives Mr. Zhang Yonggang ( 張永剛)
Block 58, Seinepongfei Estate
No. 85 Beijing East Road
Laixi, Qingdao, Shandong Province
PRC
Mr. Au Yeung Ming Yin Gordon ( 歐陽銘賢)
Room 4, 1/F
Oi Wai House
Tsz Oi Court
Tsz Wan Shan
Kowloon, Hong Kong
Audit committee Mr. Lam Chik Tong ( 林植棠) (Chairman)
D r .L iJ u n l i a n g(李俊良)
Ms. Chow Wai Mee May ( 周煒美)
CORPORATE INFORMATION
–7 9–


--- page 89 ---
Remuneration committee Ms. Chow Wai Mee May ( 周煒美) (Chairlady)
Mr. Lam Chik Tong ( 林植棠)
D r .L iJ u n l i a n g(李俊良)
Nomination committee Mr. Zhang Yonggang ( 張永剛) (Chairman)
Ms. Chow Wai Mee May ( 周煒美)
Mr. Lam Chik Tong ( 林植棠)
D r .L iJ u n l i a n g(李俊良)
Compliance adviser Grande Capital Limited
Room 2701, 27/F
Tower 1, Admiralty Centre
18 Harcourt Road
Admiralty
Hong Kong
Principal share registrar in the
Cayman Islands
Conyers Trust Company (Cayman) Limited
Cricket Square
Hutchins Drive
PO Box 2681
Grand Cayman KY1-1111
Cayman Islands
Hong Kong Branch Share Registrar
and transfer office
Tricor Investor Services Limited
17/F, Far East Finance Centre
16 Harcourt Road
Hong Kong
Principal bank Bank of China (Hong Kong) Limited
Bank of China Tower
1 Garden Road
Central
Hong Kong
CORPORATE INFORMATION
–8 0–


--- page 90 ---
The information and statistics set out in this section and other sections of this
prospectus were extracted from the repo rt prepared by Frost & Sullivan, which was
commissioned by us, and from various official government publications and other publicly
available publications. We eng aged Frost & Sullivan to prepare the Frost & Sullivan Report,
an independent industry report, in connection with the Share Offer. The information from
official government sources has not been independently verified by us, the Sole Sponsor, the
Joint Overall Coordinators, the Joint Global Coordinators, the Joint Bookrunners, the Joint
Lead Managers, the Capital Market Intermediaries, the Underwriters, any of their
respective directors and advisers, or any other persons or parties involved in the Share Offer,
and no representation is given as to its accuracy.
SOURCE AND RELIABILITY OF INFORMATION
We have commissioned Frost & Sullivan, an Independent Third Party, to conduct a
study on China’s vegetable produce market and potted vegetable produce market. We
agreed to pay Frost & Sullivan a fee of RMB1 ,240,000 for the preparation of the F&S
Report, and our Directors consider that such fee reflects market rates and are of the view
that the payment of such fee does not affect the fairness of conclusions drawn in the F&S
Report. Founded in 1961, Frost & Sullivan has o ver 50 global offices with more than 3,000
industry consultants, market research analysts, technology analysts and economists.
RESEARCH METHODOLOGY
The methodology used by Frost & Sullivan in gathering the relevant market data in
compiling the F&S Report included primary in terviews and secondary research. Primary
interviews are conducted with relevant institutions to obtain objective and factual data and
prospective predictions. Secondary research in volves information integration of data and
publication from publicly available resources, including official data and announcements
from PRC government departments, and market research on industry and enterprise player
information issued by our chief competitors.
BASES AND ASSUMPTIONS
The F&S Report was compiled based on independent market assessment through both
primary and secondary research and the following assumptions: (i) China’s economy is
likely to maintain steady growth in the next decade; (ii) China’s social, economic, and
political environment is likely to remain s table from 2023 to 2027; and (iii) increasing
frequencies of dining out and growing concerns about food safety of China’s residents are
likely to drive the future growth of the industry.
Based on above, our Directors are satisfied that the disclosure of future projects and
industry data included in this section of the pr ospectus is not misleading in material aspects.
Our Directors confirmed that, as at the L atest Practicable Date, after taking
reasonable care, there had been no adverse change in the market information since the
date of the F&S Report which may qualify, contradict or have an impact on the information
in this section of the prospectus.
INDUSTRY OVERVIEW
–8 1–


--- page 91 ---
AN OVERVIEW OF CHINA MACRO ECONOMY
According to the National Bureau of Statistics of China, the Chinese economy grew at
a CAGR of 7.8% from 2017 to 2022. Going forward, the Chinese authorities are likely to
maintain the consistency and stability of macroeconomic policies so as to maintain
macroeconomic stability. According t o the International Monetary Fund (‘‘ IMF’’), the
Chinese economy is forecast to keep growing at a CAGR of 5.9% from 2022 to 2027.
Together with the continuous growth in e conomy and urbanisation, the average
income level of Chinese urban households has been increasing continuously in recent years.
The per capita annual disposable income of urban households has increased to RMB49.3
thousand in 2022 from RMB36.4 thousand in 2017, representing a CAGR of 6.3%.
The growth of Chinese per capita annual disposable income has demonstrated positive
effect on the Chinese residents’ purchasing power. Frost & Sullivan estimates that by 2027,
the per capita annual disposable income of urban households is forecast to increase to
RMB66.0 thousand with a CAGR of 6.0% from 2022.
CHINA’S VEGETABLE AND POTTE D VEGETABLE PRODUCE MARKETS
An overview of China and Shandong province’s vegetable produce market
Vegetable is necessary for human being’s daily diet. The huge population of China and
increasing overseas demand for Chinese vegetable produce support growth of the PRC
vegetable industry. Major vegetable cultivation methods are in-ground vegetable
cultivation, hydroponic, in-pot cultivation, et c.. In-ground vegetable cultivation refers to
growing vegetable in soil and is the most common vegetable cultivation method in the PRC.
Hydroponic is an alternative to in-ground vegetable cultivation which uses water-soluble
nutrients to cultivate vegetables while in-pot cultivation refers to growing vegetable
produce in pots filled with nutritious substrates. This method has become more popular in
the PRC for improving productivity and freshness of vegetable produce.
INDUSTRY OVERVIEW
–8 2–


--- page 92 ---
Market size of China and Shandong province’s vegetable produce market
The PRC vegetable market recorded a total sale volume of 740.4 million tonnes in
2022, representing a CAGR of 1.9% between 2017 and 2022. The market has experienced
relatively moderate growth which is generally in line with the population growth in China.
In 2022, the sales volume of potted vegetable produce accounted for approximately 0.02%
of total sales volume of vegetable in China. S imilar trend is expected to continue in the
forecast period from 2022 and 2027, the growth of the total sales volume of vegetables is
forecast to increase steadily with an anticipated CAGR of 2.0% for the period from 2022 to
2027 and is expected to reach 818.6 million tonnes by 2027. Meanwhile, Shandong province
is the largest vegetable producing province in China in 2022. The total sales volume of
vegetables in Shandong province increased from 79.0 million tonnes in 2017 to 85.0 million
tonnes in 2022, representing a CAGR of approximately 1.5%. The number is likely to grow
at a CAGR of approximately 1.5% from 2022 to 2027, reaching 91.5 million tonnes in 2027.
Total Sales Volume of Vegetables (China), 2017 — 2027E
Total Sales Volume (Million Tonnes)
Total Sales Volume of Vegetables, Breakdown
by Type of Vegetable Produce, 2022
673.8 686.4 705.0 710.0 729.1 740.4 754.9 771.2 786.7 802.6 818.6
0
200
400
600
800
1,000
2017 2018 2019 2020 2021 2022 2023E 2024E 2025E 2026E 2027E
Sales volume22/27E17/22CAGR
2.0%1.9%Sales volume
Percentage (%)
0.1%Potted
Vegetable
98.4%
In-ground
Cultivation
Vegetable
1.5%
Hydroponic
Cultivation
Vegetable
Source: Frost & Sullivan
Total Sales Volume of Vegetables (Shandong Province), 2017 – 2027E
79.0 79.7 81.2 81.9 83.6 85.0 86.2 87.4 88.9 90.1 91.5
0
30
60
90
120
2017 2018 2019 2020 2021 2022 2023E 2024E 2025E 2026E 2027E
22/27E17/22
1.5%1.5%CAGR
Total Sales Volume (Million Tonnes)
Source: Frost & Sullivan
INDUSTRY OVERVIEW
–8 3–


--- page 93 ---
Average Wholesale Price of Vegetables (China and Shandong Province), 2017 – 2027E
3.7 3.9 4.2 4.6 4.9 4.9 5.2 5.5 5.8 6.1 6.3
3.1
3.3
0
1
2
3
4
5
6
7
8
9
10
2017 2018 2019 2020
4.3
2021
4.3
2022
4.7
2023E
4.9
2024E
5.2
2025E
5.4
2026E
5.6
2027E
3.6 3.9
22/27E17/22CAGR
5.2%5.8%China
5.4%6.8%Shandong Province
China
Shandong province
RMB per KG
Source: National Bureau of Statistics, MOA, Frost & Sullivan
Different Kinds of Vegetable Pr oduce in China and Shandong Province
The table below sets forth the major differences among different type of vegetable
produce:
Traditional
in-ground cultivation Hydroponic cultivation In-pot cultivation
Major steps of
cultivation
process
1. Tilling or loosening soil on
cultivation bed to prepare
it for planting;
2. Sowing;
3. Growth management
which mainly includes
watering, adding chemical
fertilisers and pesticides
and weeding; and
4. Harvesting upon maturity
1. Formulating nutrient-rich
water;
2. Seedling;
3. Transplanting to
hydroponic farming
system;
4. Growth management
which mainly includes
control over temperature
and humidity, regular
replacement of nutrient
solution and pumping
equipment maintenance;
and
5. Harvesting upon maturity
1. Premix organic substrates;
2. Sowing;
3. Growth management
which mainly includes
watering, control over
temperature, humidity and
carbon dioxide density
and pest control
4. Sale in pot (without
harvesting) once reach
maturity
Major limitations . Require large and flat
growing area
. Time and cost requirements
for soil preparation
. Expose to harmful external
factors
. Vulnerable to water and
power supply shortage
. High setup and
maintenance cost
. Risk of disseminate of
water-borne disease as
vegetable produce share
the same nutrient solution
. Relatively high initial
investment cost
. High delivery cost for
matured vegetable produce
as it is transported in pot
INDUSTRY OVERVIEW
–8 4–


--- page 94 ---
Traditional
in-ground cultivation Hydroponic cultivation In-pot cultivation
Initial investment
cost
Relatively low, while the land
cost being major cost item
Relatively high, as
construction of greenhouse,
the set-up of hydroponic
system and research and
development in the
composition of nutrient
solutions are required
Relatively high, as
construction of greenhouse,
research and development in
the composition of substrates
and the acquisition of raw
materials are required
Suitable species Basically all species not suitable for some of the
leafy-vegetable species
almost all kinds of short-
lived leafy vegetables species.
Technical
requirements
Minimal; the cultivation
process can be completed
with basic equipment and
facilities
High; the composition of
nutrient solution varies
during different growing
stages of vegetable produce
High; horticultural
techniques are required in the
preparation of the best suit
the organic substrates.
Sales method The matured vegetable
produce will undergo
harvesting, packaging and
transporting before sale. In
general, such vegetable
produce shall stay fresh for
3–5 days
The matured vegetable
produce will undergo
harvesting, packaging and
transporting before sale. In
general, such vegetable
produce shall stay fresh for
3–5 days with better
packaging.
The matured vegetable
produce will not be harvested
before sale. In general, such
vegetable produce shall stay
fresh and alive for 10–14
days after delivery
INDUSTRY OVERVIEW
–8 5–


--- page 95 ---
Traditional
in-ground cultivation Hydroponic cultivation In-pot cultivation
Retail price The retail price generally
remains in the low end of the
range of the consumer’s
acceptable prices,
nonetheless, the retail price
of certain vegetable produce
may fluctuate in different
seasons, in particular those
which are temperature-
sensitive, due to the limited
supply.
The retail price is similar to
those vegetables grown under
traditional in-ground
cultivation method
The retail price is expected to
be in the high-end of the
customer’s acceptable price
range, which can be four
times to five times of those
from traditional in-ground
cultivation method. As
potted vegetable produce is
cultivated in greenhouses and
targeted to the commercial
sector of the catering
industry, the supply shall
remain stable, whilst demand
is relatively inelastic.
Therefore, the retail price
will remain relatively stable
throughout the year.
Number of yields
per year
. Due to the negative effects
of continuous cropping,
the output rate will
gradually deteriorate.
. It is common to adopt a
rest period or cultivate
other crops for soil
recovery between each
cultivation.
. Vegetable producers can
only complete two yields to
six yields of cultivation per
year.
. Hydroponic cultivation is
favourable to the growth of
certain water-hungry
vegetable, such as lettuce,
purple lettuce and romaine
lettuce.
. On average, six yields to
ten yields per year can be
achieved.
. With the use of
greenhouses, single-use
substrates and not being
affected by the negative
effects of continuous
cropping, vegetable
producers using the in-pot
cultivation method will
generally achieve high
productivity. In general, it
is able to cultivate a
maximum of ten yields to
14 yields per year, subject
to the conditions of
greenhouses and the
optimal use of cultivation
time.
An Overview of China’s Potted Vegetable Produce Market
Potted vegetable produce refers to vegetabl es that are cultivated in pots instead of
being cultivated on the ground. Potted vegetable produce is a small segment of the vegetable
market as a whole which is predominantly cultivated under traditional in-ground
cultivation method. Major species of potted vegetable produce are leafy vegetables and
solanaceous vegetables, including spinach, lettuce, water spinach, Chinese chives and
tomatoes. More and more restaurants display the fresh potted vegetable to arouse
consumers’ interest and for consumers to choose and order from around 2010. Along with a
rising awareness in personal wellness and co ncerns about food safety, potted vegetable
produce is becoming increasingly popular among urban residents and restaurants as a direct
access to quality and fresh vegetables.
INDUSTRY OVERVIEW
–8 6–


--- page 96 ---
Essential facilities and raw materials for producing potted vegetable produce include,
among others, greenhouses, seed s, substrates, fertilisers, pots and machinery. Cultivating
potted vegetable produce in a greenhouse allows for growth in optimal climatic conditions
as if ideal cultivation seasons were extended , allowing a year-round fresh supply of potted
vegetable produce.
Seedling nursery, substrates blending, transplanting and field management are four key
steps of production of potted vegetable produce. Potted vegetable producers with long
operating history, scientific expertise an d knowledgeable employees are more likely to
achieve higher production rates.
After maturation, fresh potted vegetable produce reach domestic consumers through
wholesalers and retailers or through direct sales. With the development of communication
technology, customers are able to place orders for potted vegetable produce online via
personal computers, tablets, or mobile phones.
Value chain of potted vegetable produce market
Upstream
Facility/Raw material supply
Greenhouse
Seeds
Substrates
Fertilisers
Pots
Machinery
Seedling
nursery
Substrates
blending
wholesaler Retailer
Restaurant
Hotel
Corporate
End
Consumers
Field
management Transplanting
Midstream
Production of potted vegetable produce
Downstream
Distribution & sales
>80%
15% ~ 20%
<5%
Source: Frost & Sullivan
Market size of China’s potted vegetable produce
In line with the increasing rate of vegetable consumption of residents in China due to
the increasing total population and disposable income, the sales volume of potted vegetable
produce increased from 107.8 million pots in 2017 to 239.4 million pots in 2022,
representing a CAGR of approximately 17.3%. Since (i) potted vegetable produce will
not be harvested at the time of sale; (ii) due to t he difference in species; and (iii) depending
on the maturity of the vegetable produce, there will be variation in weight of each potted
vegetable produce upon sale, the measurement of potted vegetable produce by pots is
commonly acknowledged in the industry and is applied to each market player in the
industry. As advised by Frost & Sullivan, it is w idely recognised across the potted vegetable
produce industry that each pot of vegetable produce shall contain approximately net weight
of 0.7 kg to 1.0 kg of vegetable produce.
In 2022, total sales revenue of potted veget able produce accounted for less than 0.1%
of total sales revenue of vegetable produce in China. It is an industry practice for vegetable
producers and potted vegetable producers to sell their products through wholesalers and
distributors in China. In 2022, approximately 70% of potted vegetable produce is sold
through wholesale channel. Meanwhile, the sales revenue of potted vegetable produce
increased from RMB1,520.8 million in 201 7 to RMB4,069.3 million in 2022 with a CAGR
of approximately 21.8%. In 2022, affected by the recurrence of COVID-19 epidemic in
many cities like Shanghai, Shenzhen, Chengdu, Qingdao, the supply and sales of potted
vegetable were interrupted more heavily comparing to that in 2021. As a result, the sales
volume and sales revenue of potted vegetable produce in 2022 is lower than 2021.
INDUSTRY OVERVIEW
–8 7–


--- page 97 ---
Sales volume and sales revenue of potted vegetable produce (China), 2017–2027E
Sales revenue
Sales volume
RMB Million
1,520.8 2,233.6
3,378.0 3,521.0 4,226.8 4,069.3 4,293.9 4,757.2 5,298.3 5,906.3 6,591.0107.8
151.0
216.5 220.5
251.2 239.4 245.3 263.6
284.2
306.1 329.4
0
50
100
150
200
250
300
350
400
450
0
5,000
10,000
15,000
20,000
25,000
2017 2018 2019 2020 2021 2022 2023E 2024E 2025E 2026E 2027E
22/27E17/22CAGR
6.6%17.3%Sales volume
10.1%21.8%Sales revenue
Million Pots
Source: Frost & Sullivan
Going forward, as potted vegetable produce is increasingly popular in China, the
market is expected to keep an upward trend. In addition, assuming that the operation of
restaurants are to be back to normal since 2023 if the restriction measures of COVID-19 are
gradually alleviated, the demand for potted vegetables is expected to be back to the rising
channel. The sales volume of potted vegetable produce is likely to reach 329.4 million pots
in 2027 with a CAGR of approximately 6.6%. The sales revenue is also expected to grow to
RMB6,591.0 million in 2027, representing a CAGR of approximately 10.1%.
The outbreak of COVID-19 in early 2020 has impacted the catering market in the first
four months in 2020. For instance, in February, Qingdao Administration for Market
Regulation issued COVID-19 Prevention and Control Measures on Food Safety of Catering
Services ( 餐飲服務疫情防控食品安全工作細則), which suggested residents to reduce the on-
site dining in restaurants. Most of the restaurants and hotels reopened by the end of March
2020. In February, Dalian Command Centre for COVID-19 Control and Prevention issued
Notice of Strengthening the Control on Cityw ide Catering Services during the Period of
Prevention and Control of the COVID-19 Outbreak ( 關於加強新冠肺炎防控期間全市餐飲
服務經營管控的通告), which required restaurants stop providing on-site dining services.
However, as the spread of COVID-19 alleviates in China, restaurants reopened and the
economy recovered gradually. The decline of catering market in China had slowed down
since March 2020. By 8 April 2020, the lockdown of Wuhan had came to an end. By 15 May
2020, over 20 provinces in China had adjusted the Public Health Emergency Response to
the third level. Despite the total revenue of catering industry in April 2020 witnessed a year-
on-year drop of 29.7%, it is noted that in October 2020, the total revenue of catering market
INDUSTRY OVERVIEW
–8 8–


--- page 98 ---
in China witnessed a slight increase comparin g to the previous year. Due to the subsequent
outbreak of COVID-19 epidemic in Dalian bet ween December 2020 and January 2021, the
Municipal Government of Dalian had implemented some lockdown measures between the
middle of December 2020 and the middle of January 2021. In 2022, there were several
recurrence of COVID-19 epidemic in many cities like Shanghai, Shenzhen, Chengdu,
Qingdao, where lockdown measures are taken to prevent the spread of the epidemic. People
are increasingly concerned about the safety and quality of food, which may drive the
demand for quality vegetable produce and potted vegetable produce among the residents of
China. On 7 December 2022, the PRC authorities announced the ‘‘Ten New Guidelines’’,
which followed ‘‘The 20 Measures’’ released on 11 November 2022 to accelerate the
economic recovery and resume normal operations of the society. The relaxation of rules,
which include allowing infected people with mild or no symptoms to quarantine at home
and dropping testing for peopl e travelling within the country, is a strong sign on promoting
economic recovery since the outbreak of COVID-19 in 2020. According to the ‘‘Ten New
Guidelines’’, low-risk areas are not allowed t o control movement or suspend any services,
work, or production. Local economy has grad ually returned to normal operation. Hence,
the negative impact on potted vegetable produce market in China has been gradually
diminishing.
As one of the major vegetable producing provinces in China, Shandong province has a
long history of vegetable cultivation and has large greenhouse areas, providing a
development basis for potted vegetable produce. With increasing disposable income and
rising population in Shandong province, the sales volume of potted vegetable produce in
Shandong province increased from 23.7 millio n pots in 2017 to 48.5 million pots in 2022,
representing a CAGR of approximately 15.4%. Meanwhile, the sales revenue of potted
vegetable produce increased from RMB32 2.2 million to RMB773.6 million during the same
period with a CAGR of approximately 19.1 %. The Group recorded revenue growth of
approximately 4% from FY2020 to FY2022 which underperformed the market as the
revenue growth of potted vegetable produce in Shandong province was approximately 14%
during the same period. This is mainly due to the fact that, notwithstanding the increase in
our revenue by approximately 28% between FY2020 and FY2021, our business was
materially affected in FY2022 by the temporary suspension of business activities of our
Laixi Facility as a result of the resurgenc e of COVID-19 cases in Shandong province
between March 2022 to April 2022, leading to decline of revenue by approximately 18.2%
between FY2021 and FY2022. The impact caused by COVID-19 in Qingdao area where our
Laixi Facility situated, is mo re severe than other areas in Shandong province, such as
Shouguang and Qingzhou where most of our peers are located, thus we underperformed the
potted vegetable produce market in China and Shandong province in terms of the revenue
growth.
The PRC government has substantially lifte d its COVID-19 prevention and control
policies since December 2022. Our business h as recovered from the impact of COVID-19
outbreak in 2023 and returned to 2021 level, as our business operation was no longer
affected by COVID-19 epidemic. We recorded a revenue of approximately RMB121.3
million for the nine months ended 30 September 2023, which slightly exceeded the revenue
of approximately RMB117.2 million for th en i n em o n t h se n d e d3 0S e p t e m b e r2 0 2 1 .
Looking forward, the sales revenue of potted vegetable produce in Shandong province
is likely to maintain a growing trend with a CAGR of approximately 7.3%, reaching
RMB1,102.2 million in 2027. Meanwhile, the sales volume of potted vegetable produce is
expected to reach 61.6 million pots in 2027, r epresenting a CAGR of approximately 4.9%
from 2022 to 2027.
INDUSTRY OVERVIEW
–8 9–


--- page 99 ---
Sales volume and sales revenue of potted veg etable produce (Shandong province), 2017–2027E
Sales revenue
Sales volume
RMB Million Million Pots
322.2 443.0
660.0 681.2 811.7 773.6 821.7 904.2 979.0 1,043.3 1,102.2
23.7
30.8
44.0 45.7
51.5 48.5 50.1 53.5 56.6 59.3 61.6
0
10
20
30
40
50
60
70
80
90
100
0
500
1,000
1,500
2,000
2,500
3,000
3,500
2017 2018 2019 2020 2021 2022 2023E 2024E 2025E 2026E 2027E
22/27E17/22CAGR
4.9%15.4%Sales volume
7.3%19.1%Sales revenue
Source: Frost & Sullivan
As one of the most developed cities in Shandong province, Qingdao is highly urbanised
and has relatively higher household income, which brings about a higher frequency of
dining out and increasing demands for high-quality vegetables. The sales revenue of potted
vegetable produce increased from RMB54.2 million in 2017 to RMB144.5 million in 2022,
with a CAGR of approximately 21.7%.
With continuous economic development in Qingdao, the sales revenue of potted
vegetable produce is expected to continue growing at a CAGR of approximately 8.0%,
reaching RMB212.4 million in 2027.
Sales Revenue of Potted Vegetable Produce
(Qingdao, Yantai, Weifang, Xi’an, Dalian a nd Langfang), 2017–2027E, in RMB Millions
City Province 2017 2018 2019 2020 2021 2022 2023E 2024E 2025E 2026E 2027E
CAGR
(%)
17/22
CAGR
(%)
22/27E
Qingdao Shandong 54.2 76.0 115.5 121.0 146.3 144.5 152.0 166.8 182.0 197.2 212.4 21.7% 8.0%
Yantai Shandong 19.1 26.0 37.0 37.5 43.9 40.9 42.8 46.6 49.9 52.7 55.1 16.4% 6.1%
Weifang Shandong 34.7 51.1 79.4 82.5 98.5 89.7 94.7 103.7 111.6 118.0 123.4 20.9% 6.6%
Xi’an Shaanxi 19.7 27.0 42.0 43.4 54.5 53.7 58.1 64.5 70.5 75.8 80.7 22.2% 8.5%
Dalian Liaoning 47.1 59.2 87.4 91.1 113.1 112.5 119.0 130.9 141.4 149.3 155.0 19.0% 6.6%
Beijing Beijing 33.7 41.6 5 4.1 56.3 72.8 73.8 77.2 84. 6 92.6 102.2 111.8 17.0% 8.7%
Hebei Hebei 164.3 226.9 329.8 343.9 440.2 452.0 470.5 514.6 561.8 620.1 685.1 22.4% 8.7%
Jiangsu Jiangsu 230.1 320.0 475.2 500.0 635.5 636.8 689.4 782.4 885.9 997. 5 1,124.3 22.6% 12.0%
Jinan Shandong 56.9 74.8 99.5 102.0 116.0 116.8 120.4 130.6 141.0 150.9 159.7 15.5% 6.5%
Tianjin Tianjin 12.7 17.5 2 6.1 26.4 34.7 35.4 37.9 42. 8 48.7 54.2 60.5 22.8% 11.3%
Langfang Hebei 24.5 33.3 48.7 50.1 64.5 66.2 70.5 77.3 86.2 96.0 106.1 22.0% 9.9%
Source: Frost & Sullivan
The sales revenue of potted vegetable produce in Beijing increased from RMB33.7
million in 2017 to RMB73.8 million in 2022. Ther e were approximately 50 potted vegetable
producers in Beijing in 2022. In 2022, there were approximately 6 thousand chained
restaurants in Beijing. With potential dem and from restaurants on potted vegetable
produce, the sales revenue of potted vegetable produce in Beijing is expected to increase to
RMB111.8 million with a CAGR of 8.7% from 2022 to 2027.
INDUSTRY OVERVIEW
–9 0–


--- page 100 ---
Langfang locates near to B eijing and Tianjin, and is one of the fastest growing
economies in Hebei province. The sales revenue of potted vegetable produce in Langfang
increased from RMB24.5 million in 2017 to RMB66.2 million in 2022. There were
approximately 30 to 50 potted vegetable producers and approximately 500 to 800 chained
restaurants in Langfang in 2022. With pote ntial demand from restaurants for potted
vegetable produce, the sales revenue of potted vegetable produce in Langfang is expected to
increase to RMB106.1 million with a CAGR of 9.9% from 2022 to 2027.
Historical price trend of raw materials and potted vegetable produce
Major raw materials of potted vegetable produce includes, among others, substrates,
seeds, fertilisers and pots. The cost of foliar fertilisers is an important part of total cost of
vegetable producer and potted veg etable producers. The average price of foliar fertilisers in
Shandong province increased from RMB12.5 per kilogram in 2017 to RMB13.6 per
kilogram in 2022, representing a CAGR of 1.7%.
The price of foliar fertilisers is expected t o further increase to RMB15.0 per kilogram
in 2027 with a CAGR of 2.0%.
Average price of foliar fertiliser s (Shandong province), 2017–2027E

12.5 12.7 13.0 13.2 13.4 13.6 13.8 14.1 14.4 14.7 15.0
0
10
20
2017 2018 2019 2020 2021 2022 2023E 2024E 2025E 2026E 2027E
CAGR: 1.7 %
CAGR: 2.0%
RMB per KG
Source: Frost & Sullivan
Water spinach is a common type of vegetable that are widely cultivated by potted
vegetable producers. The cost of water spinach seed in Shandong province has increased
from RMB45.5 per kilogram in 2017 to RMB52.9 per kilogram in 2022, representing a
CAGR of 3.1%.
The price of water spinach seed is expected to further increase to RMB61.3 per
kilogram in 2027 with a CAGR of 3.0%.
INDUSTRY OVERVIEW
–9 1–


--- page 101 ---
Average Price of Water Spinach Seeds (Shandong province), 2017–2027E

45.5 47.4 48.9 49.4 51.6 52.9 54.7 56.4 58.0 59.6 61.3
0
10
20
30
40
50
60
70
2017 2018 2019 2020 2021 2022 2023E 2024E 2025E 2026E 2027E
CAGR: 3.1 %
CAGR: 3.0%
RMB per KG
Price analysis of potted vegetable produce in China and in Shandong province
Due to the increasing consumption of potted vegetable produce in China, the
wholesale price of potted vegetable produce in China increased from RMB14.1 per pot in
2017 to RMB17.0 per pot in 2022 with a CAGR of 3.8%. The wholesale price of potted
vegetable produce is expected to increase to RMB20.0 per pot by 2027, representing a
CAGR of 3.3% from 2022 to 2027. Meanwhile, the wholesale price of potted vegetable
produce in Shandong province also increased from RMB13.6 per pot in 2017 to RMB16.0
per pot in 2022 with a CAGR of 3.2%. The wholesale price of potted vegetable produce is
expected to increase to RMB17.9 per pot by 2027, representing a CAGR of 2.3% from 2022
to 2027. In 2022, the market price that distributors sold to hotel and restaurants in China
and Shandong province was around RMB20.0 per pot.
Wholesale prices of potted vegetable produce (China and Shandong province), 2017–2027E
14.1
14.8
15.6 16.0
16.8 17.0 17.5 18.0 18.6
19.3
20.0
13.6
14.4 15.0 14.9 15.8 16.0 16.4 16.9 17.3 17.6 17.9
10
15
20
25
2017 2018 2019 2020 2021 2022 2023E 2024E 2025E 2026E 2027E
22/27E17/22CAGR
3.3%3.8%China
2.3%3.2%Shandong Province
China
Shandong province
RMB per Pot
Source: Frost & Sullivan
Drivers of China and Shandong province’s potted vegetable produce market
Rising urbanisation and increasing health consciousness: Along with rising urbanisation
and increasing health consciousness, an increasing number of people has begun to
emphasize on personal wellness and are looking for measures to stay healthy. The per capita
annual nominal GDP in Shandong province has increased from RMB63,900 in 2017 to
RMB86,000 in 2022, with a CAGR of 6.1%. Meanwhile, the urbanization rate in Shandong
INDUSTRY OVERVIEW
–9 2–


--- page 102 ---
province has increased from 60.6% in 2017 to 64.5% in 2022. Chinese residents have
preference on quality and fresh vegetables in the city, thus leading to a growth in demand
for vegetable market including potted vegetable produce in China.
Increasing frequency of dining out: With an upward trend of consumption upgrading in
China and in Shandong province, consumers are more willing to dine out and spend more
when dining at restaurants for better food quality. Potted vegetable produce is highly
preferred by restaurants for their freshness, quality and safety. Therefore, the increasing
frequency of dining out in China and in Shandong province rockets the demand for potted
vegetable produce from restaurants.
Awareness of Food Safety: With the desire for higher living standards and
improvements of the suboptimal health status, people in China and in Shandong
province have begun paying more attention to personal health problems and consuming
healthier food. As potted vegetable produce are generally cultivated with natural and
organic substrates and fertilisers, eating po tted vegetable produce can reduce the risk of
eating vegetables that contain harmful chemicals. Therefore, potted vegetable produce has
gradually become more welcomed by people in China and in Shandong province and is
expected to continue in the near future.
Expanding Online Distribution Channels: As growing numbers of households, especially
those youngsters, are ordering products through online distribution channels, leading
vegetable and potted vegetable producers have already expanded their distribution channels
from traditional wholesalers and retailers to online platforms, such as Taobao and WeChat.
Future trends of the China’s potted vegetable produce market
Application of cultivation technology: Compared with traditiona l in-ground cultivation,
cultivating potted vegetable produce has vari ous advantages, such as land-saving, higher
productivity, quality and consistency. However, there are also higher requirements in
cultivation and management. Potted vegetable produce needs to be planted in greenhouses
or other protected areas, which should be equipped with micro-sprays or watering facilities.
Along with the development of cultivation technology, potted vegetable producers are
expected to conduct more stringent management on temperature, humidity, light, pest
control, and also refined treatment such as thinning branches, in order to meet quality
requirements.
Expanding varieties of potted vegetable produce: Existing species of potted vegetable
produce consist mainly of ordinary leafy vegetables, supplemented by solanaceous
vegetables species. In line with the growing consumption of potted vegetable produce
from restaurants and households, as well as customers’ changing demand for more varied
vegetable species, varieties of potted vegetable produce are likely to be more diversified in
the future. Potted vegetable producers have been taking the healthiness of potted vegetable
produce more into consideration, rather than just taste, to satisfy customers’ needs. It is
expected that the expanding variety of potted vegetable produce is likely to drive further
development of the market.
INDUSTRY OVERVIEW
–9 3–


--- page 103 ---
Improving logistics capabilities: Logistics capabilities are key to the distribution of
fresh vegetable produce and potted vegetable produce. Most of the vegetable produce needs
to be circulated through a cold-chain system to keep fresh. Along with the development of
the logistics industry in China, the improving logistics network, in particular cold-chain
logistics network, is expected to assist in th e expansion of the delivery scope of potted
vegetable produce and is likely to create mo re opportunities for the potted vegetable
produce market.
Entry barriers analysis
Potted vegetable produce cultivation know-how: Cultivation of potted vegetable
produce requires potted vegetable producers to have the right know-how to ensure the
supply of quality vegetables. Cultivation k now-how mainly includes construction of
greenhouses, seeds selection, sowing, vegetab le growth management, formula of cultivation
materials, as well as use of automated machineries and equipment. Existing players are
likely to have accumulated sufficient know-how and abundant professionals. New entrants
are likely to encounter difficulties in mastering such know-how in a short run.
Capital requirements: For potted vegetable producers, abundant capital is essential for
expanding sown areas, developing techniques fo r cultivating new vegetable species, hiring
experienced professionals and maintaining the greenhouses. Moreover, to achieve
economies of scale in production, huge capital investment is required. It is not easy for
the new players to enter into China’s potted vegetable produce market without abundant
capital.
Brand recognition: Reputation of vegetable producers is often established by word of
mouth, and customers are more inclined to choose reputable brands for guaranteed quality.
So far, there are already some well-known brands in China’s vegetable produce and potted
vegetable produce markets with large customer bases. Those companies can gain trust easier
from customers and can reduce their cost of reaching new customers significantly. It is
difficult for new entrants to compete with existing participants for customers. A huge
amount of marketing expense will be necessary for a new player to enter into the market.
Competitive landscape of China’s vegetable produce and potted vegetable produce markets
China’s vegetable produce market was hi ghly fragmented with around one million to
two million vegetable producers in the mark et in 2022. There was no single vegetable
producer that accounted for over 1% of the total market share in China’s vegetable produce
market in terms of production volume. In 2022, the Group, with a sales revenue of
RMB126.7 million, accounted for less than 0 .01% of total sales revenue of vegetable
producers in China.
China’s potted vegetable produce market was highly fragmented in 2022 with
thousands of potted vegetable producers. In 2022, the Group, with a sales revenue of
RMB126.7 million, accounted for approximat ely 3.1% of total sales revenue of potted
vegetable producers in China.
INDUSTRY OVERVIEW
–9 4–


--- page 104 ---
Competitive landscape of Shandong province’s potted vegetable produce market
The total sales revenue of Shandong province’s potted vegetable produce market was
RMB773.6 million in 2022. There are over 50 0 potted vegetable producers in Shandong
province in 2022.
Shandong province’s potted vegetable produce market was relatively fragmented in
2022 with top five players accounted for 16.8% of the total market share in Shandong
province’s potted vegetable produce market in terms of sales revenue. In 2022, the Group,
with a sales revenue of RMB114.5 million, acc ounted for 14.8% of total sales revenue of
potted vegetable producers in Shandong province.
It is noted that the average selling price of the Group was within the range of the
selling price of the industry players during the Track Record Period. The Group’s revenue
in FY2022 from the sales of potted vegetable produce is approximately 14.5 times of the
revenue of the second largest potted vegetable producer in Shandong province. The Group
is the largest producer of potted vegetable produce in Shandong province, with a market
share of 14.8% in terms of sales revenue in Shandong province in 2022, and is one of the
potted vegetable producers in Shandong province which started large scale production of
potted vegetable produce.
INDUSTRY OVERVIEW
–9 5–


--- page 105 ---
Ranking of top five potted vegetable producers by sales revenue (Shandong province), 2022
Rank Company
Total Sales
Revenue
(RMB Million)
Market Share
(%)
Number of
Vegetable
Species
1 The Group 114.5 14.8% 29
2 Shouguang Seed 7.9 1.0% 15 to 20
3 QiDi 3.7 0.5% ~5
4 Liaoyuan 2.2 0.3% ~10
5 Huikangyuan 1.4 0.2% ~10
Average Selling
Price of Potted
Vegetable
(RMB per Pot)
15.1
~20
~20
~15
15 to 20
Top 5 Subtotal 129.7 16.8%
Others 643.9 83.2%
Total 773.6 100.0%
Source: Frost & Sullivan
Notes:
(1) Established in 2011, Shouguang Seed is a non- listed company headquartered in Shouguang,
Shandong province, China, primarily focusing o n the cultivation and distribution of potted
vegetable produce and vegetable seeds.
(2) Established in 2017, QiDi is a non-listed company headquartered in Shouguang, Shandong
province, China, primarily focusing on the producti on and sales of, among others, potted vegetable
produce and seeds.
(3) Established in 2002, Liaoyuan is a non-listed company headquartered in Shouguang, Shandong
province, China, primarily focusing on the produc tion and sales of vegetable and potted vegetable
produce.
(4) Established in 2016, Huikangyuan is a non-listed company headquartered in Qingzhou, Shandong
province, China, primarily focusing on the pr oduction and sales of potted vegetable produce and
substrates.
INDUSTRY OVERVIEW
–9 6–


--- page 106 ---
LAWS AND REGULATIONS
During the Track Record Period, our product ion activities were principally based in
the PRC. To the best knowledge and belief of our Directors and having made all reasonable
enquiries, our Group had complied with the relevant applicable laws and regulations in all
material aspects for its business operations in the PRC during the Track Record Period and
up to the Latest Practicable Date. Such major relevant PRC laws and regulations are set out
below:
LAWS AND REGULATIONS RELATING TO SAFETY OF AGRICULTURAL
PRODUCTS
Product Quality Law
According to the provisions of the Product Quality Law of the PRC ( 中華人民共和國
產品質量法) promulgated by the Standing Committee of the National People’s Congress
(the ‘‘NPCSC’’) on 22 February 1993, effective on 1 September 1993 and last amended on 29
December 2018, producers and ve ndors shall undertake responsibilities of the quality of
products produced by them. If anyone produces or sells products in violation of the
national standards or industry standards that protect human health, safety of physical body
and property, the market supervision authority may order to stop the production or sales of
such products, confiscate the products produced or sold illegally, and impose a fine in an
amount equivalent to three times the value of products produced or sold illegally (including
sold and unsold products); any illegal profit gai ned will be forfeited concurrently. In serious
cases, the business licence will be revoked. If an offence is committed, such person will be
liable for criminal liability.
The Agriculture Law
T h eA g r i c u l t u r eL a wo ft h eP R C(中華人民共和國農業法) was promulgated by the
NPCSC on 2 July 1993, effective on the same day and last amended on 28 December 2012.
The law is enacted with a view to consolid ating and strengthening the position of
agriculture as the foundation of the national economy. The main objective in developing
agriculture includes, among others, enhancing the quality and efficiency of agriculture as a
whole, ensuring the supply and quality of agricultural products and gradually bringing
about the modernisation of agriculture. The system of registration or licence shall be
applied in respect of the production and operation of the means of agricultural production
such as seeds, pesticides, veterinary medicines, fodder and feed additives, fertilisers and
farm machines. Governments at all levels shall establish a sound system for the safe use of
the means of agricultural production while manufactures and sellers of the same shall be
responsible for the quality of the products which they manufacture and sell.
Agricultural Products Quality Safety Law
According to the Agricultural Prod ucts Quality Safety Law of the PRC ( 中華人民共和
國農產品質量安全法) (the ‘‘Agricultural Products Quality Safety Law ’’) promulgated by the
NPCSC on 29 April 2006, effective on 1 November 2006, and amended on 26 December
2018 and 2 September 2022, the agricultural products refer to the primary products derived
REGULATORY OVERVIEW
–9 7–


--- page 107 ---
from agriculture, more specifically, the plants, animals, microorganisms and their products
obtained in the course of agricultural activities . According to this law, agricultural products
must comply with the relevant requirements in the following aspects to ensure that the
quality of agricultural products will comply with the protective requirements for human
health and safety, namely (i) quality safety standards for agricultural products; (ii) place of
origin of the agricultural products; (iii) production of agricultural products; and (iv)
packaging and identification marks of agricultural products.
Pursuant to the Agricultural Products Quality Safety Law, the standards for
agricultural products quality safety are the compulsory technical specifications. Entity
engaged in the production of agricultural products must compile production records and
retain data in relation thereto. The administrative department of agriculture under the
people’s government at or above the county level shall be responsible for supervision and
control of the quality and safety of agricultural product. The relevant department of the
people’s government at or above the county level shall, in compliance with the division of
duties, be responsible for the work related to the quality and safety of agricultural products.
The Agricultural Product Quality Safety L aw provides that the materials used in the
package, preservation, storage and transport of agricultural products, such as preservatives,
antiseptics and additives, shall meet the relev ant compulsory technical specifications of the
state; agricultural products failing to comply with such requirement are prohibited from
sale.
Pursuant to Opinions of the Ministry of Agriculture and the China Food and Drug
Administration on Strengthening Quality Safety Supervision and Management over Edible
Agricultural Products ( 農業部、食品藥品監管總局關於加強食用農產品質量安全監督管理工
作的意見) promulgated and effective on 31 October 2014, edible agricultural products refer
to primary products that come from agricultural activities, namely plants, animals,
microorganisms and other products obtained in the course of agricultural activities and for
human consumption. ‘‘Agricultural activity’ ’ includes not only traditional agricultural
activity, such as planting, breeding, picking, fishing, but also modern agricultural activity,
such as facility agriculture and bioengineering. ‘‘Plants, animals, microorganisms and other
products’’ refer to products that are directly obtained in the course of agricultural activities
and processed products which have been obtain ed through the process of sorting, peeling,
husking, smashing, cleaning, incising, freez ing, waxing, classifying, packing and without
changes of natural traits and chemical properties of these products.
Food recall
The Agricultural Product Quality Safety Law of the PRC stipulates various
circumstances under which agricultural pr oducts already sold should be recalled. The
competent departments for agriculture and rural affairs of the local people’s governments at
the county level or above shall have the power to, when an agricultural product production
business violates the provisions of this Law and commits certain acts, order it to cease
production and operation, recall the agricultural products already sold, and make harmless
or destroy under supervision the agricultural products produced or operated in violation of
REGULATORY OVERVIEW
–9 8–


--- page 108 ---
law. In addition, the competent departments may confiscate the illegal earnings, confiscate
among others the tools, equipment and raw materials used for illegal production and
operation; and impose a fine.
According to Article 41 of the Agricultura l Product Quality Safety Law, ‘‘the state
shall implement traceability management f or agricultural products included in the
catalogue of agricultural product quality s afety traceability,’’ and according to the Food
Safety Law of the PRC ( 《中華人民共和國食品安全法》), the General Office of the State
Council’s Opinions on Accelerating the D evelopment of Traceability Systems for Key
Products ( 《國務院辦公廳關於加快推進重要產品追溯體系建設的意見》), and Certain
Measures of the Shandong Provincial People’s Government General Office on
Strengthening Food Safety Efforts ( 《山東省人民政府辦公廳關於加強食品安全工作的若干
措施》) and the provincial standard DB37/T 4349–2021 Catalogue of Key Traceable
Products — Edible Agricultural Products in Shandong Province, the main varieties of our
potted vegetable products are leafy vegetables, which belong to ‘‘products under
encouragement to have traceability.’’ We have accessed the Qingdao Agricultural Product
Quality Safety Traceability System, filled in in formation on, among oth ers, products, inputs
applied, and agricultural operations, and has obtained traceability codes, so that
agricultural product tracing and recall can be carried out effectively when necessary.
Product Liabilities
According to the Civil Code of the PRC ( 中華人民共和國民法典)
 promulgated by the
National People’s Congress on 28 May 2020, effective on 1 January 2021, and the Law on
the Protection of Consumer Rights and Interests of the PRC ( 中華人民共和國消費者權益保
護法) promulgated by the NPCSC on 31 October 1993, effective on 1 January 1994 and last
amended on 25 October 2013, the manufacturers and distributors will be liable for losses
and damages suffered by consumers caused by the defective products manufactured or
distributed by them.
Food Safety Law
Pursuant to the Food Safety Law of the PRC ( 中華人民共和國食品安全法) (the ‘‘Food
Safety Law ’’) promulgated by the NPCSC on 28 February 2009, effective on 1 June 2009,
and last amended on 29 April 2021, the national standards of food safety shall be
formulated and announced jointly by the health administration department of the State
Council (the ‘‘ State Council ’’) and the food safety supervision and administration
department thereunder, while the standardisation administration department of the State
Council shall provide the national standards codes. In addition, the state shall implement a
licensing system for food manufacturing and food business operations. Persons engaging in
food manufacturing, sale of food, food and beverage services shall obtain a licence pursuant
to the law. However, it is not required to obtain a licence for sale of edible agricultural
products. Food manufacturers and business operators shall establish a food safety tracing
system to ensure the traceability of foodstuffs. The people’s governments at county level
and above shall arrange their food safety supervision and administration department and
REGULATORY OVERVIEW
–9 9–


--- page 109 ---
the agricultural administration departm ent to formulate the annual supervision and
administration plan for food safety in their respective administrative region, announce to
the public and organise implementation of the plans accordingly.
Pursuant to the Food Safety Law, in response to illegal conduct violating the Food
Safety Law, the competent authority may forfeit the illegal profit and the food products and
food additives produced or oper ated illegally, issue a warning, order for rectification or
impose a fine; in serious cases, the relevant licence may be revoked and criminal liability
may be incurred. If the value of illegally prod uced and operated food products and food
additives is below RMB10,000, a fine abo ve RMB50,000 and below RMB100,000 shall be
imposed concurrently; if the value is above RMB10,000, a fine equivalent to an amount
above 10 times and below 20 times of the value of the products shall be imposed
concurrently.
Pursuant to the Food Safety Law and the Implementing Regulation for the Food
Safety Law of the PRC ( 中華人民共和國食品安全法實施條例) promulgated by the State
C o u n c i l ,e f f e c t i v eo n2 0J u l y2 0 0 9a n dl a s ta m e n d e do n2 6M a r c h2 0 1 9 ,a n yp e r s o nw h o
engages in the production and operation of food products and food additives shall obtain
the corresponding licences for the production of food products and food additives in
compliance with the law. The Food Safety Commission of the State Council will exercise
supervision and administration on food production and operation activities. A food
product recall system has been established at national level. If producers or operators of
food products discover that the food products produced or operated by them do not comply
with the food safety standards or evidences are available to prove that the food products
may be harmful to human health, they should cea se production and operation immediately,
recall the food products which have been launched for sale in the market, notify the relevant
producers, distributors and consumers, and keep the record of the recall and notification.
When a food distributor discovers that the food it distributes does not comply with food
safety standards, it shall immediately stop distributing such food, notify the relevant
producers, sub-distributors and consumers, and keep the record of the cessation of
distribution and the notification. The food producers shall take measures to safely recall
and destroy the affected fo od, and report the treatment of the recalled food to the
competent quality supervision authority.
Regulations on Plant Quarantine
Pursuant to the Regulations on Plant Quarantine ( 植物檢疫條例)p r o m u l g a t e db yt h e
State Council, effective on 3 January 1983 and last amended on 7 October 2017, plants and
plant products set out in the quarantine catalogues are subject to quarantine inspections
before they are delivered from a county administration area where an epidemic occurs.
Plant seeds, seedlings or other propagating materials are subject to quarantine inspections
prior to delivery, regardless of whether or not they are on list of the quarantine catalogues
or where they will be transported to.
REGULATORY OVERVIEW
–1 0 0–


--- page 110 ---
Regulations relating to Pollution-free Agricultural Products
Pursuant to the Measures for the Management of Pollution-free Agricultural Products
(2007 Amendment) (無 公害農產品管理辦法（2007修 正）) (the ‘‘Management Measures ’’)
implemented on 8 November 2007, pollution-free agricultural products are unprocessed or
pretreated edible agricultural products which passed the relevant national standards and
requirements in relation to the environment of origin, production process and product
quality, and the products will be certified and allowed to use the pollution-free agricultural
products logos.
According to the Management Measures, the origin of the pollution-free agricultural
products shall meet the following criteria: ( i) the environment of the origin meets the
standard requirements of the environment of origin of pollution-free agricultural products;
(ii) the area and scope of the origin is clear; and (iii) the origin holds a certain scale of
production. The management of production of pollution-free agricultural products shall
meet the following criteria: (i) the production process meets the standard requirements of
pollution-free agricultural production technology; (ii) there are appropriate technical
professions and management personnel; and (iii) there are co mprehensive quality control
measures and complete production and sales records. Entity or individual engaged in the
production of pollution-free agricultural products shall apply agricultural inputs strictly in
accordance with the relevant restrictions. The use of state-banned and eliminated
agricultural inputs (such as calcium phosphide and DDT) are prohibited.
The procedures and criteria of applying for a C ertificate of Pollution-free Agricultural
Products are: (i) the product under the applic ation for the Certificate of Pollution-free
Agricultural Products must be listed on the Product List of Implementation of Pollution-
free Agricultural Products Certificate ( 實施無公害農產品認證的產品目錄) implemented on
25 December 2013 under the Notice No. 2034 of Ministry of Agriculture and the State
Certification and Accred itation Administration ( 農業部、國家認證認可監督管理委員會公
告第2034號 ); (ii) according to the Regulations for the Recognition of Pollution-free Food
Origin ( 無公害食品產地認定規範) (NY/T 5343–2006), the production areas and scope
should be clear and relatively concentrated, and the area of vegetables in the facility should
be more than 50,000 sq.m.; and (iii) according to the Management Measures, upon
satisfactory assessment of the application mat erials, on-site inspection (if necessary) and
product testing results by the certificate issuing authority, a Certificate of Pollution-free
Agricultural Products will be issued within 30 working days from the date of receipt of the
on-site inspection report and product testing report. The entity or individuals obtaining the
Certificate of Pollution-free Agricultural Pr oducts
 can use the pollution-free agricultural
products logo on the products, packaging, labels, advertisements and product manuals as
specified in the certificate.
Pursuant to the Notice of Implementation and Deep Learning of the Agricultural Products
Safety Regulations of the PRC ( 關於深入學習貫徹<中華人民共和國農產品品質安全法>的通
知)( 農辦質[2022]16號)( t h e‘ ‘Implementation Notice ’ ’) issued by the Office of Agricultural
Rural Bureau* ( 農業農村部辦公廳) on 24 September 2022, the Agricultural Rural Bureau
will not accept any new applications (including renewal) of Certificate of Pollution-free
Agricultural Products with effective from the date of the Implementation Notice. However,
REGULATORY OVERVIEW
–1 0 1–


--- page 111 ---
the existing Certificate of Pollution-free Agricultural Products will still be valid before they
expired. Following the change of the food safety regulations of the PRC (i.e. the
amendments to the Agricultural Products Quality Safety Law in 2022 in relation to
compliance with the relevant requirements in quality safety standards for agricultural
products and compulsory technical specifications of the standards for agricultural products
quality), the Agricultural Rural Bureau w ill no longer issue any new Certificate of
Pollution-free Agricultural Products. However, the new food safety regulations have
imposed a more stringent requirements on the use of pesticides for all agricultural
producers and the government authorities will strictly enforce the food safety regulations by
closely monitoring the agricultural producers. Pursuant to the Implementation Notice, the
relevant government authorities will continue strength the food safety monitoring system,
risk management and inspection of agricultural products to ensure that agricultural
products in the market are in compliance with the relevant food safety regulations.
REGULATIONS RELATING TO PREVENTION AND CONTROL OF COVID-19
EPIDEMIC
The General Office of Ministry of Agriculture and Rural Affairs issued an urgent
notice to manage and arrange the supply of vegetables during the epidemic on 29 January
2020. The notice stressed that the vegetable portfolio and production shall be arranged
according to the market demands during the epidemic. The production of leafy vegetables
and fast-growing vegetables may be increased accordingly to meet the market demands and
ensure the vegetable variety-balance in supplying. To accelerate the growing of vegetables,
cultivation technology could be utilised and the vegetable production bases shall strengthen
their cooperation so as to guarantee the time ly supply of vegetables in the market. The
competent authorities shall provide more guidance to the vegetable production units
especially to the sized-production agricultu re enterprises. By active cooperating with the
transport department, public safety department etc., the unimpeded transport of fresh farm
products through ‘‘green channels’’ shall be guaranteed with higher efficiency and lower
costs to realise the smooth distribution of vegetables.
On 30 January 2020, the General Office of the Ministry of Agriculture and Rural
Affairs, the General Office of the Ministry of Transport and the General Office of the
Ministry of Public Security issued an urgent notice on ensuring the normal supply of
‘‘vegetable basket’’ products and agricultural production materials, which requires strict
implementation of the ‘‘green channel’’ syste m and the implementation of the requirements
in the Notice of the Ministry of Transport, the National Development and Reform
Commission and the Ministry of Finance on Further Optimising the ‘Green Channel’ Policy
for the Transportation of Fresh Agricultural Products ( 交通運輸部、國家發展改革委、財
政部關於進一步優化鮮活農產品運輸‘‘綠色通道’’政策的通知), so as to ensure the smooth
transportation of fresh agricultural products and the normal supply of ‘‘vegetable basket’’
products and agricultural production materials.
On 12 February 2020, the State Council issued the Notice of the Joint Prevention and
Control Mechanism for the Outbreak of COVID-19 of the State Council on Holding City
Mayors Responsible for the ‘‘Vegetable Bask et’’ and Steady Production and Guarantee of
Agricultural Products ( 國務院應對新型冠狀病毒感染肺炎疫情聯防聯控機制關於壓實‘‘菜籃
REGULATORY OVERVIEW
–1 0 2–


--- page 112 ---
子’’市長負責制做好農產品穩產保供工作的通知), which requires that during the prevention
and control of outbreak of COVID-19, normal economic and social order shall be
maintained, and the supply of vegetables, meat, eggs, milk, food and other residents’
necessities shall be ensured. The problem of recruitment difficulty and high cost of labour
for vegetable production should be resolved. Industrialised seedling production should be
developed to shorten the growth cycle of vegetables, and fast growing leafy vegetables and
sprouting vegetable should be appropriately cultivated in the surrounding areas of large and
medium-sized cities in order to accelerate the production of vegetables. It is necessary to
implement the ‘‘green channel’’ policy for the transportation of fresh agricultural products
to maintain the normal market supply.
On 12 February 2020, the General Office of Shandong Provincial People’s Government
issued the Notice of Certain Measures on Expediting the Resumption of Agricultural
Production and Ensuring Stable Production and Supply of Major Agricultural Products for
the Purpose of Actively Responding to the Novel Coronavirus Epidemic ( 關於積極應對新冠
肺炎疫情加快恢復農業生產確保重要農產品穩產保供的若干措施的通知), which requires the
speedy resumption of agricultural production throughout the province and strictly
implement the practice of holding city mayors responsible for the ‘‘vegetable basket’’
(non-grain food supply), so as to ensure the supply of major agricultural products to
markets and ensure free passage of fresh agricultural products. The ins pection formalities
and procedures for vehicles carrying fresh agricultural products shall be simplified. On 15
February 2020, Shandong Provincial Department of Agriculture and Rural Affairs issued
the Qualification Certificate of Livelihood Enterprise ( 民生保供企業 資質證明), the vehicles
carrying the products within the scope of the companies’ transportation, production and
processing shall be given priority in road access.
LAWS AND REGULATIONS RELATING TO ENVIRONMENTAL PROTECTION
The existing production and operation projects of our Group fall within the
agricultural products base projects speci fied in the List of Systematic Management on
Construction Projects Environmental Impact Assessment ( 建設項目環境影響評價分類管理
名錄), and Laixi Facility is located in the protection area of drinking water source.
Therefore, any construction pr ojects of our Group within Laixi Facility shall go through
the relevant procedures of environmental impact assessment according to law.
Environmental
Protection Law
Pursuant to the PRC Environmental Protection Law ( 中華人民共和國環境保護法)
promulgated by the NPCSC, effective on 26 December 1989 and last amended on 24 April
2014, the government department in charge of the administration in relation to
environmental protection under the State Council shall conduct unified supervision and
management of the environment al protection work throughout the State, and establish the
national standards for environment quality and discharge of pollutants. The government
departments in charge of the administration in relation to environmental protection of the
local governments at or above the county lev el shall conduct unified supervision and
management of the environmental protection work within areas of their jurisdiction. The
relevant departments of the people’s governments at county level and above and the
REGULATORY OVERVIEW
–1 0 3–


--- page 113 ---
environmental protection departments of ar med forces shall implement supervision and
administration of environmental protection work such as resource protection and
prevention and treatment of pollution pursuant to the provisions of the relevant laws.
The environmental protection department of the State Council shall formulate the state’s
pollutant emission standards in accordance with the state’s environmental quality standards
and the economic and technological conditions. Enterprises in breach of the environmental
protection law may be subject to warning, payment of damages, fines, restriction or
suspension of production or an order to halt production, depending on the degree of
seriousness of each case. If a criminal offence is committed, the operator will be liable for
criminal liability in accordance with the law.
Water Pollution Prevention and Control Law
Pursuant to the Law of the PRC on the Prevention and Control of Water Pollution ( 中
華人民共和國水污染防治法) promulgated by the NPCSC on 11 May 1984, effective on 1
November 1984 and last amended on 27 June 2017, irrigation water shall meet appropriate
standards for the sake of prevention of the pollutions of soil, underground water and
agricultural products. The production and operation units must discharge water pollutants
in accordance with national and local standards. If the amount of discharged water
pollutants exceeds the national or local standards, the production and operation units will
be imposed a fine equivalent to an amount between RMB100,000 and RMB1,000,000. In
addition, the environmental protection authority is empowered to order the relevant
production and operation units to restrict or cease their production for rectification, and in
severe circumstances, the case will be report ed to the government with approval authority
to impose an order to suspend or shut-down its business.
POLICIES ON SUPPORTING THE DEVELOPMENT OF AGRICULTURE AND THE
VEGETABLE INDUSTRY
On 16 January 2012, the National Development and Reform Commission of the PRC*
(國家發展改革委), the Ministry of Agriculture, and relevant departments jointly formulated
the National Plan for the Development of Vegetable Industry (2011–2020) (全 國蔬菜產業發
展規劃（2011–2020 年）), according to which the vegetable industry has gradually developed
from a ‘‘family vegetable garden’’ into a pilla r industry for the economic development of the
agriculture and villages in m ajor production areas. The v egetable industry has also
d e v e l o p e di n t oa na d v a n c e di n d u s t r yw i t hr e l a t i vely strong international competitiveness,
with prominent force in securing supply, increasing revenue and boosting employment. The
document explicitly states that Yellow River and Huaihe River Basin and Bohai Sea Region
are major regions for balancing the annual supply and demand in the country. Among
which, Shandong region is suitable for developing greenhouse vegetable production as it has
relatively abundant light and heat resources during winter and spring seasons as well as
convenient transportation.
On 30 January 2015, the General Office of the Ministry of Agriculture promulgated the
National Plan for the Development of Major Regions for Greenhouse Vegetables (2015–
2020) ( 全國設施蔬菜重點區域發展規劃（2015–2020 年）), according to which vegetable is
necessary food for people’s daily life and its supply should be primarily dependent on local
REGULATORY OVERVIEW
–1 0 4–


--- page 114 ---
production and supplemented by long-distance supply in order to meet nationwide
vegetable demand. For realising local produ ction, it is necessary to use facilities like
sunlight greenhouse, plastic arch shed, sunshade, and net shed to create suitable
environments during seasons unfit for open land vegetable plantation. The development
of the greenhouse vegetable industry will not only solve the problem of balancing full-year
supply and demand of vegetables, but also make historic contributions to the increase of
farmers’ revenue and resources optimisation.
On 18 January 2018, the Ministry of Agriculture issued the Opinions on Facilitating
the Transform and Upgrade of Agriculture by Imp lementing Rural Revitalisation Strategies
(關於大力實施鄉村振興戰略加快推進農業轉型升級的意見), according to which the
agricultural industry of our country shall be transformed from quantity expansion to
quality improvement, and facilitating the transform and upgrade of agriculture. The
standardisation of agriculture shall be promo ted with efforts. Entities with economics of
scale are encouraged to adopt standardised production and establish production records.
After 2–3 years of efforts, agriculture production standardisation will be basically realised
in the suburbs of major cities and main ‘‘Vegetable Basket’’ counties. Brand improvement
actions will be implemented in order to build a series of regional public brands of
agricultural products, etc.. The developmen t of greenhouse agriculture shall be enhanced
and the comprehensive management of continuous cropping shall also be improved.
On 2 January 2020, the Central Committee o f the Communist Party of China and the
State Council issued the Opinions on Strengthening the Works on Agriculture, Rural Areas
and Rural People to Ensure the Scheduled Realisation of All-around Well-off ( 關於抓好
「三農」領域重點工作確保如期實現全面小康的意見), according to which the battle against
poverty is set as a must-win task, the refo rm in supply-side of agriculture will be
strengthened, and the development of high quality agriculture will be promoted. The
construction of facilities for modern ag riculture will be strengthened and the
implementation of a series of major invest ment projects in modern agriculture will be
planned in advance in order to support the earlier kick-off of projects and to effectively
expand the investment in agriculture.
LAWS AND REGULATIONS APPLICABLE TO CONSUMER PROTECTION
Consumer Protection Law
The principal legal provisions for the protection of consumer interests are set out in the
Consumer Protection Law of the PRC ( 中華人民共和國消費者權益保護法)
(the ‘‘Consumer
Protection Law ’’), which was promulgated by the NPCSC on 31 October 1993, effective on 1
January 1994 and was last amended on 25 October 2013.
According to the Consumer Protection Law, the rights and interests of consumers who
buy or use commodities or receive services for the purposes of daily consumption are
protected and all manufacturers and distributors involved must ensure that the products
and services they provide will not cause damage to the safety of consumers and their
properties. Any breach of the Consumer Protection Law may result in the imposition of
fines. In addition, the operator will be ordered to suspend operations and its business
REGULATORY OVERVIEW
–1 0 5–


--- page 115 ---
licence will be revoked. Business operators ma y incur criminal liability where they infringe
consumers’ rights by producin g or selling foods that incorp orate toxic and harmful non-
food materials.
Price Law
According to the Price Law of the PRC ( 《中華人民共和國價格法》)p r o m u l g a t e da n d
effective on 29 December 1997, except for prices under guidance of or fixed by the
government, the prices of goods and services shall be regulated by the market and
determined independently by operators. According to the Agricultural Law of the PRC ( 《中
華人民共和國農業法》) promulgated and effective on July 2, 1993, and amended on
December 28, 2002, August 27, 2009, and Decem ber 28, 2012, the purchase and sale of
agricultural products shall take place under the regulation of the market, and the state shall
exercise necessary macro-control over the pu rchase and sale activities of agricultural
products that are vital to the national economy and people’s livelihood. The potted
vegetable business of Fujing Agriculture does not fall under the circumstances where prices
are guided or fixed by the government, and should follow the principles of fairness,
legitimacy and good faith to in dependently determine prices.
LAWS AND REGULATIONS RELATING TO LABOUR PROTECTION
Employment Contract Law
Pursuant to the Employment Contract Law of the PRC ( 中華人民共和國勞動合同 法)
promulgated by the NPCSC on 29 June 2007, effective on 1 January 2008, and amended on
28 December 2012, and the Regulation on the Im plementation of the Employment Contract
Law of the PRC ( 中華人民共和國勞動合同法 實施條例) promulgated by the State Council
on 18 September 2008 and effective on the same date, an employment relationship shall be
deemed to have been established from the date when an employee begins to work for the
employer. Labour contracts must be prepared in writing. After consensus has been reached
with sufficient negotiations, the employer and employee may enter into labour contracts
with a fixed term or a variable term; or with a term of service ended on the completion of
certain tasks. After consensus has been reached with sufficient negotiations or in
circumstances where the statutory conditions are fulfilled, the employer may terminate
the labour contracts in accordance with the law and lay off the employees. Where the
employer fails to contribute social security premiums for the employee pursuant to the law,
an employee may rescind the labour contract and the employer shall make economic
compensation to such employee.
Labour Law
Pursuant to the Labour Law of the PRC ( 中華人民共和國勞動法)p r o m u l g a t e db yt h e
NPCSC on 5 July 1994, effective on 1 January 1995 and last amended on 29 December 2018,
enterprises and institutions shall establish and perfect their system of work place safety and
sanitation and strictly abide by the state rule s and standards on work place safety, educate
employees in labour safety and sanitation. Labour safety and sanitation facilities shall
REGULATORY OVERVIEW
–1 0 6–


--- page 116 ---
comply with statutory standards. Enterprises and institutions shall provide employees with
a safe work place and sanitation conditions w hich are in compliance with relevant laws and
regulations of labour protection.
Law of the PRC on Labour-dispute Mediation and Arbitration
Pursuant to the Law of the PRC on Labour-dispute Mediation and Arbitration ( 中華
人民共和國勞動爭議調解仲裁法) promulgated by the NPCSC on 29 December 2007 and
effective on 1 May 2008, where a labour disp ute arises and the parties are not willing to
have a consultation, or the consultation fa ils, or the settlement agreement reached is not
performed, they may apply to a mediation institution for mediation. Where the parties are
not willing to have mediation, or the mediation fails, or the mediation agreement reached is
not performed, they may apply to a labour-dispute arbitration commission for arbitration.
Where they are dissatisfied with the arbitral award, they may initiate a litigation to a
people’s court, unless otherwise provided for in this law.
Other Relevant Laws and Regulations
Pursuant to (i) the Social Insurance Law of the PRC ( 中華人民共和國社會保險法) (the
‘‘Social Insurance Law ’’) promulgated by NPCSC on 28 October 2010, effective on 1 July
2011 and amended on 29 December 2018, (ii) the Interim Regulations concerning the
Collection and Payment of Social Insurance Premiums ( 社會保險費徵繳暫行條例)
promulgated and implemented on 22 January 1999 and amended on 24 March 2019 by
the State Council, (iii) the Regulation on the Administration of Housing Provident Funds
(住房公積金管理條例) promulgated by the State Council a nd effective on 3 April 1999, and
last amended on 24 March 2019, (iv) the Regulation of Insurance for Labour Injury ( 工傷保
險條例) promulgated by the State Council on 27 April 2003, effective on 1 January 2004 and
amended on 20 December 2010, (v) the Provisional Measures for Maternity Insurance of
Employees of Corporations ( 企業職工生育保險試行辦法) promulgated by the Ministry of
Labour on 14 December 1994 and effective o n 1 January 1995, and (vi) regulations on
pension insurance, medical insurance and unemployment insurance in the provincial and
municipal levels, the employer shall pay pension insurance fund, basic medical insurance
fund, unemployment insurance fund, occupational injury insurance fund, maternity
insurance fund and housing fund for the employees. After the Social Insurance Law
became effective, where an employer fails to pay social insurance premiums on time or in
full amount, he/she/it will be ordered by the co llection agency of social insurance premiums
to pay or make up the deficit of premiums within a prescribed time limit, and a daily late fee
at the rate of 0.05% of the outstanding amount from the due date will be imposed; and if it
stil
l fails to pay the premiums within the pre scribed time limit, a fine of one time to three
times to the outstanding amount might be imposed by the relevant administrative
department.
Meanwhile, an overdue in the payment and deposit of, or underpayment of the housing
provident fund constitutes a breach of the Regulation on the Administration of Housing
Provident Funds. The housing provident fund management centre shall order it to make the
payment and deposit within a prescribed time limit. Where the payment and deposit has not
REGULATORY OVERVIEW
–1 0 7–


--- page 117 ---
been made after the expiration of such time limit, an application may be made by the
housing provident fund management centre to a people’s court for compulsory
enforcement.
Pursuant to the Opinions of the General Office of the State Council on
Comprehensively Advancing Combined Implementation of Maternity Insurance and
Basic Medical Insurance for Employees ( 國務院辦公廳關於全面推進生育保險和職工基本
醫療保險合併實施的意見) promulgated and implemented by the General Office of the State
Council on 6 March 2019, the maternity insurance and basic medical insurance for workers
will be merged with the basic medical insurance fund for workers and the contribution by
the employers shall be uniformly paid to th e relevant administrative department.
LAWS AND REGULATIONS RELATING TO TAXATION
PRC Enterprise Income Tax
Pursuant to the EIT Law promulgated on 16 March 2007, effective on 1 January 2008
and last amended on 29 December 2018, and the Regulation on the Implementation of the
Enterprise Income Tax Law of the PRC ( 中華人民共和國企業所得稅法實施條例) (the
‘‘Regulations of Enterprise Income Tax Law ’’) promulgated on 6 December 2007, effective
on 1 January 2008 and amended on 23 April 2019, the EIT is applicable to all domestic
enterprises and foreign-inve sted enterprises in the PRC and all foreign enterprises with
production and operation facilities set up in the PRC. These enterprises are classified as
resident enterprises and non-resident enterprises. Enterprises which are incorporated
according to the laws of foreign countries or regions with their de facto management
organisation (which refers to the organisat ion that exercises substantive and full
management and control over, among others, the production and operation, personnel,
accounts and properties of the enterprise) situated in the PRC are deemed to be resident
enterprises, therefore their income sourced from within and outside the PRC will generally
be subject to EIT at the tax rate of 25%. According to the Article 27 of the EIT Law and
Article 86 of the Regulations of Enterprise Income Tax Law, enterprise income from
agriculture, forestry, husbandry and fishery projects may be reduced or exempted from
taxation. Pursuant to the abovementioned provisions and with the approval of Dianbu
Branch of the State Taxation Bu reau of Laixi City, Fujing Agric ulture’s enterprise income
from agriculture has been exempted from taxation for the period from 1 May 2010 to 1 May
2050.
According to the Announcement on Several Issues concerning the Enterprise Income
Tax on Income from the Indirect Transfer of Assets by Non-Resident Enterprises ( 關於非居
民企業間接轉讓財產企業所得稅若干問題的公告)
issued by the SAT on 3 February 2015,
e f f e c t i v eo nt h es a m ed a t ea n dl a s ta m e n d e don 29 December 2017, if any non-resident
enterprise transfers assets, such as the equity i nterest in a resident enterprise of the PRC, by
carrying out an arrangement without a reasonable business purpose to avoid the EIT
payment obligation, the nature of such indirect transfer transaction should be re-
determined according to the provisions of the EIT Law and be recognised as a direct
transfer of assets, such as the equity interest in a resident enterprise of the PRC. The income
from an indirect transfer of real property or the income from an indirect transfer of shares
REGULATORY OVERVIEW
–1 0 8–


--- page 118 ---
is taxable for EIT according to the Notice, the entity or individual that is directly
responsible for payment obligations of the relevant amounts to the transferor of the equity
interest under the relevant provisions of the law or contract terms shall be responsible for
withholding and payment of tax. According to the Announcement on Issues concerning the
Withholding of Enterprise Income Tax at Source on Non-Resident Enterprises ( 關於非居民
企業所得稅源泉扣繳有關問題的公告) issued by the SAT on 17 October 2017, effective on 1
December 2017 and amended on 15 June 2018, the party responsible for withholding and
payment of tax shall report to the competent t axation authority at the place where it is
located and release the withheld amount for tax payment within seven days from the date
when the obligation of withholding and payme nt of tax arises. If the party responsible for
withholding and payment of tax fails to make payment on the due date, the case should be
handled according to Section 1 of the Announcement of the State Administration of
Taxation on Several Issues Concerning the Administration of Income Tax on Non-Resident
Enterprises ( 國家稅務總局關於非居民企業所得稅管理若干問題的公告).
Value-added Tax
According to the Provisional Regulations on Value-added Tax of the PRC ( 中華人民共
和國增值稅暫行條例) (the ‘‘Provisional Regulations on Value-added Tax ’’) promulgated by
the State Council on 13 December 1993, effective on 1 January 1994 and last amended on 19
November 2017, and the Detailed Rules for the Implementation of the Provisional
Regulations on Value-added Tax of the PRC ( 中華人民共和國增值稅暫行條例實施細則)
promulgated by the Ministry of Finance and the SAT and effective on 25 December 1993
and last amended on 28 October 2011, all uni t
 s and individuals engaged in the sales of
goods, provision of processing, repairs and r eplacement services, and the import of goods
within the territory of the PRC are subject to VAT. According to the Article 15 of the
Provisional Regulations on Value-added Tax, self-produced agricultural products sold by
agricultural producers shall be exempted from VAT. Pursuant to Article 15 and with the
approval of Dianbu Branch of the State Taxation Bureau of Laixi City, Fujing
Agriculture’s income from self-produced agricultural products during 1 January 2012 and
30 June 2031 has been exempted from VAT.
Withholding Tax on Dividend Distributions
According to the EIT Law and the Regulations of Enterprise Income Tax Law, the
dividends distributed to investors who are non-resident enterprises (which have not
established any organisation or premises in the PRC, or although they have established
organisation or premises in the PRC, the income obtained has no de facto connection with
such organisation or premises), to the extent of being sourced from the PRC, are subject to
the withholding tax of 10% in the PRC, except for the availability of tax credit on the
relevant tax under an applicable tax treaty sig ned between the PRC and the jurisdiction of
such non-resident enterprises. Similarly, if any gain obtained by such investors from the
transfer of shares is deemed to be a gain in income sourced within the PRC, such gain is
taxable for PRC income tax at the tax rate of 10% (or at a lower rate under tax treaty, if
applicable).
REGULATORY OVERVIEW
–1 0 9–


--- page 119 ---
According to the Arrangement between Ma inland China and the Hong Kong Special
Administrative Region for the Avoidance of Double Taxation and the Prevention of Fiscal
E v a s i o nw i t hr e s p e c tt oT a x e so nI n c o m e(內地和香港特別行政區關於對所得避免雙重徵稅
和防止偷漏稅的安排) effective on 8 December 2006 and amended by the Fifth Protocol to
the Arrangement between the Mainland China and the Hong Kong Special Administrative
Region for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with
respect to Taxes on Income ( 內地和香港特別行政區關於對所得避免雙重徵稅和防止偷漏稅
的安排第五議定書) effective on 6 December 2019, the withholding tax rate for dividends
paid by a PRC enterprise to a Hong Kong enterprise is 5% in case the Hong Kong
enterprise is the beneficial owner and directly holds at least 25% of equity interests of the
subject PRC enterprise.
Pursuant to the Circular of the State Admi nistration of Taxation on Relevant Issues
relating to the Implementation of Dividend Clauses in Tax Agreements ( 國家稅務總局關於
執行稅收協定股息條款有關問題的通知)
promulgated by the SAT and effective on 20
February 2009, all of the following requirements shall be satisfied where a taxable resident
of the other party to a tax agreement is entitle d to such tax agreement treatment to be taxed
at a rate specified in the tax agreement for the dividends paid to it by a Chinese resident
company: (i) such a taxable resident should be a company as provided in the tax agreement;
(ii) such a taxable resident holds equity inter ests and voting shares in a Chinese resident
company which are above a particular percent age; and (iii) such a taxable resident directly
holds the equity interests in a Chinese resident company above a particular percentage, at
any time during the twelve months prior to the obtainment of the dividends.
According to the Administrative Measures on Non-resident Taxpayers’ Enjoyment of
the Treatment under Tax Treaties ( 非居民納稅人享受協定 待遇管理辦法)p r o m u l g a t e db y
the SAT on 14 October 2019 and effective on 1 January 2020, where a non-resident taxpayer
self-assesses and concludes that it satisfies the criteria for claiming treaty benefits, it may
e n j o yt r e a t yb e n e f i t sa tt h et i m eo ft a xd e c l a r ation or at the time of withholding declaration
through the withholding agent, simultaneousl y gather and retain the relevant materials for
future inspection, and accept follow-up administration of the tax authorities. The relevant
materials to be retained for future inspectio n include the materials to prove that the non-
resident taxpayer is a ‘‘beneficiary owner’’ under the tax treaties. Pursuant to the
Announcement of the State Administration of T axation on Issues relat ing to ‘‘Beneficial
Owner’’ in Tax Treaties ( 國家稅務總局關於稅收協定中「受益所有人」有關問題的公告) (the
‘‘Announcement of Beneficial Owner ’’) promulgated on 3 February 2018 and effective on 1
April 2018, the ‘‘beneficial owner’’ shall m e a nap e r s o nw h oh a so w n e r s h i pa n dc o n t r o lo v e r
the income and the rights and property from which the income is derived. When an
individual who is a resident of the treaty counterparty derives dividend income from the
PRC, such individual may be identified as a ‘‘beneficial owner’’. The Announcement of
Beneficial Owner also specifies that if the business activities carried out by the applicant do
not constitute substantive business activities, such applicant will be treated unfavourably in
determining whether it has the st atus as a ‘‘beneficial owner’’.
REGULATORY OVERVIEW
–1 1 0–


--- page 120 ---
Environmental Protection Tax Law
According to the Environmental Protection Tax Law of the PRC ( 中華人民共和國環境
保護稅法)( t h e‘ ‘EPT Law ’’) promulgated by the NPCSC on 25 December 2016, last
amended on 26 October 2018 and effective on the same day, enterprises which discharge
taxable pollutants such as air pollutants, wate r pollutants, solid waste and noise shall file
and pay environmental protection tax to the authorities on a quarterly basis from 1 January
2018 based on the List of Items and Amounts of Environmental Protection Tax ( 環境保護稅
稅目稅額表) and the List of Taxable Pollutant and Relevant Equivalent under the
Environmental Protection Law ( 應稅污染物和當量值表). The environmental protection
tax will be collected and managed by tax authorities in accordance with the Law of the PRC
on the Administration of Tax Collection ( 中華人民共和國稅收徵收管理法)a n dt h eE P T
Law; and the environmental protection tax instead of the pollutant discharge fees shall be
collected after the EPT Law takes effect.
LAWS AND REGULATIONS RELATING TO INTELLECTUAL PROPERTY RIGHTS
Trademark Law
Pursuant to the Trademark Law of the PRC ( 中華人民共和國商標法) (the ‘‘Trademark
Law’’) promulgated by the NPCSC on 23 August 1982, effective on 1 March 1983 and last
amended on 23 April 2019, and Regulation for the Implementation of Trademark Law of
the PRC ( 中華人民共和國商標法實施條例) promulgated on 3 August 2002, effective on 15
September 2002 and amended on 29 April 2014, the Trademark Office of China National
Intellectual Property Administration ( 國家知識產權局商標局,t
 h e‘ ‘Trademark Office ’’)
under the SAIC is responsible for the registration of trademarks in the PRC. Any
individual, legal entity or organisation that intends to acquire the exclusive right to use a
trademark in the production and operation acti vities shall file an application for trademark
registration with the Trademark Office. The duration of a trademark right is 10 years. The
registered holder of a trademark may apply for an extension of registration for a subsequent
valid term of 10 years. The registered holder of a trademark may enter into a trademark
licensing agreement to allow the use of his/her /its trademark by the licencee. Trademark
licensing agreements must be submitted to t he Trademark Office for filing and record. In
consideration of application for registration, the Trademark Law adopts the principle of
‘‘first application’’. If a subsequent applic ation is the same as or similar to a trademark
which has been registered or approved under initial review with the same or similar class(es)
of commodity or service, the application for trademark registration may be refused. Any
person who makes an application for trademark r egistration must not impair the existing
prior rights of others, and shall not register in advance the trademark which has been used
by others and has ‘‘certain influence’’. In the event of a dispute arising from any act of
infringement of exclusive rights to use registered trademarks, the parties involved shall
negotiate for resolution; where the parties i nvolved are unwilling to negotiate or where
negotiation is unsuccessful, the trademark registrant or a stakeholder may file a lawsuit
with a people’s court or request the administration for industry and commerce to handle the
dispute.
REGULATORY OVERVIEW
–1 1 1–


--- page 121 ---
On 23 April 2019, the NPCSC issued amendments on the Trademark Law, which
becomes effective since 1 November 2019. According to the new amendments, where an
application for the registration of a trademark is made with malicious intent and not for the
purpose of usage, the application shall be reje cted and the Trademark Office can punish the
applicant by giving warning or imposing a fine. Furthermore, if a registration is considered
to be malicious and not for the purpose of usage, the Trademark Office may declare that
such registration is invalid; and a third party may request the Trademark Appeal Board to
declare that such registered trademark is invalid.
Patent Law
Pursuant to the Patent Law of the PRC ( 中華人民共和國專利法)p r o m u l g a t e db yt h e
NPCSC on 12 March 1984, effective on 1 April 1985 and last amended on 1 June 2021, and
its implementation rules ( 中華人民共和國專利法實施細則) promulgated by the State
Council on 15 June 2001 and last amended on 9 January 2010, the patent administrative
department under the State Council is responsible for the administration of patents in the
country level, whereas the patent administrative authorities under the people’s governments
of provinces, autonomous regions and municipalities are responsible for the administration
of patents within their respective administrative regions. The patent system in the PRC
follows the principle of ‘‘first application’ ’, which means if two or more applicants have
applied for a patent of the same invention or creation, the patent will be granted to the first
applicant. An application for a patent for invention or utility model must fulfil three
criteria, namely novelty, inventiveness and pra ctical applicability. A patent of invention has
a valid period of 20 years, whereas the valid period of patents for utility model and design
are 10 years and 15 years respectively, all commencing from the application date. Non
holder must obtain licence or proper authorisation from the patent holders before using the
patents. In the event of a patent dispute, the parties involved shall negotiate for resolution;
where the parties involved are unwilling to negotiate or where negotiation is unsuccessful,
the patent holder or a stakeholder may file a lawsuit with a people’s court, or may request
the authorities for administration of patent matters to handle the matter.
Domain Law
Pursuant to the Measures for the Admini stration of Internet Domain Names ( 互聯網域
名管理辦法) promulgated by the Ministry of Industry and Information Technology (the
‘‘MIIT ’’) on 24 August 2017 and effective on 1 November 2017, domain name shall refer to
the character mark of hierarchical structure, which identifies and locates a computer on the
Internet and corresponds to the Internet Protocol address of that computer. The MIIT
supervises and administers the domain name services in the PRC. The registration for
domain names such as the first-tier domain nam e ‘‘.cn’’ follows the principle of ‘‘first
application, first registration’’. An applican t for registration of domain name shall provide
information for the registration of domain name such as the true, accurate and complete
information on the identity of the domain name holder to the domain name registration
service authority. After completion of the registration procedures, the applicant will
become the holder of the relevant domain name. Any registration and use of domain names
by organisations and individuals shall abide by the requirements of the Measures for the
REGULATORY OVERVIEW
–1 1 2–


--- page 122 ---
Administration of Internet Domain Names, and any registrations and uses of domain
names in breach of the said Measures constitutes an offence and is subject to criminal
liability.
Pursuant to the Procedures for Resolution of Disputes over National Top-level
Domain Names ( 國家頂級域名爭議解決辦法), which was issued by the China Internet
Network Information Centre (‘‘ CNNIC’’), which was promulgated and effective on 18 June
2019, domain name disputes shall be handled and resolved by the dispute resolution service
providers as accredited by the CNNIC.
LAWS AND REGULATIONS RELATING TO THE USE, ACQUISITION AND LEASE
OF COLLECTIVELY-OWNED LAND
Land Administration Law
Pursuant to the Land Administration Law of the PRC (中 華人民共和國土地管 理法)
(the ‘‘Land Administration Law ’’) promulgated by the NPCSC on 25 June 1986, effective on
1 January 1987 and last amended on 26 August 2019, and the Regulations for the
Implementation of the Land Administration Law of the PRC ( 中華人民共和國土地管 理法
實施條例) promulgated by the State Council on 27 December 1998, effective on 1 January
1999 and last amended on 2 July 2021 and effective on 1 September 2021, the natural
resources administrative department under the State Council shall be responsible for
administration and supervision work pertaining to land nationwide. On the other hand, the
respective people’s governments of provinces, autonomous regions and centrally-
administered municipalities shall be responsible for setting up their respective natural
resources administrative departments and determining their respective duties pursuant to
the relevant provisions promulgated by the S tate Council. Further, the State Council may
authorise agencies to supervise land use and land administration by the people’s
governments of provinces, autonomous regions and centrally-adminis tered municipalities
as well as municipal people’s governments determined by the State Council. Pursuant to the
Article 9 of the Land Administration Law, downtown area land in cities shall belong to the
state. Rural and suburbs land shall be colle ctively-owned by farmers, unless the laws
stipulate otherwise; homestead and reserve d land and hilly land rese rved for private use
shall be collectively-owned by farmers. Pursuant to the Article 63 of the Land
Administration Law, where collectively-operated development land is determined as
industrial use and commercial use or other business purposes in the land use master plan
or urban-rural planning and has been registered pursuant to the law, subject to consent of
more than two-thirds of the members of the rural collective economic organisation or more
than two-thirds of villager representatives , the land owner may transform the land use to
organisation or individual user by way of, among others, assignment and lease.
According to the Provisions on Transfer of the Use Right of State-owned Construction
Land through Bidding, Auction and Listing ( 招標拍賣掛牌出讓國有建設用地使用權規定)
promulgated by the Ministry of Resources on 9 May 2002, effective on 1 July 2002 and
amended on 1 November 2007, a parcel of bus iness land for industrial, commercial,
tourism, entertainment and commercial housing purposes and a land parcel that has more
than two potential users shall be transferred by means of bidding, auction or listing. Any
individual or entity within the territory of the PRC may apply to participate in such
REGULATORY OVERVIEW
–1 1 3–


--- page 123 ---
bidding, auction and listing. The land admini stration department at municipal or county
levels shall determine the base bidding price in accordance with the land appraisal and the
government’s policy. The base bidding pric e shall not be lower than the minimum price
specified by the state. If the bidder’s construction plan of the land is in compliance with the
requirements prescribed in the announ cement published by the competent land
administration and the bidder offers the highest price in the bidding, such bidder would
win the bidding, and should enter into the grant contract of land use right contract with the
land administration department and pay grant fees and other charges to the government for
the grant of land use right. After the aforementi oned formalities are completed, the entity
or individual will obtain the land use right of the subject state-owned land accordingly.
Classification of Land Use Status
Pursuant to the Classification of Land Use Status ( 土地利用現狀分類) (GB/T 21010–
2017) promulgated and implemented by the General Administration of Quality Supervision,
Inspection and Quarantine of the PRC ( 國家質量監督檢驗檢疫總局)a n dt h e
Standardisation Administration of the PRC ( 國家標準化管理委員會)o n1N o v e m b e r
2017, the classification code ‘‘1202’’ ‘‘land for facilities agriculture’’ ( 設施農用地) applies to
the land directly used for commercial livestock and poultry breeding and production
facilities and ancillary facilities therefor; land for facilities and ancillary facilities directly
used for the production of agricultural products such as crop cultivation or aquaculture;
land for facilities directly used for auxiliary pr oduction of facilities agriculture; drying
farm, grain and fruit drying facilities, temporary storage of grain and agricultural materials,
temporary storage of large agricultural machi nery and tools, and other necessary facilities
for large-scale grain production.
Notice on Further Support for the Healthy Development of Facilities Agriculture
The Notice on Further Support for the Healt hy Development of Facilities Agriculture
(關於進一步支持設施農業健康發展的通知), which was promulgated by the Ministry of
Resources and the Ministry of Agriculture and Rural Affairs and effective from 29
September 2014 to 28 September 2019, pro vides the scope of land for (i) facilities
agriculture (ii) production facilities, an d (iii) ancillary facilities, and the detailed
specifications for the land for production fac ilities, ancillary facilities and supporting
facilities for the said period. The said Notic e also specifically provides that the land for
facilities agriculture shall be managed as agricultural land.
Notice on the Management of the Land for Facilities Agriculture
The Notice on the Management of the Land for Facilities Agriculture issued by the
Ministry of Natural Resources and the Ministry of Agriculture and Rural Affairs ( 自然資源
部農業農村部關於設施農業用地管理有關問題的通知),
 which was promulgated and effective
on 17 December 2019, pres cribes the scope and scale of land for facilities agriculture. The
Notice also prescribes that government departments in charge of management of natural
resources agriculture and rural affairs at municipal and county levels shall be jointly
responsible for the routine management of land for facilities agriculture. On the other hand,
the government departments in charge of natu ral resources and agricultural and rural
affairs at national and provincial levels shal l be responsible for the supervision of land for
REGULATORY OVERVIEW
–1 1 4–


--- page 124 ---
facilities agriculture. Land for facilities agr iculture shall be filed with the government at
town level for record purpose by the rural colle ctive economic organisations or operators,
and the government at town level shall regula rly collect and pass the information to the
government department of natural resources at county level. Construction works involving
the permanent basic farmland* ( 永久基本田) shall not begin until and unless approval of
the government department of natural resources at county level is obtained.
A c c o r d i n gt ot h eL a wo ft h eP R Co nL a n dC o n t r a c ti nR u r a lA r e a s(中華人民共和國農
村土地承包法) promulgated by the NPCSC on 29 August 2002 and last amended on 29
December 2018, the PRC applies the system of contractual management of rural land; and
the contractee and contractor shall enter into a contract setting out the rights and
obligations of the parties thereto. During the contracting period, the contractee shall not
take back the contracted land. In accordan ce with the Administrative Measures for
Transfer of Management Rights of Rural Land ( 農村土地經營權流轉管理辦法)
p r o m u l g a t e db yt h eM O Ao n2 6J a n u a r y2 0 2 1a n de f f e c t i v eo n1M a r c h2 0 2 1 ,t h e
contractor may transfer the management rights of contracted rural land by leasing
(subcontracting), share acquisition, or any other methods in accordance with the relevant
laws and national policies. When transferri ng the management rights of contracted rural
land, the contractor shall enter into a written contract with the assignee on the basis of
agreement reached through neg otiation, and report the matter to the contractee for record.
LAWS AND REGULATIONS RELATING TO FOREIGN EXCHANGE
Regulation on Foreign Exchange Administration
Pursuant to the Regulation on Foreign E xchange Administration of the PRC ( 中華人
民共和國外匯管理條例) promulgated by the State Council on 29 January 1996, effective on
1 April 1996 and last amended on 5 August 2008, the foreign exchange income of a domestic
entity or individual may be repatriated to the PRC or deposited overseas. The conditions
and deadline for repatriation to the PRC or deposit overseas are subject to the requirements
of the foreign exchange administration authority of the State Council depending on the
status of international balance of payments and the need for foreign exchange management.
The foreign exchange income from current account items may be retained or sold to
financial institutions operating foreign exchange settlement and sales business in
accordance with the relevant national requirements. Where any foreign exchange income
on capital account is to be retained or sold to a financial institution engaging in foreign
exchange settlement and sales business, an approval shall be obtained from the relevant
foreign exchange administrative authority, unless specified otherwise.
Provisions on the Settlement and Sale of and Payment in Foreign Exchange
Pursuant to the Provisions on the Settlement and Sale of and Payment in Foreign
Exchange ( 結匯、售匯及付匯管理規定) promulgated by the People’s Bank of China on 20
June 1996 and effective on 1 July 1996, upon approval, foreign-invested enterprises can
open a foreign exchange settlement account for their current account foreign exchange
income with a selected bank engaging in f oreign exchange business in its place of
incorporation. Foreign exchange receipts under the current account of foreign-invested
REGULATORY OVERVIEW
–1 1 5–


--- page 125 ---
enterprises may be retained to the extent as specified by the foreign exchange bureau. Any
p o r t i o ni ne x c e s so fs u c ha m o u n ts h a l lb es o l dt oad e s i g n a t e df o r e i g ne x c h a n g eb a n ko r
through a foreign exchange centre.
Circular of Further Improving and Adjusting Foreign Exchange Administration Policies on
Foreign Direct Investment
The Circular of Further Improving and Adjusting Foreign Exchange Administration
Policies on Foreign Di rect Investment ( 國家外匯管理局關於進一步改進和調整直接投資外匯
管理政策的通知) (the ‘‘Circular 59 ’’), which was promulgated by the SAFE, effective on 17
December 2012 and last amended on 4 May 2015, substantially amends and simplifies the
foreign exchange procedure. According to the Circular 59, the opening of various foreign
exchange accounts for direct investment no longer requires SAFE’s approval or
verification, and purchase and remittance of foreign exchange as a result of capital
reduction, liquidation, early repatriation or share transfer in a foreign invested enterprise
no longer requires SAFE’s approval.
Notice of the SAFE on Relevant Issues concerning Foreign Exchange Administration relating
to Domestic Residents Offshore Investment and Financing and Round-trip Investment through
Special Purpose Vehicles
Pursuant to the Circular 37 effective on 4 July 2014, a domestic resident (either natural
person or legal person) shall apply to effect fore ign exchange registration with the foreign
exchange office, when he/she/it uses his/her/ its enterprise assets or interests in the PRC to
establish or take control of a special purpose vehicles (the ‘‘ SPV’’) aboard, and his/her/its
domestic enterprises receive round-trip investments from funds raised by such SPV
controlled by the domestic resident for going through the procedures for foreign exchange
registration of overseas investments. A domestic resident which contributes capital with
lawful asset or equity interest located outside the PRC shall apply to the foreign exchange
office of its place of incorporation, or the foreign exchange office of the location of
household registration for going through the registration procedures. The Circular 37
narrows the scope of registrable offshore SPV to the extent that only those offshore SPVs
that are directly established or controlled b y domestic residents shall be registered. In
addition, the scope of the change of registration covers the change of information in
relation to the domestic individual resident, an d occurrence of significant events such as the
capital increase or decrease and equity transfe r or swap by the domestic individual resident.
Failure to comply with the registration pro cedures of Circular No. 37 may result in
penalties and sanctions, including the imposition of restrictions on the offshore SPV’s PRC
subsidiary to distribute dividends to its overseas parent.
Notice of the SAFE on Further Simplifying and Improving Policies for the Foreign Exchange
Administration of Direct Investment
The Notice of the SAFE on Further Simp lifying and Improving Policies for the
Foreign Exchange Administr a t i o no fD i r e c tI n v e s t m e n t(國家外匯管理局關於進一步簡化和
改進直接投資外匯管理政策的通知) and the Guidelines for Direct Investment-related
Foreign Exchange Business (直 接投資外匯業務操作指引),
 which were promulgated on 13
REGULATORY OVERVIEW
–1 1 6–


--- page 126 ---
February 2015, effective on 1 June 2015 and last amended on 30 December 2019, simplify
the administrative approval procedures for foreign exchange registration under overseas
direct investment and foreign exchange regist ration under overseas direct investment shall
instead be approved and handled directly by banks. The SAFE and its branches indirectly
supervise the foreign exchange registration under direct investment through banks. In case
such domestic resident makes overseas investme nt with his/her onshore assets or interests,
he/she shall proceed with the foreign exchange registration of SPV by PRC resident
individuals with the banks situated at the place where the onshore corporate assets or
interests are located.
Notice of the SAFE on Reforming and Regulating the Policies for the Administration of
Settlement of Foreign Exchange under Capital Accounts
Pursuant to the Notice of the SAFE on Reforming and Regulating the Policies for the
Administration of Settlement of Foreign Exchange under Capital Accounts ( 國家外匯管理
局關於改革和規範資本項目結匯管理政策的通知) issued by the SAFE and effective on 9
June 2016, settlement of the foreign exchange income under capital accounts to be settled
voluntarily as confirmed by the relevant polic ies explicitly (including foreign exchange
capital amount, foreign debt amount and capital amount repatriated from overseas listing)
may be carried out at banks according to the practical operating needs of the domestic
entity. The amounts in RMB received from discretionary settlement shall be managed in an
account of foreign exchange settlement pendin g for payment. The ratio of voluntary foreign
exchange settlement for foreign exchange income under capital account items of domestic
entities for the time being is 100%. The SAFE may adjust the above ratio from time to time
according to the conditions of international balance of payments. Foreign exchange receipts
under the capital account of domestic entities and its capital in RMB obtained from foreign
exchange settlement shall not be directly or indirectly used for payments outside the
company’s scope of business.
Notice on Reforming the Administrative Approach regarding the Settlement of the Foreign
Exchange Capitals of Foreign-Invested Enterprises
Pursuant to the Notice on Reforming the Administrative Approach regarding the
Settlement of the Foreign Exchange Capitals of Foreign-Invested Enterprises ( 國家外匯管
理局關於改革外商投資企業外匯資本金結匯管理方式的通知) issued by the SAFE on 30
March 2015, effective on 1 June 2015 and last amended on 30 December 2019, a
discretionary settlement mechanism for foreign exchange capital funds to foreign-invested
enterprises shall be implemented, so the foreign exchange capital in the capital account of a
foreign-invested enterprise for which the right s and interests of monetary contribution have
been confirmed by the local foreign exchange bureau (or the book-entry registration of
monetary contribution by the banks) can be settled at the banks based on the actual
operational needs of the foreign-invested enterprise. The proportion of discretionary
foreign exchange settlement of the foreign exchange capital of a foreign-invested enterprise
is temporarily set at 100%. The SAFE may adjust the foregoing percentage as appropriate
based on prevailing international balance of payments. The RMB funds obtained by a
foreign-invested enterprise from its discret ionary foreign exchange settlement of capital
s h a l lb ei n c l u d e di n t oaf o r e i g ne x c h a n g es ettlement account pending payment. A foreign-
REGULATORY OVERVIEW
–1 1 7–


--- page 127 ---
invested enterprise shall use its capital for its own operational purposes within its business
scope, and may make domestic equity investment with the foreign exchange amount. The
SAFE may conduct the verification and inspection on the foreign-invested enterprises, and
may disqualify a foreign-invested enterprise which commits grave or malicious irregularities
from discretionary settlement of foreign exchange.
LAWS AND REGULATIONS RELATING TO FOREIGN INVESTMENT
Company Law
The Company Law of the PRC ( 中華人民共和國公司法) (the ‘‘Company Law ’’), which
was promulgated by the NPCSC on 29 December 1993, effective on 1 July 1994 and last
amended on 26 October 2018, provides for the establishment, corporate structure and
corporate management of companies, which also applies to foreign-invested enterprises in
the PRC. The Company Law stipulates that a limited company shall prepare a shareholders’
register, which shall record (i) the name and address of each shareholder; (ii) the capital
contribution made by each shareholder; an d (iii) the serial number of each capital
contribution certificate. Shareholders record ed in the shareholders’ register may, pursuant
to the shareholders’ register, claim and exercise shareholders’ rights. A company shall
register the name of each shareholder and the shareholder’s capital contribution at the
company registration authority shall carry out amendment of the registration for any
change of the registration details. Any deta il which shall be registered but fails to be
amended or registered shall not b e valid against any third-party.
Foreign Investment Law
The Foreign Investment Law of the PRC ( 中華人民共和國外商投資法) (the ‘‘Foreign
Investment Law ’’), which was promulgated by the National People’s Congress on 15 March
2019 and effective on 1 January 2020, is the fundamental law for foreign investment in the
PRC, will replace the Law of the PRC on Sino-foreign Equity Joint Ventures ( 中華人民共和
國中外合資經營企業法), the Law of the PRC on Sino-foreig n Cooperative Joint Ventures
(中華人民共和國中外合作經營企業法) and the Law of the PRC on Wholly Foreign-owned
Enterprise (中 華人民共和國外資企業法) as the general law applicable for the foreign
investment within the PRC.
The Foreign Investment Law defines foreign investment as any investment activity
dir
ectly or indirectly carried out in the PRC by one or more foreign natural persons,
enterprises or other organisations (the ‘‘ Foreign Investor(s)’’), and specifically stipulates
four forms of investment activities as foreign investments, namely (i) establishment of a
foreign-invested enterprise in the PRC by a Foreign Investor, either individually or
collectively with any other investor; (ii) obtaining shares, equities, assets interests or any
other similar rights or interests of an enterprise in the PRC by a Foreign Investor; (iii)
investment in any new construction project in the PRC by a Foreign Investor, either
individually or collectively with any other investor; and (iv) investment in any other
manners stipulated by laws, administrative regulations or provisions prescribed by the State
Council.
REGULATORY OVERVIEW
–1 1 8–


--- page 128 ---
The Foreign Investment Law establishes the administration system for foreign
investment, which mainly consists of pre-establishment national treatment plus negative
list, foreign investment information report system and security review system. The said
system, together with other administrati ve measures stipulated under the Foreign
Investment Law, constitute the frame of foreign investment administration. While the
pre-establishment national treatment refers to granting to foreign investors and their
investments, in the stage of investment access, the treatment no less favourable than that be
granted to domestic investors and their investments; the negative list refers to special
administrative measures for access of foreign i nvestment in specific fields as stipulated by
the state. The state will give national treatme nt to foreign investments outside the negative
list. The negative list will be release d by or upon approval by the State Council.
The Foreign Investment Law sets forth the principles and measures to promote foreign
investment in the PRC and specifically provides that the PRC legally protects foreign
investors’ investment, earnings and other legitimate rights and interests in the PRC.
The Foreign Investment Law further provides that foreign-invested enterprises
established before the Foreign Investment Law coming into effect may adjust, among
others, their organisation form and structure pursuant to the provisions of the Company
Law, the Partnership Enterprise Law of the PRC ( 中華人民共和國合夥企業法)a n dr e l a t e d
laws, and complete the change of registration pursuant to the law, or may retain their
original form of organisations within five years after the Foreign Investment Law comes
into effect. Specific implementing measu res will be prescribed by the State Council.
Regulation on the Implementation of the Foreign Investment Law of the PRC
Pursuant to the Regulation on the Impleme ntation of the Foreign Investment Law of
the PRC ( 中華人民共和國外商投資法實施條例) promulgated by the State Council on 26
December 2019 and effective on 1 January 2020, starting from 1 January 2025, the market
supervision and administration department shall not handle any application for registration
by existing foreign-invested enterprises whi ch fail to adjust their organisational forms
structures in accordance with the law and go through registration procedures for alteration.
Instead, the department shall publicise the relevant information. After the adjustment of the
organisational form structure of the existing foreign-invested enterprises in accordance with
the law, the measures for the transfer of equity or rights and interests, the distribution of
profits and the distribution of residual property agreed in the contracts between the parties
to the original joint venture and the cooperation may continue to be handled in accordance
with the provisions as agreed upon in the contracts.
Catalogue of Industries for Encouraging Foreign Investment (2020 Edition) and The Special
Management Measures (Negative List) fo r the Access of Foreign Investment (2020)
Under the Catalogue of Industries for Encouraging Foreign Investment (2020 Edition)
(鼓勵外商投資產業目錄（2020年 版）) which was promulgated by the National Development
and Reform Commission and the Ministry of Commerce on 27 December 2020 and effective
on 27 January 2021, the production of green, organic vegetable produce shall fall within the
category of encouraged foreign-invested industries.
REGULATORY OVERVIEW
–1 1 9–


--- page 129 ---
The Special Management Measures (Negative List) for the Access of Foreign
Investment (2021) ( 外商投資准入特別管理措施（負面清單） （2021 年版）)( t h e‘ ‘ 2021
Negative List ’’), which was promulgated on 27 December 2021 and effective on 1 January
2022, unified the requirements in respect of ownership and senior executives, and other
special administrative measures for the access of foreign investment. Industries which are
not on the 2021 Negative List shall be governed by the principle of equal treatment to both
domestic and foreign investment. Since the principal business of our PRC subsidiaries is not
listed on the 2021 Negative List, the same sha ll be governed by the principle of equal
treatment.
LAWS AND REGULATIONS RELATING TO M&A AND OVERSEAS LISTING
Rules on the Merger and Acquisition of Domestic Enterprises by Foreign Investors in the PRC
Pursuant to the requirements as set forth in the Rules on the Merger and Acquisition
of Domestic Enterprises by F oreign Investors in the PRC ( 關於外國投資者併購境內企業的
規定) promulgated by six PRC governmental and regulatory agencies (including the
Ministry of Commerce and the China Securities Regulatory Commission) on 8 August 2006,
effective on 8 September 2006 and last amended on 22 June 2009, where a domestic
company, enterprise or natural person mergers with or acquires his/her/its related domestic
company in the name of an offshore company which he/she/it lawfully established or
controls or a foreign investor mergers with or acquires the shareholding of a domestic
company, the merger or acquisition shall be s ubject to examination and approval by the
Ministry of Commerce and shall proceed with the registration of change or registration of
establishment with the SAIC or local admin istration of industry and commerce. SPV’s
overseas listing shall be subject to the approval of the securities regulatory and management
authority of the State Council.
REGULATIONS RELATING TO OVERSEAS LISTING
On 17 February 2023, the CSRC formally released the Trial Administrative Measures
of Overseas Securities Offering an d Listing by Domestic Companies 《境內企業境外發行證
券和上市管理試行辦法》(the ‘‘Trial Overseas Listing Measures ’’) and five filing guidelines,
which became effective on 31 March 2023.
Pursuant to the Trial Overseas Listing Measures, if the issuer both meets the following
criteria, the overseas securities offering an d listing conducted by such issuer will be deemed
as indirect overseas offering by PRC domestic companies: (i) 50% or more of any of the
issuer’s operating revenue, total profit, to tal assets or net assets as documented in its
audited consolidated financial statements f or the most recent accounting year is accounted
for by domestic companies; (ii) the main part of the issuer’s business activities are
conducted in the PRC, or its origin of business are mainly located in the PRC, or the
majority of the issuer’s senior management in charge of the management of business
operations are PRC citizens or have their usual place(s) of residence located in the PRC.
Where an issuer submits an applic ation for initial public offering for overseas offering or
listing directly or indirectly, such issuer must file
 with the CSRC within three business days
after such application is submitted overseas. The Trial Overseas Listing Measures also
REGULATORY OVERVIEW
–1 2 0–


--- page 130 ---
requires subsequent reports to be filed with the CSRC on material events, such as change of
control or voluntary or forced delisting of the issuer(s) who have completed overseas
offerings and listings.
The Trial Overseas Listing Measures provide that, an overseas offering and listing is
prohibited under any of the following circumstances: if (i) such securities offering and
listing is explicitly prohibited by provisions in laws, administrative regulations and relevant
state rules; (ii) 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; (iii) the domestic company intending to make the securities offering and listing, or
its controlling shareholder(s) and the actua l controller, have committed crimes such as
corruption, bribery, embezzlement, misappropriation of property or undermining the order
of the socialist market economy during the last three years; (iv) the domestic company
intending to make the securities offering and listing suspected of committing crimes or
major violations of laws and regulations, an d is under investigation according to law, and
no conclusion has yet been made thereof; or (v ) there are material ownership disputes over
equity held by the domestic company’s contro lling shareholder(s) or by other shareholder(s)
that are controlled by the controlling sha reholder(s) and/or actual controller.
We had completed the filing procedures with the CSRC for the Listing on 23 October
2023.
REGULATORY OVERVIEW
–1 2 1–


--- page 131 ---
OVERVIEW
We have over ten years of experience in the cultivation and sales of potted vegetable
produce to our customers in the PRC. Our hist ory can be traced back to December 2006,
when our Controlling Shareholder, Mr. Zhang, founded our principal operating subsidiary,
Fujing Agriculture, which was then known as Qingdao Fujing Agriculture Ecological
Development Limited Liability Company* ( 青島富景農業生態開發有限公司), a one-person
limited liability company in the PRC.
Mr. Zhang tapped into the agricultural industry as he sees agriculture essential to
people’s livelihood and therefore believes that the industry would have huge prospects. In
December 2003, ‘‘Certain Opinion of the Ce ntral Committee of the Communist Party of
China and the State Council in relation to the promotion of farmers’ income* ( 中共中央、
國務院關於促進農民增加收入若干政策的意見)’’ was executed by the then President of
China and later became the ‘‘2004 No. 1 Document* (2004 年度一號文件)’’ of the
Communist Party of China. With the public ation of the ‘‘2004 No. 1 Document’’, Mr.
Zhang believes that the Chinese governm ent may publish favourable policy for the
agricultural industry and therefore he founded Fujing Agriculture in December 2006. When
Fujing Agriculture was established, we grew vegetables in traditional methods. Mr. Zhang
found that there were shortcomings in traditi onal way of agriculture, particularly in the
aspects of food safety, production standardisation, preservation and brand building.
Meanwhile, as he took part in the industry and has gained considerable knowledge, Mr.
Zhang eventually came up with an idea to grow vegetable produce in individual pots as a
solution to the shortcomings of traditional agr iculture. In 2011, we established our first
greenhouse and started our research on cultivation of potted vegetable produce. Since
second half of 2012, we developed our potted vegetable produce which became the main
products of our Group and we started large scale production of potted vegetable produce
with an annual production capacity of one m illion pots above in 2016. We started research
on and developed our own formulated organic su bstrates in 2012 and 2014 respectively. For
more information about Mr. Zhang, please refer to the paragraph headed ‘‘Directors and
Senior Management — Directors and Senior Management — Executive Directors’’ in this
prospectus.
MILESTONES
Year Events
2006 Establishment of Fujing Agriculture
2007–2010 Conducted land clearing and s ite formation for our Laixi Facility in
Qingdao, Shandong province
2010 We commenced sales of non-potted vegetable produce by our Laixi Facility
2012 We commenced cultivation and sales of potted vegetable produce
2014 Accredited with the Qingdao Municipal Vegetable Base* ( 青島市市控蔬菜基
地) by the Bureau of Commerce, Qingdao ( 青島市商務局)
HISTORY, REORGANISATION AND CORPORATE STRUCTURE
–1 2 2–


--- page 132 ---
Year Events
2015 Accredited with the March 15 — the Most Socially Trustworthy Brand* (3 ‧
15最具社會誠信品牌) by Peninsula Metropolitan Newspaper* ( 半島都市報
社)
Accredited with the Qingdao 2015 World Leisure Games Franchisee* ( 青島
2015世 界休閒體育大會特許經營商) by Qingdao 2015 World Leisure Games
Organising Committee* (青 島2015 世界休閒體育大會組委會)
Expanded our Laixi Facility with aggregate site area of approximately
378,000 sq.m.
The Shares of Fujing Agriculture became quoted on the NEEQ under stock
code 834389
We ceased sales and production of non-potted vegetable produce
2017 Accredited with the Certificate of Origin of Pollution-free Agricultural
Products* ( 無公害農產品產地認定證書) by Qingdao Agriculture
Commission* (青 島市農業委員會)
2018 Accredited with the Qingdao Green Vegetable Garden* ( 青島市綠色菜園)b y
Qingdao Agriculture Commission* ( 青島市農業委員會)
Esta
blished over 100 greenhouses wi th total gross floor area exceeding
100,000 sq.m.
2019 Establishment of Xi’an Facility and Dalian Facility
Being selected to be involved in the development of the industry standard for
the industrial cultivation of potted vegetable produce in the PRC together
with the Laixi Potted Vegetable Cultivation Association* ( 萊西市盤菜種植協
會), Qingdao Fugeng Agricultural Machinery Professional Cooperative* ( 青島富
耕農機專業合作社) and Qingdao Institute of Technology and Standards*
(青島市技術標準科學研究所) by the Qingdao Association of Standardisation
(青島市標準化協會)
2020 Obtained: (i) GB/T 45001-2020 idt ISO 45001 : 2018 Certificate of
Occupational Health and Safety Management System ( 職業健康安全管理
體系認證證書); (ii) GB/T 24001-2016 idt ISO 14001 : 2015 Certificate of
Environmental Management System ( 環境管理體系認證證書); and (iii) GB/
T 19001-2016 idt ISO 9001 : 2015 Certificate of Quality Management System
(質量管理體系認證證書) issued by Qingdao Huazhong Century Certification
Co., Ltd.* ( 青島華中世紀認證有限公司)
HISTORY, REORGANISATION AND CORPORATE STRUCTURE
–1 2 3–


--- page 133 ---
CORPORATE HISTORY AND DEVELOPMENT
Our Company
Our Company is an exempted company incorporated in the Cayman Islands under the
Companies Act with limited liability on 23 Jul y 2019 with authorised share capital of
US$50,000 divided into 50,000 shares of par val ue of US$1.00 each. Upon the incorporation
of our Company, one share of par value of US$1.00 was allotted and issued to the initial
subscriber at par, which was then transferredt oW i d e rI n t e r n a t i o n a lo nt h es a m ed a t e .
Upon the completion of the Reorganisation, our Company shall become the ultimate
holding company of our Group.
Fujing Agriculture
Fujing Agriculture is our main operating subsidiary with principal business of
cultivation and sales of potted vegetable pr oduce and was established under the name of
Qingdao Fujing Agriculture Ecological De velopment Limited Liability Company* ( 青島富
景農業生態開發有限公司) in the PRC on 4 December 2006 as a one-person limited liability
company with a registered and paid up capital of RMB100,000 with Mr. Zhang being its
sole owner.
Pursuant to the resolutions of Fujing A griculture passed on 16 May 2007, Fujing
Agriculture was converted from a one-person limited liability company to a limited liability
company, and the registered capital of Fujin g Agriculture was increased from RMB100,000
to RMB1.6 million. The additional registered capital of RMB1.5 million was contributed in
cash by Ms. Zhang, sister of Mr. Zhang, and was settled on 25 May 2007. After such
contribution of capital, Mr. Zhang and Ms. Zhang held 6.25% and 93.75% of the total
equity interests of Fujing Agriculture respecti vely. Fujing Agriculture completed the legal
procedure and registration of such incr ease in registered capital on 31 May 2007.
On 21 February 2010, pursuant to an equity transfer agreement dated the same date,
Mr. Zhang transferred 6.25% of the then total equity interests in Fujing Agriculture to Ms.
Zhang, who paid Mr. Zhang RMB100,000 as consideration, which was determined after
arm’s length negotiation with reference to the registered capital of Fujing Agriculture at the
time of such transfer. Such consideration was fully and legally settled and the legal
procedure for such transfer of equity interest was completed on the same day, as a result of
which Ms. Zhang became the sole equity owner in Fujing Agriculture. On the same day, Ms.
Zhang resolved to convert Fujing Agricultu re back into an one-person limited liability
company. The conversion was duly registered and the legal procedure for such conversion
was completed on 23 February 2010.
On 18 October 2010, pursuant to an equity transfer agreement dated the same date,
Ms. Zhang transferred 100% of the then total equity interests in Fujing Agriculture to Mr.
Zhang, who paid Ms. Zhang RMB1,600,000 as co nsideration, which was determined after
arm’s length negotiation with reference to the registered capital of Fujing Agriculture at the
time of such transfer. Such consideration was f ully and legally settled and the transfer of
equity interest was completed on 18 October 2010. On the same day, Fujing Agriculture was
HISTORY, REORGANISATION AND CORPORATE STRUCTURE
–1 2 4–


--- page 134 ---
resolved to be renamed as Qingdao Fujing Agriculture Development Limited Liability
Company* ( 青島富景農業開發有限公司). Such renaming was duly registered on 1
November 2010.
Pursuant to the resolutions of the then sole equity owner in Fujing Agriculture passed
on 28 December 2010, Fujing Agr iculture was converted from a one-person limited liability
company into a limited liability company, and the registered capital of Fujing Agriculture
increased from RMB1.6 million to RMB16.0 million as Mr. Zhang, Ms. Li Meiping ( 李美
平), Ms. Bi Ailing (畢 愛玲), Ms. Zhang and Ms. Geng Qi ( 耿琦) contributed approximately
RMB12.1 million, RMB1.3 million, RMB 720,000, RMB144,000 and RMB144,000
respectively as the registered capital of Fujin g Agriculture. Such additional registered
capitals were contributed in cash and were fully and legally settled on 29 December 2010.
Fujing Agriculture completed the legal pro cedure and registration of such increase in
registered capital on 30 December 2010. Upon the completion of such increase in registered
capital, the equity holding structure of Fujing Agriculture was as follows:
Name of equity owners
Capital
contribution
Percentage of
equity holding
(RMB’000)
Zhang Yonggang ( 張永剛) (Mr. Zhang) 13,696 85.6%
Li Meiping ( 李美平)
(Note 1) 1,296 8.1%
Bi Ailing ( 畢愛玲)(Note 2) 720 4.5%
Zhang Chunyan ( 張春燕) (Ms. Zhang) 144 0.9%
Geng Qi ( 耿琦)(Note 3) 144 0.9%
Total 16,000 100%
Notes:
1. Ms. Li Meiping is an Independent Third Party. Except for the investment Ms. Li made in Fujing
Agriculture in December 2010 and being a shareholder of Fujing Agriculture, she has no relation
with our Group and/or any of our Controlling Shareholders.
2. Ms. Bi Ailing was formerly a supervisor of Fuji ng Agriculture and her term of office ended on 25
September 2018.
3 . M s .G e n gQ ii st h es i s t e ro fM s .G e n gJ u a n( 耿娟) who is cohabiting with Mr. Zhang, our
Controlling Shareholder, as his spouse.
On 23 April 2015, the then equity owner of Fujing Agriculture resolved to, among
other things, rename Fujing Agriculture as Qingdao Fujing Agriculture Development
Company Limited* ( 青島富景農業開發股份有限公司) and to convert Fujing Agriculture
from a limited liability company into a joint stock limited company. The legal procedure
HISTORY, REORGANISATION AND CORPORATE STRUCTURE
–1 2 5–


--- page 135 ---
and registration of such conversion was completed on 25 August 2015, after which the total
share capital of Fujing Agriculture was RMB16.0 million divided into 16 million shares
with nominal value of RMB1.0 each, and its then shareholding structure was as follows:
Name of shareholders
Number of
shares held
Percentage of
shareholding
Zhang Yonggang ( 張永剛) (Mr. Zhang) 13,696,000 85.6%
Li Meiping ( 李美平) 1,296,000 8.1%
Bi Ailing ( 畢愛玲) 720,000 4.5%
Zhang Chunyan ( 張春燕) (Ms. Zhang) 144,000 0.9%
Geng Qi ( 耿琦) 144,000 0.9%
Total 16,000,000 100%
On 5 November 2015, Fujing Agriculture received approval for its shares to be listed
on NEEQ in the PRC (stock code: 834389). It s shares began to be traded on NEEQ on 25
November 2015.
On 28 April 2016, the then shareholders of F ujing Agriculture resolved to allot and
issue 54 million shares to the then existing shareholders on the basis of 33.75 shares for
every 10 shares held and to debit a sum of RMB 54.0 million in the capital common reserve
fund of Fujing Agriculture for such allotment and issuance. As a result, the total share
capital of Fujing Agriculture increased from RMB16.0 million to RMB70.0 million. The
legal procedure and registration in relation to such increase in share capital was completed
on 19 May 2016. After such allotment of shares, th e shareholding of Fujing Agriculture was
as follows:
Name of shareholders
Number of
shares held
Percentage of
shareholding
Zhang Yonggang ( 張永剛) (Mr. Zhang) 59,920,000 85.6%
Li Meiping ( 李美平) 5,670,000 8.1%
Bi Ailing ( 畢愛玲) 3,150,000 4.5%
Zhang Chunyan ( 張春燕) (Ms. Zhang) 630,000 0.9%
Geng Qi ( 耿琦) 630,000 0.9%
Total 70,000,000 100%
On 21 January 2019, the then shareholders of Fujing Agriculture passed a resolution to
approve the voluntary delisting of Fujing Agriculture’s shares from NEEQ (‘‘ NEEQ
Delisting ’’). Fujing Agriculture received regula tory approval for the NEEQ Delisting on 15
May 2019. The NEEQ Delisting took place on 22 May 2019. For further details of the
HISTORY, REORGANISATION AND CORPORATE STRUCTURE
–1 2 6–


--- page 136 ---
NEEQ Delisting, please refer to the paragraph headed ‘‘NEEQ Delisting’’ in this section of
the prospectus. Immediately following the NEEQ Delisting, the then shareholding of Fujing
Agriculture was as follows:
Name of shareholders (Note 1)
Number of
shares held
Approximate
percentage of
shareholding
Zhang Yonggang ( 張永剛) (Mr. Zhang) 48,370,000 69.1%
Li Meiping ( 李美平) 3,193,000 4.6%
Bi Ailing ( 畢愛玲) 2,370,000 3.4%
Geng Qi ( 耿琦) 630,000 0.9%
Zhang Chunyan ( 張春燕) (Ms. Zhang) 472,500 0.7%
Shi Cunqiang ( 史存強) 12,803,500 18.3%
Wu Hongchang ( 吳紅廠) 554,000 0.8%
Ying Jie (應 杰) 312,000 0.4%
Jiang Yuanhao ( 江源浩) 235,000 0.3%
Beijing Yupeng Investment Management Co.,
Ltd. — Yupeng Huali No. 2 Private Equity
Fund* ( 北京宇鵬投資管理有限公司 — 宇鵬華
利二號私募基金) 198,000 0.3%
Yang Changqing ( 楊長青) 170,000 0.2%
Xu Erhua ( 徐二華) 123,000 0.2%
Yang Shichuan ( 楊世傳) 85,000 0.1%
Wu Haijing ( 吳海靜) 76,000 0.1%
Wang Yajun ( 王亞君) 67,000 0.1%
Zhang Guohong ( 張國宏)
 40,000 0.1%
Xu Yongqiang ( 徐勇強) 36,000 0.1%
Chen Wenrui ( 陳文銳) 36,000 0.1%
Ouyang Qiong ( 歐陽瓊) 32,000 Note 2
Tu Guigang ( 屠貴剛) 32,000 Note 2
Song Mingjie ( 宋明杰) 30,000 Note 2
Ye Zhihua ( 葉志華) 27,000 Note 2
Guangzhou Weide Trading Co., Ltd.*
(廣州偉德貿易有限公司) 26,000 Note 2
Gan Jun ( 甘軍) 20,000 Note 2
Luo Kai ( 羅凱) 17,000 Note 2
Ding Yan ( 丁燕) 12,000 Note 2
Wang Qinghua ( 王青華) 11,000 Note 2
Xie Li ( 謝立) 11,000 Note 2
Guangzhou Masuda Digital Technology
Co., Ltd.* ( 廣州馬速達數碼科技有限公司) 11,000 Note 2
Total 70,000,000 100%
HISTORY, REORGANISATION AND CORPORATE STRUCTURE
–1 2 7–


--- page 137 ---
Notes:
1. Except Mr. Zhang, Geng Qi (sister of Ms. Geng Juan who is cohabiting with Mr. Zhang as his
spouse) and Ms. Zhang (sister of Mr. Zhang), all oth er then shareholders of Fujing Agriculture are
Independent Third Parties to the best knowledge of our Directors having made all reasonable
enquiries.
2. The percentage of shareholding in Fujing Agriculture was less than 0.1%.
Upon completion of the Reorganisation, Fujing Agriculture became an indirect
wholly-owned subsidiary of our Company.
Glory Team
On 8 August 2019, Glory Team was incorporated in the BVI as a BVI business
company which is authorised to issue a maximum of 50,000 shares of par value of US$1.00
each. On 5 September 2019, one share in Glor y Team was allotted and issued as fully paid
to our Company at the consideration of US$1. 00. Following such allotment, Glory Team
became a direct wholly-owned subsid iary of our Company on the same day.
Fujing Holdings (HK)
On 9 October 2019, Fujing Holdings (HK) was incorporated in Hong Kong as a
company limited by shares under the Compan ies Ordinance. On the same day, one share in
Fujing Holdings (HK) was allotted and is sued as fully paid to Glory Team at the
consideration of HK$1.00. Following such allotment, Fujing Holdings (HK) became
wholly-owned by Glory Team, and became an indirect wholly-owned subsidiary of our
Company on the same day.
Xinfujing
On 6 May 2020, Xinfujing was established in the PRC as a limited liability company
under the PRC laws with a registered capital of RMB2.0 million. Since its incorporation,
Xinfujing has been a wholly-owned subsidia ry of Fujing Holdings (HK). Upon completion
of the Reorganisation, Xinfujing became an indirect wholly-owned subsidiary of our
Company.
Deregistration of QF Vegetables
QF Vegetables was a limited liability company incorporated in the PRC on 14
September 2011 and had been a wholly-owned subsidiary Fujing Agriculture since its
incorporation. QF Vegetables was origina lly set up for the business of plantation,
preservation, cold storage and inventory storage of agriculture produce. However, as
Fujing Agriculture subsequently commenced its business of cultivation and sales of potted
vegetable produce which did not require cold storage in 2012, Fujing Agriculture ceased to
commence its plan to develop its business in cold storage of agriculture produce. Therefore,
QF Vegetables never commenced its business. Fujing Agriculture also did not engage in the
business of cold storage of agriculture produce since the incorporation of QF Vegetables in
HISTORY, REORGANISATION AND CORPORATE STRUCTURE
–1 2 8–


--- page 138 ---
light of the aforesaid. In order to optimise the governance structure and reduce the
operation costs of Fujing Agriculture, QF Vegetables was duly deregistered on 20 December
2016 as QF Vegetables had never commenced business.
NEEQ DELISTING
Delisting of Fujing Agriculture from NEEQ
On 21 January 2019, the then shareholders o f Fujing Agriculture passed resolutions
approving, among other things, the NEEQ Delisting. Fujing Agriculture applied and
subsequently received regulatory approval on 15 May 2019, for the NEEQ Delisting. The
shares of Fujing Agriculture ceased to be traded on NEEQ on 22 May 2019. Immediately
before delisting from NEEQ, the valuatio n of Fujing Agriculture was estimated at
RMB105,000,000 with the basis on the last tra ding price of RMB1.50 per share and the then
70,000,000 issued shares.
Compliance during listing on NEEQ
As advised by our PRC Legal Advisers based on searches conducted on the official
websites of the NEEQ and CSRC and as confirmed by our Company, Fujing Agriculture
complied with all applicable laws and regulations and the listing rules of NEEQ during its
listing on the NEEQ in all material aspects. Fujing Agriculture and all its then directors or
senior management had not been subject to any investigation or disciplinary action by the
relevant regulators during the period when its shares were quoted on the NEEQ and up to
the NEEQ Delisting. As such, our Directors confirm that (i) there is no matter that might
materially and adversely affect our Company’s suitability for the Listing in relation to the
previous quotation of the shares of Fujing Agriculture on the NEEQ; and (ii) there has not
been any matter that needs to be brought to the attention of the potential investors or the
regulators in Hong Kong in respect of the p revious quotation of shares of Fujing
Agriculture on the NEEQ.
Reasons for the NEEQ Delisting and the Listing on the Stock Exchange
Our Directors are of the view that the NEEQ Delisting and the Listing will be in the
interests of our business development strategies, and would benefit us and our Shareholders
as a whole for the reasons below:
(a) NEEQ is a market in the PRC ope n to qualified investors only;
(b) NEEQ has a low trading volume and low liquidity level, making it difficult to
identify and establish the fair value of Fujing Agriculture to reflect the underlying
quality of our assets and management. Listing on NEEQ also inhibits our ability
to publicly raise funds, in equity or debt, to sustain our business growth, and
execute substantial on-market disposals by shareholders to realise value;
HISTORY, REORGANISATION AND CORPORATE STRUCTURE
–1 2 9–


--- page 139 ---
(c) in contrast, the Stock Exchange, as a lead ing player of the international financial
markets, could offers us a direct access to the international capital markets,
enhance our fund-raising capabilities and channels and broaden our Shareholders
base and accelerate our fund-raising exercise to support our business expansion.
Thus, the Listing will give us a stronger ability to attract new customers, business
partners and strategic investors; as well as greater access to international investors
and global markets;
(d) our Company can better re-allocate and focus the use of our limited financial and
administrative resources on the Listing; and
(e) the Listing would also enable our Company to devise more appealing share
incentive plan, which correlates directly to the performance of our business, which
in turn would help us to attract and motivate the talents needed to support our
rapid growth and enhance our operating efficiency on an ongoing basis. Also, the
Listing will raise our business profile and thus enhance our ability to recruit,
motivate and retain key managem ent personnel for our business.
REORGANISATION
The corporate structure of our Group immediately following the NEEQ Delisting and
before the Reorganisation is shown in the following chart:
Fujing Agriculture
(PRC)
Mr. Zhang Ms. Li
Meiping Ms. Bi Ailing Ms. Zhang Ms. Geng Qi
21.3% 3.4% 4.6% 0.9% 69.1% 0.7%
shareholders
(Note)
Other
Note: ‘‘Other shareholders’’ comprise of 24 sharehol ders who are all Independent Third Parties to the
best knowledge of our Directors hav ing made all reasonable enquiries.
HISTORY, REORGANISATION AND CORPORATE STRUCTURE
–1 3 0–


--- page 140 ---
In preparation for the Listing, our Group underwent a series of reorganisation, details
of which are set out below:
1. Incorporation of offshore holding companies
For the purpose of Reorganisation, the following companies were incorporated in the
B V Ia sB V Ib u s i n e s sc o m p a n i e s :
Name of company
Date of
incorporation
Authorised share
capital Changes of shareholding since incorporation
Wider International 24 May 2019 US$50,000 divided
into 50,000 shares
of US$1.00 each
Upon incorporation, one share in Wider
International was allotted and issued as
fully paid at par to Mr. Zhang, and thus
Wider International became wholly-owned
by Mr. Zhang
Beauty Sources 24 May 2019 US$50,000 divided
into 50,000 shares
of US$1.00 each
Upon incorporation, one share in Beauty
Sources was allotted and issued as fully
paid at par to Ms. Geng Qi, and thus
Beauty Sources became wholly-owned by
Ms. Geng Qi
Vortex Festive 24 May 2019 US$50,000 divided
into 50,000 shares
of US$1.00 each
Upon incorporation, one share in Vortex
Festive was allotted and issued as fully paid
at par to Mr. Li Changbai, and thus Vortex
Festive became wholly-owned by Mr. Li
Changbai
Yuen Sang Tai 24 May 2019 US$50,000 divided
into 50,000 shares
of US$1.00 each
Upon incorporation, one fully paid share in
Yuen Sang Tai was allotted and issued as
fully paid at par to Ms. Geng Qi. As part
of the Reorganisation, on 22 February
2020, Ms. Bi Ailing, a former supervisor of
Fujing Agriculture, acquired the said one
share in Yuen Sang Tai from Ms. Geng Qi
at the consideration of HK$20,000, which
was determined based on arm’s length
negotiation between Ms. Bi Ailing and Ms.
Geng Qi with reference to costs of
incorporation of Yuen Sang Tai. On the
same day, Yuen Sang Tai allotted and
issued 829 shares to Ms. Bi Ailing and 534
shares in aggregate to eight other
individuals, who are all Independent Third
Parties, respectively. After such allotment
of shares, Yuen Sang Tai became owned as
to approximately 60.9% by Ms. Bi Ailing
and 39.1% by eight other individual
shareholders respectively.
HISTORY, REORGANISATION AND CORPORATE STRUCTURE
–1 3 1–


--- page 141 ---
Name of company
Date of
incorporation
Authorised share
capital Changes of shareholding since incorporation
Great Winner 2 January
2020
US$50,000 divided
into 50,000 shares
of US$1.00 each
On 13 February 2020, 3,315 fully paid shares
in Great Winner were allotted and issued as
fully paid at par to Ms. Bi Ailing, and thus
Great Winner became wholly-owned by
M s .B iA i l i n g .A sp a r to ft h e
Reorganisation, and pursuant to a
declaration of trust dated 3 November
2023, Ms. Bi Ailing declared that she held
624 out of the said 3,315 shares in Great
Winner on trust for Mr. Ying Jie ( 應杰),
w h oi sa nI n d e p e n d e n tT h i r dP a r t y .
Caring Plentiful 24 May 2019 US$50,000 divided
into 50,000 shares
of US$1.00 each
Upon incorporation, one share in Caring
Plentiful was allotte d and issued as fully
paid at par to Mr. Cui Wei, and thus
Caring Plentiful became wholly-owned by
Mr. Cui Wei.
Well Resourced 24 May 2019 US$50,000 divided
into 50,000 shares
of US$1.00 each
Upon incorporation, one share in Well
Resourced was allotted and issued as fully
paid at par to Ms. Zhang, and thus Well
Resourced became wholly-owned by Ms.
Zhang.
2. Incorporation of our Company
Our Company was incorporated in the Cayman Islands under the Companies Act as an
exempted company with limited liability on 23 July 2019 with authorised share capital of
US$50,000 divided into 50,000 shares of par value of US$1.00 each. Our Company was
registered as a non-Hong Kong company pursuant to Part 16 of the Companies Ordinance
on 3 March 2020. It shall be the ultimate holding company of our Group upon Listing.
Upon the incorporation of our Company, one share of par value of US$1.00 was allotted
and issued as fully paid to the initial subscrib er, an Independent Third Party, at par, which
was then transferred to Wider International on the same day. Upon the completion of the
above allotment, issue and transfer on 23 July 2019, our Company became a wholly-owned
subsidiary of Wider International.
3. Incorporation of offshore subsidiaries
Glory Team was incorporated in the BVI as a BVI business company on 8 August 2019
with authorised share capital of US$50,000 divided into 50,000 shares of US$1.00 each. On
5 September 2019, one share in Glory Team wa s allotted and issued as fully paid at par to
our Company, after which Glory Team became a direct wholly-owned subsidiary of our
Company.
HISTORY, REORGANISATION AND CORPORATE STRUCTURE
–1 3 2–


--- page 142 ---
On 9 October 2019, Fujing Holdings (HK) was incorporated under the laws of Hong
Kong as a limited liability company. Upon its incorporation, one share in Fujing Holdings
(HK) was allotted and issued as fully paid to Glory Team, after which Fujing Holdings
(HK) became wholly-owned by Glory Team.
4. Pre-IPO investments by Ms. Geng Qi, Mr. Li Changbai and Mr. Cui Wei
On various dates during the period from 18 February 2019 to 18 January 2020, Ms.
Geng Qi made pre-IPO investments in our Group by entering into agreements with Ms. Li
Meiping, Ms. Bi Ailing and other then sharehold ers of Fujing Agriculture respectively to
acquire, in aggregate, 17,313,853 shares in Fujing Agriculture, representing approximately
24.7% of the then total number of issued shares of Fujing Agriculture at the total
consideration of RMB19,956,299.5. The said consideration of the said acquisitions were
fully settled on various dates during the period from 19 June 2019 to 8 June 2020.
O n1D e c e m b e r2 0 1 9 ,M r .L iC h a n g b a i(李長柏) made a pre-IPO investment in our
Group by entering into an agreement with Ms. Geng Qi to acquire from her 3,150,000
shares in Fujing Agriculture, representing a pproximately 4.5% of the then total number of
issued shares of Fujing Agriculture, at the consideration of RMB4,725,000. The said
acquisition was properly and legally completed on 5 March 2020 when the consideration
was fully settled.
Also on 1 December 2019, Mr. Cui Wei, one of our Directors, made pre-IPO
investment in our Group by entering into ag reements with Ms. Geng Qi and Ms. Bi Ailing
respectively, to acquire 1,557,853 and 192,147 shares in Fujing Agriculture, representing
approximately 2.2% and 0.3% of the then total number of issued shares of Fujing
Agriculture, from Ms. Geng Qi and Ms. Bi Ailing at the considerations of RMB2,336,779.5
and RMB288,220.5 respectively. The said trans fers were properly and legally completed on
6 March 2020 and 9 March 2020, respectively.
The following table sets forth other information of the aforesaid pre-IPO investments:
Ms. Geng Qi Mr. Li Changbai Mr. Cui Wei
Date on which the
agreement(s) for the pre-
IPO investment was
entered into
on various dates during
the period from 18
February 2019 to 18
January 2020 (Note 1)
1 December 2019 1 December 2019
Parties to the pre-IPO
investment agreement
Ms. Geng Qi and various
other shareholders of
Fujing Agriculture
(Note 1)
Mr. Li Changbai
and Ms. Geng Qi
(i) Mr. Cui Wei
and Ms. Bi
Ailing; and
(ii) Mr. Cui Wei and
Ms. Geng Qi
Approximate percentage of
shareholding in Fujing
Agriculture upon
completion of pre-IPO
investments
18.9% (Note 2) 4.5% 2.5%
HISTORY, REORGANISATION AND CORPORATE STRUCTURE
–1 3 3–


--- page 143 ---
Ms. Geng Qi Mr. Li Changbai Mr. Cui Wei
Approximate percentage of
shareholding in our
Company upon Listing
(Note 3)
15.0% 3.6% 2.0%
Amount of consideration paid RMB19,956,299.5 in
aggregate (without
taking account the
transfers of 3,150,000
and 1,557,853 shares
from Ms. Geng Qi to
Mr. Li Changbai and
Ms. Cui Wei
respectively) or
RMB12,894,520.0 in
aggregate (after taking
into account the
transfers of 3,150,000
and 1,557,853 shares
from Ms. Geng Qi to
Mr. Li Changbai and
Mr. Cui Wei
respectively)
RMB4,725,000.0 RMB2,625,000.0 in
aggregate
Date(s) on which the
consideration of the pre-
IPO investment was fully
settled
on various dates during
the period from 19 June
2019 to 8 June 2020
5 March 2020 On 6 March 2020
a n d9M a r c h2 0 2 0
Effective cost per share paid
(based on effective
shareholding in our
Company upon the Listing)
HK$0.22 (Note2) HK$0.34 HK$0.34
Effective discount to the mid-
point of indicative Offer
Price range
81.4% 71.3% 71.3%
Use of proceeds from the pre-
IPO Investment
Not applicable Not applicable Not applicable
HISTORY, REORGANISATION AND CORPORATE STRUCTURE
–1 3 4–


--- page 144 ---
Ms. Geng Qi Mr. Li Changbai Mr. Cui Wei
Basis of determining the
consideration
the consideration was
determined based on
arm’s length
negotiation between the
respective parties to the
pre-IPO investment
agreements with
reference to the
historical share prices
of Fujing Agriculture
quoted on NEEQ,
financial position of
Fujing Agriculture at
the time and its
prospects of
development of
business.
the consideration
was determined
based on arm’s
length
negotiation
between the
respective parties
to the pre-IPO
investment
agreement with
reference to the
price of the shares
of Fujing
Agriculture
quoted on NEEQ
immediately prior
to the NEEQ
Delisting.
(Note 4)
the consideration
was determined
based on arm’s
length negotiation
between the
respective parties
to the pre-IPO
investment
agreement with
reference to the
price of the shares
of Fujing
Agriculture
quoted on NEEQ
immediately prior
to the NEEQ
Delisting. (Note 5)
Special rights granted No special right was granted to any of Ms. Geng Qi, Mr. Li Changbai and
Mr. Cui Wei.
Strategic benefits to our
Group
The pre-IPO investors’ investments and commitment in our Group
demonstrated their confidence in our business prospects and growth
potential. With such investments and commitment in our Group, our
Directors believe that we could benef it from (i) the diversified business
connections of the pre-IPO investors; and (ii) the diversified knowledge
and experience of our pre-IPO investors in the way that they could
share with us on their insights accumulated in their respective industry
sectors.
HISTORY, REORGANISATION AND CORPORATE STRUCTURE
–1 3 5–


--- page 145 ---
Ms. Geng Qi Mr. Li Changbai Mr. Cui Wei
Lock-up and public float Ms. Geng Qi is not subject
to any lock-up under
the relevant pre-IPO
investment agreements.
A sM s .G e n gQ ii sa
substantial Shareholder
of our Company and
therefore a core
connected person of our
Company, its
shareholding in our
Company will not be
counted as part of the
public float for the
purpose of Rule 8.08 of
the Listing Rules.
Mr. Li Changbai is
not subject to any
lock-up under the
relevant pre-IPO
investment
agreement. As
Mr. Li Changbai
is not a core
connected person
of our Company
and its investment
in our Group was
not financed
directly or
indirectly by any
core connected
person of our
Company, its
shareholding in
our Company will
be counted as
part of the public
float for the
purpose of Rule
8.08 of the Listing
Rules.
Mr. Cui Wei is not
subject to any
lock-up under the
relevant pre-IPO
investment
agreements. As
M r .C u iW e ii s
one of our
Directors and
therefore a core
connected person
of our Company,
his shareholding
in our Company
will not be
counted as part of
the public float
for the purpose of
Rule 8.08 of the
Listing Rules.
Notes:
(1) Ms. Geng Qi had entered into 17 share transfer agreements with 17 other shareholders of Fujing
Agriculture (who are all Independent Third Parties ) respectively, which were dated on various dates
from 18 February 2019 to 18 January 2020, and the consideration payable pursuant to these share
transfer agreements, which was determined after ar m’s length negotiations between the parties, were
legally and fully settled on various dates on or before 8 June 2020.
(2) The calculation of shareholding in Fujing Agriculture and effective cost per share paid has taken
into account the transfer of 3,150,000 and 1,557,853 shares from Ms. Geng Qi to Mr. Li Changbai
and Mr. Cui Wei, respectively.
(3) Without taking into account any Shares which may be issued upon the exercise of the Over-
allotment Option or any option and/or award w hich may be granted under the Share Scheme.
(4) The share price Mr. Li paid to Ms. Geng is higher than the average share price Ms. Geng acquired
the shares from the 17 other Independent Third Par ty shareholders as Ms. Geng considered that her
shares were acquired through lengthy and effor t-consuming negotiations with the 17 other
shareholders.
(5) The share price Mr. Cui paid to Ms. Geng is highe r than the average share price Ms. Geng acquired
the shares from the 17 other Independent Third Par ty shareholders as Ms. Geng considered that her
shares were acquired through lengthy and effor t-consuming negotiations with the 17 other
shareholders.
HISTORY, REORGANISATION AND CORPORATE STRUCTURE
–1 3 6–


--- page 146 ---
Ms. Geng Qi had been one of the equity owners in Fujing Agriculture since 2010. She is
an entrepreneur and has her own real estate business. Ms. Geng has built up extensive
connections when she was building up her own business. Ms. Geng is also a shareholder in a
company in Qingdao and she participates in the operation of such company which is
principally engaged in the manufacturing of p rimarily-processed peanuts, through which
she has gained experience in the agricultural industry. Since 6 February 2020, she has
become the supervisor of Fujing Agriculture. Save as disclosed herein, Ms. Geng Qi has
never been involved in the management and daily operation of our Group.
We become acquainted with Ms. Geng Qi through Mr. Zhang, our Controlling
Shareholder, as Ms. Geng Qi is the sister of Ms. Geng Juan, who is cohabiting with Mr.
Zhang as his spouse. Ms. Geng Qi decided to invest in our Group because she is optimistic
about the prospects of the potted vegetable produce industry in the PRC.
Between June 2011 and May 2015, Mr. Li Changbai was a chief financial officer of
Fujing Agriculture. Thereafter, he decided to r etire himself from the management of Fujing
Agriculture in order to focus on his family life and thus took up the role of part-time
assistant to the chairman of Fujing Agriculture. Mr. Li was interested in investing in our
Group in light of the potential business prospects and future development of the potted
vegetable produce industry in the PRC, he decided to make investment in our Group by
acquiring 3,150,000 shares (representing approximately 4.5% of the then total number of
issued shares) in Fujing Agricultu re from Ms. Geng Qi on 1 December 2019.
Mr. Cui Wei is one of our executive Directors. He has gained extensive knowledge in
the agricultural industry when he served as an administration assistant for a company which
principally engaged in the production, development and sale of fertilisers before joining our
Group. Mr. Cui has built up extensive social network when he was serving as the secretary
to the board of directors of Fujing Agriculture. For biographical information of Mr. Cui,
please refer to the section headed ‘‘Directors and Senior Management’’ of this prospectus.
Mr. Cui was a director of Fujing Agriculture at the time when he invested in our Group.
Mr. Cui invested in our Group because he is optimistic about the potential growth and
bright prospects of the potted vegetable produce industry in the PRC.
The Sole Sponsor confirms that the pre-IPO investments by each of Ms. Geng Qi, Mr.
Li Changbai and Mr. Cui Wei are in compliance with Chapter 4.2 of the Guide For the New
Listing Applicants issued by the S tock Exchange in December 2023.
Save as disclosed above, to the best of our Directors’ knowledge, information and
belief having made all reasonable enquirie s, Ms. Geng Qi, Mr. Li Changbai and Mr. Cui
Wei did not have any past or present relationsh ips, including without limitation family,
trust, business or employment relationship, or any agreement, arrangement or
understanding with our Company, our subsidiaries, Shareholders, Directors or members
of senior management and any of their respective associates as at the Latest Practicable
Date. To the best of our Directors’ knowled ge, information and belief having made all
reasonable enquires, the Sole Sponsor and other professional parties involved in the Share
Offer (collectively the ‘‘ Professional Parties ’’) and their respective staff members involved in
the Share Offer, have not introduced Ms. Geng Qi, Mr. Li Changbai and/or Mr. Cui Wei, to
HISTORY, REORGANISATION AND CORPORATE STRUCTURE
–1 3 7–


--- page 147 ---
the Company and none of the Professional Partie s has participated in any liaison with Ms.
Geng, Mr. Li and/or Mr. Cui in respect of any matter that would reasonably affect Ms.
Geng, Mr. Li and/or Mr. Cui’s decision of investing in the Group.
The table below sets out the shareholding s tructure of Fujing Agriculture after the
above pre-IPO investments made by Ms. Geng Qi, Mr. Li Changbai and Mr. Cui Wei:
Name of shareholder (Note 1)
Number of
shares held
Approximate
percentage of
shareholding
Zhang Yonggang ( 張永剛) (Mr. Zhang) 48,370,000 69.1%
Geng Qi ( 耿琦) 13,236,000 18.9%
Li Changbai ( 李長柏) 3,150,000 4.5%
Bi Ailing ( 畢愛玲) 2,175,500 3.1%
Cui Wei ( 崔偉) 1,750,000 2.5%
Zhang Chunyuan ( 張春燕) (Ms. Zhang) 472,500 0.7%
Ying Jie (應 杰) 312,000 0.4%
Yang Changqing ( 楊長青) 170,000 0.2%
Xu Erhua ( 徐二華) 123,000 0.2%
Yang Shichuan ( 楊世傳) 85,000 0.1%
Wang Yajun ( 王亞君) 67,000 0.1%
Ouyang Qiong ( 歐陽琼) 32,000 Note 2
Gu Bing ( 顧兵) 26,000 Note 2
Gan Jun ( 甘軍) 20,000 Note 2
Wang Qinghua ( 王青華) 11,000 Note 2
Total 70,000,000 100%
Notes:
1. Except Mr. Zhang, Ms. Geng Qi, Mr. Cui Wei and Ms. Zhang, all other shareholders are
Independent Third Parties to the best knowledg e of our Directors having made all reasonable
enquiries.
2. The percentage of shareholding in Fujing Agriculture was less than 0.1%.
HISTORY, REORGANISATION AND CORPORATE STRUCTURE
–1 3 8–


--- page 148 ---
5. Conversion of Fujing Agriculture into a limited liability company
Pursuant to the shareholders’ resoluti ons passed on 6 February 2020, Fujing
Agriculture was converted from a joint stock company with limited liability into a
limited liability company. The legal procedure for such conversion was completed on 12
February 2020, and the ownership of Fujing Agriculture after such conversion was as
follows:
Name of equity owner
(Note 1)
Capital
contribution
Approximate
percentage of
equity holding
(RMB’000)
Zhang Yonggang ( 張永剛) (Mr. Zhang) 48,370 69.1%
Geng Qi ( 耿琦) 13,236 18.9%
Li Changbai ( 李長柏) 3,150 4.5%
Bi Ailing ( 畢愛玲) (Note 2) 2,175.5 3.1%
Cui Wei ( 崔偉) 1,750 2.5%
Zhang Chunyuan ( 張春燕) (Ms. Zhang) 472.5 0.7%
Ying Jie (應 杰) (Note 2) 312 0.4%
Yang Changqing ( 楊長青) 170 0.2%
Xu Erhua ( 徐二華) 123 0.2%
Yang Shichuan ( 楊世傳)8 5 0.1%
Wang Yajun ( 王亞君)6 7 0.1%
Ouyang Qiong ( 歐陽琼)3 2 Note 3
Gu Bing ( 顧兵)2 6 Note 3
Gan Jun ( 甘軍)2 0 Note 3
Wang Qinghua ( 王青華)1 1 Note 3
Total 70,000 100%
Notes:
1. Except Mr. Zhang, Ms. Geng Qi, Mr. Cui Wei and Ms. Zhang, all other equity owners are
Independent Third Parties to the best knowledg e of our Directors having made all reasonable
enquiries.
2. Since the NEEQ Delisting, we have been unable to contact Mr. Ying Jie, who held 312,000 shares in
Fujing Agriculture as at date of the NEEQ Delisting, despite our management having taken all
reasonable steps to reach him. For the purpose of the Reorganisation, pursuant to the resolutions
passed in the shareholders’ meeting of Fujing Agr iculture held on 6 February 2020, Ms. Bi Ailing
was registered as having made contribution of RM B2,487,500 to Fujing Agriculture, which in
substance represents RMB2,17 5,500 contributed by Ms. Bi Ailin g and RMB312,000 contributed by
Mr. Ying Jie. In this connection, Ms. Bi Ailing m ade a declaration of trust on 3 November 2023
whereby she declared that she held 624 out of the 3,315 shares in Great Winner, one of our corporate
Shareholders after the Reorganisation, on trust for Mr. Ying Jie to represent his interest in Fujing
Agriculture. Ms. Bi Ailing has also confirmed in w riting that she will procure Great Winner to
transfer the corresponding portion of the Shares i t holds to Mr. Ying Jie if Mr. Ying Jie elects to
hold the Shares and enters into a written agreement with Ms. Bi Ailing. Our PRC Legal Advisers are
HISTORY, REORGANISATION AND CORPORATE STRUCTURE
–1 3 9–


--- page 149 ---
of the view that the aforesaid arrangement would not (i) affect the legality and validity of the
Reorganisation; (ii) cause any material adverse effect to the Reorganisation; and (iii) would not
incur any liability on the part of our Group , under the PRC laws and regulations.
3. The percentage of shareholding in Fujing Agriculture was less than 0.1%.
6. Pre-IPO investment by Mr. Xie Xing and conversion of Fujing Agriculture into a sino-
foreign equity joint venture enterprise
On 12 March 2020, Mr. Xie Xing ( 謝星), an Independent Third Party, through
Prosperity Plentiful (HK) made a pre-IPO investment in our Group by entering into a
capital injection agreement with Fujing Agriculture, whereby Prosperity Plentiful (HK)
agreed to contribute registered capital to Fujing Agriculture in the amount of RMB707,080,
representing approximately 1.0% of its enlarged registered capital, at the consideration of
RMB1,767,700. As a result, the registered capital of Fujing Agriculture increased from
RMB70,000,000 to RMB70,707,080, and Fujing Agriculture became a sino-foreign equity
joint venture enterprise. As advised by our PRC Legal Advisers, the transaction
contemplated under the said capital injection agreement has been conducted in
compliance with applicable PRC laws and re gulations and has been legally completed
and duly registered with the relevant authorities of the PRC on 13 March 2020.
Details of the pre-IPO investment by Mr. Xie Xing are as follow:
Date on which the agreement(s)
for the pre-IPO investment
was entered into
12 March 2020
Parties to the pre-IPO
investment agreement
Prosperity Plentiful (HK) and Fujing Agriculture
Approximate percentage of
shareholding in Fujing
Agriculture upon completion
of pre-IPO investment
1.0%
Approximate percentage of
shareholding in our Company
upon Listing
(Note)
0.80%
Amount of consideration paid RMB1,767,700
Date(s) on which the
consideration of the pre-IPO
investment was fully settled
27 May 2020
Effective cost per share paid
(based on effective
shareholding)
HK$0.56
HISTORY, REORGANISATION AND CORPORATE STRUCTURE
–1 4 0–


--- page 150 ---
Effective discount to the mid-
point of indicative Offer Price
range
52.2%
Use of proceeds from the pre-
IPO Investment
General working capital and the proceeds were all
utilised.
Strategic benefits to our Group Our Directors are of the view that our Group could
benefit from the additional capital provided by
investment by Prosperity Plentiful (HK) and
knowledge and experience of Mr. Xie Xing. The
investment from Mr. Xie has improved our
liquidity and is an essential step to complete the
Reorganisation.
Basis of determining the
consideration
The consideration was determined based on arm’s
length negotiation between Mr. Xie Xing and our
Group with reference to the net asset value as
a p p r a i s e db ya nI n d e p e n d e n tT h i r dP a r t yv a l u e r .
The effective cost of Mr. Xie is different from that
of Ms. Geng Qi, Mr. Li Changbai and Mr. Cui Wei
as Mr. Xie made direct investment in our Group
and negotiated directly with our Controlling
S h a r e h o l d e r sw h i l eM s .G e n g ,M r .L ia n dM r .
Cui’s investments were purchased among other
shareholders of Fujing Agriculture and negotiated
separately in the absence of our Controlling
Shareholders.
Special rights granted No special right was granted to Prosperity Plentiful
(HK).
Lock-up and public float Mr. Xie Xing is not subject to any lock-up under the
relevant pre-IPO investment agreement. As Mr.
Xie Xing is not a core connected person of our
Company and his investment in our Group was not
financed directly or indirectly by any core
connected person of our Company, his
shareholding in our Company will be counted as
part of the public float for the purpose of Rule
8.08 of the Listing Rules.
Note: Without taking into account any Shares which ma y be issued upon exercise of the Over-allotment
Option or any option and/or award which may be granted under the Share Scheme.
Prosperity Plentiful (HK) is a company with limited liability incorporated in Hong
Kong on 6 June 2019. Through Prosperity Plentiful (BVI), Mr. Xie Xing was the ultimate
sole shareholder of Prosperity Plentiful (HK) at the time of making the pre-IPO investment.
HISTORY, REORGANISATION AND CORPORATE STRUCTURE
–1 4 1–


--- page 151 ---
Mr. Xie Xing has worked in the accounting and financial field for over 17 years. He
has been a member of the Hong Kong Institute of Certified Public Accountants since May
2011 and has held management positions in various companies before investing in our
Group. He currently acts as the chief financial officer of Zeta Capital (H.K.) Limited, a
licensed corporation to carry out Type 4 (advising on securities) and Type 9 (asset
management) regulated activities under the SFO and the responsible officer of Zeta Capital
(H.K.) Limited for Type 9 (asset management) regulated activities under the SFO. We
became acquainted with Mr. Xie through Mr. Zhang, our Controlling Shareholder at a
social event. Mr. Xie has never been involved in the management and daily operation of our
Group.
Mr. Xie Xing decided to invest in our Group because he is confident in the prospects
and development of the potted vegetable produce industry in the PRC.
The Sole Sponsor confirms that the investment by Mr. Xie Xing through Prosperity
Plentiful (HK) is in compliance with Chapter 4.2 of the Guide of the New Listing
Applicants issued by the Stock Exchange in December 2023.
Save for the Pre-IPO investment stipulated above, to the best of our Directors’
knowledge, information and belief having made all reasonable enquiries, Mr. Xie Xing did
not have any past or present relationships, including without limitation family, trust,
business or employment relationship, or any agreement, arrangement or understanding with
our Company, our subsidiaries, Shareholders, Directors or members of senior management
and any of their respective associates as at the Latest Practicable Date. To the best of our
Directors’ knowledge, information and belief having made all reasonable enquires, the
Professional Parties and their respective staff members involved in the Share Offer, have not
introduced Mr. Xie Xing to the Company and none of the Professional Parties has
participated in any liaison with Mr. Xie in r e s p e c to fa n ym a t t e rt h a tw o u l dr e a s o n a b l y
affect Mr. Xie’s decision of investing in the Group.
7. Subdivision of share capital of our Company and allotment of Shares to offshore holding
companies
Pursuant to the resolutions of the then Shareholders passed on 24 March 2020, the
authorised share capital of our Company was sub-divided from US$50,000.00 divided into
50,000 Shares of a par value of US$1.00 each to US$50,000.00 divided into 5,000,000 Shares
of a nominal value of US$0.01 each. Accordingly, the one Share held by Wider
International was sub-divided into 100 Shares of a par value of US$0.01 each. On the
same day, our Company allotted and issued (i) 96,640, (ii) 26,4 72, (iii) 6,300, (iv) 3,500, (v)
3,315, (vi) 2,728 and (vii) 945 Shares as fully paid at par to (i) Wider International, (ii)
Beauty Sources, (iii) Vortex Festive, (iv) Cari ng Plentiful, (v) Great Winner, (vi) Yuen Sang
Tai and (vii) Well Resourced respectively. A fter such allotment and issuance of Shares, the
HISTORY, REORGANISATION AND CORPORATE STRUCTURE
–1 4 2–


--- page 152 ---
shareholding of our Company was as follows:
Name of shareholder
Number of
shares held
Approximate
percentage of
shareholding
Wider International 96,740 69.1%
Beauty Sources 26,472 18.9%
Vortex Festive 6,300 4.5%
Caring Plentiful 3,500 2.5%
Great Winner (Note 1) 3,315 2.4%
Yuen Sang Tai (Note 2) 2,728 1.9%
Well Resourced 945 0.7%
Total 140,000 (Note 3) 100%
Notes:
1. Pursuant to a declaration of trust dated 3 Nove mber 2023, Ms. Bi Ailing declared that she held 624
out of the 3,315 shares in Great Winner on trust for Mr. Ying Jie, who is an Independent Third
Party.
2. Among the entire issued share capital of Yuen Sang Tai, 830 shares of Yuen Sang Tai were owned by
Ms. Bi Aliling and 534 shares of Yuen Sang Tai w ere owned by eight individuals, namely (i) Yang
Changqing; (ii) Xu Erhua; (iii) Yang Shichuan; (i v) Wang Yajun; (v) Ouyang Qiong; (vi) Gu Bing;
(vii) Gan Jun; and (viii) Wang Qinghua, who were the shareholders of Fujing Agriculture
immediately upon the completion of step 5 of Reorganisation. To the best knowledge of our
Directors, such eight individuals are Independent T hird Parties. RMB534,000 contributed by those
eight individuals were represented by 534 shares of Yuen Sang Tai owned by the same group of
persons in a ratio of RMB1,000 to one share in Yuen Sang Tai.
3. Immediately after the aforesaid allotment and issuance of Shares on 24 March 2020, there were
140,000 Shares, in view of the registered capital of Fujing Agriculture immediately before the pre-
IPO investment by Mr. Xie Xing, the overall conversion ratio was RMB500 for each Share.
8. Incorporation of Xinfujing
Xinfujing was established on 6 May 2020 as a limited liability company under the PRC
laws with a registered capital of RMB2.0 mill ion. Since its incorporation, Xinfujing has
been a direct wholly-owned subs idiary of Fujing Holdings (HK).
9. Acquisition of equity interest of Fujing Agriculture by Xinfujing
Pursuant to the respective equity transfer a greements entered into by the then equity
owners of Fujing Agriculture (excluding Prosperity Plentiful (HK)) and Xinfujing on 27
June 2020 Xinfujing agreed to acquire approximately 99% of the entire equity interest in
Fujing Agriculture at the total considerat ion of RMB70,000,000, which were determined
b a s e do nt h e i rr e s p e c t i v ec o n t r i b u t i o nt or e g i s t e r e dc a p i t a l .U p o nt h es e t t l e m e n to fs u c h
consideration and the completion of the ab ove acquisition on 24 December 2020, Fujing
Agriculture became owned as to approximately 99% by Xinfujing and approximately 1%
by Prosperity Plentiful (HK).
HISTORY, REORGANISATION AND CORPORATE STRUCTURE
–1 4 3–


--- page 153 ---
10. Acquisition of entire share capital of Prosperity Plentiful (BVI) by our Company
Pursuant to an agreement dated 8 February 2021 entered into between our Company
and Mr. Xie Xing, our Company acquired the entire issued share capital of Prosperity
Plentiful (BVI) from Mr. Xie, in exchange of which, our Company allotted and issued 1,414
Shares, representing approximately 1% of the enlarged share capital of our Company, to
Mr. Xie. Following such transfers of shares, Prosperity Plentiful (BVI) became a direct
wholly-owned subsidiary of our Company and Mr. Xie became a Shareholder of our
Company.
Corporate Structure immediately upon the completion of the Reorganisation
The chart below illustrates the shareholding structure of our Group immediately after
the Reorganisation but before the completion of the Capitalisation Issue and Share Offer:
100%
Mr. Zhang Ms. Geng Qi Mr. Li
Changbai Mr. Cui Wei Ms. Bi Ailing(Note 1)
Wider
International
(BVI)
Beauty
Sources
(BVI)
V ortex Festive
(BVI)
Caring
Plentiful
(BVI)
Yuen Sang Tai
(BVI)
Well
Resourced
(BVI)
68.41% 18.72% 4.46% 2.48% 0.67% 2.34% 1.93% 1.00%
100% 100% 100% 100% 100%
Ms. Bi Ailing
and other
shareholders(Note 2)
Great Winner
(BVI)
Ms. Zhang
100%
Mr. Xie Xing
Our Company
(Cayman Islands)
Glory Team
(BVI)
Xinfujing
(PRC)
Fujing Agriculture
(PRC)
Offshore
Onshore
100%
99.00%
100%
Prosperity Plentiful (BVI)
(BVI)
Prosperity Plentiful (HK)
(HK)
100%
100%
100%
100%
1.00%
Fujing Holdings (HK)
(HK)
Notes:
1. Pursuant to a declaration of trust dated 3 Nove mber 2023, Ms. Bi Ailing declared that she held 624
shares in Great Winner on trust for Mr. Ying Jie. Ms. Bi Ailing has also confirmed in writing that
she will procure Great Winner to transfer the co rresponding portion of the Shares it holds to Mr.
Ying Jie if Mr. Ying Jie elects to hold the Shares a nd enters into a written agreement with Ms. Bi
Ailing.
HISTORY, REORGANISATION AND CORPORATE STRUCTURE
–1 4 4–


--- page 154 ---
2. ‘‘Other shareholders’’ comprise of Yang Changqing ( 楊長青), Xu Erhua ( 徐二華), Yang Shichuan
(楊世傳), Wang Yajun ( 王亞君), Ouyang Qiong ( 歐陽琼), Gu Bing ( 顧兵), Gan Jun (甘 軍) and Wang
Qinghua ( 王青華) who are the same group of persons under ‘‘other shareholders’’ as set out above
under step 5 of the Reorganisation. Save as disclosed above, to the best knowledge of our Directors
having made all reasonable enquiri es, such persons are (i) are all I ndependent Third Parties; (ii) are
independent from each other; and (iii) did not h ave any past or present relationships (including
business, employment, family, trust or financing relationships) with our Company or any of our
subsidiaries, Shareholders, Directors, or senior management or any of their respective associates.
As confirmed by our Directors, our Group does not have any outstanding share
options, warrants, convertible instruments, pre-IPO share option or similar rights
convertible into our Shares as at the Latest Practicable Date.
POST-REORGANISATION
Increase of authorised share capital
Pursuant to the resolutions of the Share holders passed on 16 November 2023, the
authorised share capital of our Company w as increased from US$50,000 divided into
5,000,000 Shares of par value of US$0.01 each to US100,000,000 divided into 10,000,000
Shares of US$0.01 each by the creation of an additional 9,995,000,000 Shares of par value
US$0.01 each.
CAPITALISATION ISSUE AND SHARE OFFER
Capitalisation Issue
Pursuant to the written resolutions of our Shareholders passed on 11 March 2024,
conditional upon the fulfillment or waiver of the conditions set out in the section headed
‘‘Structure and Conditions of the Share Offer’’ in this prospectus and subject to the share
premium account of our Company being credited as a result of the issue of the new Shares
under the Share Offer, our Directors are author ised to allot and issue a total of 399,858,586
Shares credited as fully paid at par to our Shareholders whose names appear on the register
of members of our Company at the close of business on 11 March 2024 in proportion to
their respective shareholdings by way of capitalisation of an amount of US$3,998,585.86
standing to the credit of the share premium account of our Company.
Share Offer
The Share Offer comprises the Placing and t he Public Offer, involving the issue of a
total of 100,000,000 Shares. Under the Placing, 90,000,000 Shares, representing
approximately 18.0% of the enlarged issued share capital of our Company upon Listing
will be issued and placed. Under the Public Of fer, 10,000,000 Shares, representing
approximately 2.0% of the enlarged issued share capital of our Company upon Listing, will
be offered for subscription by members of the public in Hong Kong.
HISTORY, REORGANISATION AND CORPORATE STRUCTURE
–1 4 5–


--- page 155 ---
Corporate Structure immediately after the completion of the Capitalisation Issue and Share
Offer
The chart below sets out the shareholding structure of our Group immediately after the
Reorganisation and the completion of the Capitalisation Issue and Share Offer (without
taking into account any Shares of our Company which may be issued upon the exercise of
the Over-allotment Option or any option and/or award which may be granted under the
Share Scheme):
100%100% 100% 100% 100% 100% 100%
Offshore
Onshore
100%
99.00%
100%
100%
100%
100%
100%
1.00%
Mr. Zhang Ms. Geng Qi Mr. Li
Changbai Mr. Cui Wei Ms. Zhang Mr. Xie Xing Public
shareholders
Ms. Bi Ailing
and other
shareholders(Note 2)
Ms. Bi Ailing(Note 1)
Wider
International
(BVI)
Beauty
Sources
(BVI)
V ortex Festive
(BVI)
Caring
Plentiful
(BVI)
Yuen Sang Tai
(BVI)
Well
Resourced
(BVI)
Great Winner
(BVI)
Our Company
(Cayman Islands)
Glory Team
(BVI)
Xinfujing
(PRC)
Fujing Agriculture
(PRC)
Prosperity Plentiful (BVI)
(BVI)
Prosperity Plentiful (HK)
(HK)
Fujing Holdings (HK)
(HK)
54.73% 14.98% 3.56% 1.98% 0.53% 1.88% 1.54% 0.80% 20.00%
Notes:
1. Pursuant to a declaration of trust dated 3 Nove mber 2023, Ms. Bi Ailing declared that she held 624
shares in Great Winner on trust for Mr. Ying Jie. Ms. Bi Ailing has also confirmed in writing that
she will procure Great Winner to transfer the co rresponding portion of the Shares it holds to Mr.
Ying Jie if Mr. Ying Jie elects to hold the Shares a nd enters into a written agreement with Ms. Bi
Ailing.
2. ‘‘Other shareholders’’ comprise of eight indivi dual shareholders who are the same group of persons
under ‘‘other shareholders’’ as set out above i n the paragraph headed ‘‘Corporate Structure
immediately upon the completion of the Reorgan isation’’ in this section of the prospectus.
HISTORY, REORGANISATION AND CORPORATE STRUCTURE
–1 4 6–


--- page 156 ---
SHARE SCHEME
We have conditionally adopted the Share Scheme, summary of the principal terms of
which are summarised in the paragraph head ed ‘‘D. Share Scheme’’ in Appendix VI to this
prospectus. The Company will comply with Chapter 14A of, and other applicable rules
under the Listing Rules, for Shares to be issued to connected persons under the Share
Scheme after Listing.
PRC REGULATORY REQUIREMENTS
The Rules on the Mergers and Acquisition of Domestic Enterprises by Foreign Investors in the
PRC
A c c o r d i n gt ot h eR u l e so nt h eM e r g e ra n dAcquisition of Domestic Enterprises by
Foreign Investors in the PRC ( 關於外國投資者併購境內企業的規定) (the ‘‘PRC Regulations
on Merger and Acquisition ’’) jointly issued by the authorities in the PRC on 8 August 2006
a n dw a sr e v i s e do n2 2J u n e2 0 0 9 ,af o r e i g ni n v e s t o ri sr e q u i r e dt oo b t a i nn e c e s s a r y
approvals when it (i) acquires the equity of a domestic enterprise so as to convert the
domestic enterprise into a foreign-invested enterprise; (ii) subscribes the increased capital of
a domestic enterprise so as to convert the dom estic enterprise into a foreign-invested
enterprise; (iii) establishes a foreign-invest ed enterprise through which it purchases the
assets of a domestic enterprise and operates these assets; or (iv) purchases the assets of a
domestic enterprise, and then invests such asse ts to establish a foreign invested enterprise.
According to Article 11 of the PRC Regulations on Merger and Acquisition, the
merger and acquisition of a domestic company with a related party relationship by a
domestic company, enterp rise or individual in the name of an overseas company
legitimately incorporated or controlled by the domestic company, enterprise or individual
shall be subject to examination and approval by the Ministry of Commerce of the PRC ( 中
華人民共和國商務部). The parties involved shall not us e domestic investment by foreign
invested enterprises or other methods to circu mvent the aforesaid requirements. Pursuant to
the Manual of Guidance on Administration for Foreign Investment Access (2008 edition)
(外商投資准入管理指引手冊（2008年 版）), the transfer of equity interest from Chinese
parties to foreign parties in existing foreign-invested enterprises does not refer to the
PRC Regulations on Merger and Acquisition, regardless of whether there is any affiliated
relationship between the Chinese and foreign parties, and whether the foreign party is the
original shareholder or new investor; the subject of merger and acquisition only includes
domestic enterprises.
As advised by our PRC Legal Advisers, the PRC Regulations on Merger and
Acquisition are not applicable to the acquisition by Xinfujing of the equity interest of
Fujing Agriculture, which was then a sino-foreign equity joint venture enterprise.
Accordingly, the approval by CSRC or M inistry of Commerce of the PRC was not
required under the PRC Regulations on Merger and Acquisition.
HISTORY, REORGANISATION AND CORPORATE STRUCTURE
–1 4 7–


--- page 157 ---
Circular 37 and ODI Rules
Pursuant to the Circular 37 promulgated by the SAFE, a PRC resident must register
with the local SAFE branch before he or she contributes assets or equity interests in an
overseas special purpose vehicle that is direc tly established or indirectly controlled by the
PRC resident for the purpose of conducting investment or financing.
Pursuant to the Notice of the SAFE on Further Simplifying and Improving Policies for
the Foreign Exchange Administration of Direct Investment ( 國家外匯管理局關於進一步簡
化和改進直接投資外匯管理政策的通知) (the ‘‘ Circular 13 ’’), promulgated by the SAFE
which became effective on 1 June, 2015 the power to accept SAFE registration was
delegated from local SAFE to local banks where t he assets or interest in the domestic entity
was located.
Pursuant to the Administrative Measures for the Outbound Investment of Enterprises
(企業境外投資管理辦法) and the Measures on the Administration of Overseas Investments
(境外投資管理辦法) (collectively, the ‘‘ ODI Rules ’’), promulgated by the National
Development and Reform Commission and the Ministry of Commerce respectively, a
domestic institution shall un dergo approval or record-filin g or other procedure with the
relevant authorities prior to its overseas inve stment in accordance with the provisions of the
ODI Rules.
PRC Legal Compliance
Our PRC Legal Advisers confirm that all relevant approvals and permits (where
applicable) required under the PRC laws and regulations in respect of the Reorganisation as
described above have been obtained and the procedures and steps involved are in
compliance with relevant P RC laws and regulations.
Our PRC Legal Advisers further advise that our ultimate PRC individual shareholders
(as PRC residents as defined under the applicable provisions under SAFE Circular 37 and
Circular 13) who were required to undergo registration have completed the registration as
at the Latest Practicable Date.
HISTORY, REORGANISATION AND CORPORATE STRUCTURE
–1 4 8–


--- page 158 ---
OVERVIEW
We are the largest producer of potted vegetable produce in Shandong province, with a
market share of 14.8% in terms of sales revenue in Shandong province in 2022. With a sales
revenue of RMB126.7 million, ou r Group accounted for approxim ately 3.1% of total sales
revenue of potted vegetable producers and less than 0.01% of total sales revenue of
vegetable producers in China in 2022. During the Track Record Period, our products were
marketed under our brand ‘‘ 富景農業’’, and included 29 potted vegetable produce species.
In 2022, Shandong province, the largest potted vegetable producing province in the
PRC contributed approximately 20.3% and 1 9.0% in terms of the total sales volume and
the total sales revenue of potted vegetable produce of the PRC, respectively. China’s
vegetable produce market and potted vegetable produce market are both highly fragmented
with around one million to two million veget able producers and thousands of potted
vegetable producers, respectively. Total s ales revenue of potted vegetable produce
accounted for less than 0.1% of total sales revenue of vegetable produce in China in 2022.
We are one of the potted vegetable producers in Shandong province of the PRC which
started large scale production of potted vegetable produce with an annual production
capacity of more than one million pots in 2016. Our business of cultivation and sales of
potted vegetable produce commenced in 2012 in Laixi, Qingdao, Shandong province, and
we have since grown into a major potted vegetable producer in the PRC. For ensuring the
quality and to meet the relevant safety requirements, all of our potted vegetable produce are
grown in greenhouses in our cultivation facilities, and we do not purchase potted vegetable
produce from other producers. As at the Latest Practicable Date, we had been accredited
with Certificate of Pollution-free Agricultural Products* ( 無公害農產品證書) issued by
Qingdao Agricultural Rural Bureau* ( 青島市農業農村局) in respect of the potted vegetable
produce cultivated at our Laixi Facility. We had also been awarded various awards and
certifications for recognition such as Qingdao Green Vegetable Garden* ( 青島市綠色菜園)
in 2018 by Qingdao Agriculture Commission* (青 島市農業委員會) and Qingdao Municipal
Vegetable Base* (青 島市市控蔬菜基地) in 2014 by Bureau of Commerce, Qingdao ( 青島市
商務局).
In recognition of our technical and qualit y control capabilities, we were selected by
Qingdao Association of Standardisation ( 青島市標準化協會) in 2019 to be involved in the
development of the industry standard for the industrial cultivation of potted vegetable
produce in the PRC together wi th the Laixi Potted Vegetable Cultivation Association* ( 萊
西市盤菜種植協會),
Qingdao Fugeng Agricultural Machinery Professional Cooperative*
(青島富耕農機專業合作社) and Qingdao Institute of Technology and Standards* ( 青島市技
術標準科學研究所).
With Shandong province as our primary geographical market, we extended our
geographical coverage by commencing sales of our potted vegetable produce in Xi’an,
Shaanxi province and Dalian, Liaoning pr ovince in 2019. During FY2020, we further
expanded our Laixi Facility by a total site are a of approximately 90,000 sq.m. We sell our
potted vegetable produce primarily through a network of distributors in the PRC which
then on-sell our products to end-user customers in Shandong, Liaoning and Shaanxi
BUSINESS
–1 4 9–


--- page 159 ---
provinces in the PRC, the majority of which are hotels and restaurants. These hotels and
restaurants end-user customers sell both trad itional vegetable produce and potted vegetable
produce. However, majority of the potted vegetable produce sold by them was supplied by
us.
We combine the use of greenhouses, in-pot cultivation know-how, the use of single use
substrates and industrialised production, ther eby achieving a stable, all-season cultivation
environment unaffected by the negative effects of continuous cropping, and enabling us to
cultivate a wide range of vegetable species (inclu ding those cold-sensitive species) all-year-
round with up to 14 yields per annum.
As a potted vegetable producer, we are at the upstream of the value chain of the potted
vegetable market. Due to the labour intensive nature of cultivation of agricultural products,
we engage subcontractors to handle simple labour work in the cultivation process under our
day-to-day management and supervision. Our employees perform the key processes
including monitoring and/or adjusting environment parameters such as temperature,
humidity, carbon dioxide density and illumi nation duration inside our greenhouses,
monitoring vegetable’s growth progress and performing quality control of our potted
vegetable produce. Our subcontractors, which engage in labour subcontracting services and
provide labour services to various businesses in a wide range of industries, have no specific
knowledge on maintaining greenhouses, performing quality control, monitoring vegetable’s
growth progress and developing and formulating organic substrates for potted vegetable
produce.
BUSINESS
–1 5 0–


--- page 160 ---
The following table sets forth a breakdown of our revenue, sales volume and average selling price by our geographical location
and cultivation facilities during the Track Record Period:
Year ended 31 December Nine months ended 30 September
2020 2021 2022 2022 2023
Revenue
% of total
revenue
Sales
volume
Average
selling price Revenue
% of total
revenue
Sales
volume
Average
selling price Revenue
%o ft o t a l
revenue
Sales
volume
Average
selling price Revenue
% of total
revenue
Sales
volume
Average
selling price Revenue
%o ft o t a l
revenue
Sales
volume
Average
selling price
RMB’000 (’000 pots) (RMB) RMB’000 (’000 pots) (RMB) RMB’000 (’000 pots) (RMB) RMB’000 (’000 pots) (RMB) RMB’000 (’000 pots) (RMB)
(Note) (Note) (Note) (unaudited) (unaudited) (Note) (Note)
Shandong province
Laixi Facility 105,737 87.1 7,045 15.0 141,291 91.2 9,419 15.0 114,468 90.3 7,631 15.0 80,127 90.4 5,342 15.0 111,058 91.6 7,404 15.0
Shaanxi province
Xi’an Facility 8,704 7.2 543 16.0 6,206 4.0 388 16.0 5,316 4.2 332 16.0 3,932 4.4 246 16.0 4,517 3.7 282 16.0
Liaoning province
Dalian Facility 6,964 5.7 434 16.0 7,449 4.8 466 16.0 6,910 5.5 432 16.0 4,567 5.2 285 16.0 5,719 4.7 358 16.0
Total/overall 121,405 100.0 8,022 15.1 154,946 100.0 10,273 15.1 126,6 94 100.0 8,395 15.1 88,626 100.0 5,873 15.1 121,294 100.0 8,044 15.1
Note: Average selling price represents total revenue divided by sales volume for the respective period.
BUSINESS
–1 5 1–


--- page 161 ---
Throughout FY2020, FY2021 , FY2022 and 9M2023, our average selling price per pot
of our potted vegetable produce remained unchanged at RMB15.1. In general, the selling
price of vegetable products in the general wholesale market are affected by various factors
such as seasonal variations, cultivation volume and market conditions, resulting in unstable
prices with significant fluctuations. Howe ver, unlike the general wholesale market for
vegetable products with a vast number of different producers and purchasers, we maintain
long-term relationships with our 12 distributo rs, which maintain stable relationships with
our end-user customers. Any price volatilit y of our potted vegetable produce poses many
uncertainties for customers, particularly hotels and restaurants, in terms of cost control and
operational management. Besides, the COVID-19 epidemic lasted from 2020 to 2022, which
created uncertainties over the market and bu siness environment. Accordingly, the Group
decided to maintain a stable selling price of ou r products during the Track Record Period in
order to maintain a long-term relationship w ith our distributors. However, we will review
the selling price of our products to our distributors from time to time and consider
adjusting the selling price if necessary.
The following table sets forth a breakdown of our revenue by sales channels during the
Track Record Period:
Year ended 31 December Nine months ended 30 September
2020 2021 2022 2022 2023
RMB’000
%o ft o t a l
revenue RMB’000
% of total
revenue RMB’000
% of total
revenue RMB’000
% of total
revenue RMB’000
% of total
revenue
(unaudited)
Sales to distributors 121,028 99.7 154,937 100.0 126,692 100.0 88,624 100.0 121,292 100.0
Direct sales to end-user customers
(Note) 377 0.3 9 —* 2 —* 2 —* 2 —*
Total 121,405 100.0 154,946 100.0 126,694 100.0 88,626 100.0 121,294 100.0
Note: Total revenue attributable to direct sales to end-user customers in each of FY2020, FY2021,
FY2022 and 9M2023 includes revenue attributable to the online sales to end-user customers of
approximately RMB8,000, RMB9,000, RMB 2,000 and RMB2,000, respectively.
* represents percentage ratio of less than 0.1%.
As our potted vegetable produce is sold to our customers in pots while still fresh and
living, it allows our potted vegetable produc e to continue to grow and maintain a longer
period of freshness after deliver y from our cultivation facilities.
We apply an industrial cultivation method to produce our potted vegetable produce.
Such cultivation method requires the use of enclosed greenhouses together with the
application of our horticultural know-how and equipment in connection with pest control,
heat preservation, ventilation and/or shading of sunlight to adjust parameters such as
temperature, humidity, illumination duration and carbon dioxide density during the
cultivation process in our greenhouses in order to create an appropriate and ideal
microclimate environment for the growth of our potted vegetable produce. Given that our
products are potted vegetable produce which are perishable in nature, we strategically
targeted to sell our potted vegetable produce t o end-user customers in major cities who are
geographically proximate to our cultivation facilities in order to shorten delivery time and
BUSINESS
–1 5 2–


--- page 162 ---
maintain a high level of freshness of our products when they reach the end-user customers.
As at the Latest Practicable Date, we had 140 greenhouses located in three cultivation
facilities for cultivating our potted vegetable produce. The following table sets forth the
number of greenhouses and their respective approximate total gross floor area by location
as at 1 January 2020, 31 December 2020, 31 December 2021, 31 December 2022, 30
September 2023 and the Latest Practicable Date:
As at
1 January 2020
As at
31 December 2020
As at
31 December 2021
As at
31 December 2022
As at
30 September 2023
As at the
Latest Practicable Date
Number of
greenhouses
Approx.
total gross
floor area
Number of
greenhouses
Approx.
total gross
floor area
Number of
greenhouses
Approx.
total gross
floor area
Number of
greenhouses
Approx.
total gross
floor area
Number of
greenhouses
Approx.
total gross
floor area
Number of
greenhouses
Approx.
total gross
floor area
(sq.m.) (sq.m.) (sq.m.) (sq.m.) (sq.m.) (sq.m.)
Qingdao, Shandong
Province 67 72,001 107 139,134 107 139,134 104 136,801 104 136,801 104 136,801
Xi’an, Shaanxi
Province 10 10,000 10 10,000 7 7,000 7 7,000 7 7,000 7 7,000
Dalian, Liaoning
Province 15 6,000 29 11,600 29 11,600 29 11,600 29 11,600 29 11,600
Total 92 88,001 146 160,734 143 157,734 140 155,401 140 155,401 140 155,401
Our technical department personnel have engaged in testing of cultivation methods
and techniques for the refinement of our current cultivation methods and techniques and
the optimisation of species selection for our new products.
We have achieved a solid track record of growth in revenue and profit, save for
FY2022 and 9M2022 when our results were temporarily and adversely affected by COVID-
19 epidemic which seriously affected our Sha ndong province and Dalian markets during the
period. In FY2020, FY2021, FY2022, 9M2022 and 9M2023, we recorded a total revenue of
approximately RMB121.4 million, RMB154 .9 million, RMB126.7 million, RMB88.6
million and RMB121.3 million, respectivel y, while our net profit in FY2020, FY2021,
FY2022, 9M2022 and 9M2023 was approximately RMB43.8 million, RMB47.3 million,
RMB31.8 million, RMB19.7 million and RMB41.1 million, respectively.
OUR COMPETITIVE STRENGTHS
We believe that the following competitiv e strengths have allowed us to achieve
sustainable growth and profitability and maintain our leading position a nd competitiveness
in the potted vegetable produce industry:
Leading position in the potted vegetable produce industry in Shandong province with brand
recognition and high product quality
Leading market position
We are one of the potted vegetable producer in Shandong province of the PRC which
started large scale production of potted vegetable produce with an annual production
capacity of more than one million pots in 2016 and we have accumulated more than eight
years of experiences in the cultivation of potted vegetable produce. All of our products are
mainly marketed under our brand ‘‘ 富景農業’’ while we also use our registered trademark,
, only for conducting online direct sales through our WeMall account. We believe that,
by focusing on a brand, it helps to build brand recognition and awareness among our
customers. Through consistently promoting ou r brand, we can increase our brand visibility
BUSINESS
–1 5 3–


--- page 163 ---
and make it easier for customers to identify and remember our products. Moreover, we can
streamline our marketing efforts, reduce brand development and maintenance costs, and
allocate our resources more efficiently. With b rand recognition, we have been able to secure
a leading market position in the potted vegetable produce industry in Shandong province.
We were the largest potted vegetable producer in Shandong province with a market share of
14.8% in terms of sales revenue in Shandong province in 2022. Meanwhile, with a sales
revenue of RMB126.7 million, the Group accounted for less than 0.01% of total sales
revenue of vegetable producers and approximately 3.1% of total sales revenue of potted
vegetable producers in China in 2022. Our market leading position and brand recognition
are not only evidenced by our sales performance, but also by the awards and certifications
received, such as Qingdao Green Vegetable Garden* ( 青島市綠色菜園)i n2 0 1 8b yQ i n g d a o
Agriculture Commission* ( 青島市農業委員會) and Qingdao Municipal Vegetable Base* ( 青
島市市控蔬菜基地) in 2014 by Bureau of Commerce, Qingdao ( 青島市商務局). For further
details of our awards, please refer to the paragraph headed ‘‘Awards’’ in this section of the
prospectus.
Reputation of food safety and quality control
To ensure product quality, we have implemented strict quality control measures in our
cultivation process. In general, consumers would not be provided with information such as
the origin of and the level of pesticides contained in the vegetable produce, whether the
vegetable produce is pollution-free or not, and the quality control procedures adopted by
the subject vegetable producer. The feature of our potted vegetable produce which is sold
while fresh and living in pots printed with our brand, together with our reputation of food
safety and quality control, can assure the confidence of consumers who pursue healthy
lifestyle that they are paying for quality products. Further, we have a dedicated quality
control team to ensure that our internal quality procedures are duly followed.
Certification and recognition
As at the Latest Practicable Date, we had obtained GB/T 19001–2016 idt ISO 9001 :
2015 certificate for our quality management system (質 量管理體系認證證書), GB/T 24001–
2016 idt ISO 14001 : 2015 certificate for our environmental management system ( 環境管理
體系認證證書) and GB/T 45001–2020 idt ISO 45001 : 2018 certificate for our occupational
health and safety system ( 職業健康安全管理體系認證證書) issued by Qingdao Huazhong
Century Certification Co., Ltd.* ( 青島華中世紀認證有限公司) in April 2020. We had also
been accredited with Certificate of Pollution-free Agricultural Products* ( 無公害農產品證
書)
issued by Qingdao Agricultural Rural Bureau* ( 青島市農業農村局) in respect of the
potted vegetable produce cultivated at our Laixi Facility. In particular, in order for us to
obtain the Certificate of Pollution-free Agricultural Products* ( 無公害農產品證書), our
products are required to fulfil the relevant nat ional standard and requirements in relation to
the environment of the product origin, production process and product quality pursuant to
the relevant PRC laws and regulations. Pleas e refer to the paragraph headed ‘‘Regulatory
Overview — Regulations relating to Polluti on-free Agricultural Products’’ in this
prospectus for further details.
BUSINESS
–1 5 4–


--- page 164 ---
Accordingly, our Directors be lieve that obtaining such cer tificate could strengthen
recognition of our brand, increase our customers’ confidence in our products and attract
potential customers.
Further and as confirmed by Agricultural Rural Bureau of Laixi* ( 萊西市農業農村局),
no administrative punishment had been imposed by Agricultural Rural Bureau of Laixi to
the Group for any violation of the relevant rules and regulations on quality and safety of
our agricultural produce during the Track Record Period.
In recognition of our technical and qualit y control capabilities, we were selected by
Qingdao Association of Standardisation ( 青島市標準化協會) in 2019 to be involved in the
development of the industry standard for the industrial cultivation of potted vegetable
produce in the PRC together wi th the Laixi Potted Vegetable Cultivation Association* ( 萊
西市盤菜種植協會), Qingdao Fugeng Agricultural Machinery Professional Cooperative*
(青島富耕農機專業合作社) and Qingdao Institute of Technology and Standards* ( 青島市技
術標準科學研究所).
We believe the recognition of our brand and our high quality potted vegetable produce
will continue to be a main factor driving our future success and we are well positioned to
leverage our strength in the potted vegetable produce industry to capture future growth and
to tap into new markets.
Well-established distribution network across Shandong province
We have a well-established distribution network across Shandong province consisting
of distribution channels operated by distributors. We sell our potted vegetable produce
primarily to distributors, which then on-sell our products to end-user customers. As at 31
December 2020, 31 December 2021, 31 December 2022 and 30 S eptember 2023, we had ten
distributors for each year/period for selling o f our potted vegetable produce over Shandong
province and they are all experienced in sellin g potted vegetable produce and familiar with
the market practice. Since potted vegetable produce is a fresh daily consumable, catering
service providers such as hotels and restauran ts would generally expect a stable supply from
the producers or distributors so that the potted vegetable produce would be replenished
rapidly after consumption from time to time. He nce, our distributorship model, which allow
efficient delivery, is proven to be useful for our existing markets as well as for tapping into
new markets in the future. Further, our distribution network allows us to benefit from our
distributors’ established distribution channels and resources, save cost that would otherwise
be required to build up a logistic network across the area and increase the effectiveness of
the penetration of our products, allowing us to distribute effectively and efficiently our
products at all levels, from cities and urban centres to counties and towns. Our Directors
believe that our well-established distributio n network in Shandong province constitutes an
important element of our strength and success given the perishable nature of our potted
vegetable produce which requires speedy distribution to consumers.
BUSINESS
–1 5 5–


--- page 165 ---
Our extensive distribution network in Shandong province is supported by our sales and
marketing team who has built up our effective distribution channel management system.
Our sales and marketing personnel gather market intelligence from distributors so as to
monitor changing market trends, consumer preferences, sales performance of our products
on a regular basis, which allows us to anticipate and respond to these changes in a timely
manner as well as to facilitate our marketing strategies.
We believe our well-established distribut ion network will continue to allow us to
successfully market and deliver our products to consumers and support our future growth.
Experienced management team with a proven track record to lead our development
Our management team is composed of knowledgeable and experienced personnel with
a proven track record in the potted vegetable produce industry. Our senior management
team members have extensive operational and management experience in the cultivation of
vegetable produce and potted vegetable produce in the PRC. Our management is led by Mr.
Zhang (being our founder, chairman of our Board, chief executive officer and our executive
Director) and Mr. Pang Jinhong (being our executive Director), both have about 11 years of
experience in the potted vegetable produce industry. Further, Mr. Zhang has over 17 years’
experience in the industry of cultivation an d sales of vegetable produce. Prior to our
inception to the potted vegetable produce industry, Mr. Zhang was inspired by the
advancement of new cultivation methods and shortcomings of traditional in-ground
cultivation method and had decided to convert our business model from traditional in-
ground cultivation in open fields to cultivation of vegetable in pots and in greenhouses,
w h i c hl e a dt oaf a s tg r o w t ha n de x p a n s i o no fo u rG r o u p .P l e a s er e f e rt ot h es e c t i o nh e a d e d
‘‘Directors and Senior Management’’ in this prospectus for details of the biographies of our
Directors and senior management.
Our dedicated management team spearheads our business operations and designs our
future growth plans. Their experience in, and knowledge of, the potted vegetable produce
industry in which we operate also enable us to identify new business opportunities and the
change of market taste and demand. Our management team has played a key role in
building a corporate culture which encourages consistent delivery of high quality potted
vegetable produce. Our management team contributed significantly to our continuous
growth during the Track Record Period. We believe our experienced management team is a
key to our success in the past and will continue to contribute to our growth of our
operations and profitability in the future.
Our potted vegetable produce cultivation method ensures high productivity as compared with
traditional in-ground cultivation method
Under our potted vegetable cultivation method, we do not reuse our organic
substrates, and could avoid the common problems of continuous cropping. The harmful
effects of continuous cropping occur when plants are repeatedly and intensively growing on
the same soil for extended periods of time, or without sufficient recovery period, which
would lead to the reduction of micronutrients and minerals, distortion of soil
BUSINESS
–1 5 6–


--- page 166 ---
microenvironment and the accumulation of pathogenic substances in the soil. Hence,
continuous cropping will lead to the reduction of soil fertility and productivity of the land,
and will increase the use of fertiliser, pesticides and insecticide.
Since we cultivate our vegetable produce in pots filled with organic substrates in
greenhouses and we do not reuse our organic substrates, we could ensure that all our potted
vegetable produce is growing in organic substrates with ideal nutrients which are freshly
prepared by us and are less likely to be contaminated by pollutants or harmful substances.
Further, since we do not reuse our organic substrates, there is no chance for distortion of
soil microenvironment and the accumulati on of pathogenic substances as compared to
continuous cropping. Lastly, the growth of vegetable produce in individual pots provides
physical segregation between each of the vegetable produce, which could prevent the spread
of crop diseases or pest infestations as it lowered the risk of cross contamination.
Our cultivation method could effectively a void the harmful effects of continuous
cropping that are commonly found in agricultural produce that grown in common fields,
leading to a higher productivity compared to traditional in-ground cultivation. As advised
by Professor Cui Dejie ( 崔德杰), our Agricultural Adviser, who is a professor of Qingdao
Agricultural University who possesses more t han 35 years of experience in research on soil
science: (i) for vegetable producers who adopt traditional in-ground cultivation method,
they are subject to the problem of continuous cropping which may lead to a significant
reduction of productivity in the long run; (ii) with the use of greenhouses, single-use
substrates and without being affected by the negative effects of continuous cropping, potted
vegetable producers using the in-pot cultivation method will achieve high productivity, in
general they are able to cultivate a maximum of ten yields to 14 yields per year, subject to
the conditions of greenhouses and the optimal u se of cultivation time; and (iii) whereas for
traditional in-ground cultivation method, due to the negative effects of continuous
cropping, it is common for vegetable producers to adopt a rest period or cultivate other
crops for soil recovery between each cultivation, which limits the maximum output per year;
the productivity and overall output level will also be lower for those vegetable producers
without effective heat insulation facility as m any species do not grow in summer or winter.
As a result, it is expected that with traditiona l in-ground cultivation method, vegetable
producers can only complete two yields to six yiel ds of cultivation per year. Our cultivation
method allows us to stand out from agricultural producers who use traditional in-ground
cultivation method as we could cultivate mor e efficiently throughout the year and yield
products with better quality.
The higher requirements and upfront investment costs in cultivation of potted vegetable
produce in greenhouses differentiate us from traditional players in the vegetable produce
industry
The higher requirements and the demand for significant upfront investments in
cultivation of potted vegetable produce in greenhouses excluded certain market players to
enter into the potted vegetable produce industry. Our enhanced greenhouses are equipped
with various facilities such as rolling sun shadin g curtains, insulating quilts, fibreglass water
duct and vegetable greenhouse environment monitoring system. The development of a large
scale cultivation base with these facilities require significant investments. Historically, we
BUSINESS
–1 5 7–


--- page 167 ---
invested over RMB100.0 million in developing our greenhouses and our infrastructure,
which we believe is an effective entry barrier. D espite the high upfront investment cost, our
Directors believe that the higher productivit y, stable and all-year-round cultivation and
better quality of goods achieved by our cultivation method could provide long-term benefit
to our Group. During the Track Record Period, we recorded a gross profit margin of
44.0%, 42.4%, 41.5% and 42.9%, and our Dir ectors believe that the use of specially
formulated organic substrates and the app lication of our cultivation technology will
continue to differentiate our Group from the traditional players in the vegetable produce
industry and support our future growth.
OUR BUSINESS STRATEGIES
We intend to achieve sustainable growth in sales and profit and further strengthen our
leading position in the potted vegetable produce industry in the PRC by implementing the
following strategies:
Expansion of our cultivation capacity
1. Improvement and expansion of cultivation facilities in our existing geographical markets
We intend to improve and/or expand on our cultivation capacities in our existing
geographical markets including Shandong, Liaoning and Shaanxi provinces in the PRC.
Our expansion and improvement plan in our existing geographical market primarily
comprise of (i) establishing a new cultivation facility in Jinan, Shandong province (the
‘‘Jinan Facility ’’); (ii) expanding our existing cultivation facilities through the construction
of additional greenhouses; and (iii) upgradin g part of our current greenhouses in our Laixi
Facility and Xi’an Facility. Upon completion of the expansion and improvement plan, our
Jinan Facility will have 15 enhanced large gre enhouses and our Dalian Facility will have an
additional of two enhanced large greenhouses. The newly constructed greenhouses in the
Jinan Facility and our Dalian Facility will increase an additional 38,667 sq.m. of the total
gross floor area of greenhouses. We plan to a llocate approximately RMB31.7 million of net
proceeds from the Share Offer to expand and improve the cultivation capacity in our
existing geographical market. We believe our expansion and improvement plan in our
existing geographical market is vital to the expansion of our operations and necessary for
the following reasons:
i. Historical growth and latest expansion
We have achieved a solid track record of growth in revenue and profit from the
cultivation and sales of potted vegetable pr oduce and achieved significant growth in
the sales volume of our potted vegetable produce, save for FY2022 and 9M2022 when
our results were temporarily and adversely affected by COVID-19 epidemic which
seriously affected our Shandong province and Dalian markets during the period. In
FY2020, FY2021, FY2022, 9M2022 and 9M2023, we recorded a total revenue of
approximately RMB121.4 million, RMB154 .9 million, RMB126.7 million, RMB88.6
million and RMB121.3 million, respectively , while our net profit in FY2020, FY2021,
FY2022, 9M2022 and 9M2023 was appro ximately RMB43.8 million, RMB47.3
million, RMB31.8 million, RMB19.7 million and RMB41.1 million. In particular,
BUSINESS
–1 5 8–


--- page 168 ---
between FY2020 and FY2021, our revenue generated from Shandong province, our
largest geographical market by revenue, increased from approximately RMB105.7
million to approximately RMB141.3 million, representing an annual growth of 33.6%.
In addition, our sales volume increased fro m approximately 8.0 million pots in FY2020
to approximately 10.3 million pots in FY2021.
The increase in our revenue and sales volume during the Track Record Period was
primarily attributable to the expansion of our cultivation capacity. During the Track
Record Period, our total gross floor area of greenhouses increased from 88,001 sq.m.
at the beginning of FY2020 to 155,401 sq.m. as at the Latest Practicable Date. In
particular, the total gross floor area of greenhouses of our Laixi Facility, our largest
cultivation facility located in Shandong pr ovince, increased from 72,001 sq.m. at the
beginning of FY2020 to 136,801 sq.m. as at the Latest Practicable Date. Our Directors
believe that our rapid expansion and increase in sales volume during the Track Record
Period is an indication of a growing market demand for our potted vegetable produce
and a testament to our commitment to the development of our business.
Although our total revenue decreased by approximat ely RMB28.3 million from
approximately RMB154.9 million in FY202 1 to approximately RMB126.7 million in
FY2022, such decrease in revenue was primarily due to the temporary adverse effect of
the resurgence of the COVID-19 cases which seriously affected our Shandong province
market in FY2022. Our directors believe that such decrease in revenue was exceptional
as a result of the one-off effect of COVID-19 epidemic in Laixi which caused the
suspension of our Laixi Facility for more than a month in FY2022. However, in
August 2022, we recorded a revenue of approximately RMB17.2 million, which
exceeded our revenue of approximately R MB16.1 million in August 2021. In addition,
we recorded a revenue of approximately RMB54.2 million from September 2022 to
December 2022, which is comparable to the revenue of approximately RMB54.6
million we recorded during the same period in 2021. Our total revenue increased by
approximately RMB32.7 million from approximately RMB88.6 million in 9M2022 to
approximately RMB121.3 million in 9M2023, s uch increase in revenue was primarily
due to the increase in the volume of our actual cultivation output in the corresponding
period as our business operation was no longer affected by COVID-19 epidemic in
9M2023.
In view of our significant growth in Shandong province, we expanded our
geographical coverage by commencing sales of our potted vegetable produce in Xi’an,
Shaanxi province and Dalian, Liaoning province in 2019. Our revenue generated from
Dalian was approximately RMB7.0 million in FY2020, and increased to approximately
RMB7.4 million in FY2021. We expect tha t our growth in Dalian will continue as we
further cement our sales network in th e respective geographical markets.
Our Directors believe that the significant growth in our revenue in Shandong
province during the Track Record Period and our latest successful expansion in Xi’an
and Dalian indicates an increasing demand for our potted vegetable produce in the
market and a growing need to expand our cultivation capacity to capture future
market demand in our existing geographical markets.
BUSINESS
–1 5 9–


--- page 169 ---
ii. Anticipated increase in market demand
Our expansion plan in our existing geographical markets is also formulated in
view of an anticipated increase in demand for our potted vegetable produce in
Shandong, Liaoning and Shaanxi provinces in the PRC. We have an established
presence in the markets in which we operate. We are the largest producer of potted
vegetable produce in Shandong province with a market share of 14.8% in terms of sales
revenue in Shandong province in 2022. Based on the sales revenue of potted vegetable
produce in Xi’an and Dalian in 2022, ou r market share in Xi’an and Dalian was
approximately 9.9% and 6.1% in FY2022, respectively. Although we have already had
a leading market position in Shandong province and considerable market share in
Xi’an and Dalian, our market share in these markets do not exceed 20%, meaning that
there is ample room for future growth to capture the remaining market share.
The sales volume of potted vegetable produce in Shandong province, our largest
geographical market by revenue during the Track Record Period, is expected to
increase from 48.5 million pots in 2022 to 61 .6 million pots in 2027, representing a
CAGR of 4.9%. Furthermore, the sales revenue of potted vegetable produce in
Shandong province is expected to incr ease from RMB773.6 million in 2022 to
RMB1,102.2 million in 2027, representing a CAGR of 7.3%. Similar growth is also
expected in the potted vegetable produce market in Xi’an and Dalian. The sales
r e v e n u eo fp o t t e dv e g e t a b l ep r o d u c ei nX i ’ a ni se x p e c t e dt oi n c r e a s ef r o mR M B 5 3 . 7
million in 2022 to RMB80.7 million in 202 7, representing a CAGR of 8.5%, and the
sales revenue of potted vegetable produce in Dalian is expected to increase from
RMB112.5 million in 2022 to RMB155.0 million in 2027, representing a CAGR of
6.6%. When formulating our expansion plan, we have also consulted with some of our
major existing customers in respect of their anticipated demand for our potted
vegetable produce. Up until the Latest Practi cable Date, we have entered into five non-
legally binding letters of intent with five of our existing customers whose revenue
contribution together represented approximately 56.1%, 66.3%, 67.3% and 68.1% of
our total revenue in FY2020, FY2021, FY2022 and 9M2023, respectively. Pursuant to
the letters of intent, the relevant customers have expressed their intention to continue
to purchase potted vegetable produce from us and anticipated an annual increase of
approximately 10% in the next three years. Given the anticipated increase in sales
volume from our existing customers and the anticipated increase in demand for potted
vegetable produce, our Directors believe that the increase in our cultivation capacity
will be well-received by the market in the future.
The anticipated increase in demand for potted vegetable produce in China is
mainly attributable to the increase in demand for healthier food options as a result of
increase concerns for improvements in personal health and well-being. Given that our
potted vegetable produce is cultivated with ideal nutrients and in a manner which
reduces likelihood of contamination and pollution, our Directors are of the view that
the demand for our potted vegetable produce will likely grow in the future. In view of
the above, we consider it vital to expand our cultivation capacity in our existing
markets to accommodate for the increase in demand for potted vegetable produce.
BUSINESS
–1 6 0–


--- page 170 ---
iii. High utilisation of our existing cultivation facilities
During the Track Record Period, the approximate utilisation rates of our
cultivation facilities are as follow:
Cultivation facility FY2020 FY2021 FY2022 9M2023
Laixi Facility 88.6% 85.8% 74.9% (Note 4) 91.3%
Xi’an Facility 74.5% 71.5% 63.4% (Note 4) 68.8%
Dalian Facility 67.2% (Notes 1&2) 60.8% (Notes 1,2&3) 54.7% (Notes 1,2&4) 58.5% (Notes 1&2)
Notes:
(1) Among the 29 greenhouses at our Dalian Facility, 14 of them are traditional regular
greenhouses which led to slightly longer culti vation time per crop in cold weather and the
optimised cultivation conditions ha d not been met. As a result, a slightly lower utilisation rate
has been recorded as compared to other cultivati on facilities during the Track Record Period.
(2) Our Dalian Facility is located in Liaoning pr ovince, which is at a higher latitude as compared
to that of our Laixi Facility. Due to the lower average yearly temperature, the cultivation
conditions of our Dalian Facility are slightly inferi or as compared to other facilities, resulting
in a relatively lower utilisation r ate during the Track Record Period.
(3) The lower utilisation rate of our Dalian Faci lity in FY2021 was primarily due to the outbreak
of COVID-19 epidemic in Dalian between December 2020 and January 2021. In particular, the
lockdown measures of Dalian had led to a tempor ary suspension of business activities of our
Dalian Facility, resulting in a lower utilisation rate in FY2021. For further details, please refer
to the paragraph headed ‘‘Impact of the outbreak of COVID-19 epidemic’’ in this section of
the prospectus.
(4) The lower utilisation rate of our cultivatio n facilities in FY2022 was primarily due to the
resurgence of COVID-19 cases w hich affected our business operations. In particular, the
lockdown measures in Laixi and Dalian had led to the temporary suspension of business
activities of our Laixi Facility and Dalian Fa cility between March 2022 to April 2022, and the
lockdown measures in Xi’an had also affected the business activities of our Xi’an Facility in
January 2022, resulting in the lower utilisation rate in FY2022. For further details, please refer
to the paragraph headed ‘‘Impact of the outbreak of COVID-19 epidemic’’ in this section of
the prospectus.
In FY2020, FY2021, FY2022 and 9M2023 , the utilisation rate of our Laixi
Facility, our largest cultivation facility, maintained at a high utilisation rate of 88.6%,
85.8%, 74.9% and 91.3%, respectively, desp ite the COVID-19 epidemic which affected
our business in FY2022. The utilisation rate of our Dalian Facility reached 67.2% in
FY2020 despite it only commenced operatio n in November 2019. The utilisation rate
of our Xi’an Facility remained consistently above 70% in average in its first two years
of operation during the Track Record Period. Our Directors are of the view that the
near saturated utilisation rate of our Laix i Facility during the Track Record Period,
despite our continuous expansion and the addition of 40 enhanced greenhouses on our
L a i x iL a n dP a r c e l sDa n dL a i x iL a n dP a r c e lEw i t ha na p p r o x i m a t et o t a lg r o s sf l o o r
BUSINESS
–1 6 1–


--- page 171 ---
area of greenhouses of 67,134 sq.m. (as compared to the approximate total gross floor
area of greenhouses of 72,000 sq.m. on our Laixi Land Parcel A, Laixi Land Parcel B
and Laixi Land Parcel C immediately prior to our expansion) in the third quarter of
FY2020, indicates a consistent demand for our potted vegetable produce and such high
utilisation rate would result in inflexibility in scheduling our potted vegetable
cultivation and lack of capacity to meet additional purchase orders from existing
and potential new customers. Accordingly, our Directors are of the view that there is a
need to further expand the cultivation capacity in our existing geographical market.
For further details of the utilisation rate of our cultivation facilities during the Track
Record Period, please refer to the paragraph headed ‘‘Cultivation of our potted
vegetable produce — Utilisation of our existing cultivation facilities’’ in this section of
the prospectus.
Our business has recovered from the impact of COVID-19 outbreak in 2023. For the
9M2023, the utilisation rate of our Laixi Fac ility, Xi’an Facility and Dalian Facility was
approximately 91.3%, 68.8% and 58.5%, respectively, while the overall utilisation rate of
our three cultivation facilities is approximat ely 88.1%. In view of the reasons above, we
consider it vital to expand the cultivation cap acity in our existing geographical markets to
meet increasing customer demand for potted vegetable produce as indicated from some of
our major distributors. We believe that our expansion plan in our existing geographical
markets will enhance our production capacit y to meet the expected demand in a timely
m a n n e ra n dm a i n t a i no u rc o m p e t i t i v e n e s si nt h ef u t u r e .W ei n t e n dt oi m p l e m e n tt h e
following expansion and improvement pla ns in our existing geographical markets:
i. Establishing our Jinan Facility
We intend to set up a new cultivation facility in Jinan, Shandong province
comprised of 15 enhanced large greenhouses with a total gross floor area of
greenhouses of approximately 36,000 sq.m. through a three-year period to
supplement and expand our geographical coverage in the central and western part of
Shandong province. During the Track Record Period, Shandong province is our
largest geographical market in terms of both revenue and sales volume. Our largest
cultivation facility, Laixi Facility, is strategically located at Laixi, Shandong province
which allows convenient access to prominent markets in eastern and central part of
Shandong province, namely Qingdao, Yantai and Weifang. Given the importance of
maintaining the freshness and quality of our potted vegetable produce, it is vital for
our cultivation facilities to be strategica lly located near our end-user customers. As
such, the establishment of our Jinan Facilit y will not only strengthen our presence in
the central part of Shandong province, namely Weifang, but also allow our Group to
reach a greater number of customers in prominent markets in western Shandong
province including Jinan and Liaocheng. In preparation of establishing our Jinan
Facility, we have communicated with some of our existing customers and potential
customers on their potential demand for potted vegetable produce in Jinan and the
surrounding area. As at the Latest Practicable Date, we have entered into non-legally
binding letters of intent with two existing distributors and one potential distributor for
the distribution of our potted vegetable produce in Jinan and the surrounding area.
Pursuant to the letters of intent, the distributors have expressed their intention to
BUSINESS
–1 6 2–


--- page 172 ---
purchase an aggregate of 800,000 pots of potted vegetable produce in 2024. We intend
to allocate approximately RMB17.1 millio n of the net proceeds fr om the Share Offer
for the construction of the 15 enhanced lar ge greenhouses at our Jinan Facility and we
intend to fund the remaining set-up costs through our internal resources. The table
below sets forth the details of our Jinan Facility:
Location
Approximate
area
Expected number
of greenhouses
Approximate
gross floor area
per greenhouse
Approximate
total
cultivation
capacity
(sq.m.) (sq.m.)
Jinan, Shandong
province
36,000 sq.m. 15 enhanced large
green houses
2,400 2.9 million
pots per year
The estimated lead time from the construction of the premise to the actual
commencement of cultivation will be approximately three months. We intend to
increase the cultivation capacity of our Jinan Facility by phases and we expect to
complete construction of ten enhanced larg e greenhouses by the second quarter of 2024
and the remaining five enhanced large greenhouses by the second quarter of 2025. Each
of the additional enhanced large green houses in our Jinan Facility will have an
approximate gross floor area of 2,400 sq.m. The following table sets forth an
approximate breakdown of the cost items for the construction of an enhanced large
greenhouse with a gross floor area of approximately 2,400 sq.m.:
Particulars
Estimated
construction cost
per greenhouse
(RMB’000)
Foundation and land works 528
Fitting out and renovation works 5
Installation works 98
Installation of fibreglass water duct 508
Total construction cost per greenhouse 1,139
BUSINESS
–1 6 3–


--- page 173 ---
We intend to rent a parcel of land to set u p our Jinan Facility. As at the Latest
Practicable Date, we have not identified a parcel of land in Jinan where we will set up
our Jinan Facility. The expected breakeven operating period will be around 3 months
for our Jinan Facility. The breakeven operating period is the period after which the
monthly revenue of the Jinan Facility is at l east equal to the monthly expenses. The
investment payback period is expected to be around 27 months. Investment payback
period refers to the length of time to recover the initial investment cost from the
accumulated net cash inflow to be generate d from the Jinan Facility since the date of
the initial investment cash outflow assuming there will be no material impact on our
sales due to fluctuation in market demand, inflations, increase in raw material cost or
labour cost.
ii. Expanding our existing cultivation fac ility through the construction of additional
greenhouses
As part of our expansion plan in our existing geographical market, we intend to
construct additional greenhouses in Dalian. We intend to construct two enhanced large
greenhouses with a total gross floor area of approximately 2,667 sq.m. in our Dalian
Facility. We intend to allocate approximately RMB1.5 million of the net proceeds from
the Share Offer for the construction of the two additional greenhouses in our Dalian
Facility and we intend to fund the remaini ng set-up costs through our internal
resources. The table below sets forth details of our planned additional greenhouses in
our Dalian Facility:
Cultivation
facility
Number of
additional
greenhouses
Approximate
total gross
floor area
Approximate
gross floor
area per
greenhouse
Approximate
total cultivation
capacity
Estimated
total
construction
cost
Estimated
construction
cost per
greenhouse
(sq.m.) (sq.m.) (RMB) (RMB)
Dalian Facility 2 enhanced large
greenhouses
2,667 1,333 0.2 million pots
per year
1.5 million 0.8 million
Given the limited available space in our Dalian Facility, we intend to rent
additional parcels of land to construct our additional greenhouses to expand our
Dalian Facility. As at the Latest Practicable Date, we have not identified the parcels of
land in Dalian on which our additional greenhouses will be constructed. In order to
integrate our resources in close proximity, we intend to construct our new greenhouses
BUSINESS
–1 6 4–


--- page 174 ---
in parcels of land that are adjacent or located close to our existing cultivation facilities.
Each of the additional enhanced large gree nhouses in our Dalian Facility will have an
approximate gross floor area of 1,333 sq.m. The following table sets forth a breakdown
of the cost items for the construction of an enhanced large greenhouse with a gross
floor area of approximately 1,333 sq.m.:
Particulars
Estimated
construction cost
per greenhouse
(RMB’000)
Foundation and land works 411
Fitting out and renovation works 4
Installation works 66
Installation of fibreglass water duct 282
Total construction cost per greenhouse 763
iii. Upgrading our current greenhouses
In addition to expanding the cultivation capacity of our existing cultivation
facilities, we also intend to upgrade part of our existing greenhouses through the
installation of fibreglass water duct. In order to maintain the freshness and quality of
our potted vegetable produce, our potted vegetable produce must be cultivated in an
appropriate and ideal microclimate environment within our enclosed greenhouses to
reduce exposure to environmental and natural risks. For more information of our
cultivation process and growth management, please refer to the paragraph headed
‘‘Cultivation of our potted vegetable produce — Cultivation process’’ in this section of
the prospectus. During the Track Record Period, most of our greenhouses were
constructed directly on the soil without the fibreglass water duct separating our potted
vegetable produce and the ground. As such, our potted vegetable produce will still be
vulnerable to the risk of pest infestation as a high level of moisture will build up on the
ground when we carry out the irrigation process. Pest infestations is commonly caused
by tree or shrub branches grown on soil grounds and excess moisture in the
environment. During and after the irrigation process, excess water can be drained as
soon as possible through the fibreglass water duct within the greenhouse to avoid
build-up of moisture within the greenhouse. By minimising build-up of moisture within
the greenhouse, we are able to minimise the risk of pest infestation.
BUSINESS
–1 6 5–


--- page 175 ---
We intend to install the fibreglass water duct in 35 of our existing greenhouses
with a total gross floor area of approximately 54,000 sq.m. through a three-year
period. The expected total capital expenditure for the installation of fibreglass water
duct is approximately RMB11.4 million and we intend to utilise the net proceeds from
the Share Offer to fund the upgrade plan. Set forth below are details of the upgrade
plan at our Laixi Facility and Xi’an Facility:
Cultivation facility
Number of
greenhouses
to install
fibreglass
water duct
Approximate
total gross
floor area
Estimated
total
construction
cost
(sq.m.) (RMB’000)
Laixi Facility 28 47,000 9,942
Xi’an Facility 7 7,000 1,481
We intend to carry out our expansion and improvement plans in our existing
geographical market through a three-year period and expect to complete the expansion
plan by end of 2026. Subject to unforeseeable circumstances, the estimated timetable
for the set up of our Jinan Facility and the expansion and upgrade of our existing
cultivation facilities is as follows:
Timing of
completion/
expected
completion
Cultivation
facility Event
Estimated
increase in
cultivation
capacity
Third quarter of
2024
Jinan Facility . Construction of ten greenhouses 2.0 million pots
per year
Laixi Facility . Upgrade of 10 greenhouses N/A
Xi’an Facility . Upgrading five greenhouses N/A
Second quarter
of 2025
Jinan Facility . Construction of five new
greenhouses
1.0 million pots
per year
Laixi Facility . Upgrading 7 greenhouses N/A
Xi’an Facility . Upgrading two greenhouses N/A
Dalian Facility . Construction of two new
greenhouses
0.2 million pots
per year
Third quarter of
2026
Laixi Facility . Upgrading 11 greenhouses N/A
BUSINESS
–1 6 6–


--- page 176 ---
We expect that after the completion of the expansion and improvement plan, the
maximum cultivation capacity of our Jinan Facility will be 2.9 million pots per year
and the cultivation capacity of our Dalia n Facility will increase by 0.2 million pots per
year.
Our business strategy of improvement an d expansion of cultivation facilities in
our existing geographical markets will resu lt in an increase in cultivation capacity by
3.2 million pots per year when fully completed by the end of the three-year period in
2026, representing approximately 24.7% increase in capacity when compared with our
total expected cultivation output under opt imal cultivation conditions for FY2022, or
a CAGR of approximately 7.6%. Such 7.6% CAGR is relatively modest when
compared with (i) the 27.6% growth in our revenue from FY2020 to FY2021; (ii) the
19.3% CAGR of expected cultivation output under optimal cultivation conditions
from the year ended 31 December 2019 to FY2021; (iii) the 7.3% CAGR of expected
increase in the sales revenue of potted vegetable produce in Shandong province
between 2022 and 2027; and (iv) the 6.6% CAGR of expected increase in the sales
r e v e n u eo fp o t t e dv e g e t a b l ep r o d u c ei nD a l i a nb e t w e e n2 0 2 2a n d2 0 2 7 .
Although we have already had a leading market position in Shandong province
and considerable market share in Dalian, our market share in these markets does not
exceed 20%, meaning that there is ample room for future growth to capture the
remaining market share. We successfully enhanced the competitiveness of our potted
vegetable produce by expanding the number of species from 15 species as at 31
December 2018 to 29 species as at 30 September 2023 and significantly improved our
capability to cultivate potted vegetable produce in winter. Our Directors believe the
broad range of vegetable species we can offe r, our ability to supply 27 potted vegetable
produce species in all seasons, our established business network and reputation due to
our presence in the markets give us signifi cant competitive edge over other potted
vegetable producers to capture a higher market share and also the increasing market
demand in future. Thus our Directors consider that there is sufficient existing and
future demand to meet the increase in cultivation capacity under this business strategy.
2. Establishing a new cultivation f acility in new geographical market
As part of our expansion plan, we also intend to expand our geographical reach and
business operations by establishing a new cult ivation facility in Hebei province. We have
identified Langfang, Hebei province as our targeted geographical market to set up our new
cultivation facility. Our plans to expand our ge ographical reach in Langfang, Hebei is based
on the following reasons:
(i) Strategic location and estimated increase in market demand for potted vegetable
produce
Given the importance of the location of our cultivation facility, Langfang is
strategically located near Beijing, the capital city of PRC, which provides plenty of
opportunities to expand our market. Accordingly, our Directors are of the view that
the prime location of Langfang will allow our Group to introduce our potted vegetable
produce in the geographical markets of Beijing. In addition to its close proximity to
BUSINESS
–1 6 7–


--- page 177 ---
Beijing, Langfang itself is also one of the fa stest growing economies in Hebei province
and we plan to further complement our expa nsion in the Beijing market by developing
sales channel targeting local chai n restaurants in Langfang as well.
The aggregated sales revenue of potted v egetable produce in Beijing and Langfang
increased from RMB58.2 million in 2017 to RMB140.0 million in 2022. The sales
revenue is expected to further increase to RMB217.9 million in 2027, representing a
CAGR of 9.3%. Furthermore, there are only approximately 80 to 100 potted vegetable
producers in Beijing and Langfang in 2022. With around 6,500 chain restaurants in
Beijing and Langfang in 2022, our Directors are of the view that the penetration rate
for potted vegetable produce in the market remains relatively low and there is ample
room for future growth. Furthermore, si nce Beijing and Langfang are close to our
existing markets in Shandong province and Dalian which are all situated in Northern
China, the consumers there share similar die tary habit. In view of the low penetration
rate and the similarities to our existing m arket, we consider Beijing and Langfang are
suitable markets for the expansion of our potted vegetable produce.
The anticipated increase in demand for potted vegetable produce is in part due to
the rising income level of residents in the above geographical markets. The increase in
income level has generally prompted a greater emphasis on personal wellness and food
quality and safety. Potted vegetable produce possesses advantages in safety and
freshness over vegetable produced in open fields. Given that our potted vegetable
produce is cultivated with ideal nutrients and in a manner which reduces likelihood of
contamination and pollution as mentioned in previous paragraphs, our Directors take
the view that there will be a growing market demand for our potted vegetable produce
in the above geographical markets. In view of the favourable location of Langfang and
the anticipated increase in market demand for potted vegetable produce in the above
geographical markets, our Directors consider our planned expansion in Langfang as a
necessary step for the long-term success of our Group. We plan to implement our
expansion plan by leveraging on our expertise and experience in cultivation and sales
of potted vegetable produce. In preparation o f establishing our cultivation facility in
Langfang, we began sourcing and identifying potential local distributors in Beijing and
Langfang to establish our sales network in the region. As at the Latest Practicable
Date, we have entered into non-legally binding letters of intent with two potential
distributors in Langfang and one potential distributor in Beijing to distribute our
potted vegetable produce u pon commencement of our ne w cultivation facility.
Pursuant to the letters of intent, the said distributors have expressed their intention
to purchase an aggregate of 950,000 pots of potted vegetable produce in 2024.
(ii) Historical track record of successful expansion in new geographical markets
In view of our significant growth in sales in Shandong province, we expanded our
geographical coverage by commencing sales of our potted vegetable produce in Xi’an,
Shaanxi province and Dalian, Liaoning province in 2019. Our revenue generated from
Xi’an was approximately RMB8.7 million in FY2020, while our revenue generated
from Dalian was approximately RMB7.0 millio n in FY2020. Our net profit generated
from Xi’an was approximately RMB3.5 million in FY2020, and our net profit
BUSINESS
–1 6 8–


--- page 178 ---
generated from Dalian was approximately RMB3.1 million in FY2020. We were able
to achieve relative success in a short span of time as a result of our ability to rapidly
establish a sales network in the respectiv e geographical markets by engaging local
distributors to distribute our products, which we believe is a testament to the quality of
our potted vegetable produce. Given the su ccess we achieved in our recent expansion in
Xi’an and Dalian, our Directors are confident we will be able to replicate our success in
Langfang.
Location and site selection
In formulating our expansion plan in new geographical markets, we place
significant emphasis on identifying a suitable location to establish our cultivation
facility as the location of the cultivation fac ility directly affects our ability to source
new potential customers in the surrounding area. Given the importance of the location
of our cultivation facilities, we will consider the following factors when determining
the location of the cultivation facility:
(i) the size and population of the surrounding area and the potential customer
pool;
(ii) the accessibility of the potential site for the cultivation facility; and
(iii) the rental cost of the parcel of land and construction cost for setting up our
cultivation facility.
We intend to rent a parcel of land to set up our new cultivation facility. As at the
Latest Practicable Date, we have not identifi ed specific sites in Langfang on which our
new cultivation facility will be built. Our Directors estimate the typical lead time from
the construction of the premises to the actual opening of a cultivation facility will be
approximately three months.
Cultivation capacity of our new cultivation facilities
We intend to establish our new cultivatio n facility in Langfang gradually over a
three-year period. We expect to complete construction of eight enhanced large
greenhouses by the third quarter of 2024 and the remaining two enhanced large
greenhouses by the third quarter of 2025. The table below sets forth the details of our
planned new cultivation facility:
Location of
proposed
cultivation
facilities
Approximate
total gross
floor area
Expected time of
commencement of
operation
Expected number
of greenhouses
Approximate
gross floor
area per
greenhouse
Expected
maximum
cultivation
capacity
(sq.m.) (sq.m.)
Langfang, Hebei
province
24,000 Third quarter of
2024
10 enhanced large
green houses
2,400 2.0 million
pots per year
BUSINESS
–1 6 9–


--- page 179 ---
We intend to allocate approximately RMB 11.4 million of the net proceeds from
the Share Offer for the construction of the ten enhanced large greenhouses at our
Langfang Facility and we intend to fund the remaining set-up costs through our
internal resources. The breakdown of costs for the construction of the enhanced large
greenhouses is as follows:
Langfang Facility
Particulars
Estimated
investment cost
(RMB’000)
Foundation and land works 5,280
Fitting out and renovation works 49
Installation works 983
Installation of fibreglass water duct 5,077
Total construction cost 11,389
The expected breakeven operating period will be around 3 months for our new
cultivation facility in Langfang. The break even operating period is the period after
which the monthly revenue of the cultivation facilities is at least equal to their monthly
e x p e n s e s .T h ei n v e s t m e n tp a y b a c kp e r i o di se x p e c t e dt ob ea r o u n d2 7m o n t h s .
Investment payback refers to the length of time to recover the initial investment cost
from the accumulated net cash inflow to be generated from our new cultivation
facilities since the date of the initial inves tment cash outflow assuming there will be no
material impact on our sales due to fluctuation in market demand, inflations, increase
in raw material cost or labour cost.
Although our business strategy will result in an increase in cultivation capacity in
Langfang by 2.0 million pots per year when fully completed, the expansion is to be
made over the 3-year period, meaning that there will be additional capacity of
approximately 0.67 million pots per year on av erage. The average annual increment in
cultivation capacity of 0.67 million pots per year represents only approximately 5.3%
of our total expected cultivation output under optimal cultivation conditions for
FY2022. Given Beijing and Langfang ha ve combined permanent residents of
approximately 27.3 million as at 31 Decem ber 2022, more than the aggregate
permanent residents of approximately 26.8 million of Qingdao, Yantai and Weifang
in Shandong province as at 31 December 202 2, while the sales volume of our sales to
customers in these three cities in Sha ndong province exceeded 7.6 million pots in
FY2022, our Directors consider that the expansion plan in Langfang is modest.
The aggregated sales revenue of potted v egetable produce in Beijing and Langfang
is expected to further increase from RMB1 40.0 million in 2022 to RMB217.9 million in
2027, representing a CAGR of 9.3%. With only approximately 80 to 100 potted
vegetable producers and around 6,500 chain restaurants in Beijing and Langfang in
2022, our Directors are of the view that the penetration rate for potted vegetable
produce in the market remains relatively low and there is ample room for future
BUSINESS
–1 7 0–


--- page 180 ---
growth. Based on the above, our Directors consider that there is sufficient existing and
future demand to meet the increase in cultivation capacity under this business strategy.
3. Setting up a dedicated organic substrates preparation facility
Our potted vegetable produce is cultivated in pots filled with our specially formulated
organic substrates. Using such organic substrates allows our potted vegetable produce to be
cultivated with ideal nutrients for healthy growth and reduces the likelihood of
contamination and pollution compared to vegetable produce grown in open fields. The
organic substrates preparation process includes three stages: (i) the procurement and
proportioning of raw materials; (ii) the fermentation of the proportioned raw materials; and
(iii) the further processing and fermentation of the proportioned raw materials to turn the
same into organic substrates. For further details of our organic substrates preparation
process, please refer to the paragraph headed ‘‘Cultivation of our potted vegetable produce
— Organic substrates preparation process’’ in this section of the prospectus. During the
Track Record Period, we engaged suppliers to handle the first stage of the preparation
process involving the procurement of raw materials and proportioning the raw materials
according to our formula. Once the proportioned raw materials are delivered to us, we
complete the second and third stage of the prep aration process at our cultivation facilities.
As such, we intend to enhance our existing cu ltivation capability by establishing our own
organic substrates preparation facility in La ixi, Shandong province to complete all three
stages of the organic substrates preparation process internally. Our Directors believe that
there is an operational need to establish our ow n organic substrates preparation facility for
the following reasons and considerations:
(i) Developing and producing new types of organic substrates which can best suit the
growth of the various species of our potted vegetable produce
During the Track Record Period, we procured the proportioned raw materials
required for making organic substrates from suppliers who are Independent Third
Parties. Our suppliers procure the raw mat erials needed such as cow manure, fungi
residue and peanut shells and then proportion the same according to our own formula
and then deliver the proportioned raw materials to our cultivation facilities. We would
then ferment repeatedly such proportioned ra w materials to eliminate quality risks and
then mix them with further raw materials, such as turfy soil and perlite, to process and
turn such fermented and proportioned raw materials to the organic substrates required
for our cultivation purpose. For further details of our entire cultivation process, please
refer to the paragraph headed ‘‘Cultivation of our potted vegetable produce —
Cultivation process’’ in this section of the prospectus.
Under the current arrangement, we are r estricted to one formula of organic
substrates for all of our potted vegetable produce. With the establishment of our own
organic substrates preparation facility, we are able to tailor make and proportion
different formulas of organic substrate to maximise the quality of different species of
vegetable produce. The establishment of the new organic substrates preparation
facility will give us the flexibility and ability to develop and produce a variety of
organic substrates dedicated for different vegetable species which can best suit the
BUSINESS
–1 7 1–


--- page 181 ---
growth of different species of our potted vegetable produce and thus improve the
productivity and quality of the same. Furthermore, given the importance of the
organic substrate to the cultivation of our potted vegetable produce, the establishment
of our own organic substrate preparation facility will allow us to maintain the different
formulas designed for different species of vegetables in-house and prevent the
dissemination of our formulas to third-parties.
(ii) Improving the quality control of the major raw materials in our cultivation process
We have placed a strong emphasis on product quality and adopted a stringent
quality control system in our cultivation process to ensure that we meet our customers’
requirements. Since organic substrates are the major raw materials in our cultivation
process, we believe we can better control the quality of our potted vegetable produce
by controlling the quality of the organic s ubstrates with our own quality control
process during organic substrates preparation. Our Directors consider that the quality
of our potted vegetable produce depends to a large extent on the quality of the organic
substrates used in our cultivation process. By conducting the upstream production, we
will be able to have a better control of the cost of our key raw materials and thus can
further ensure the quality of our potted vegetable produce and minimise the risks from
sourcing low-quality proportioned raw materials produced by our supplier.
(iii) Mitigating potential risk of shortage of supply from our suppliers and hence offering
us more flexibility in our cultivation process
With our own organic substrates preparation facility, our Directors believe that
we will be able to control the production lead time of organic substrates which is a key
raw material for our cultivation process. Further, our Directors believe that having the
capability to produce our own organic substrates will mitigate the potential risk of
shortage of supply from suppliers and hence give us more flexibility in our cultivation
process since we can adjust the quantity of organic substrates to be produced in
accordance with our cultivation plan.
(iv) Lowering cultivation cost and achieving economies of scale
By setting up and operating our own organic substrates preparation facility, we
will be able to lower the production cost of our potted vegetable produce and increase
our gross profit margin. We estimate that the cost of proportioned raw materials for
making organic substrates prepared by us (assuming similar specifications as those we
purchased from our suppliers for FY2020, FY2021 and FY2022) will be approximately
RMB814 per tonne, which is approximately RMB490 per tonne (or 37.6%) lower than
our average purchase cost of such proportioned raw materials from our suppliers for
FY2020, FY2021 and FY2022. Assuming that th e cost of producing such proportioned
raw materials internally would be approximately 37.6% less than the cost of
purchasing from our suppliers, the cost of producing proportioned raw materials
would have been lowered by approximatel y RMB12.1 million in average per annum if
all of such proportioned raw materials were p repared internally and transported to our
cultivation facilities rather than purch ased from our suppliers for FY2020, FY2021
and FY2022.
BUSINESS
–1 7 2–


--- page 182 ---
As at the Latest Practicable Date, we have identified a potential target premise with a
floor area of 3,500 sq.m. in Laixi to set up our organic substrates preparation facility. Set
out below are details of the organic substrates preparation facility:
Location Area
Expected number of
machineries and equipment
Expected number
of personnel
Estimated
annual production
capacity
(sq.m.) (tonnes per year)
Jinling Industrial Park,
Jiangshan Town, Laixi,
Shandong province
3,500 . Single production line
composed of production
machinery equipment
including primarily
automatic dosing
machines, granulators and
roller conveyer belts.
31 cultivation and
quality control staff,
11 management and
administration staff
50,000
. 10 quality control machinery
We expect the total capital expenditure for setting up our organic substrates
preparation facility to be approximately RMB7.4 million, out of which approximately
RMB3.9 million will be used for the construction and renovation works, approximately
RMB3.0 million will be used for the acquisitio n of machinery and equipment required for
the preparation of organic substrates and app roximately RMB0.4 million will be for set-up
costs. We intend to utilise the net proceeds from the Share Offer to fund the set up of our
organic substrates preparation facility. The breakeven operating period for our new organic
substrates preparation facility is expected to be around 3 months while the investment
p a y b a c kp e r i o di se x p e c t e dt ob ea r o u n d1 0m o n t h s .
We expect the lead time from the construction of the premise to the actual opening of
the organic substrates preparation facility to be approximately three months. We currently
plan to begin operation of the organic substrates preparation facility by the fourth quarter
of 2024. Upon completion of the o rganic substrates preparat ion facility, all of the organic
substrates used for the cultivation of our potted vegetable produce will be produced and
supplied internally. We intend to engage inde pendent logistics suppliers to deliver our
organic substrate to our existing and planned cultivation facilities.
4. Strengthening our operational efficiency through upgrade of our information technology
system
We plan to strengthen our operational efficiency and organisation through the
installation of an ERP system in our operations. Our planned ERP system will include the
following components: (i) supply chain management; (ii) produc tion management; (iii) sales
management; (iv) financial management; (v) accounting management; (vi) inventory
management; and (vii) human resources man agement. The application of the ERP system
will allow us to achieve better control and tracking of information and records in various
stages of our operation process. Furthermore, as we begin to expand our operations by
setting up new cultivation facilities in differe nt geographical markets and establishing our
new dedicated organic substrates prepara tion facility, the ERP system will provide a
centralised and digitalised platform to co llect data and records in our procurement,
BUSINESS
–1 7 3–


--- page 183 ---
production and sales and marketing stage. Upon the commencement of our organic
substrates preparation facility, all of the organic substrates used for the cultivation of our
potted vegetable will be produced and supplied internally. With the new ERP system, we
will be able to maintain a real time electroni c database of the inventory level of our raw
materials including organic substrates at different cultivation facilities. Such information
allows us to ensure timely replenishment and pr oper allocation of raw materials, efficient
production of the organic substrates and to schedule the delivery of the organic substrates
ahead of time. Furthermore, we will be able to maintain an electronic database of the
utilisation level of our different cultivation f acilities and provide real time information on
our sales orders. Our Directors are of the view that the installation of an ERP system and
our transition to a centralised and digitalised system will effectively help further improve
our operational efficiency and ensure the delivery of consistent and high-quality potted
vegetable produce and services to our custom ers. We plan to utilise approximately RMB4.4
million of the net proceeds from the Share O ffer to engage a ERP system supplier for the
development, installation and maintenance of our ERP system.
OUR PRODUCTS
We are principally engaged in the cultivation and sales of potted vegetable produce,
which is cultivated and sold in pots. During the Track Record Period, our potted vegetable
produce was leafy vegetable species which included 29 species, with vegetable species such
as crown daisy, rapeseed, Frise ´e, Indian lettuce, pak choi, lettuce, Chinese celery and tatsoi
being our principal products offered in the market during the Track Record Period. All of
our potted vegetable produce has similar life cycles and time for maturation until the point
of sales ranging from approximately 22 to 31 days as affected by seasonal factors and
weather conditions. For details, please refer to the paragraph headed ‘‘Seasonality’’ in this
section of the prospectus. The following table sets forth our sales by vegetable species for
the years indicated:
Year ended 31 December Nine months ended 30 September
2020 2021 2022 2023
Vegetable species
Sales
volume
(’000
pots) RMB’000
%o ft o t a l
revenue
Sales
volume
(’000
pots) RMB’000
%o ft o t a l
revenue
Sales
volume
(’000
pots) RMB’000
%o ft o t a l
revenue
Sales
volume
(’000
pots) RMB’000
%o ft o t a l
revenue
Crown daisy (茼 蒿) 623 9,430 7.8 517 7,784 5.0 209 3,147 2.5 510 7,674 6.3
Rapeseed ( 油菜) 608 9,174 7.5 839 12,622 8.1 969 14,625 11.5 854 12,904 10.6
Frise´e( 苦菊) 567 8,526 7.0 658 9,849 6.4 390 5,847 4.6 76 1,135 0.9
Indian lettuce ( 油麥菜) 503 7,655 6.3 557 8,427 5.4 281 4,261 3.4 575 8,674 7.2
Pak choi ( 小白菜) 669 10,151 8.4 906 13,706 8.8 858 12,979 10.2 879 13,244 10.9
Lettuce ( 生菜) 486 7,356 6.0 440 6,607 4.3 493 7,406 5.8 416 6,250 5.2
Chinese celery ( 山芹) 339 5,097 4.2 751 11,319 7.3 567 8,554 6.8 788 11,917 9.8
Tatsoi ( 烏塌菜) 623 9,450 7.8 900 13,622 8.8 713 10,761 8.5 801 12,108 10.0
Purple lettuce (紫 生菜) 456 6,919 5.7 418 6,314 4.1 213 3,200 2.5 119 1,790 1.5
Amaranth (莧菜) 150 2,261 1.9 22 327 0.2 94 1,406 1.1 — — —
Malabar spinach ( 木耳菜) 358 5,405 4.4 476 7,189 4.7 471 7,123 5.7 316 4,780 3.9
Water spinach (空 心菜) 398 6,006 4.9 498 7,523 4.9 424 6,417 5.1 338 5,096 4.2
Tai cai (苔 菜) 361 5,412 4.5 718 10,774 7.0 704 10,601 8.4 630 9,463 7.8
Spinach ( 菠菜) 233 3,511 2.9 250 3,746 2.4 296 4,442 3.5 200 3,010 2.5
Purple rapeseed (紫 油菜) 544 8,208 6.8 759 11,431 7.4 633 9,572 7.6 503 7,586 6.3
BUSINESS
–1 7 4–


--- page 184 ---
Year ended 31 December Nine months ended 30 September
2020 2021 2022 2023
Vegetable species
Sales
volume
(’000
pots) RMB’000
%o ft o t a l
revenue
Sales
volume
(’000
pots) RMB’000
%o ft o t a l
revenue
Sales
volume
(’000
pots) RMB’000
%o ft o t a l
revenue
Sales
volume
(’000
pots) RMB’000
%o ft o t a l
revenue
Romaine lettuce
(綠羅馬生菜) 454 6,902 5.7 576 8,724 5.6 440 6,649 5.2 540 8,146 6.7
Purple Romaine lettuce
(紫羅馬生菜) 408 6,173 5.1 433 6,535 4.2 52 822 0.6 35 562 0.5
Panax notoginseng (田 七) 51 760 0.6 186 2,786 1.8 142 2,132 1.7 169 2,539 2.1
Sedum aizoon L ( 養心菜) 46 686 0.6 183 2,750 1.8 147 2,200 1.7 154 2,303 1.9
Ji mao cai (雞 毛菜) 54 867 0.7 49 779 0.5 13 208 0.2 — — —
Maixiang lettuce ( 麥香生
菜) 22 347 0.3 — ## 2— * ——————
Nai Bai ( 奶白菜) 62 994 0.8 62 989 0.6 21 337 0.3 — — —
Fennel ( 茴香) — — — 72 1,087 0.7 25 374 0.3 — — —
Radish (水 蘿蔔) 4 68 0.1 3 54 — * 12 4— * 22 5 — *
Choi Sum ( 菜芯) 34 2— * ———— ## 4— * 23 9 — *
Turnip (大 頭菜) — — — — — — 80 1,202 0.9 57 850 0.7
Coriander ( 香菜) — — — — — — 137 2,061 1.6 80 1,199 1.0
Garlic sprout (蒜 苗) ——————1 3 1 9 4 0 . 2———
Purple Tatsoi ( 紫烏塌) —————— 9 1 4 6 0 . 1———
Others (Note) — ## 5— * — ## — # — * — ## — # —* — ## — # —*
Total 8,022 121,405 100.0 10,273 154,946 100.0 8,395 126,694 100.0 8,044 121,294 100.0
* represents percentage ratio of less than 0.1%.
# represents amount less than RMB1,000.
## represents amount less than 1,000 pots.
Note: Others consist of our vegetable gift boxes which contain vegetable cultivated by us.
We aim at cultivating our potted vegetable species that fit for the market demand and
the changing customer taste. Further, we expand the number of species of our potted
vegetable produce by taking advantage of the enhanced heat preservation and temperature
regulation function of our enhanced greenhouses. Although the sale of our principal
products remained generally stable, we had mi nor adjustments in our product mix during
the Track Record Period. In 2019, we added ten new vegetable species in our product
portfolio including those vegetable species that are temperature sensitive, so that our
customers would have a greater variety of choice for selection and consumption. Among
these ten new vegetable species, purple rapeseed, garden lettuce, Romaine lettuce and
purple Romaine lettuce are the best-selli ng items. Meanwhile, in FY2020, we added two
new species, namely radish and choi sum to our product portfolio.
During FY2020, we suspended the cultivatio n of garlic chives due to its relatively high
technical requirements for growth and prolonged maturation period of three to four
months. Hence, we have to devote more resources and time in the cultivation of garlic
chives, and therefore, the profit margin of garlic chives is lower than other vegetable species
despite its higher selling price per pot. We als o suspended the cultivation of garden lettuce
BUSINESS
–1 7 5–


--- page 185 ---
in FY2020 as we focused on the cultivation of Romaine lettuce which is a similar specie of
garden lettuce. In FY2022, we added four new species, namely turnip, coriander, garlic
sprout and purple tatsoi to our product portfolio.
Benefited from the continuous investment in our cultivation facilities by constructing
more enhanced greenhouses which could provide better regulation in temperature and
cultivation conditions during the Track Record Period, we were able to cultivate certain
relatively non-cold resistant vegetable species in winter and hence, increase our production
capacity, flexibility of our cultivation schedul e and species diversity particularly in winter.
For further details, please refer to the par agraph headed ‘‘Cultivation of our potted
vegetable produce — Culti vation facilities’’ in this section of the prospectus.
Below are sample product photos of our principal products:
Crown daisy
Pak choi
Rapeseed
 Lettuce
Frise´e
 Chinese celery
Indian lettuce
 Tatsoi
Our products are offered in the market under our brand ‘‘ 富景農業’’ during the Track
Record Period. As our potted vegetable produ ce is sold to our customers in pots filled with
organic substrates, our potted vegetable produce is sold while still fresh and living and has
not been harvested upon sales. Our pots are primarily made of plastic, clay red in colour
and printed with our brand ‘‘ 富景農業’’ with a standard size of approximately 42 cm in
length, 23 cm in width and 11 cm in height, wh ich are designed to be used for three years
under general conditions. Selling our potted vegetable produce in pots, in contrast to
vegetable produce that is harvested before sale, allows our potted vegetable produce to
continue growing and maintain a longer period of freshness after delivery from our
cultivation facilities.
BUSINESS
–1 7 6–


--- page 186 ---
As at the Latest Practicable Date, we had been accredited with Certificate of Pollution-
free Agricultural Products* ( 無公害農產品證書) issued by Qingdao Agricultural Rural
Bureau* ( 青島市農業農村局) in respect of the potted vegetable produce cultivated at our
L a i x iF a c i l i t y .A sc o n f i r m e db yo u rP R CL e g a lA d visers, it is a prerequisite for an applicant
to have a cultivation area of at least 50,000 sq.m . at the relevant cultivation facility for the
application of the Certificate of Pollution-fr ee Agricultural Products. As the cultivation
area of each of our Xi’an Facility and Dalian Facility is less than 50,000 sq.m., we are
unable to apply for the Certificate of Pollution-free Agricultural Products for our vegetable
produce cultivated at these cultivation facilities. Despite the lack of such certificate, our
Directors believe that there is no material impact on the demand and pricing of our potted
vegetable produce cultivated from our Xi’a n Facility and Dalian Facility as we implement
standardised measures and procedures in th e raw materials procurement, cultivation
process, growth management and quality control of our potted vegetable produce across all
cultivation facilities in different locations. This can be evidenced by the fact that in FY2022,
we were selling our potted vegetable produce to our distributors in Xi’an and Dalian at the
price of RMB16.0 per pot under the framework d istribution agreements, which is slightly
above the average unit price to our distributors in Shandong province (RMB15.0 per pot)
a n dt h a tw eh a v es u c c e s s f u l l ye s t a b l i s h e dap r e s e n c ei nt h em a r k e ti nX i ’ a na n dD a l i a na s
reflected by the increase in the sales volume in these areas. For further details on our
cultivation process and such accreditations, please refer to the paragraphs headed
‘‘Cultivation of our potted vegetable produc e — Cultivation process’’ and ‘‘Licences,
permits and certificates’’ respective ly in this section of the prospectus.
During the Track Record Period, our produc ts were sold to our distributors at selling
prices generally ranging from RMB15.0 per pot to RMB16.0 per pot.
BUSINESS
–1 7 7–


--- page 187 ---
DISTRIBUTION AND SALES NETWORK
Our geographical coverage
During the Track Record Period, we sold our products primarily in Shandong province
where we derived 87.1%, 91.2%, 90.3% and 91.6% of our revenue during FY2020, FY2021,
FY2022 and 9M2023, respectively. We extended our geographical coverage by commencing
sales of our potted vegetable produce in Xi’an, Shaanxi province in May 2019, and we
further extended our geographical coverage by commencing sales of our potted vegetable
produce in Dalian, Liaoning province in December 2019. The table below shows a
breakdown of our revenue in terms of the geographical locations of our customers during
the Track Record Period:
Year ended 31 December Nine months ended 30 September
2020 2021 2022 2022 2023
RMB’000
% of total
revenue RMB’000
% of total
revenue RMB’000
%o ft o t a l
revenue RMB’000
% of total
revenue RMB’000
%o ft o t a l
revenue
(unaudited)
Shandong province
Qingdao 74,787 61.6 99,547 64.3 81,911 64.6 57,322 64.7 79,601 65.7
Yantai 24,496 20.2 32,726 21.1 26,966 21.3 18,735 21.1 27,429 22.6
Weifang 6,454 5.3 9,018 5.8 5,591 4.4 4,070 4.6 4,028 3.3
Shaanxi province
Xi’an 8,704 7.2 6,206 4.0 5,316 4.2 3,932 4.4 4,517 3.7
Liaoning province
Dalian 6,964 5.7 7,449 4.8 6,910 5.5 4,567 5.2 5,719 4.7
Total 121,405 100.0 154,946 100.0 126,694 100.0 88,626 100.0 121,294 100.0
Our customers
We sell our potted vegetable produce primarily through a network of distributors in
the PRC, which is consistent with industry pr actice. Our distributors then on-sell our
products to over 1,000 end-user customers in Shandong, Liaoning and Shaanxi provinces in
the PRC, the majority of which are restaurant s and hotels. These hotels and restaurants
end-user customers sell both traditional vegetable produce and potted vegetable produce.
However, majority of the potted vegetable produce sold by them was supplied by us. To a
lesser-extent, we also sell our product s to end-user customers through WeMall.
BUSINESS
–1 7 8–


--- page 188 ---
The following table sets forth a breakdown of our revenue by sales channels during the
Track Record Period:
Year ended 31 December Nine months ended 30 September
2020 2021 2022 2022 2023
RMB’000
%o ft o t a l
revenue RMB’000
%o ft o t a l
revenue RMB’000
%o ft o t a l
revenue RMB’000
%o ft o t a l
revenue RMB’000
%o ft o t a l
revenue
(unaudited)
Sales to distributors 121,028 99.7 154,937 100.0 126,692 100.0 88,624 100.0 121,292 100.0
Direct sales to end-user
customers (Note) 377 0 .39 — *2 — *2 — *2 — *
Total 121,405 100.0 154,946 100.0 126,694 100.0 88,626 100.0 121,294 100.0
Note: Total revenue attributable to direct sales to end-user customers for each of FY2020, FY2021,
FY2022 and 9M2023 includes revenue attributable to the online sales to end-user customers of
approximately RMB8,000, RMB9,000, RMB 2,000 and RMB2,000, respectively.
* represents percentage ratio of less than 0.1%.
For FY2020, FY2021, FY2022 and 9M2023, sale s to our largest customer in each year/
period accounted for approximately 15.3%, 16.3%, 16.5% and 16.7%, of our total revenue,
respectively. For the same years/period, our five largest customers in each year/period
combined accounted for approximately 56.1%, 66.3%, 67.3% and 68.1%, respectively, of
our total revenue. Please refer to the paragraph headed ‘‘Risk Factors — Risks relating to
our business — We derive a significant portion of our revenue from our five largest
customers and any decrease in or termination of our sales to any one of them may have a
material adverse effect on our business and financial conditions’’ in this prospectus for the
risk on customer concentration.
During the Track Record Period, none of our five largest customers in each year/
period was also our suppliers. As at the Latest Practicable Date, our five largest customers
(save for Customer F which was incorporated in April 2019, Customer A which was
terminated for being our distributor in July 2020 and Customer G which replaced Customer
A) in each year/period during the Track Record Period had maintained business
relationship with us for at least eight years. For further details about the termination of
the distribution agreement with Customer A, please refer to the paragraph headed ‘‘Sales to
distributors’’ in this section of the prospectus. During the Track Record Period and up to
the Latest Practicable Date, we did not have any material dispute with our customers.
BUSINESS
–1 7 9–


--- page 189 ---
The following tables set forth certain information with respect to our five largest
customers in each year/period during the Track Record Period:
FY2020
Rank Customer Location
Principal business
activity of the
customer
Role in
our sales
Approximate
year(s) of business
relationship with
our Group as at
the Latest
Practicable Date
Typical credit terms and
payment method
Approximate
amount of
purchase
Approximate
percentage of our
total revenue
RMB’000 (%)
1C u s t o m e r B
(Note 1) Qingdao, Shandong
province
Wholesale of
vegetable produce
Distributor Nine Four months;
bank transfer
18,608 15.3
2C u s t o m e r D (Note 2) Yantai, Shandong
province
Wholesale of
vegetable produce
Distributor Eight Four months;
bank transfer
14,486 11.9
3C u s t o m e r F (Note 4) Qingdao, Shandong
province
Wholesale of
vegetable produce
Distributor Five Four months;
bank transfer
13,631 11.2
4C u s t o m e r E (Note 3) Qingdao, Shandong
province
Wholesale of
vegetable produce
Distributor Nine Four months;
bank transfer
10,889 9.0
5C u s t o m e r G (Note 5) Qingdao, Shandong
province
Wholesale of
vegetable produce
Distributor Three Four months;
bank transfer
10,503 8.7
FY2021
Rank Customer Location
Principal business
activity of the
customer
Role in
our sales
Approximate
year(s) of business
relationship with
our Group as at
the Latest
Practicable Date
Typical credit terms and
payment method
Approximate
amount of
purchase
Approximate
percentage of our
total revenue
RMB’000 (%)
1C u s t o m e r G
(Note 5) Qingdao, Shandong
province
Wholesale of
vegetable produce
Distributor Three Four months;
bank transfer
25,288 16.3
2C u s t o m e r B (Note 1) Qingdao, Shandong
province
Wholesale of
vegetable produce
Distributor Nine Three to four months;
bank transfer
25,068 16.2
3C u s t o m e r D (Note 2) Yantai, Shandong
province
Wholesale of
vegetable produce
Distributor Eight Three to four months;
bank transfer
19,482 12.6
4C u s t o m e r F (Note 4) Qingdao, Shandong
province
Wholesale of
vegetable produce
Distributor Five Three to four months;
bank transfer
17,807 11.5
5C u s t o m e r E (Note 3) Qingdao, Shandong
province
Wholesale of
vegetable produce
Distributor Nine Three to four months;
bank transfer
15,003 9.7
BUSINESS
–1 8 0–


--- page 190 ---
FY2022
Rank Customer Location
Principal business
activity of the
customer
Role in
our sales
Approximate
year(s) of business
relationship with
our Group as at
the Latest
Practicable Date
Typical credit terms and
payment method
Approximate
amount of
purchase
Approximate
percentage of our
total revenue
RMB’000 (%)
1C u s t o m e r G
(Note 5) Qingdao, Shandong
province
Wholesale of
vegetable produce
Distributor Three Four months, bank
transfer
20,914 16.5
2C u s t o m e r B (Note 1) Qingdao, Shandong
province
Wholesale of
vegetable produce
Distributor Nine Three months, bank
transfer
20,729 16.4
3C u s t o m e r D (Note 2) Yantai, Shandong
province
Wholesale of
vegetable produce
Distributor Eight Three months, bank
transfer
16,164 12.8
4C u s t o m e r F (Note 4) Qingdao, Shandong
province
Wholesale of
vegetable produce
Distributor Five Three months, bank
transfer
15,054 11.9
5C u s t o m e r E (Note 3) Qingdao, Shandong
province
Wholesale of
vegetable produce
Distributor Nine Three months, bank
transfer
12,255 9.7
9M2023
Rank Customer Location
Principal business
activity of the
customer
Role in
our sales
Approximate
year(s) of business
relationship with
our Group as at
the Latest
Practicable Date
Typical credit terms and
payment method
Approximate
amount of
purchase
Approximate
percentage of our
total revenue
RMB’000 (%)
1C u s t o m e r G
(Note 5) Qingdao, Shandong
province
Wholesale of
vegetable produce
Distributor Three Four months, bank
transfer
20,234 16.7
2C u s t o m e r B (Note 1) Qingdao, Shandong
province
Wholesale of
vegetable produce
Distributor Nine Three months, bank
transfer
20,077 16.5
3C u s t o m e r D (Note 2) Yantai, Shandong
province
Wholesale of
vegetable produce
Distributor Eight Three months, bank
transfer
16,103 13.3
4C u s t o m e r F (Note 4) Qingdao, Shandong
province
Wholesale of
vegetable produce
Distributor Five Three months, bank
transfer
14,569 12.0
5C u s t o m e r E (Note 3) Qingdao, Shandong
province
Wholesale of
vegetable produce
Distributor Nine Three months, bank
transfer
11,661 9.6
Notes:
(1) Customer B, which had 105 to 140 end-user cu stomers and 12 to 16 employees during the Track
Record Period, initially traded with us as a sole proprietor and later traded with us as a limited
liability company incorporated in the PRC. It i s owned as to 99.0% by the same sole proprietor
since its incorporation in November 2018.
(2) Customer D, which had 105 to 124 end-user cu stomers and 13 to 17 employees during the Track
Record Period, initially traded with us as a sole proprietor and later traded with us as a limited
liability company incorporated in the PRC. It i s owned as to 99.0% by the same sole proprietor
since its incorporation in May 2019.
BUSINESS
–1 8 1–


--- page 191 ---
(3) Customer E, which had 76 to 110 end-user cu stomers and 10 to 12 employees during the Track
Record Period, initially traded with us as a sole proprietor and later traded with us as a limited
liability company incorporated in the PRC. It is sol ely owned by the same sole proprietor since its
incorporation in March 2019.
(4) Customer F, which had 87 to 102 end-user cu stomers and 11 to 13 employees during the Track
Record Period, traded with us as a limited liability company incorporated in the PRC.
(5) Customer G, which had 114 to 150 end-user customers and 17 to 20 employees during the Track
Record Period, traded with us as a limited liability company incorporated in the PRC.
To the best knowledge of our Directors, none of our Directors or their associates, or
any Shareholders, who owns more than 5% of our issued share capital, had any interest in
any of our five largest customers in each year/period for the Track Record Period and up to
the Latest Practicable Date.
Sales to distributors
Our major distributors consist of distributors who are principally engaged in the
wholesale of vegetable produce and are primarily involved in the on-selling of our potted
vegetable produce to end-user customers in their respective designated regions. The end-
user customers of our distributors are mainly hotels and restaurants. Each distributor is
assigned with an exclusive geographical area to avoid cannibalism and undue competition
among our distributors. As at 31 December 2020, 31 December 2021, 31 December 2022 and
30 September 2023, we had 12 distributors, respectively. In FY2020, FY2021, FY2022 and
9M2023, sales to our distributors (which were all based in the PRC) amounted to
approximately RMB121.0 million, RMB154 .9 million, RMB126.7 million and RMB121.3
million, respectively, representing approximately 99.7%, 100.0%, 100.0% and 100.0% of
our revenue during the same periods, respectively. Through our distributors, our potted
vegetable produce was sold to over 1,000 end-user customers in Shandong, Liaoning and
Shaanxi provinces in the PRC during the Track Record Period, the majority of which are
hotels and restaurants. Our distributors generally place their purchase orders every day.
The delivery vehicles of our distributors wou ld normally come to our cultivation facilities
every day to pick up the potted vegetable produce. To the best knowledge of the Directors,
the Group’s distributors would generally deliver most of the potted vegetable produce on
the delivery vehicles to their hotels and restaurants end-user customers directly from the
cultivation facility within the same day or the next day. The following table sets out the
major stage of our transaction and the estima t e dt i m er e q u i r e df o rat y p i c a lt r a n s a c t i o n
cycle:
BUSINESS
–1 8 2–


--- page 192 ---
Major stage of the transaction: Estimated time required:
(1) receipt of purchase orders from our
distributors
the first day
(2) Our distributors come to our
cultivation facility to pick up the
potted vegetable produce and
deliver the potted vegetable
produce to their hotels and
restaurants end-user customers
The second/third days after order
placing by our distributors
(3) receipt of funds by us from the
distributors
2-4 months from the date of order by our
distributors (subject to the credit period
we granted to the respective distributors)
Throughout the Track Record Period, we engaged 12 distributors, who then on-sell
our products to over 1,000 end-user customers. To the best knowledge of our Directors,
before the Track Record Period, 7 of our distributors were engaged in the business of
distributing traditional agricultural products, 3 of our distributors worked in the catering
industry and 3 of our distributors were ex-employees of our Company who are familiar with
the potted vegetable produce market. Our distributors build connections with the end-user
customers through pre-existing customer relationships, past work experience and visits to
end-user customers as a distributor of our potted vegetable produce. All of our distributors
have a long standing relationship of three years or more with over 50% of their respective
end-user customers. Although some of our distributors were engaged in other business
before, all of our distributors currently solely sell our potted vegetable produce. The
transitions of our distributors’ business scope, to the best knowledge of our Directors, were
mainly attributable to the higher profit margin and stable supply of our products and the
exclusivity nature of distributing our potted vegetable produce in designated geographical
locations.
Reasons for adopting distributorship model
Our potted vegetable produce is a consumable product that is for the daily
consumption by the general public and it is quite common that the potted vegetable
produce needs to be delivered to customers, such as hotels and restaurants, located in
numerous different premises for the consumption by the consumers. As a result, it is an
industry practice for vegetable and potted vegetable producers to sell their products
through distributors in the PRC.
On the one hand, our end-user customers usually need to prepare a variety of different
food ingredients to satisfy the public’s needs, but on the other hand, our end-user customers
a r eo n l ya b l et ok e e pl i m i t e ds t o c ko nf o o di n g r edients in order to preserve the freshness. It
is typical for them to order from a wide range of suppliers in small quantity per order and
require frequent replenishment.
BUSINESS
–1 8 3–


--- page 193 ---
Furthermore, the mass market of the catering industry is notably diverse and scattered,
ranging from different style of cuisines and scale of catering service operation. It is also a
constantly changing market, where the consumers’ taste and preference change rapidly and
the demand from each individual hotel and restaurant tightly follows consumers’
preference. To liaise with and accommodate the needs of each individual hotel and
restaurant will involve substantial cost and efforts.
In addition, since the cultivation facilities of agricultural producers are usually located
in suburban area, save for a handful of custome rs which are located closely proximate to the
cultivation facility, it is extremely rare that the operators of hotels and restaurants in the
city would attend to the cultivation facility t o pick up the products they ordered as it is not
cost-effective to do so given the small quantity per order and the frequency of delivery
required to maintain freshness of the agricultural produce. As a result, distributorship
model is widely adopted in the agricultural indu stry as it effectively and cost-efficiently
connects the agricultural producers and the end-user customers.
Our Directors believe that the adoption of d istributorship model in supplying the
potted vegetable produce to the market is beneficial to the long term development of our
Group after taking into consideration the following factors:
(i) Frequency of delivery: our potted vegetable produce needs to reach the end-user
customers as soon as possible once reaching maturity and our end-user customers
usually request replenishment on a day-to-day basis. Given the need for frequent
delivery of small quantity of potted vegetable produce to each individual end-user
customer, it would not be cost effective for our Group to establish our own
delivery fleet. It is estimated that we will incur an additional transportation cost
of RMB2.0 per pot and an initial investment of approximately RMB10.1 million
(comprising cost of investment in vehic les of approximately RMB8.6 million and
working capital of approximately RMB1.5 million which is equivalent to
additional operating expense for one month), based on our business scale in
FY2020;
(ii) Business focus on cultivation and quality of our produces: as the core competitive
strength of our Company is our experience in the cultivation and the quality of
our potted vegetable produce, it is considered that such factors should remain as
our core focus in the future. During the Track Record Period, we had more than
1,000 active end-user customers from five cities and their subordinate towns. It
would be unduly burdensome in reaching out to such vast number of end-user
customers. If we conduct direct sales to them, we would have to establish more
local offices and recruit more local (i) sales and marketing and (ii) logistic and
delivery staff in order to penetrate into and develop our business in these cities
and towns;
(iii) Clientele coverage: our end-user customers consist of restaurants and hotels which
spread over a wide area in different cities that cover an area of over 2,200 sq.km,
whilst our sales and marketing team is a small team consisting of four staff
members, which is insufficient for estab lishing a sizeable distribution and sales
BUSINESS
–1 8 4–


--- page 194 ---
network. The distributorship model a llows our Company to leverage on the client
network, local market insights and sales and marketing experience of the
distributors and penetrate the products into different geographical regions more
quickly and effectively; and
(iv) Special transportation requirement: due to the special feature of our products, the
use of distributorship model would facilitate the collection of used pots by our
distributors from their customers and to reuse the pots in our next round of
cultivation. Under the current arrangement, our distributors could coordinate the
collection of used pots from their end user customers and return the used pots to
us.
By taking advantage of our distributor network which includes their local market
knowledge, resources, established distributio n and sales channels and concrete commitment
to the promotion and expansion of the end-u s e rc u s t o m e rb a s e ,w ea r ea b l et oa v o i dt h e
significant capital investment that would o therwise be required to establish a sizeable
distribution and sales network. We believe that our distribution model not only allows us to
reach more geographical regions in the PRC and penetrate our products into the market
more quickly and effectively, but also minim ises operational risk to our Group and allows
us to focus on our core competitive strengths in cultivation, despite the extra variable cost
of approximately RMB1.3 per pot (derived from the spread that our distributor could earn
(i.e. approximately RMB3.3 per pot) in FY2020 minus the additional transportation cost of
approximately RMB2.0 per pot), which we wou ld have incurred if we delivered our potted
vegetable produce directly to our end-user customers.
Apart from our distribution model, we sell a small percentage of our products through
WeMall, a channel which presents online p romotion and enhanced brand visibility
opportunities for our Group. As the main current purpose of our sales through WeMall
is for marketing and branding, it does not contradict with our adoption of the
distributorship model. For further details, please refer to the paragraph headed ‘‘Sales to
end-user customers’’ in this section of the prospectus.
Criteria for selecting distributors
In view of the advantages of distributorship as discussed above, we engaged local
distributors since 2015. Given the nature of the potted vegetable produce that requires
frequent delivery of small quantity of potted vegetable produce we expect each distributor
to devote focused effort on establishing customer base with a large number of end-user
customers in a relatively small region (e.g. one city or even one region within a major city).
Thus, our management believes it is in our interests to engage several regional distributors,
being sole proprietors in some cases, each of them having local knowledge and networks in
their confined regions, rather than to engage a sizable distributor with a provincial
coverage. For such reasons, historically we engaged some distributors which were sole
proprietors before the Track Record Period. This strategy is proven to be successful, as our
Group has recorded a sustainable growth in revenue and profit during the Track Record
Period. In year 2019, for the purpose of enhancing corporate governance and better
management of our distributors, we encouraged our major distributors to become
BUSINESS
–1 8 5–


--- page 195 ---
incorporated entities and required any new d istributor to be a limited liability company.
Thus, our then major distributors (except for one of these major distributors which was
already a limited liability company in 2019) c onverted from sole proprietors to limited
liability companies. As confirmed by the Dir ectors, none of our distributors was a sole
proprietor as at the Latest Practicable Date. In China, it is an entrenched tradition that
agricultural related activities are conducted b y villagers in the capacity of sole proprietor or
in the form of small family business. Among the wholesalers of agricultural produce, more
than 80% of them are trading as a sole proprietor or registered individual businesses in 2022
in Shandong province. Hence, due to the prevalence of sole proprietorship in the
agricultural industry, it is common and practi cally inevitable, for agr icultural producers
to engage various sole proprietors for the distribution of their products in the regional
market.
We have established an internal system to a ssess whether a candidate is eligible and
suitable to be engaged as a distributor. Th e key criteria we apply in assessing whether a
candidate shall be engaged as our distributor (regardless of whether they are owned or
operated by the Independent Third Parties or our ex-employees) are (i) local industry
knowledge; (ii) distribution network coverage ; (iii) potential client base; (iv) the resources
to be devoted in developing the customer base; (v) creditworthiness; (vi) their business track
record in catering, sales of agricultural produc ts or related business; and (vii) their plan on
how they will establish a customer base for our potted vegetable produce. In the course of
our assessment, our senior management enquires with the candidate and requests it to
provide all material background information such as its relevant experience in the vegetable
industry and clientele for our verification and consideration. We will also further evaluate
their distribution capability by reviewing the s cale of their distribution workforce and their
distribution efficiency. We will only enter into distribution agreement if the candidate can
substantially satisfy our requirements under our internal assessment.
We have established an appropriate, adequate and effective internal control measures
on engaging distributors, as we (i) have condu cted suitable pre-engagement procedures
before entering into distributor agreement wi th our distributors, including conducting
interviews with the potential distributors , performing site visits and reviewing the
background of the potential distributors; (ii) have internal controls on managing credit
terms granted to the distributors, including p erforming background check, preparing credit
assessment form before accepting a distributor, and re-assessing the credit terms for those
with long outstanding trade receivable; and (iii) have review the performance of the existing
distributors on a regular basis.
We adopt a flexible approach in relation to the expansion of our distributorship
network. Factors that we may consider including (i) the geographical location of the
potential market, (ii) the expected cultivation output required for the expansion and the
remaining cultivation capacity of our existin g cultivation facilities, (iii) our financial
conditions if capital investment is needed for construction of new greenhouses, (iv) the
estimation of demand in the new market by the distributor(s) and us; and (v) the general
economy and market conditions. To balance the risk and uncertainty in new geographical
BUSINESS
–1 8 6–


--- page 196 ---
market expansion, unless there is clear market demand in the region, as a usual practice, we
prefer not to engage too many new distributors at the same time so as to control and
mitigate the risk of over expansion.
Change of distributors during the Track Record Period
The following table sets forth the changes in the number of our distributors for the
periods indicated:
Year ended 31 December
Nine months
ended 30
September
2020 2021 2022 2023
Number of distributors at the
beginning of the year/period 12 12 12 12
Number of distributors added
during the year/period 1 0 0 0
Number of existing distributors
terminated during the year/
period (1) 0 0 0
Net increase in the number of
distributors during the year/
period 0 0 0 0
Number of distributors at the
end of the year/period 12 12 12 12
In 2019, we engaged two new distributors in Yantai, one new distributor in Weifang,
one new distributor in Xi’an and one new distributor in Dalian. We had one new distributor
to replace an old distributor for selling of our potted vegetable produce for FY2020 and nil
new distributor for the remaining of the Track Record Period.
Termination of distribution agr eement with Customer A in FY2020
In July 2020, we terminated our distribution agreement with Customer A, which is one
of our customers during the Track Record Period, under mutual agreement. The
termination of distribution agreement with Customer A was due to the violation of the
terms of our distribution agreement by Customer A who sold our potted vegetable produce
beyond the designed geographical location as stipulated in the distribution agreement. For
details about how we identified the breach of the distribution agreement by Customer A,
please refer to the paragraph headed ‘‘Manag ement of our distributors’’ in this section of
the prospectus.
Due to the incident, we issued a letter to Customer A to notify it our intention to
terminate the distribution agreement. However, since we have over nine years of business
relationship with Customer A and would like to minimise and mitigate the cost and impact
of such termination, instead of unilaterally terminate the agreement with Customer A, we
mutually agreed with Customer A that the termin ation shall be subject to the condition that
Customer A agrees to pass to our Group certain market information and its customers list.
BUSINESS
–1 8 7–


--- page 197 ---
While we were advised by our PRC Legal Advisers that we are entitled to file a claim in
the relevant court for compensation for the bre ach of contract, it is uncertain as to the time,
the final amount of compensation and the le gal cost that could be recovered in legal
proceedings. Moreover, unilaterally terminating the agreement with Customer A would
bring significant disruption to the business of our Group as neither our Group nor the
successor of Customer A was in possession of the full list and all the contact details of the
end-user customers of Customer A, and it would take a considerable amount of time to re-
establish the clientele at the relevant region. The management of our Group had thoroughly
considered the situation and decided that mu tual termination is most favourable to our
Group as it could alleviate, to the greatest extent, the impact on our business operation and
our end-user customers, and could promote a smooth transition for the change of
distributors, which was the prime objective in this matter. To the best knowledge of our
Directors, such mutual termination arrangement also brings benefits to our Group and
Customer A in avoiding significant time and costs to be incurred by both parties in legal
proceedings.
In occurrence of such incident, we were exploring a new distributor to replace
Customer A and we identified Customer G which subsequently passed our internal
evaluation with our assessment criteria as set out in the paragraph headed ‘‘Distribution
a n ds a l e sn e t w o r k—S a l e st od i s t r i b u t o r s—C riteria for selecting distributors’’ in this
section of the prospectus regardless of whether Customer G will obtain Customer A’s
assistance or take up the end-user custome rs of Customer A. Eventually in July 2020,
Customer A, Customer G and our Group signed a tripartite agreement in which, Customer
A undertook to properly handover and voluntarily assist Customer G in communication
with the end-user customers for the change of distributors. In August 2020, our Group
signed a distribution agreement with Customer G to take up the designated geographical
region for distribution we originally assign ed to Customer A. In addition, our sales and
marketing personnel had closely followed up a nd coordinated with Customer G to ensure it
ran smoothly at the initial stage of business operation. Both Customer A and Customer G
are Independent Third Parties and are independent from each other. Save as disclosed, there
was no other side agreement, arrangement or understanding among the Group, Customer A
and Customer G, and there was no other relationship between Customer A or its owner
with the Group or with Customer G.
From 1 August 2020 to 31 December 2020, the total revenue from Customer G
amounted to RMB10.5 million, accounting for approximately 8.7% of our total revenue in
FY2020. Since Customer G has taken up the role as one of our distributors in August 2020
and up to December 2021, Customer G sourced 83 new end-user customers which
contributed additional revenue of approx imately RMB11.0 million to our Group. Between
August 2020 and December 2021, our Group gene rated revenue of approximately RMB35.8
million from Customer G, representing month ly revenue of approximately RMB2.1 million,
which is higher than the monthly revenue of approximately RMB1.2 million as generated
from Customer A for the FY2020. Thus it is demonstrated that Customer G is capable of
sourcing new customers and promoting our potted vegetable produce in the market, and
our Directors believe that Customer G has satisfactorily taken over the relevant
geographical region of distribution and the termination of distribution agreement with
Customer A has no significant impact on the business operation and financial performance
BUSINESS
–1 8 8–


--- page 198 ---
of our Group. To the best knowledge of the Directors, Customer A had ceased its business
operation for the sale of potted vegetable produce immediately after the said termination of
the distribution agreement and it was subsequently deregistered on 8 September 2021.
All of the distributors who ceased to be our distributors, including Customer A, had
settled their trade receivables with the Group during the Track Record Period.
Our cooperations with our three ex-employee distributors
During the Track Record Period and up to the Latest Practicable Date, we had three
distributors (i.e. Customer E and two other distributors in Shandong province) which were
wholly-owned by our ex-employees. We first star ted our business in cultivation, marketing
and sale of potted vegetable produce in 2012. In light of a growing demand of pollution-free
potted vegetable produce in the local market which brought about positive business
prospects, we decided to expand our business in 2014 by hiring more employees. During the
expansion stage in 2014, we had hired a total of 15 employees in 2014. The said three ex-
employees were employed by our Group as our sales and marketing representatives in April
2014. In 2015, to cope with our continuous expansion, we decided to adopt the
distributorship model to reach more end-user customers and penetrate deeper into
existing markets. Seeing that the ex-employees were equipped with in-depth knowledge of
o u rp r o d u c t sa n dw e r ew i l l i n gt oh e l pe x p a n dour market presence in the Qingdao area, we
were desirous to engage them as our distributors. Thus, we initiated discussion with the said
three ex-employees to explore the opportunity for cooperation under the distributorship
model. As the said three ex-employees also showed great interest in setting up their own
distribution businesses, they left our Gro up in 2015. We then reached distribution
agreements with the said three ex-employees in 2015. Since then they set up their own
business for selling vegetable produce and becoming our distributors. Our Directors
confirm that our sales to such distributors had been on normal commercial terms which
were consistent with the terms offered to other distributors. Our Directors also confirm that
none of those ex-employees had ever acted as distributors while still being our employees at
the same time. Our Directors believe that en gaging these ex-employees, who are familiar
with our market practice and possess adequate product knowledge, as our distributors
would be beneficial to the business development of our Group. In identifying and assessing
whether a candidate shall be engaged as our distributor, we apply the same set of criteria to
all candidates regardless of whether they are owned or operated by the Independent Third
Parties or our ex-employees.
During the Track Record Period, the total revenue from our said three ex-employee
distributors amounted to approximatel y RMB23.3 million, RMB31.4 million, RMB25.2
million and RMB24.7 million, respectively, acco unting for approximately 19.2%, 20.3%,
19.9% and 20.4% of our total revenue, respectively.
To the best knowledge of our Directors, save for the disclosure above, during the
Track Record Period and up to the Latest Practicable Date, all of our five largest
distributors in each year/period during the Track Record Period were Independent Third
Parties, and none of our five largest distributors in each year/period during the Track
Record Period was owned by our current or ex-employees.
BUSINESS
–1 8 9–


--- page 199 ---
Designated geographical region
We impose geographical restriction to our distributors by assigning designated areas
for distribution in the distribution agr eements. We believe there is no potential
cannibalisation or undue competition among our distributors because (i) our distributors
are prohibited from selling our products in ar eas beyond the designated geographical areas
and we are entitled to unilaterally terminate the distribution agreements with our
distributors if they are in breach of suc h restriction pursuant to the framework
distribution agreements; (ii) the designated geographical areas of each distributor do not
overlap; (iii) we arrange our sales and mark eting personnel to conduct regular on-site
inspections on our distributors and keep track of any potential cannibalisation or
competition among them; and (iv) we maintain a relatively low number of distributors of
12 as at the Latest Practicable Date considering the extensiveness and size of the potted
vegetable produce markets in Qingdao, Yantai, Weifang, Xi’an and Dalian.
Minimum purchase requirement, sales targets and rebates
We set monthly minimum purchase requirements in the framework distribution
agreements to our distributors to ensure a minimum amount of purchase of potted
vegetable produce from our distributors and we are entitled to unilaterally terminate the
distribution agreement with our distributors if they fail to meet the minimum purchase
requirements for three consecutive months. Terms of such minimum purchase requirements
are negotiated and determined with referenc e to various criteria, including the past
performance of the distributor, the market conditions and our own estimated annual
cultivation volume. We do not provide sales targets nor rebates to our distributors in the
distribution agreements. During the Track Record Period and as at the Latest Practicable
Date, none of our distributors has failed to meet the minimum purchase requirements.
We recognise our revenue from sales at the point of time when control over our
products has transferred, being after our distributors’ acknowledgment of acceptance of our
products. Following the acknowledgement of acceptance of our products, our distributors
have full discretion over the manner of distribution within the designated geographical
region and price to sell our products, and bears the risks of obsolescence and loss in relation
to our products. Our distributors will not be entitled to any recourse, such as obtaining
refund or asking for return of products from our Group if they fail to on-sell our products
to their customers.
Management of our distributors
We have entered into framework distribution agreements with our distributors to
govern our transactions with them and to manage o ur distributors efficiently in a consistent
and systematic manner. Further, we arrange our sales and marketing personnel to conduct
surprise spot check from time to time on our dis tributors and the end-user customers and
conduct regular assessments with our distributors to collect, among others, information
about inventory levels of our distributors and their distribution network, check whether our
distributors distribute our potted vegetable produce within the designated geographical
area, monitor the number of distributors in any given area and keep track of any potential
competition among our distributors. Throug h these spot checks and assessments, we seek to
BUSINESS
–1 9 0–


--- page 200 ---
ensure that the terms and conditions of the distr ibution agreements are being complied with
throughout our distribution and sales network. In addition, we also arrange our staff to
handle complaints and whistleblowers.
We will terminate the distribution agreement if there is any material breach of the
agreement by our distributors such as the provi sions relating to geographical restrictions
and minimum purchase requirements. For in stance, in FY2020, we received a complaint
that Customer A sold our potted vegetable produce beyond the designated geographical
location. In view of such, we arranged our sales and marketing personnel to conduct secret
inspections to gather evidence of the said alleged breach of Customer A. As our sales and
marketing personnel in the subsequent inspe ctions discovered that Customer A continued
to breach the geographical restrictions as to distribution despite our warnings, we
terminated our distribution agreement with Customer A in July 2020. Hence, we believe
that our current arrangement in respect of our distributors has allowed us to have better
credit control and distribution management.
Consistent with market practice, our distributors do not keep material amount of
inventories as the distributors will on-sell our products to end-user customers within a short
period of time after they receive our products due to the perishable nature of our potted
vegetable produce. During the Track Record Period and up to the Latest Practicable Date,
we were not aware of any material accumulation of stock by our distributors. As confirmed
by our five largest customers in each year/period during the Track Record Period, the
amount of unsold potted vegetable produce held by each of our five largest customers as at
31 December 2020, 31 Decemb er 2021, 31 December 2022 and 30 September 2023 were not
more than 17 pots.
We regularly evaluate the performance of o ur distributors based primarily on the
following factors:
. purchase amount under the distribution agreement;
. payment history; and
. maintenance of their creditworthiness
We normally renew the relevant distributi on agreements every one year to two years
with the distributors who pass our performance evaluation.
Framework distribution agreements
We enter into legally-binding framework distribution agreements with our distributors,
who maintain buyer and seller relationships with us. All distributors purchase our products
by making requests to us specifying the type and quantity of products they want from time
to time. We are not obligated to accept any return of products that have not been sold by
our distributors, and our distributors would bear any loss for unsold products. During the
Track Record Period, we did not accept any return of unsold products from our
distributors.
BUSINESS
–1 9 1–


--- page 201 ---
The following table sets forth a summary of the principal terms of our framework
distribution agreements with our distributors:
Term of agreement One year to two years
Geographical restriction for
distribution
The distributors are only allowed to sell our products
within the designated geographical areas stipulated
in the agreement
Pricing Fixed prices stipulated in the agreement
Minimum purchase amount The distributors promised to order from us for each
month not less than a specific amount of our
products as stipulated in the agreement
Delivery cost Distributors bear the cost
Payment method By bank transfer
Credit terms 60 days to 120 days
Passing of risk Risk of the goods passes to the distributors upon
their acknowledgment of acceptance of the goods
Early termination right We are entitled to unilaterally terminate the
agreement if the distributors (i) fail to meet the
minimum purchase requirements for three
consecutive months; or (ii) on-sell our products
outside the designated geographical area. The
agreement is also terminable by either party by
giving one month prior notice to the other party and
the parties shall liaise and agree with each other for
any early termination arrangement
Renewal No automatic renewal; the parties would have to
enter into a separate agreement to continue business
relationship upon expiry of the agreement
Our framework distribution agreements do not impose any restriction on our
distributors on how they fix the selling pri ce of our potted vegetable produce. To the
best knowledge of our Directors, our distributors were generally selling our potted
vegetable produce to their customers at an average price of RMB18.4 per pot in FY2020
and RMB18.5 per pot in FY2021, FY2022 and 9M2023, with a price range of
approximately RMB17 per pot to RMB22 per pot during the Track Record Period.
Our framework distribution agreements do not impose any restriction on our
distributors from selling vegetables which are supplied to them by other vegetable
producers (including potted vegetable produce and/or vegetable produce cultivated by other
cultivation methods). As the end-user customers of our potted vegetable produce are mainly
restaurants and hotels which purchase a wide variety of vegetable produce on a daily basis,
we believe that there is an on-going demand for vegetable produce of different kinds, and
BUSINESS
–1 9 2–


--- page 202 ---
thus it would not cause material impact to our business if our distributors sell other
vegetable species. Moreover, our potted vegetable produce and other vegetable produce
cultivated using traditional in-ground cultivation methods are highly differentiable as our
potted vegetable produce is sold while still fresh and living, often displayed in restaurants to
arouse consumers’ interest. Further, we believe that our ability to supply 27 potted
vegetable produce species all-year-round gives us significant competitive edge over other
potted vegetable producers. Although there is no such restriction on our distributors from
selling vegetable produce supplied by other vegetable producers, to the best knowledge of
our Directors, our distributors did not sell any potted vegetable produce from other
vegetable producers during the Track Record Period and up to the Latest Practicable Date.
As confirmed by the Directors, all of our distributors only sold the Group’s potted
vegetable produce but not other agricultural produce during the Track Record Period. To
the best knowledge of the Directors, due to (i) the leading position of the Group in the
potted vegetable produce market in Shandong pro vince; (ii) the different sale and delivery
requirement of potted vegetable produce; (iii) the limited resources of the distributors who
would like to focus on a subsector (i.e. the potted vegetable industry) which is more
profitable and less competitive as compared to traditional vegetable market; and (iv) the
lack of synergetic effects of selling ordinary vegetable or other food at the same time, it is
commercially reasonable for all of our distributors to rely on the Group as their sole
supplier during the Track Record Period. To t he best knowledge of the Directors, save as
disclosed in this prospectus, there were or are no other past or present relationship or
dealings (including family, business, employment, trust, fund flow, financing or otherwise)
between our Group and each of our distributors, their respective shareholders, directors or
senior management or any of their respective ass ociates. Our Directors also confirmed that,
they had not, and none of their family members and/or any of their investee entities had,
directly or indirectly, provided any financing or guarantees/security in respect of any
financing arrangement (whether past or prese nt), for the funding of the establishment or
operation of the Group’s distributors.
Financial impact of adopting distributorship model
In FY2020, FY2021, FY2022 and 9M2023, the spread between the wholesale price (i.e.
the average price at which our Group sells to ou r distributors) and the retail price (i.e. the
average price at which our distributors sell to hotel and restaurants) were approximately
RMB3.3 per pot, RMB3.4 per pot, RMB3.4 per pot and RMB3.4 per pot on average,
respectively. The market price spread generally ranges between RMB2.0 per pot to RMB5.0
per pot. Based on this, our Directors are of the view that the said price spread was in line
with the market range. Should the Company decide to deliver our potted vegetable produce
to end-user customers by its own fleet and employees, it is estimated that our Group will
incur an additional transportation cost o f RMB2.0 per pot, and need to make an initial
investment cost of approximately RMB10.1 m illion (comprising cost of investment in
vehicles of approximately RMB8.6 million and working capital of approximately RMB1.5
million which is equivalent to additional operating expense for one month), based on the
scale of operation in FY2020. Considering the transportation cost of RMB2.0 per pot and
the investment cost of approximately RMB10.1 million, our Group is of the view that the
profit margin of our distributors is slim and reasonable, as they have to make substantial
investment, maintain a large number of distribution workforce and to bear the various
business risks. Having considered (i) the various reasons for adopting distributorship model
as explained in the paragraph headed ‘‘Distribution and Sales Network — Sales to
BUSINESS
–1 9 3–


--- page 203 ---
distributors — Reasons for adopting distributorship model’’ in this section above; (ii) the
saving of cost and investment in adopting distr ibutorship model; and (iii) the lower business
risks which are born by our distributors, our Directors are of the view that adopting
distributorship model is in the interests of our Company and our Shareholders as a whole.
Customer concentration
For FY2020, FY2021, FY2022 and 9M2023, our revenue attributable to our five
largest customers in each year/period amoun ted to approximately 56.1%, 66.3%, 67.3%
and 68.1%, while our revenue attributable to our largest customer in each year/period for
the corresponding period amounted to approximately 15.3%, 16.3%, 16.5% and 16.7%,
respectively. To diversified our customer base in Yantai, we expanded our geographical
coverage to other regions, such as Weifang, Dalian and Xi’an since 2019 by appointing new
distributors in these regions.
In respect of our top five largest customers, the concentration of credit risk associated
with them was 58.8%, 63.1%, 69.1% and 69.2% of the total gross trade receivables and
among which, only 14.0%, 18.1%, 18.6% an d 21.9% was due from the Group’s largest
customer as at 31 December 2020, 2021, 2022 and 30 September 2023, respectively. As of
the Latest Practicable Date, the five customer s with the largest trade receivables balance
aging over 90 days as of 30 September 2023 had fully settled their respective outstanding
trade receivables as of 30 September 2023. Based on the above and the fact that we have
internal controls policies in p lace to manage our customers, we consider the risk of default
to be limited. Our management considers that there was no significant concentration of
credit risk with any single customer as of 30 September 2023. There has been no material
change in credit risk since 30 September 2023 and the amount of trade receivables that have
been settled as of 30 September 2023 was in line with our management’s expectations,
having taken into consideration of the enterprise customers’ ongoing business activities,
market conditions, as well as their financial strength and shareholder background. Based on
the actual repayment pattern exhibited by our customers during the Track Record Period
and up to the Latest Practicabl e Date, the recoverability of the trade receivables was in line
with the management’s expectation and we did n ot have material collection issues with any
of our customers, thus there was no material deviation that indicates an adjustment in
expected credit loss rate for trade receivables.
Reasons for our customer concentration
Our Directors consider that our customer concentration during the Track Record
Period is contributed by a combination of the following key factors:
(1) Our Group is able to maintain a stable and mutual beneficial relationship with our
major distributors
S a v ef o rC u s t o m e rFw h i c hw a si n c o r porated in April 2019 and Customer G
which replaced Customer A, which was terminated for being our distributor in July
2020, our Group maintained over eight years business relationship with our five largest
customers in each year/period during the Track Record Period as at the Latest
Practicable Date. Our Directors believe that the long term business relationship and
BUSINESS
–1 9 4–


--- page 204 ---
stable demand from our five largest customers demonstrate that our five largest
customers and their respective end-user cus tomers are satisfied with our products and
therefore continued to place orders to us. Despite our reliance on the distribution
network of our five largest customers, our five largest customers are also mutually
dependent on our Group for the supply of potted vegetable produce. To the best
knowledge of our Directors, our Group is the sole supplier of potted vegetable produce
and the major supplier of vegetable produce of our five largest customers in each year/
period during the Track Record Period. Further, since our potted vegetable produce is
perishable in nature and needs to be delivered to a large number of different premises
for the consumption by the consumers, it is necessary for our five largest customers to
maintain a high business turnover in order to attain a reasonable profit margin. Hence,
our stable and large quantity of supply would enable our five largest customers to
achieve economies of scale. Our Directors believe that our five largest customers treat
our Group as their valued business partner, and that we have established a long-term
strategic relationship with them and such relationship will have mutual benefits. As
such, our Directors believe that it would be commercially sensible for our five largest
customers to continue to place orders for our products and the likelihood of
termination of our relationship with our five largest customers is low.
(2) Our Group strategically focused on Shandong province market, which has growing
demands on potted vegetable produce
We have been focusing on Shandong province potted vegetable market since our
commencement of cultivation of our potted vegetable produce in 2012. Our largest
cultivation facility is strategically located at Laixi, which allows convenient access to
prominent markets at major cities in Shandong province. The sales volume of potted
vegetable produce in Shandong province increased from 23.7 million pots in 2017 to
48.5 million pots in 2022, representing a CAGR of approximately 15.4%. Further, the
sales volume of potted vegetable produce in Shandong province is expected to reach
61.6 million pots in 2027, representing a C AGR of approximately 4.9% from 2022 to
2027. During the Track Record Period, all our five largest customers in each year/
period were our distributors for the Shandong province market. Our Directors believe
that we had built up a business network and reputation in Shandong province market
which fostered our foundation to maintain our market share and capture future
growth.
Sustainability of our business model
Our Directors believe that our business model is sustainable and we are not reliant on
any single distributor despite such customer concentration due to the following reasons:
(1) Shandong province is still a fast-growing market
The sales volume of potted vegetable produce in Shandong province is expected to
reach 61.6 million pots in 2027, represen ting a CAGR of approximately 4.9% from
2022 to 2027, and the sales of potted vegetable produce in Shandong province is likely
to maintain a growing trend with a CAGR of approximately 7.3%, reaching
BUSINESS
–1 9 5–


--- page 205 ---
RMB1,102.2 million in 2027. Our Directors b elieve that we would be able to leverage
on our abundant experience and the business network in Shandong province market to
strive for maintaining the market share there.
(2) We have been expanding our geographical coverage to other regions in the PRC
We are expanding our geographical coverage to other regions in the PRC. In 2019,
we engaged two new distributors in Yantai, one new distributor in Weifang, one new
distributor in Xi’an and one new distributor in Dalian.
Before Track Record Period, we have ex tended our geographical coverage by
commencing sales of our potted vegetable produce in Xi’an, Shaanxi province and
Dalian, Liaoning province in 2019. As a result, the proportion of our revenue
contribution from our five largest customers had declined from the year ended 31
December 2019 to FY2020. The aggregated revenue contribution from our five largest
customers accounted for 70.1% of our total revenue in the year ended 31 December
2019, which was reduced to 56.1%, 66.3%, 67.3% and 68.1% of our total revenue in
FY2020, FY2021, FY2022 and 9M2023.
Going forward, we will continue endeavour to broaden our customer base and
geographical coverage by establishing a new cultivation facility in Langfang, Hebei
province. For details, please refer to the paragraph headed ‘‘Business — Our business
strategies — Expansion of our cultivation capacity — 2. Establishing a new cultivation
facility in new geographical market’’.
(3) We are able to replace our distributors if they are in violation of the terms of the
distribution agreement
We generally maintained go od relationships with our five largest customers in
each year/period during the Track Record P eriod. As confirmed by our Directors, we
did not receive any material complaints from our five largest customers in each year/
period during the Track Record Period and as at the Latest Practicable Date. Further,
we aim to develop long term business relationship with our distributors or potential
distributors in both existing and new markets. In order to properly manage our
distributors, we perform regular inspections on our distributors to ensure that they
comply with the terms of our distribution agreement. During FY2020, we terminated
the distribution agreement with Customer A, one of our customers during the Track
Record Period, who violated the terms of th e distribution agreement by selling our
potted vegetable produce beyond the designated geographical location as stipulated in
the distribution agreement. Since we have signed a distribution agreement with a new
distributor to take up the designated geogra phical region for distribution originally
assigned to Customer A immediately upon the termination with Customer A, the
termination of distribution agreement wit h Customer A has no significant impact on
the business operation and financial performance of our Group. For further details,
please refer to the paragraph ‘‘Sales to distri butors’’ in this section of the prospectus.
BUSINESS
–1 9 6–


--- page 206 ---
S a l e st oe n d - u s e rc u s t o m e r s
To a lesser-extent, we also directly sell our potted vegetable produce to end-users
customers. For FY2020, FY2021, FY2022 and 9M2023, our direct sales to end-users
customers amounted to approximately R MB0.4 million, RMB9,000, RMB2,000 and
RMB2,000, respectively, representing 0.3%, less than 0.1%, less than 0.1% and less than
0.1% of our total revenue during the same periods, respectively. To the best knowledge of
our Directors, during the Track Record Period and as at the Latest Practicable Date, all of
our end-user customers were Independent Third Parties.
Our Group initially conducted direct sales to the end-user customers such as hotels and
restaurants at the beginning of our business operations. Since the potted vegetable produce
is a small segment of the traditional vegetable s market, we granted a longer credit period to
such end-user customers to facilitate the sale of our products to them. Such practice
continued to apply to such end-user customers in FY2020 and, accordingly, 180 days credit
period was granted to them in FY2020. From 2021 onwards, we discontinued our direct
sales to hotels and restaurants. This was primarily driven by the increased maturity and
proven efficiency of the distributorship model, which our Group had adopted in 2015.
Apart from conducting direct sales to the end-user customers such as hotels and
restaurant, our Group sells our products to consumers through an online platform,
WeMall. Selling potted vegetable produce directly to consumers through WeMall presents
online promotion and enhanced brand visibility opportunities for our Group. This enables
individual consumers to experience the fresh and living potted vegetable produce by
purchasing directly from our Group. Such business model does not contradict with the
distributorship model as the main purpose of selling the products through WeMall is for
marketing and brand building.
During the Track Record Period, we gene rated total revenue of approximately
RMB8,000, RMB9,000, RMB2,000 and RMB2,000 for each of FY2020, FY2021, FY2022
and 9M2023 respectively from selling to end-users customers online by using WeMall. We
signed a service contract with an independent e-commerce provider in November 2018 for
the sale of our potted vegetable produce at a fi xed service fee via WeMall for a term of three
years, and we extended the service contract by one year in November 2021 and further
extended the service contract by two years in December 2022.
Pricing policy
Our sales and marketing department determ ines the selling prices of our products on
the basis of cost-plus method. In determining our pricing strategies, we primarily consider
factors such as the market demand and supply of our products, cost of our raw materials
and cultivation overheads. We review the se lling prices of our products occasionally based
on these factors and other general marke t conditions and adjust the selling prices if
necessary.
BUSINESS
–1 9 7–


--- page 207 ---
We have limited control over the prices at wh ich our customers are willing to purchase
our products as prices are driven mainly by economic factors such as demand and supply.
We also do not have control over the prices at which our distributors on-sell our products
to their customers.
Payment terms and credit terms
Except for online end-user customers of WeMall who pay immediately upon purchase,
during the Track Record Period, we grant a credit period of around 60 days to 120 days to
our distributors and a credit period of around 180 days to our end-user customers,
depending on their credit history, relationship with us and business scale. At the beginning
of the Track Record Period, a longer credit period of 120 days was granted to our
distributors, in line with the relatively long credit period that our distributors granted to
their respective end-user customers. As the potted vegetable produce was a pricey and high-
end segment to the traditional vegetable produce market and those end-user customers a
relatively long credit period was initially granted by our distributors to expand the customer
base. As such, our Group agreed to grant a longer credit period to these distributors for the
benefit of the Group. Because of the relatively high profit margin of our Group, our
Directors believe that our Group is able to continue to offer more competitive and longer
credit terms to our distributors so that our distributors can secure the relationships with
more respective end-user customers. Our Group in such scenario can ultimately develop our
distributorship network and thus strength our position in the potted vegetable produce
market in the PRC.
We regularly review our credit term with our distributors from time to time. During the
Track Record Period, having considered that the distributors have gained larger bargaining
power over their respective end-user customers with an enlarged customer base of over
1,000 hotels/restaurants, our Group gradually shortened the credit period granted to most
of our distributors from 120 days in FY2020 to the range of 60 — 120 days for FY2021,
FY2022 and 9M2023, with 12, 6, 4 and 4 of our distributors granted credit terms of 120
days, nil, 4, 6 and 6 of our distributors granted credit terms of 90 days, and nil, 2, 2 and 2 of
o u rd i s t r i b u t o r sg r a n t e dc r e d i tt e r m so f6 0d a y sa sa t3 1D e c e m b e r2 0 2 0 ,2 0 2 1 ,2 0 2 2a n d3 0
September 2023 respectively. In addition, our distributors had also shortened the credit
period granted to their customers when we gradually shortened the credit period we granted
to them during the Track Record Period. The overall credit period granted by our
distributors to their respective end-user customers were lowered gradually from 90 — 120
days in FY2020 to 60 — 120 days in FY2021, FY2022 and 9M2023. Our credit term policy
has been enforced throughout the Track Record Period except in FY2022 when we have
been more flexible in enforcing our credit terms for distributors in light of the uncertainty
over the business environment in relation to the lockdown measures in various regions in
China during the COVID-19 epidemic. Therefo re our average trade receivables turnover
days for FY2022 was 144.3 days and was higher than our credit term range. As the PRC
government has substantially lifted its COVID-19 prevention and control policies since
December 2022, we have urged our distributors for faster settlement of trade receivables
and enforced our credit terms in 2023. However, since the third quarter of the year is our
peak season, we recorded a monthly average revenue of approximately RMB16.7 million in
the third quarter of 2023, as compared to the monthly average revenue of approximately
BUSINESS
–1 9 8–


--- page 208 ---
RMB13.5 million for 9M2023. As a result, our tr ade receivable balance increased from
approximately RMB53.4 million as at 31 Dec ember 2022 to approximately RMB58.4
million as at 30 September 2023. Due to the i ncrease in revenue in 9M2023, our trade
receivables turnover days decreased slightly to 126.1 days in 9M2023. However, it is still
higher than our credit terms for distributors which ranged from 60 to 120 days mainly
because of our high trade receivable balances as at 31 December 2022 which led to higher
average trade receivable balances for the 9M2023.
The trade receivable recovery period of vegetable suppliers in the PRC generally ranges
from one to six months in general, and the credit period granted by our Group was within
the range of and in line with the general practic e of the catering industry and comparable to
the norm of the potted vegetable industry in the PRC.
Further, considering that (i) we do not offer a lower selling price for shorter credit term
granted to our distributors; and (ii) the credit period granted to our distributors generally
range from 60 to 120 days during the Track Record Period, which is less than one year, our
Directors consider, and the Reporting Accountants concur, the said credit term granted to
our distributors does not constitute financing from our Group and no financing income has
been recognised in accordance with HKFRS 15.
For each of FY2020, FY2021, FY2022 and 9M2023, our trade receivables turnover
days were approximately 99.2 days, 93.0 days, 144.3 days and 126.1 days, respectively. Our
finance and accounting department carries out monthly reconciliation exercise of all
outstanding accounts receivables and produces receivables reconciliation reports every
month. If a distributor or end-user customer does not settle its outstanding receivables
when they are due, our sales and marketing personnel will contact such customer by
telephone, issue demand letters and/or visit such customer’s premises to follow up on the
overdue debts. In the event that such customer continues to be delinquent, we would take
legal enforcement action to recover the relevant debts. Our finance and accounting
department monitors our receivable balances on an ongoing and regular basis and considers
whether bad or doubtful debt provisions are necessary. As at 31 December 2020, 31
December 2021, 31 December 2022 and 30 Sept ember 2023, our allowance for doubtful
debts was approximately RMB1.2 million, RMB1,000, RMB0.2 million and RMB0.1
million, respectively, representing approxi mately 1.0%, less than 0.1%, 0.1% and 0.1% of
our respective revenue. For these reasons, our Directors consider our credit management
policy as appropriate and do not consider there b eing any material liquidity risk associated
with our credit policy. For further details regarding our credit control policy, please refer to
the paragraph headed ‘‘Financial Information — Analysis of selected statement of financial
position items — Trade receivables’’ in this prospectus.
Product return, warranty and after-sales service
All of our framework agreements do not provide for product returns or warranty
periods. As our distributors and end-user customers conduct inspections on our products
before acknowledging acceptance, we generally do not accept any return of our products
nor do we accept any warranty claims once such customer has acknowledged acceptance of
the products sold and at such point, all titles and risks in connection with our products will
BUSINESS
–1 9 9–


--- page 209 ---
be passed to the customer. During the Track Record Period, we did not record any amount
of sales return from our customers. Further, we did not incur any expenses as a result of
providing any after-sales services or receive any requests for after-sales services from our
customers during the Track Record Period.
Seasonality
During the Track Record Period, we experienced seasonality in the cultivation of our
potted vegetable produce due to weather conditions. As we rely on natural heat and light
sources in the regulation of our greenhouse climate, our cultivation volume decreased
during colder seasons as the temperature inside our greenhouses is lower and the
illumination inside our greenhouses decrea ses with the shorter length of insolation
duration during colder seasons, which in t urn leads to slower maturation and longer
growth cycles of our potted vegetable produce in colder seasons. For further details on our
industrial cultivation method and greenhouses, please refer to the paragraphs headed
‘‘Cultivation of our potted vegetable produce — Cultivation process’’ and ‘‘Cultivation of
our potted vegetable produce — Cultivation fac ilities’’ in this section of the prospectus.
During the Track Record Period, we also exper ienced seasonal fluctuations in sales of
our potted vegetable produce due to customers’ purchase patterns. We recorded higher
revenue from the sale of our potted vegetable produce in the third quarter of the year. For
specific regional markets, the potted vegetable market may show seasonality fluctuations in
line with the catering market. For example, th e catering market in Qingdao generally gains
larger revenue in summer and autumn due to the growing number of visitors attracted by
various festivals including the Qingdao beer festival in August. Hence, the demand for our
potted vegetable produce generally increases during this period in line with the growing
catering market.
We recorded lower revenue from the sale of our potted vegetable produce in the first
quarter of the year, which was in line with the industry norm. Since the end-user customers
of our distributors are mainly hotels and restaurants, their operation time will affect the
demand of our potted vegetable produce. Most of the restaurants will be temporarily closed
for business for around seven days during the Chinese New Year holidays and therefore, the
reduction of demand from restaurants during this period may lead to a lower revenue from
sale of potted vegetable produce in the first quarter of the year. Moreover, potted vegetable
producers in Shandong province generally record a lower sales revenue in the first quarter
of the year due to the lower cultivation volume in winter as a result of the longer growth
cycle of potted vegetable produce caused by the lower temperature and shorter illumination
duration in the region.
BUSINESS
–2 0 0–


--- page 210 ---
The following table sets forth a breakdown of our revenue by quarters for the periods
indicated:
Year ended 31 December
2020 2021 2022
RMB’000
% of total
revenue RMB’000
% of total
revenue RMB’000
% of total
revenue
First quarter 21,342 17.6 28,763 18.6 19,204 (Note 2) 15.2
Second quarter 24,132 19.9 42,224 (Note 1) 27.3 23,443 (Note 2) 18.5
Third quarter 38,676 31. 8 46,243 29.8 45,979 36.3
Fourth quarter 37,255 30.7 37,716 24.3 38,068 30.0
Total 121,405 100.0 154,946 100.0 126,694 100.0
Notes:
(1) There was a significant increase in revenue generated in the second quarter of 2021 as compared to
that of 2020, mainly due to the conversion of trad itional regular greenhouses to enhanced large
greenhouses during the third quarter of 2020 in our Laix i Facility which enabled us to cultivate more
potted vegetable produce during the winter seas on in 2020 and, therefore, contributed to the
increase in revenue in the second quarter of 2021.
(2) Operation of Laixi Facility, our largest culti vation base, was suspended for more than a month
between March and April 2022, which caused the te mporary suspension of our production and sales
activities leading to a decrease in revenue in the first two quarters of 2022.
MARKETING AND PROMOTIONAL ACTIVITIES
We believe we attract and retain our custome rs through the quality and safety of our
potted vegetable produce and the reliability of our supply. We invite our distributors and
end-user customers to visit our cultivation fac ility to demonstrate our industrial cultivation
method, cultivation scale and quality control procedures. To promote recognition of our
brand ‘‘富景農業’’, enhance the visibility and marketability of our products and expand our
customer base, we have engaged in a variety of marketing and promotional activities, such
as attending trade shows and exhibitions relating to our industry and we have also engaged
in advertising our products on our website. We intend to continue to participate in various
trade shows and exhibitions of our industry to further increase the awareness of our brand
in the markets and make our products more visible to potential customers as well as
allowing us to collect updated information on market trends and consumer preferences.
Our sales and marketing personnel are generally experienced in sales and marketing
activities. They are primarily responsible for approaching and liaising with potential and
existing customers, promoting our products, formulating and implementing our marketing
strategies, gathering market information including market trends and estimates, conducting
regular inspections and collecting information on our distributors.
For FY2020, FY2021, FY2022 and 9M2023, we incurred advertising and promotional
expenses of RMB12,000, RMB8,000, nil and RMB1,000, respectively, representing less than
0.1%, less than 0.1%, nil and less than 0.1% of our total revenue during the same periods,
respectively.
BUSINESS
–2 0 1–


--- page 211 ---
CULTIVATION OF OUR POTTED VEGETABLE PRODUCE
Cultivation process
We cultivate our vegetable produce in green houses and in pots filled with our specially
formulated organic substrates, which are made primarily from raw materials such as cow
manure, fungi residue and peanut shells that are proportioned, mixed and processed
through high-temperature fermentation. Using such organic substrates allows our potted
vegetable produce to be cultivated with ideal n utrients for healthy growth, and reduces the
likelihood of contamination and pollution compared to vegetable produce grown in open
fields.
We apply an industrial cultivation method to produce our potted vegetable produce.
Such cultivation method requires the use of enclosed greenhouses together with the
application of our horticultural know-how and equipment in connection with pest control,
heat preservation, ventilation and/or shading of sunlight to adjust parameters such as
temperature, humidity, illumination duration and carbon dioxide density during the
cultivation process in our greenhouses in order to create an appropriate and ideal
microclimate environment for the growth of our potted vegetable produce. Our industrial
cultivation method standardises cultivation process, stabilises vegetable yield, improves
product quality and reduces exposure to environmental and natural risks. As a result, it
makes all-year-round cultivation of our potted vegetable produce possible and allows us to
cultivate potted vegetable produce that is of s uperior quality with desirable appearance,
freshness and size.
BUSINESS
–2 0 2–


--- page 212 ---
The entire cultivation process of potted vegetable produce commencing from
procurement of raw materials to delivery takes approximately 40 days to 50 days,
depending on the species of vegetable produce cultivated and the season of cultivation. We
have adopted horticultural techniques and have developed proprietary horticultural know-
how for our cultivation process. The chart below illustrates the major steps of cultivation of
our potted vegetable produce:
Procurement and proportioning of
raw materials for organic substrates
(performed by our organic substrates suppliers)
Fermentation of proportioned
raw materials
Further processing of
fermented and proportioned
raw materials and turning
the same to be organic substrates
Sowing
Procurement of seeds* Procurement of foliar
fertilisers and biopesticides*
Growth management
Maturation management
Sales
Cultivation
process
Organic
substrates
preparation
process
Approximately
7 days
Approximately
10 days
Approximately
22 days to 31 days
(affected by seasonal
factors and weather
conditions)
Approximately
1 day to
2 days
* Since we procure seeds, foliar fertilisers and biope sticides on regular occasions during our cultivation
process in accordance to our cultivation schedule and the remaining inventories level, the procurement
of seeds, foliar fertilisers and biopesticides usually will not take up additional time.
Organic substrates preparation process:
Procurement and
proportioning of raw
materials for organic
substrates:
Our supplier sources the raw materials needed, such as
cow manure, fungi residue and peanut shells and then
proportion the same according to our formula. The
supplier will then supply the proportioned raw materials
for our organic substrates to us for our fermentation.
Fermentation of
proportioned raw
materials:
We ferment repeatedly at our cultivation facility the
proportioned raw materials which we procure from our
supplier. The fermentation t emperature is required to
reach a minimum of 65 ˚C in order to eliminate quality
risks from harmful pathogens, insect eggs and weed seeds.
BUSINESS
–2 0 3–


--- page 213 ---
Further processing of
fermented and
proportioned raw
materials and turning
t h es a m et ob eo r g a n i c
substrates:
Further raw materials, such as turfy soil and perlite, are
added to the fermented and proportioned raw materials,
w h i c ha r et h e nm i x e de v e n l ya n dp r e s e r v e dt ot u r nt h e
same to be organic substrates.
Cultivation process:
Sowing: Sower machine is used for filling pots with organic
substrates and sowing seeds. We vary the sowing density,
sowing depth and water content according to our
horticultural know-how on the different ideal growth
conditions across vegetable species.
Growth management: After two to thre e days from sowing, seedlings sprout
from the seeds. Growth of the seedlings are then managed
according to our horticultu ral know-how by controlling
cultivation conditions.
For our enhanced regular greenhouses and enhanced
large greenhouses, we regulate (i) temperature inside our
greenhouses by using insulating quilts to trap heat inside
our greenhouses (especially during the cold winter) and
through adjusting the air vents to control the inflow and
outflow of air; and (ii) the level of illumination by rolling
sun shading curtains over the roofs of our greenhouses to
block excessive sunlight as well as to lower the
greenhouses’ temperature especially during the hot
summer.
For certain of our enhanced regular greenhouses, we
utilise a vegetable greenhouse environment monitoring
system to monitor parameters such as pH value of organic
substrates, temperature, humidity, carbon dioxide density
and illumination duration inside our greenhouses. Our
vegetable greenhouse environment monitoring system
consist of various sensors and electronic displays which
provide real-time data on the temperature and humidity
in our greenhouses, the intensity of illumination, carbon
dioxide density and the pH value in our organic substrate.
Our cultivation staff monitor these important parameters
and manually adjust the equip ment in our greenhouses,
such as air vents, sun shadin g curtains and insulation
quilts if necessary according to the changing
circumstances for the purpose of effectively and
efficiently maintain the optimal cultivation condition.
BUSINESS
–2 0 4–


--- page 214 ---
We also manage water application on our potted
vegetable produce through irrigation systems and we
apply foliar fertilisers and biopesticides if necessary.
Similar to other agricultural produce in general, our
potted vegetable produce is vulnerable to infestations of
pests and we rely on a comprehensive pest control system
w h i c hi so p e r a t e db yo u rs t a f ft op r o t e c to u rp o t t e d
vegetable produce. Our comprehensive pest control
system comprises pest killer lamps, insect traps and
physical barrier such as insect proof nets. Further, the
cultivation of vegetable produce in greenhouses also
prevents the invasion of pests such as crickets and
diamondback moths as the translucent plastic
greenhouse films or glass structures would serve as an
effective physical barrier to the pests from the external
environment. In addition, our cultivation personnel
would also conduct regular inspection to check our pest
control level and may adjust our pest control measures or
apply biopesticides if necessary.
Maturation management: When the vegetable produce have reached maturity,
withered and damaged leaves are removed from the
vegetable produce.
Sales: The matured vegetable produce is sold and delivered to
our customers.
Cultivation facilities
As at the Latest Practicable Date, we had th ree cultivation facilities in operation for
cultivating our potted vegetable produce, comprising of (i) Laixi Facility; (ii) Xi’an Facility;
and (iii) Dalian Facility. The aggregate land area of our cultivation facilities covers
approximately 431,605 sq.m..
At the commencement of the Track Record Period, our Laixi Facility initially
comprised (i) the Laixi Land Parcel A; (ii) the Laixi Land Parcel B; and (iii) the Laixi Land
Parcel C. In 2019, we entered into lease agreements with Independent Third Parties to lease
the lands and the greenhouses for our Xi’an Facility and Dalian Facility. To cope with our
recent expansion, in the third quarter of 2020, we further leased from the People’s
Government of Rizhuang Town of Laixi the Laixi Land Parcels D and from an Independent
Third Party the Laixi Land Parcel E which are geographically proximate to our Laixi Land
Parcel A, Laixi Land Parcel B and Laixi Land Parcel C for cultivation of potted vegetable
produce. For further details of the above properties, please refer to the paragraphs headed
‘‘Properties — Owned properties’’, ‘‘Properti es — Leased properties’’ and ‘‘Properties —
Other property interests in relation to the Laixi Land Parcel C’’ in this section of the
prospectus.
BUSINESS
–2 0 5–


--- page 215 ---
The table below sets forth the location, size and the year of commencement of
operation of our existing three cultivation facilities as at the Latest Practicable Date:
Cultivation facilities Address
Total
owned
land area
Total
leased
land area
Other
land area
Number of
greenhouses
Total gross
floor area of
greenhouses
Year of
commencement
of operation
Expiry date of leasehold/right
of use
(sq.m.) (sq.m.) (sq.m.) (sq.m.)
Laixi Facility Laixi, Qingdao,
Shandong Province
148,137
(Note 1)
N/A N/A 23 38,000
(Note 4)
2010
(Note 5)
N/A
N/A 121,801
(Note 2)
N/A 41 70,468
(Note 4)
2010 for Laixi
Land Parcel B,
2020 for Laixi
Land Parcels
Da n dL a i x i
Land Parcel E
(Note 5)
26 December 2060,
30 June 2030 and
1 October 2029,
respectively, for the Laixi
Land Parcel B, the Laixi
Land Parcels D, and the
Laixi Land Parcel E
N/A N/A 128,334
(Note 3)
40 28,333
(Note 4)
2010
(Note 5)
16 June 2056
Xi’an Facility Gaoling District,
Xi’an,
Shaanxi Province
N/A 13,333 N/A 7 7,000 2019 31 July 2025
Dalian Facility Jinzhou District,
Dalian,
Liaoning Province
N/A 20,000 N/A 29 11,600 2019 30 September 2028
148,137 155,134 128,334 140 155,401
Notes:
(1) The total owned land area of approximately 148,137 sq.m. of our Laixi Facility (i.e. the Laixi Land
Parcel A) excludes a parcel of slopy land of approx imately 66,667 sq.m. we leased to an Independent
Third Party for a term of five years since 1 April 2019 for planting of trees. Please refer to the
paragraph headed “Properties — Ow ned properties” in this section of the prospectus for further
details about the land.
(2) The total leased land area of our Laixi Facility consists of three parts (i) the land with a site area of
approximately 34,467 sq.m. (i.e. the Laixi Land P arcel B) we leased from the People’s Government
of Rizhuang Town of Laixi since December 2010; (ii) the land with a site area of approximately
76,667 sq.m. (i.e. the Laixi Land Parcels D) we l eased from the People’s Government of Rizhuang
Town of Laixi since July 2020; and (iii) the land with a site area of approximately 13,333 sq.m. (i.e.
the Laixi Land Parcel E) we leased from an Independent Third Party since July 2020. The site area of
Laixi Land Parcel E was slightly reduced to approximately 10,667 sq.m. in FY2022 due to the
resumption of land by the government for road widening works adjacent to our Laixi Land Parcel E.
(3) Other land area of our Laixi Facility refers to the land (i.e. the Laixi Land Parcel C) that our Group
obtained the land use rights under the Land Reservation Agreement we entered into with the
People’s Government of Rizhuang Town of Laixi. Plea se refer to the paragraph headed ‘‘Properties
— Other property interests in relation to the Laixi Land Parcel C’’ in this section of the prospectus
for further details.
(4) The total gross floor area of greenhouses of our Laixi Facility is approximately 136,801 sq.m., which
is smaller than its total land area of approxima tely 398,272 sq.m. by approximately 261,471 sq.m.,
because the total land area includes areas of greenery, ponds, storage and roads, etc at our Laixi
Facility. As confirmed by our Dir ectors, some land parcels at our Laixi Facility (i.e. Laixi Land
BUSINESS
–2 0 6–


--- page 216 ---
Parcel A, Laixi Land Parcel B and Laixi Land Parce l C) consist of greenery areas of approximately
73,667 sq.m., fragmented areas between greenhouses of approximately 37,933 sq.m., storerooms and
office of approximately 13,333 sq.m., roads of approximately 40,000 sq.m., slopy lands of
approximately 9,667 sq.m. and water channel an d ponds of approximately 41,333 sq.m.. Thus, the
unusable land area amounts to approximately 215,933 sq.m.
(5) The year of commencement of operation refer to the time that we have commenced cultivation of
non-potted vegetable produce at our Laixi Facility.
In determining the location of our cultivation facilities, we primar ily take into account
the market demand and the proximity to the loc ation of our potential customers, in order to
shorten delivery time and maintain a high level of freshness of our products when they reach
the location of our customers. Our largest cult ivation facility is strategically located at
Laixi, which allows convenient access to prominent markets at major cities in eastern part
of Shandong province, namely Qingdao, Yantai and Weifang. The following map shows the
location of our Laixi Facility and our major markets in Shandong province:
Weifang
Shandong Province
Laixi Facility
Qingdao
Yantai
Bohai Sea
As we adopt an industrial cultivation method to produce our potted vegetable produce,
the greenhouses in our cultivation facilities play an important role in our cultivation
process. All of our greenhouses (including our traditional greenhouses and enhanced
greenhouses) offer basic protection to our potted vegetable produce by avoiding direct
exposure to external environment, and therefore our potted vegetable produce is less
susceptible to the damage that may be cause d by adverse weather (such as rainstorm or
typhoon) and pest infestation. Our greenhouses are also designed with venting features
which allow the staff in our cultivation facilities to regulate the temperature, humidity,
airflow and carbon dioxide density by adjustin g the air vents during the day if so required.
Over the years since we commenced our potted vegetable cultivation business in 2012, we
acquired the know-how and technique to improve our greenhouse facilities to fit the
BUSINESS
–2 0 7–


--- page 217 ---
environment optimal for planting our potte d vegetables. Since 2012, we developed our
enhanced greenhouses that are made to our sp ecifications and equipped with rolling sun
shading curtains and insulating quilts for the regulation of illumination duration and
temperature inside our greenhouses to protect our perishable vegetables. These features in
our greenhouses, along with other facilities/equipment and the application of our
horticultural know-how, are essential in providing an appropriate and ideal microclimate
environment for the growth of our potted vegetable produce.
As at the Latest Practicable Date, the greenhouses in our cultivation facilities can be
categorised into (i) traditional regular greenhouse; (ii) traditional large greenhouse; (iii)
enhanced regular greenhouse; and (iv) enhanced large greenhouse. The table below
illustrates the basic characteristics of our different greenhouses:
Type Features/facilities/equipment Principal functions
Approximate
gross floor
area per
greenhouse
Approximate
construction
cost per
greenhouse
(sq.m.) (RMB’000)
Traditional regular
greenhouse
Steel frame structure with
translucent plastic films,
air vents and
thermometer
Basic greenhouse functions
(e.g. rain-water proof and
natural ventilation)
400 N/A
(Note 1)
Traditional large
greenhouse
Glass structure, sidewall
vents, mechanical
ventilation fan and
thermometer
(i) Basic greenhouse functions
(e.g. rain-water proof and
natural or mechanical
ventilation); and
(ii) temperature regulation
1,333 or
3,333
(Note 2)
1,066 and
1,920
Enhanced regular
greenhouse
Concrete and steel frame
structure with translucent
plastic films, air vents,
thermometer, rolling sun
shading curtains and
insulating quilts
(i) Basic greenhouse functions
(e.g. rain-water proof and
natural ventilation); (ii)
illumination duration
regulation; and (iii)
enhanced heat preservation
and temperature regulation
400 or
667
348
(Notes 3&4)
Additional features in some
of the enhanced regular
greenhouses:
fibreglass water duct and
vegetable greenhouse
environment monitoring
system
Additional functions in some
of the enhanced regular
greenhouses:
(i) Weeds and moisture
prevention; (ii) electronic
temperature and humidity
monitoring;
(iii) illumination intensity
detection; (iv) carbon
dioxide density sensing;
and (v) pH detection for
organic substrate
BUSINESS
–2 0 8–


--- page 218 ---
Type Features/facilities/equipment Principal functions
Approximate
gross floor
area per
greenhouse
Approximate
construction
cost per
greenhouse
(sq.m.) (RMB’000)
Enhanced large
greenhouse
Concrete and/or steel frame
structure with translucent
plastic films, air vents,
thermometer, rolling sun
shading curtains and
insulating quilts
(i) Basic greenhouse functions
(e.g. rain-water proof and
natural ventilation);
(ii) illumination duration
regulation; and (iii)
enhanced heat preservation
and temperature regulation
800 to
3,533
203 to 925
Notes:
1. As at the Latest Practicable Date, we have 14 trad itional regular greenhouses at our Dalian Facility
which were rented from Independent Third Party , hence, the estimation of construction cost per
greenhouse is inapplicable.
2. As at the Latest practicable Date, we have two tr aditional large greenhouses at our Laixi Facility.
3,333 sq.m. is the cultivation area of our larger tradition large greenhouse. The gross area of the
larger traditional large greenhouse is in fact lar ger than 3,333 sq.m. as it contains an area of
approximately 500 sq.m. for the operation of our automatic sowing machine.
3. The construction cost per greenhouse refer to the estimated construction cost of the enhanced
regular greenhouses which were constructed by us at our Laixi Facility. The gross floor area of each
of these greenhouses is approximately 667 sq.m . The enhanced regular greenhouses at our Dalian
Facility were rented from Independent Third Party, and the enhanced regular greenhouses on our
Laixi Land Parcel E were acquired from Independent Third Party, therefore, these greenhouses are
not included in the estimation of construction cost per greenhouse.
4. The construction cost per greenhouse does not include the cost of installati on of fibreglass water
duct and vegetable greenhouse environment monitoring system in those enhanced regular
greenhouses that equipped with these latest feat ures. This is because fibreglass water duct and
vegetable greenhouse environment monitoring system are not standa rd basic features and are only
installed in some enhanced regular greenhouses and thus the cost of installation of such facilities is
not included in the calculation of the construction cost per greenhouse.
Before the Track Record Period, our Group invested an aggregate sum of
approximately RMB96.5 million in improving the infrastructure at our Laixi Facility.
The improvement works include, for exampl e, levelling of land and/or site formation,
building of roads, and setting up utilities on the levelled land at our Laixi Facility. After
completion of these infrastructure works in around 2017, we started expanding our
greenhouses in the Laixi Facility. In 2018, the total gross area of our greenhouses in the
Laixi Facility increased by 44% from approximately 68,000 sq.m. as at 1 January 2018 to
approximately 98,001 sq.m. as at 31 December 2018.
As at 1 January 2018, we were operating 98 traditional regular greenhouses, which
represents approximately 79.7% of the total number of greenhouses that we have at our
Laixi Facility and Chengyang Facility at t hat time. Due to the simple structure and
flexibility of our traditional regular greenhouse s, we constructed certain traditional regular
BUSINESS
–2 0 9–


--- page 219 ---
greenhouses on the vacant lands at our Laixi Facility during 2018 to increase our
production capacity quickly for meeting the market demand for the peak season. However,
our Directors understand the limitations of our traditional regular greenhouses and their
insufficiency in heat preservation and temperature regulation. Therefore, for the long term
benefits of our Group, we started to develop more enhanced greenhouses since 2018 for the
purpose of increasing our cultivation capacit y particularly for the colder seasons. During
2018, our Group had constructed 32 enhanced r egular greenhouses at our Laixi Facility and
the said construction had costed us an inves tment sum of approximately RMB11.2 million.
From 1 January 2018 to 31 December 2018, we had a net increase of 29 enhanced regular
greenhouses at our Laixi Facility as we phased out three enhanced regular greenhouses
which were in dilapidated condition. As at 1 January 2019, we were operating a total
number of 167 greenhouses, among them 112 were the traditional regular greenhouses
located at our Laixi Facility, which represent s approximately 67.1% of our total number of
greenhouses. The reduction in percentage of our traditional regular greenhouses during the
year were primarily due to our gradual transformation of our operation from traditional
regular greenhouses to enhanced regu lar greenhouses at our Laixi Facility.
In order to further reduce reliance on traditional regular greenhouses, during 2019, we
gradually demolished our traditional regular greenhouses and started the construction of 22
enhanced large greenhouses which commenced operation in the last quarter of 2019. The
construction of these 22 enhanced large greenhouses had costed us approximately RMB13.1
million in total. The commencement of operati on of these 22 enhanced large greenhouses
had contributed to the increase of cultivation capacity at our Laixi Facility. By 1 January
2020, we had closed down most of our traditional regular greenhouses.
In FY2020, we constructed a total of 31 enhanced large greenhouses on our Laixi Land
Parcels D with an investment cost of approxim ately RMB15.0 million and we acquired from
an Independent Third Party two enhanced regu lar greenhouses and s even enhanced large
greenhouses on our Laixi Land Parcel E with consideration of approximately RMB3.0
million. During FY2021, we phased out three enhanced large greenhouses at our Xi’an
Facility which were in dilapidated condition. During FY2022, we closed down a total of
three greenhouses (i.e. two enhanced re gular greenhouses and one enhanced large
greenhouse) on our Laixi Land Parcel E due to the resumption of land by the
government for road widening works adjacent to our Laixi Land Parcel E. The owner of
Laixi Land Parcel E had paid to us compensation in the sum of approximately RMB0.4
million for the said land resumption in FY2022.
BUSINESS
–2 1 0–


--- page 220 ---
The following table sets forth the types and numbers of greenhouses and their respective approximate total gross floor area at
each of our cultivation facilities as at 1 January 2020, 31 December 2020, 31 December 2021, 31 Decembe r 2022, 30 September 2023
and as at the Latest Practicable Date:
As at 1 January 2020 As at 31 December 2020 As at 31 December 2021 As at 31 December 2022 As at 30 September 2023
As at the
Latest Practicable Date
Number of
greenhouses
Approximate
total gross
floor area
Number of
greenhouses
Approximate
total gross
floor area
Number of
greenhouses
Approximate
total gross
floor area
Number of
greenhouses
Approximate
total gross
floor area
Number of
greenhouses
Approximate
total gross
floor area
Number of
greenhouses
Approximate
total gross
floor area
(sq.m.) (sq.m.) (sq.m.) (sq.m.) (sq.m.) (sq.m.)
Qingdao, Shandong
Province:
Laixi Facility
Traditional large
greenhouse 2 4,667 2 4,667 2 4,667 2 4,667 2 4,667 2 4,667
Enhanced regular
greenhouse 43 28,667 45 30,000 45 30,000 43 28,667 43 28,667 43 28,667
Enhanced large greenhouse 22 38,667 60 104,467 60 104,467 59 103,467 59 103,467 59 103,467
Total of Qingdao,
Shandong Province 67 72,001 107 139,134 107 139,134 104 136,801 104 136,801 104 136,801
Xi’an, Shaanxi Province —
Xi’an Facility
Enhanced large greenhouse 10 10,000 10 10,000 7 7,000 7 7,000 7 7,000 7 7,000
Dalian, Liaoning Province
— Dalian Facility
Traditional regular
greenhouse 0 0 14 5,600 14 5,600 14 5,600 14 5,600 14 5,600
Enhanced regular
greenhouse 15 6,000 15 6,000 15 6,000 15 6,000 15 6,000 15 6,000
Sub-total: 15 6,000 29 11,600 29 11,600 29 11,600 29 11,600 29 11,600
Total: 92 88,001 146 160,734 143 157,734 140 155,401 140 155,401 140 155,401
BUSINESS
–2 1 1–


--- page 221 ---
The following table sets forth the aggr egated number of greenhouses at all of our cultivation facilities by types and
their respective approximate total gross floor area as at 1 Ja nuary 2020, 31 December 2020, 31 December 2021, 31 December 2022,
30 September 2023 and as at the Latest Practicable Date:
As at 1 January 2020 As at 31 December 2020 As at 31 December 2021 As at 31 December 2022 As at 30 September 2023
As at the
Latest Practicable Date
Number of
greenhouses
Approximate
total gross
floor area
Number of
greenhouses
Approximate
total gross
floor area
Number of
greenhouses
Approximate
total gross
floor area
Number of
greenhouses
Approximate
total gross
floor area
Number of
greenhouses
Approximate
total gross
floor area
Number of
greenhouses
Approximate
total gross
floor area
(sq.m.) (sq.m.) (sq.m.) (sq.m.) (sq.m.) (sq.m.)
All of our cultivation
facilities:
Traditional regular
greenhouse 0 0 14 5,600 14 5,600 14 5,600 14 5,600 14 5,600
Traditional large
greenhouse 2 4,667 2 4,667 2 4,667 2 4,667 2 4,667 2 4,667
Sub-total: 2 4,667 16 10,267 16 10,267 16 10,267 16 10,267 16 10,267
Enhanced regular
greenhouse 58 34,667 60 36,000 60 36,000 58 34,667 58 34,667 58 34,667
Enhanced large
greenhouse 32 48,667 70 114,467 67 111,467 66 110,467 66 110,467 66 110,467
Sub-total: 90 83,334 130 150,467 127 147,467 124 145,134 124 145,134 124 145,134
Total: 92 88,001 146 160,734 143 157,734 140 155,401 140 155,401 140 155,401
BUSINESS
–2 1 2–


--- page 222 ---
Benefited from the improved heat preservati on and temperature regulation abilities of
the enhanced regular greenhouses and the enhanced large greenhouses, we are able to
cultivate our potted vegetable produce in our enhanced greenhouses all-year-round and
certain relatively non-cold-resistant vegetable species that could not tolerate cold
temperature in winter at our traditional regular greenhouse are now cultivable at our
enhanced regular greenhouses or enhanced lar ge greenhouses, and hence, it diversified the
vegetable species that we can offer during the colder season. The following table sets forth
the cultivation capabilities of different types of greenhouses in different seasons:
All seasons except for winter: Winter:
Enhanced
greenhouses
(Note)
All of our vegetable species can be
cultivated.
27 vegetable species can be
cultivated. Water spinach
and Malabar spinach are not
cultivable or unfavourable to
growth in winter since they
are cold sensitive.
Traditional
greenhouses
(Note)
All of our vegetable species can be
cultivated. However, since the
ventilation of traditional
greenhouses is less sophisticated
than our enhanced greenhouses, the
growth rate of certain heat sensitive
s p e c i e si ns u m m e ri nt r a d i t i o n a l
regular greenhouses is lower than
the same growing in enhanced
greenhouses as the cultivation
conditions in traditional regular
greenhouses are not favourable to
certain heat sensitive species during
the hot summer.
We may have to temporarily
close down our traditional
regular greenhouses during
winter since agricultural
products generally cannot
tolerate and survive in low
temperature in the traditional
regular greenhouses.
Although our traditional large
greenhouses can still be open
during the winter season,
given that we have less
control over the temperature
regulation function of such
greenhouses as it is largely
dependent on the heat
preservation nature of the
glass structure of such
greenhouses, the usage of
such greenhouses during the
winter will cause uncertainty
to our cultivation schedule.
Note: The approximate number of species cultivable in our enhanced greenhouses and traditional
greenhouses are determined based on the pas t cultivation experience of our Group and as
confirmed by our Directors, the actual number of species cultivable in the relevant seasons (in
particular, for traditional greenhouses) may be affected by weather conditions of the year.
Due to the above reasons, we prefer to grow our potted vegetable produce in our
enhanced greenhouses as the temperature and cu ltivation conditions are better regulated in
enhanced greenhouses throughout the year.
BUSINESS
–2 1 3–


--- page 223 ---
Utilisation of our existing cultivation facilities
The table below sets forth the expected annual cultivation output under optimal
cultivation conditions, actual cultivation vo lume and utilisation rate of our cultivation
facilities for the period indicated.
FY2020
Cultivation facility
Expected cultivation
output under optimal
cultivation conditions
for FY2020 (Note 1)
Actual
cultivation
output in
FY2020
Approximate
utilisation
rate (Note 2)
(pots) (pots)
(’000) (’000) (%)
Laixi Facility 8,254 7,315 88.6
Xi’an Facility 757 564 74.5
Dalian Facility 683 459 67.2 (Notes 3&4)
Overall 9,694 (Note 7) 8,338 86.0
FY2021
Cultivation facility
Expected cultivation
output under optimal
cultivation conditions
for FY2021 (Note 1)
Actual
cultivation
output in
FY2021
Approximate
utilisation
rate (Note 2)
(pots) (pots)
(’000) (’000) (%)
Laixi Facility 11,395 9,774 85.8
Xi’an Facility 573 410 71.5
Dalian Facility 835 508 60.8
(Notes 3, 4&5)
Overall 12,803 (Note 7) 10,692 83.5
BUSINESS
–2 1 4–


--- page 224 ---
FY2022
Cultivation facility
Expected cultivation
output under optimal
cultivation conditions
for FY2022 (Note 1)
Actual
cultivation
output in
FY2022
Approximate
utilisation
rate (Note 2)
(pots) (pots)
(’000) (’000) (%)
Laixi Facility 11,284 8,455 74.9 (Note 6)
Xi’an Facility 573 363 63.4 (Note 6)
Dalian Facility 835 457 54.7 (Notes 3,4&6)
Overall 12,692 (Note 7) 9,275 73.1 (Note 6)
9M2023
Cultivation facility
Expected cultivation
output under optimal
cultivation conditions
for 9M2023 (Note 1)
Actual
cultivation
output in
9M2023
Approximate
utilisation
rate (Note 2)
(pots) (pots)
(’000) (’000) (%)
Laixi Facility 8,403 7,671 91.3
Xi’an Facility 430 296 68.8
Dalian Facility 636 372 58.5 (Notes 3&4)
Overall 9,469 8,339 88.1
Notes:
(1) The expected cultivation output under optimal cultivation conditions for the respective financial
years during the Track Record Period is calculated by assuming that (i) the maximum number of
3,900 pots is cultivated in each mu, as derived by actual measurement; and (ii) the potted vegetable
produce is growing under optimised cultivation c onditions such that a maximum of 14 yields are
cultivated in each year/period as advised by the A gricultural Adviser. The expected cultivation
output of each greenhouse under optimal cultivatio n conditions equals to the gross floor area of the
greenhouse in mu multiplied by (i) 3,900 pots culti vable per unit of cultivation area in mu in each
cultivation cycle; (ii) 14 yields in the relevant year; and (iii) the time proportion the relevant
greenhouse was actually in use during the relevant year.
(2) The approximate utilisation rate is calculated by dividing the actual cultivation volume by the
expected cultivation output under optimal cultivation conditions multiplied by 100%.
BUSINESS
–2 1 5–


--- page 225 ---
(3) Among the 29 greenhouses at our Dalian Facility, 14 of them are traditional regular greenhouses
which led to slightly longer cultivation time per crop in cold weather and the optimised cultivation
conditions had not been met. As a result, a sligh tly lower utilisation rate has been recorded as
compared to other cultivation facilities during the Track Record Period.
(4) Our Dalian Facility is located in Liaoning province, which is at a higher latitude as compared to that
of our Laixi Facility. Due to the lower average ye arly temperature, the cultivation conditions of our
Dalian Facility are slightly inferior as compared t o other facilities, resulting in a relatively lower
utilisation rate during the Track Record Period.
(5) The lower utilisation rate of our Dalian Facility in FY2021 was primarily due to the outbreak of
COVID-19 epidemic in Dalian between December 2020 and January 2021. In particular, the
lockdown measures of Dalian had led to a temporary s uspension of business activities of our Dalian
Facility, resulting in a lower utilisation rate in FY2021. For further details, please refer to the
paragraph headed ‘‘Impact of the outbreak o f COVID-19 epidemic’’ in this section of the
prospectus.
(6) The lower utilisation rate of our cultivation facilities in FY2022 was primarily due to the resurgence
of COVID-19 cases which affected our business operations. In particular, the lockdown measures in
Laixi and Dalian had led to the temporary suspensio n of business activities of our Laixi Facility and
Dalian Facility between March 2022 to April 2022, and the lockdown measures in Xi’an had also
affected the business activities of our Xi’an Facility in January 2022, resulting in the lower
utilisation rate in FY2022. For further details, p lease refer to the paragraph headed ‘‘Impact of the
outbreak of COVID-19 epidemic’’ i n this section of the prospectus.
(7) The increase of expected annual cultivation output under optimal cultivation conditions during the
Track Record Period was primarily due to the increase of the total gross floor area of our
greenhouses from approximately 8 8,001 sq.m. as at 1 January 2020 to approximately 155,401 sq.m.
as at the Latest Practicable Date, as a result of the s ignificant capital expenditures of approximately
RMB44.4 million, RMB14.4 million and RMB1.5 million for FY2020, FY2021 and FY2022,
respectively.
BUSINESS
–2 1 6–


--- page 226 ---
Equipment
Our cultivation facilities are equipped with a variety of cultivation equipment for
carrying out the cultivation process of our potted vegetable produce and most of them are
sourced from suppliers located in the PRC. As at 30 September 2023, the principal
cultivation equipment used during the cultivation process of our potted vegetable produce
comprised the following:
Name of equipment Principal function(s)
Number of
unit(s)
Estimated
average
useful
life (Note 1)
Estimated
average
remaining
useful life as
at the Latest
Practicable
Date (Note 2)
(years) (years)
Fully automatic sowing machine Filling pots and sowing 1 10 3
Semi-automatic sowing machine Filling pots and sowing 1 10 1
Sowing machine Filling pots and sowing 6 10 8
Substrate crusher Breaking down of proportioned
raw materials for organic
substrates
41 0 5
Curtain rolling machine Extending and retracting sun
shading curtains
61 0 2
Pesticide residue monitor Quality control testing 3 10 4
Excavator Transporting proportioned raw
materials for organic
substrates
31 0 5
Water irrigation system Water irrigation 1 10 3
Submersible pump Water extraction 3 10 2
Bulldozer Transporting proportioned raw
materials for organic
substrates
11 0 7
Seed germinating container Seed germination 1 10 2
Notes:
(1) The average useful life is the average number of y ears an equipment is considered usable before its
value is fully depreciated. As per the accounting policies adopted by our Group, depreciation of our
equipment is calculated using straight-line method.
(2) Calculation of remaining useful life is bas ed on the average useful life minus the year of the
acquisition of the relevant equipment.
Our technical department is responsible for equipment maintenance. Our technical
department personnel are responsible for carrying out weekly inspections and routine daily
cleaning and maintenance of our cultivation equipment. During the Track Record Period
and up to the Latest Practicable Date, our Directors consider that our existing equipment
BUSINESS
–2 1 7–


--- page 227 ---
was generally in good operating condition, and we also had not experienced any material or
prolonged interruptions to our cultivation process due to equipment or machinery failure
during the Track Record Period.
RAW MATERIALS, SUPPLIE RS AND SUBCONTRACTORS
Raw Materials
Our raw materials primarily include (i) components of organic substrates; (ii) seeds;
and (iii) fertilisers (such as foliar fertilisers) and biopesticides (such as matrine). The
following table sets forth the cost of the components of organic substrates, seeds and
fertilisers and biopesticides and their per centage of our cost of sales for the periods
indicated:
Year ended 31 December Nine months ended 30 September
2020 2021 2022 2022 2023
RMB’000
%o fc o s t
of sales RMB’000
%o fc o s t
of sales RMB’000
%o fc o s t
of sales RMB’000
%o fc o s t
of sales RMB’000
%o fc o s t
of sales
(unaudited)
Components of
organic substrates 31,267 46.0 40,100 45.0 32,727 44.1 22,920 43.0 31,258 45.1
Seeds 1,265 1.9 1,549 1.7 1,386 1.9 1,013 1.9 988 1.4
Fertilisers and
biopesticides 834 1.2 1,069 1.2 873 1.2 612 1.1 834 1.2
Total 33,366 49.1 42,718 47.9 34,986 47.2 24,545 46.0 33,080 47.7
Our Directors believe that the fluctuation s of the prices of the primary raw materials
we used in the cultivation of our products during the Track Record Period are dependent
primarily on the supply of and demand for such raw materials in the PRC during the
relevant period.
We are generally able to pass on increases in cost of raw materials of our products to
our customers by increasing the prices of our products accordingly. When the prices of
certain raw materials are expected to fluctuate s ignificantly, our procurement personnel are
required to report to other relevant departments in time and take precautionary measures
accordingly. For further details of the sensitivity of our net profit during the Track Record
Period in relation to movements in our cost of raw materials, please refer to the paragraph
headed ‘‘Financial Information — Description of selected statements of profit or loss items
— Cost of sales’’ in this prospectus.
Our procurement policy adopts the following cost control measures: (i) collecting
market data on the prices of our raw materials o n a regular basis and analysing the same to
predict potential changes in the market prices of our raw materials; (ii) negotiating and
determining the purchase prices of raw materials with our suppliers, with reference to the
market data collected and analysed; and (iii) id entifying alternative raw materials suppliers
who may provide more competitive and stable prices. By adopting these cost control
BUSINESS
–2 1 8–


--- page 228 ---
measures, our Directors believe that we are able to obtain a more comprehensive and better
understanding on the trends and reasons for price fluctuation of our raw materials, and
increase our bargaining power to obtain more competitive prices when negotiating purchase
agreements framework with our suppliers.
Our procurement personnel procure raw materials according to our procurement plan,
which is formulated according to our cultivation schedule prepared by our cultivation
personnel based on market information collected by our sales and marketing department.
Our procurement personnel then contact s uppliers who can meet our raw materials
requirements. We source various raw materials of the same product from different suppliers
to compare prices and increase our negotiation leverage with suppliers. We believe this
comparative procurement system enables us to obtain more competitive prices.
Suppliers
We maintain a qualified suppliers list, from wh ich we typically select our suppliers for
purchasing raw materials. As the quality of our products are heavily dependent on the
quality of our primary raw materials, before engaging new suppliers, we adopt an internal
supplier evaluation procedure which contains a stringent set of criteria, including quality,
price, service, quality contr ol, production capability and cr edibility. Before engaging new
suppliers, we will also make on-site inspect ion of the supplier’s premises and conduct
assessments on the quality of sample raw materials to be supplied in accordance with our
quality requirements. We annually evaluate each of our existing suppliers on the quality of
their raw materials supplied. We will only engage suppliers who can satisfy all our internal
selection criteria. We did not experience any significant problems with the quality of raw
materials provided by our suppliers during the Track Record Period and up to the Latest
Practicable Date.
We typically enter into purchase agreement frameworks with our suppliers on an
annual basis. The following table sets forth a summary of the principal terms of our
purchase agreement frameworks with our suppliers:
Type of the goods Product description
Pricing Fixed prices stipulated in the agreement
Minimum purchase amount We promised to order from the supplier not less
than a specific amount of the goods
C r e d i tt e r m s 1 5d a y st o2 0d a y s
During the Track Record Period, we did not encounter any shortage of supply of our
raw materials.
All of our raw materials are procured in t he PRC. Under the purchase agreement
frameworks, our suppliers are responsible for arranging delivery of the raw materials to our
cultivation facilities at their own cost. During the Track Record Period, we did not
encounter any delay in delivery of raw material s by our suppliers that significantly affected
our cultivation process. Upon receiving the raw materials, we would perform quality checks
and are entitled to return raw materials whic h fail to meet our quality standards to our
suppliers. For further details of our quality control measures on our raw materials, please
refer to the paragraph headed ‘‘Product safety and quality control — Raw materials quality
control’’ in this section of the prospectus.
BUSINESS
–2 1 9–


--- page 229 ---
In FY2020, FY2021, FY2022 and 9M2023, our co st of raw materials (including seeds,
components of organic substrates and fertilisers) was the largest component of our cost of
sales accounting for approximately 49.1%, 47.9%, 47.2% and 47.7% of our total cost of
sales. Hence, cost control on raw materials is i mportant in maintaining our competitiveness
in the market. In this regard, we constantly obt ain quotations from different raw materials
suppliers and conduct regular appraisal on their competitiveness.
Shandong province is an agricultural oriented province which has an ample supply
with numerous suppliers of the raw materials used in our production (i.e. components of
organic substrates, seeds, fertilisers and biopesticides) and thus the agricultural raw
material supply market of Shandong province is buyer-led, competitive and fragmented.
For instance, there were approximately 6,000, 5,000 and 3,000 suppliers of seeds, fertilisers
and component of organic substrates respectively in Shandong province in 2022. Hence, we
can procure the same or substitutable raw mat erials from different suppliers and thus have
the flexibility to switch to procure from different suppliers with no impact on our
operations. Therefore, in general, our Group does not enter into any long term agreement
with our suppliers of raw materials, which is in line with the industry practice. As a result of
the above, our raw materials suppliers changed each year during the Track Record Period
and the length of the relationship between our suppliers and us was relatively short. Among
our five largest suppliers for each of FY2020, FY2022 and 9M2023, we only maintained
approximately one year of business relationship with two, one and one suppliers,
respectively.
In operation, we would keep monitoring the price of raw materials and obtain at least 2
quotations regularly from our various shortlisted suppliers before making a procurement
decision. While we are price sensitive in procuring raw materials, we would also take into
account of other factors, including quality, service and credibility to work out the most
competitive offer. That said, our Directors c onfirm that the fact that our suppliers for raw
materials changed each year during the Track Record Period did not affect our cultivation
and operation, or cause any delay in delivery of raw materials that affect our cultivation
process.
For FY2020, FY2021, FY2022 and 9M2023, purchases from our largest supplier in
each year/period accounted for approximately 70.3%, 62.9%, 50.8% and 40.6%,
r e s p e c t i v e l y ,o fo u rt o t a lp u r c h a s e s .F o rt he same periods, our five largest suppliers in
each year/period combined accounted for approximately 94.3%, 99.7%, 99.7% and 98.7%,
respectively, of our total purchases. Please refer to the risk in the paragraph headed ‘‘Risk
Factors — Risks relating to our business — We are dependent on our major suppliers, and
our business, financial conditions and results of operations could be adversely affected if
our relationships with these major suppliers are terminated, interrupted, or modified in any
way adverse to us’’ in this prospectus. Our purchase from Supplier G, our largest supplier in
FY2020, amounted to approximately RMB26.4 million (or 70.3% of our total purchase) in
FY2020. We purchased components of organic substrates in bulk from Supplier G
throughout FY2020 as in the course of monitoring the price of raw materials, we worked
out that the offer from Supplier G in respect of the components of organic substrates was
the most competitive. That said, our Directors consider that our Group is not overly reliant
on Supplier G and could seek alternate suppliers where appropriate. For this reason, in
BUSINESS
–2 2 0–


--- page 230 ---
FY2021, we shifted to purchase more of the components of organic substrates in bulk from
Supplier L, who is our second largest suppliers in FY2020 and our largest supplier in
FY2021, as its offer was the most competitive as compared to the others. Despite such
concentration of suppliers during the Track Re cord Period, our Directors consider that we
are not overly reliant on any single supplier including Supplier G and Supplier L and thus
there is no material risk arising from such concentration because:
(i) we maintain a list of qualified supp liers, which is reviewed and updated by us
periodically. We procure from a number o f suppliers for certain materials and in
the event that a supplier ceases to supply to our Group, we could select qualified
suppliers from the list as replacement to prevent disruption to the supplies and
ensure the quality thereof; and
(ii) our Directors consider that the supplies of the raw materials used in our
production are ample in the market with numerous suppliers, and that our Group
can seek alternative suppliers as and when appropriate in the market without
material limitations.
During the Track Record Period, none of our five largest suppliers in each year/period
was also our customers.
The following tables set forth certain information with respect to our five largest
suppliers in each year/period during the Track Record Period:
FY2020
Rank Supplier Location
Business activities
of our supplier
Approximate year(s) of
business relationship with
our Group as at the
Latest Practicable Date
Type(s) of products
provided to our Group
Typical credit terms and
payment method
Approximate
amount of
purchase
Approximate
percentage of
our total
purchases
RMB’000 (%)
1 Supplier G
(Note 1) Laixi, Shandong
province
Retail of seeds,
organic substrates
and fertilisers
One Components of organic
substrates
Within 15 days after delivery;
bank transfer
26,365 70.3
2 Supplier L (Note 1) Laixi, Shandong
province
Sale of organic
substrates
Two Components of organic
substrates
Within 15 days after delivery;
bank transfer
5,501 14.7
3 Supplier J (Note 1) Laixi, Shandong
province
Wholesale of groceries
and pots
One Pots Within 15 days after delivery;
bank transfer
1,406 3.8
4 Supplier D (Note 1) Laixi, Shandong
province
Sale of seeds and
fertilisers
Six Vegetable seeds Within 15 days after delivery;
bank transfer
1,193 3.2
5 Supplier I (Note 1) Laixi, Shandong
province
Wholesale and retail
of pesticides and
fertilisers
Six Foliar fertilisers and
biopesticides
Within 15 days after delivery;
bank transfer
850 2.3
BUSINESS
–2 2 1–


--- page 231 ---
FY2021
Rank Supplier Location
Business activities
of our supplier
Approximate year(s) of
business relationship with
our Group as at the
Latest Practicable Date
Type(s) of products
provided to our Group
Typical credit terms and
payment method
Approximate
amount of
purchase
Approximate
percentage of
our total
purchases
RMB’000 (%)
1 Supplier L
(Note 1) Laixi, Shandong
province
Sale of organic
substrates
Two Components of organic
substrates
Within 15 days after delivery;
bank transfer
28,151 62.9
2 Supplier O Laixi, Shandong
province
Sale of organic
substrates
Three Components of organic
substrates
Within 15 days after delivery;
bank transfer
8,863 19.8
3 Supplier P Laixi, Shandong
province
Sale of organic
substrates
Three Components of organic
substrates
Within 15 days after delivery;
bank transfer
5,021 11.2
4 Supplier D (Note 1) Laixi, Shandong
province
Sale of seeds and
fertilisers
Six Vegetable seeds Within 15 days after delivery;
bank transfer
1,542 3.4
5 Supplier I (Note 1) Laixi, Shandong
province
Wholesale and retail of
pesticides and
fertilisers
Six Foliar fertilisers and
biopesticides
Within 15 days after delivery;
bank transfer
1,077 2.4
FY2022
Rank Supplier Location
Business activities
of our supplier
Approximate year(s) of
business relationship with
our Group as at the
Latest Practicable Date
Type(s) of products
provided to our Group
Typical credit terms and
payment method
Approximate
amount of
purchase
Approximate
percentage of
our total
purchases
RMB’000 (%)
1 Supplier O Laixi, Shandong
province
Sale of organic
substrates
Three Components of organic
substrates
Within 15 days after delivery;
bank transfer
20,292 50.8
2 Supplier P Laixi, Shandong
province
Sale of organic
substrates
Three Components of organic
substrates
Within 15 days after delivery;
bank transfer
15,702 39.3
3 Supplier Q Qingdao,
Shandong
province
Sale of groceries and
pots
One Pots Within 15 days after delivery;
bank transfer
1,500 3.8
4 Supplier D
(Note 1) Laixi, Shandong
province
Sale of seeds and
fertilisers
Six Vegetable seeds Within 15 days after delivery;
bank transfer
1,407 3.5
5 Supplier I (Note 1) Laixi, Shandong
province
Wholesale and retail of
pesticides and
fertilisers
Six Foliar fertilisers and
biopesticides
Within 15 days after delivery;
bank transfer
910 2.3
9M2023
Rank Supplier Location
Business activities
of our supplier
Approximate year(s) of
business relationship with
our Group as at the
Latest Practicable Date
Type(s) of products
provided to our Group
Typical credit terms and
payment method
Approximate
amount of
purchase
Approximate
percentage of
our total
purchases
RMB’000 (%)
1 Supplier P Laixi, Shandong
province
Sale of organic
substrates
Three Components of organic
substrates
Within 15 days after delivery;
bank transfer
13,496 40.6
2 Supplier O Laixi, Shandong
province
Sale of organic
substrates
Three Components of organic
substrates
Within 15 days after delivery;
bank transfer
10,226 30.7
3 Supplier R Laixi, Shandong
province
Sale of organic
substrates
One Components of organic
substrates
Within 15 days after delivery,
bank transfer
7,289 21.9
4 Supplier D
(Note 1) Laixi, Shandong
province
Sale of seeds and
fertilisers
Six Vegetable seeds Within 15 days after delivery;
bank transfer
996 3.0
5 Supplier I (Note 1) Laixi, Shandong
province
Wholesale and retail of
pesticides and
fertilisers
Six Foliar fertilisers and
biopesticides
Within 15 days after delivery;
bank transfer
832 2.5
BUSINESS
–2 2 2–


--- page 232 ---
Note:
(1) represents suppliers who traded with us as registered individual businesses* ( 個體工商戶)i nt h e
PRC.
To the best knowledge of our Directors, none of our Directors or their associates, or
any Shareholders, who owns more than 5% of our issued share capital, had any interest in
any of our five largest suppliers in each year /period during the Track Record Period and up
to the Latest Practicable Date. We did not have any material dispute with our suppliers
during the same period.
Subcontractors
As we expanded the scale of our operation in the Laixi Facility throughout the Track
Record Period, and established our new Xi’an Facility and Dalian Facility in 2019, we
required more labour in carrying out the cultivation work in three provinces and there was
an increasing need for recruitment, monitoring, coordination and supervision of work. We
believe that engaging subcontractors to handle the simple labour work such as sowing and
watering in the cultivation process would pr ovide us with more flexibility in management,
reduce our administrative workload and allow us to manage effectively our cultivation
process and meet our demand for workforce in a timely manner to cope with our recent
expansion. It also allows our experienced staff to focus on the quality control procedures to
uphold the quality of our products and conduct testing for the refinement of our current
cultivation methods and techniques which are our core competitive advantages. We engage
subcontractors by entering into standard labour subcontracting agreements ( 勞務外包合作
協議書) with companies engaging in labour suppl y services which are Independent Third
Parties and completely outsourced all of our simple labour work since the Track Record
Period. In fact, it is an industry practice fo r potted vegetable producers in the PRC to
engage subcontractors to assist in cultivation.
The division of work between our employees and subcontracting labours are set forth
in the following table:
Nature of work
Our
employees
Subcontracting
labours
Supervising and monitoring
our subcontractors and subcontractors labour Yes No
Maintenance and operation of our cultivation
facilities Yes No
Performance of quality control of our raw
materials and potted vegetable produce Yes No
Monitoring vegetable’s growth progress, adjusting
the use of fertilisers, biopesticides, etc. Yes No
BUSINESS
–2 2 3–


--- page 233 ---
Nature of work
Our
employees
Subcontracting
labours
Monitoring and/or adjusting environment
parameters such as pH value of organic
substrates, temperature, humidity, carbon
dioxide density and illumination duration
inside our greenhouses Yes No
Managing greenhouse spaces, determining species
to be planted Yes No
Pest and crop disease control in greenhouses Yes Yes
Sowing and watering our potted vegetable
produce No Yes
Transporting our potted vegetable produce within
our cultivation facilities No Yes
During the Track Record Period, we have engaged seven, five, five and four
subcontractors. As confirmed by our Directors, as at the Latest Practicable Date, the
total number of subcontracting workforce involved in our cultivation process is
approximately 300 labours. As confirmed by our Directors, there was no injury claim
against us by any subcontracting labour during the Track Record Period.
The following table sets forth a summary of the principal terms of the labour
subcontracting agreement:
Term of agreement: Typically one year
Obligations of the
subcontractor:
The subcontractor is required to supply qualified workers
to work at our cultivation facility according to our
demands, comply with our internal guidelines including
guidelines on production safety and occupational
hygiene, and keep our trade secrets confidential. The
subcontractor is also responsible for procuring the
employment related insurance and be responsible for
any work-related injury claims and labour dispute for
their own subcontracting labours.
BUSINESS
–2 2 4–


--- page 234 ---
Subcontracting fees: Subcontracting fees are settled on a monthly basis to be
calculated based on the qualit y passing rate of each batch
of potted vegetable produce cultivated by our
subcontractors.
If the subcontractors achieve a quality passing rate
between 85% to 95%, they will be entitled to the basic
subcontracting fee per pot for the batch they cultivate. If
the quality passing rate is above 95%, the subcontractors
will be entitled to an additional subcontracting fee of
RMB0.5 per pot on top of the basic subcontracting fee for
the batch they cultivate. If the quality passing rate is
below 85% (except due to force majeure events), the
subcontractors will not be entitled to any subcontracting
fee.
Early termination right: If the subcontractor provides false qualification
certifications (i.e. an invalid business operation licence)
and does not have legal qualifications to carry out the
agreement, or if it breaches other relevant PRC laws or
terms in the agreement, we have a right to terminate the
agreement. If we fail to pay the subcontractor within the
stipulated timeline, the subcontractor has a right to
terminate the agreement.
The quality passing rate of the batch of potted vegetable cultivated by the
subcontractor is determined by the inspection conducted by our cultivation staff. During
the inspection, our staff will check the potte d vegetable produce based on a set of internal
specifications for different vegetable species, for example, colour and appearance, any
withered or damaged leaves, number of leaves/stems and the overall volume of the
vegetable, etc. to determine whether the products can pass our inspection. We will then
count the total number of potted vegetable produce that can pass our inspection to calculate
the quality passing rate.
BUSINESS
–2 2 5–


--- page 235 ---
The tables below set out the basic information of our five largest labour subcontractors
in each year/period engaged during the Track Record Period:
FY2020
Rank Name of the subcontractor Location
Background and principal
business of the subcontractor
Approximate year(s) of
business relationship with
our Group as at the
Latest Practicable Date
Major services procured from the
subcontractor
Typical credit terms and
payment method
Approximate
amount of
subcontractor
charge
Approximate
percentage of
total
subcontractor
charge
(approximately
RMB’000)
(%)
1 Labour subcontractor B
(Note 1) Qingdao, Shandong
province
A private company engaged in
the labour dispatch and
labour subcontracting services
Four Labour subcontracting services One month; bank transfer 14,587 50.4
2 Labour subcontractor A Qingdao, Shandong
province
A private company engaged in
the labour dispatch and
labour subcontracting services
Five Labour subcontracting services One month; bank transfer 7,053 24.4
3 Labour subcontractor E Qingdao, Shandong
province
A private company engaged in
the labour dispatch and
labour subcontracting services
Three Labour subcontracting services One month; bank transfer 3,967 13.7
4 Labour subcontractor C Xi’an, Shaanxi
province
A private company engaged in
the labour dispatch and
labour subcontracting services
Five Labour subcontracting services One month; bank transfer 1,928 6.7
5 Labour subcontractor G Dalian, Liaoning
province
A private company engaged in
the labour dispatch and
labour subcontracting services
Three Labour subcontracting services One month; bank transfer 592 2.0
FY2021
Rank Name of the subcontractor Location
Business activity of the
subcontractor
Approximate year(s) of
business relationship with
our Group as at the
Latest Practicable Date
Major services procured from the
subcontractor
Typical credit terms and
payment method
Approximate
amount of
subcontractor
charge
Approximate
percentage of
total
subcontractor
charge
(RMB’000) (%)
1 Labour subcontractor A Qingdao, Shandong
province
A private company engaged in
the labour dispatch and
labour subcontracting services
Five Labour subcontracting services One month; bank transfer 13,508 36.2
2 Labour subcontractor B
(Note 1) Qingdao, Shandong
province
A private company engaged in
the labour dispatch and
labour subcontracting services
Four Labour subcontracting services One month; bank transfer 13,406 36.0
3 Labour subcontractor E Qingdao, Shandong
province
A private company engaged in
the labour dispatch and
labour subcontracting services
Three Labour subcontracting services One month; bank transfer 7,388 19.8
4 Labour subcontractor G Dalian, Liaoning
province
A private company engaged in
the labour dispatch and
labour subcontracting services
Three Labour subcontracting services One month; bank transfer 1,520 4.1
5 Labour subcontractor C Xi’an, Shaanxi
province
A private company engaged in
the labour dispatch and
labour subcontracting services
Five Labour subcontracting services One month; bank transfer 1,443 3.9
BUSINESS
–2 2 6–


--- page 236 ---
FY2022
Rank Name of the subcontractor Location
Business activity of the
subcontractor
Approximate year(s) of
business relationship with
our Group as at the
Latest Practicable Date
Major services procured from the
subcontractor
Typical credit terms and
payment method
Approximate
amount of
subcontractor
charge
Approximate
percentage of
total
subcontractor
charge
(RMB’000) (%)
1 Labour subcontractor A Qingdao, Shandong
province
A private company engaged in
the labour dispatch and
labour subcontracting services
Five Labour subcontracting services One month; bank transfer 19,948 62.3
2 Labour subcontractor E Qingdao, Shandong
province
A private company engaged in
the labour dispatch and
labour subcontracting services
Three Labour subcontracting services One month; bank transfer 5,107 15.9
3 Labour subcontractor B Qingdao, Shandong
province
A private company engaged in
the labour dispatch and
labour subcontracting services
Four Labour subcontracting services One month; bank transfer 4,305 13.4
4 Labour subcontractor G Dalian, Liaoning
province
A private company engaged in
the labour dispatch and
labour subcontracting services
Three Labour subcontracting services One month; bank transfer 1,390 4.3
5 Labour subcontractor C Xi’an, Shaanxi
province
A private company engaged in
the labour dispatch and
labour subcontracting services
Five Labour subcontracting services One month; bank transfer 1,277 4.0
9M2023
Rank Name of the subcontractor Location
Business activity of the
subcontractor
Approximate year(s) of
business relationship with
our Group as at the
Latest Practicable Date
Major services procured from the
subcontractor
Typical credit terms and
payment method
Approximate
amount of
subcontractor
charge
Approximate
percentage of
total
subcontractor
charge
(RMB’000) (%)
1 Labour subcontractor A Qingdao, Shandong
province
A private company engaged in
the labour dispatch and
labour subcontracting services
Five Labour subcontracting services One month; bank transfer 26,738 92.4
2 Labour subcontractor C Xi’an, Shaanxi
province
A private company engaged in
the labour dispatch and
labour subcontracting services
Five Labour subcontracting services One month; bank transfer 1,032 3.6
3 Labour subcontractor G Dalian, Liaoning
province
A private company engaged in
the labour dispatch and
labour subcontracting services
Three Labour subcontracting services One month; bank transfer 923 3.2
4 Labour subcontractor H Dalian, Liaoning
province
A private company engaged in
the labour dispatch and
labour subcontracting services
One Labour subcontracting services One month, bank transfer 238 0.8
Note:
(1) Labour subcontractor B consists of two limited lia bility companies owned by a common controlling
shareholder.
Before engaging our subcontractors, we adopt an internal evaluation procedure which
involves consideration of a set of criteria such as their reputation, productivity, production
quality, occupational safety and credibility. We conduct reviews on our subcontractors
from time to time to ensure they continue to sa tisfy our internal requirements. We require
our subcontracting workers to undergo training conducted by us to ensure that they
understand our potted vegetable cultivation and operational standards. We have also
implemented quality control procedures to ensure the quality of the potted vegetable
BUSINESS
–2 2 7–


--- page 237 ---
produce cultivated by our subcontractors. For further details on our quality control
procedures, please refer to the paragraph headed ‘‘Product safety and quality control —
Production process quality control’’ in this section of the prospectus.
As at the Latest Practicable Date, we engaged four subcontractors, who were all
Independent Third Parties. Our Group has maintained good relationships with our
subcontractors and we have renewed the contr acts of our subcontractors who satisfied our
internal requirements. In FY2020, FY2021, FY2022 and 9M2023, the total amount of
subcontracting fees amounted to approx imately RMB28.3 million, RMB37.2 million,
RMB30.3 million and RMB29.0 million, which rep resents approximately 41.6%, 41.7%,
40.9% and 41.8% of our total cost of sales for the same period, respectively. Our Directors
consider that there is no over-reliance on any individual subcontractor and no material risk
of disruption to our normal operations since (i) we maintain a list of qualified
subcontractors which is updated by us periodically, and (ii) there are many
subcontracting companies of comparable size and quality available in the market. Our
Directors believe that we can replace one subcontractor with another with no undue
difficulty.
During the Track Record Period, we did not experience any material issue or dispute in
relation to product quality with any of our subcontractors.
To the best knowledge of our Directors, none of our Directors or their associates, or
any Shareholders, who owns more than 5% of our issued share capital, had any interest in
any of our five largest subcontractors in each year/period during the Track Record Period
a n du pt ot h eL a t e s tP r a c t i c a b l eD a t e .
P R O D U C TS A F E T YA N DQ U A L I T YC O N T R O L
To ensure the quality of our potted vegetable produce, we have established stringent
quality control measures over our entire production process, from selection of suppliers and
sourcing of raw materials to our cultivation process, inspection of finished products and
inventory storage. Our quality control department is responsible for formulating our
quality control system in accordance with the relevant PRC laws and regulations, and
monitoring our entire production process at each key stage to ensure our products meet the
required quality standards. Further, our quality control department reviews the
implementation of our quality control system on a regular basis to recommend
improvement procedures and ensure continuous improvement in the quality of our
products.
Our quality control department is led by our quality control department manager who
has more than seven years of relevant experience in implementing quality control measures
in cultivation of our potted vegetable produce as at the Latest Practicable Date. Our quality
control department personnel are required to acquire relevant knowledge in relation to
product quality assessment.
In recognition of our technical and qualit y control capabilities, we were selected by
Qingdao Association of Standardisation ( 青島市標準化協會) in 2019 to be involved in the
development of the industry standard for the industrial cultivation of potted vegetable
BUSINESS
–2 2 8–


--- page 238 ---
produce in the PRC together wi th the Laixi Potted Vegetable Cultivation Association* ( 萊
西市盤菜種植協會), Qingdao Fugeng Agricultural Machinery Professional Cooperative*
(青島富耕農機專業合作社) and Qingdao Institute of Technology and Standards* ( 青島市技
術標準科學研究所).
Raw materials quality control
As the quality of our potted vegetable produce is heavily dependent on the quality of
our primary raw materials, we have implemented stringent procedures in the selection of
our suppliers. Please refer to the paragrap h headed ‘‘Raw materials, suppliers and
subcontractors — Our suppliers’’ in this section of the prospectus for further details.
In addition, we have also implemented an inspection and testing procedure whereby
raw materials delivered to our cultivation facilit ies are sampled for inspection and testing in
accordance with our quality requirements before they are accepted. For example, we will
conduct visual examination on the seeds supplied by our suppliers to ensure that they are
not adulterated with other wild seeds that are not required for our cultivation. Moreover, as
our internal quality control measures, we will conduct searches to check whether our seeds
producers possess valid qualification certifi cate. We will also examine the packaging of the
seeds, foliar fertilisers and biopesticides to check their manufacturing date to ensure that no
near-expiry goods are delivered to us by the s uppliers. We will also conduct sample testing
on the seeds’ germination rate with the organi c substrates prepared and fermented from the
raw materials supplied by our suppliers to examine whether the raw materials they provided
could yield the organic substrates with satisfactory quality and be able to cultivate our
potted vegetable produce efficiently. We have also implemented storage control procedures
in relation to the storage of raw materials. Please refer to the paragraph headed
‘‘Inventories and logistics — Inventories m anagement’’ in this section of the prospectus
for the details of our raw materials storage.
Production process quality control
Our cultivation process is closely monitored by our quality control department, which
conducts quality sample testing and inspection on our potted vegetable produce at various
stages of our cultivation process. Our quality control department is responsible for ensuring
that (i) our cultivation procedures, including the use of raw materials , follow our internal
production guidelines; (ii) the size and appearance of our potted vegetable produce are
satisfactory in accordance with our internal standards; (iii) there is no contamination and
pollution of our products; and (iv) our products meet our quality standards. Only those
products which pass our quality checks can be sold to our customers.
In order to ensure our potted vegetable produce is growing in an environment that is
free from hazardous chemicals and pollutants and to minimise the risk of contamination
and pollution from the environment, we have implemented certain control measures in
respect of the growing environment of our potted vegetable produce. These measures
include the careful selection of water source and suppliers for the raw materials of our
organic substrates. We have also engaged a third party inspection institution to conduct
sample testing on our organic substrates and wat er for irrigation to ensure their qualities in
respect of their pH value and residual level of heavy metals comply with the environmental
BUSINESS
–2 2 9–


--- page 239 ---
requirements for origin of pollution-free ag ricultural products. We have been accredited
with Certificate of Origin of Pollution-free Agricultural Products* ( 無公害農產品產地認定
證書) from Qingdao Agriculture Commission* ( 青島市農業委員會) in December 2017.
According to the Measures for the Management of Pollution-free Agricultural
Products (2007 Amendment) ( 無公害農產品管理辦法 (2007 修正)) (the ‘‘ Management
Measures ’’), pollution-free agricultural products are unprocessed or pretreated edible
agricultural products which passed the relevant national standards and requirements in
relation to the environment of origin, production process and product quality, and the
products will be certified and allowed to use the pollution-free agricultural products logos.
Our Group has standard procedure in cultivation to ensure that our Group’s potted
vegetable produce is in compliance with the relevant requirements set out in the
Management Measures; fertilisers (such as foliar fertilisers) and biopesticides (such as
matrine) will only be applied by our Group in cultivation if necessary in strict compliance
with the Management Measures. As confirmed by our Directors, our Group has not applied
any restricted chemicals or any material or substance in cultivation that would lead to the
residual levels of the restricted chemicals exceeding the prescribed limits in the potted
vegetable produce. Our Group had conducted sample checking and the independent third
party inspection institution engaged by us had not detected any restricted chemicals that
exceeded the prescribed limits in our Group’s potted vegetable produce.
We have implemented quality control procedures to ensure the quality of the potted
vegetable produce cultivated by our subcontractors. Pursuant to the labour subcontracting
agreements, we require our subcontractors to comply with our internal production
requirements on production safety and occupational hygiene. Our quality control
department closely monitors our subcontractors’ cultivation process and provide
guidance at various stages. We are responsible for procuring and providing raw materials
to our subcontractors, who utilise such raw materials in accordance with our instructions
and training provided to them. Further, we calculate the subcontracting fees on a monthly
basis based on the quality passing rate of each batch of potted vegetable produce cultivated
by our subcontractors, the subcontractors would be entitled to receive a higher
subcontracting fee per pot of potted veget able produce if they could achieve a higher
quality passing rate for the batch they cultivate.
Finished product quality control
We perform sample-tests and inspections on our matured potted vegetable produce to
ensure that the relevant quality standards have been met. We conduct sample testing on our
potted vegetable with pesticide residue testing machines to ensure that our potted vegetable
produce would not contain residual pesticide that exceeds the safety limits. For our Laixi
Facility, the pesticide residue testing machine is connected to Qingdao Agricultural Rural
Bureau* ( 青島市農業農村局), and the testing results were reported back to Qingdao
Agricultural Rural Bureau. We have also engaged a third party inspection institution to
conduct sample testing on our potted vegetable produce for checking the residue level of (i)
heavy metals such as cadmium and lead; and (ii) pesticides such as carbofuran, omethoate
and phorate in accordance with the relevant nat ional standards mentioned in the guideline
issued by the Ministry of Agriculture of the PRC. The investigation result revealed that
BUSINESS
–2 3 0–


--- page 240 ---
none of the samples of our potted vegetable produce had been detected with the heavy
metals or pesticides that exceed the safety limits set out in the relevant national standards.
We have been granted with Certificate of Pollution-free Agricultural Products* ( 無公害農產
品證書) by Qingdao Agricultural Rural Bureau* ( 青島市農業農村局) in respect of the
potted vegetable produce cultivated at our Lai xi Facility as at the Latest Practicable Date.
INVENTORIES AND LOGISTICS
Inventories management
Our inventories primarily consist of pots and agricultural materials which mainly
include seeds, fertilisers and biopesticides which were not utilised at the end of each of the
Track Record Period. We utilise a computerised enterprise inventories management system
to record the incoming and outgoing inventori es. Such system allows us to monitor levels of
inventories on a regular basis in order to mai ntain adequate quantities of our pots and
agricultural materials.
Our cultivation facility employees regularly conduct stock-take of our agricultural
materials and are required to prepare monthly records on our inventory levels. We keep an
adequate level of inventories in accordance with the cultivation schedule of our potted
vegetable produce. During the T rack Record Period, we did not experience any shortage of
inventories.
Each of our cultivation facilities has a sto reroom for storage of our agricultural
materials. Our agricultural materials are sto r e di nd e s i g n a t e da r e a sw i t h i no u rs t o r e r o o m s
according to their product categories. Our s torerooms are maintained to be dry and well-
ventilated in order to prevent deterioration of our agricultural mater ials. We also undertake
fire safety and pest control measures to min imise fire hazards and risk of damage to our
agricultural materials.
Logistics
For sales to our distributors, we are not responsible for the delivery of our products
and our distributors will arrange for their own delivery from our cultivation facilities to
their premises or customers at th eir own cost. Any risk of liability relating to transportation
accidents, delivery delays and losses in respect of delivery to our distributors will be borne
by our distributors.
For sales to our end-user customers, we generally arrange for delivery of our products
to their premises using our own fleet of delivery vehicles. Any risk of liability relating to
transportation accidents, delivery delays and losses in respect of delivery will be borne by
us.
During the Track Record Period and up to the Latest Practicable Date, we did not
experience any significant delay in delivery tha t materially affected our business operations.
BUSINESS
–2 3 1–


--- page 241 ---
AWARDS
We have been granted a number of awards and certificates in recognition of our
business development, details of which are set forth as follows:
Year of grant Award/Accreditation Awarding Body
2020 GB/T 19001-2016 idt ISO 9001 :
2015 Certificate of Quality
Management System ( 質量管理體
系認證證書)
Qingdao Huazhong Century
Certification Co., Ltd.* ( 青島華
中世紀認證有限公司)
2020 GB/T 24001-2016 idt ISO 14001 :
2015 Certificate of
Environmental Management
System ( 環境管理體系認證證書)
Qingdao Huazhong Century
Certification Co., Ltd.* ( 青島華
中世紀認證有限公司)
2020 GB/T 45001-2020 idt ISO 45001 :
2018 Certificate of Occupational
Health and Safety Management
System ( 職業健康安全管理體系認
證證書)
Qingdao Huazhong Century
Certification Co., Ltd.* ( 青島華
中世紀認證有限公司)
2018 Qingdao Green Vegetable
Garden* ( 青島市綠色菜園)
Qingdao Agriculture
Commission* ( 青島市農業委員
會)
201
5 March 15 — the Most Socially
Trustworthy Brand* (3 ‧15最具
社會誠信品牌)
Peninsula Metropolitan
Newspaper* ( 半島都市報社)
2014 Qingdao Municipal Vegetable
Base* ( 青島市市控蔬菜基地)
Bureau of Commerce, Qingdao
(青島市商務局)
KNOW-HOW AND INTELLECT UAL PROPERTY RIGHTS
Our potted vegetable cultivation business is d ifferent from typical crop cultivation and
requires a body of specialised knowledge including seed and specie selection, substrate
development and greenhouse fa cility management. Over the years since we commenced our
p o t t e dv e g e t a b l ec u l t i v a t i o nb u s i n e s si n2 0 1 2 ,t h r o u g ho u ro p e r a t i o ne x p e r i e n c ea n d
continuous testing efforts, we have accumulate dk n o w l e d g ea n de x p e r i e n c ei nr e l a t i o nt ot h e
cultivation of potted vegetable produce in terms of method, process and organic substrate
formula which are part of our essential proprietary technical know-how. Our technical
department personnel have engaged in continuous testing for the refinement of our current
cultivation methods and techniques and the optimisation of species selection for new
products. As a result of our continuous testing of cultivation method, the number of species
we cultivated has grown from 15 species as at 31 December 2018 to 29 species as at 30
September 2023. Hence, the accumulation a nd effective protection of proprietary
BUSINESS
–2 3 2–


--- page 242 ---
information and technical know-how are ess ential to our operations. As some of our
proprietary information and know-how are not patented, we are vulnerable to unauthorised
disclosure of such proprietary information to our competitors.
Through our past experience, we also acquired the know-how and technique to
improve and utilise our greenhouse facilities to develop the environment optimal for
planting our potted vegetables. We developed our enhanced greenhouses that are made to
our specifications and equipped with a com bination of facilities or equipment for
monitoring and improving the cultivation e nvironment such as thermometer, rolling sun
shading curtains, insulating quilts, fibreg lass water duct and vegetable greenhouse
environment monitoring system.
As at the Latest Practicable Date, we had ten registered patents. The details of the ten
registered patents which represent the equipm ent developed or invented by us for improving
the operation of potted vegetable cultivation are set out below:
Name of invention Type of invention
Place of
registration Expiry date
Vegetable greenhouse environment
monitoring system*
(一種蔬菜大棚環境監測系統)
Invention patent
(發明專利)
PRC 1 January 2037
Automatic sowing machine*
(自動播種機)
Invention patent
(發明專利)
PRC 27 February 2039
Automatic sowing machine*
(自動播種機)
Utility model patent
(實用新型專利)
PRC 27 February 2029
Sun blocking curtain device*
(遮陽網捲簾裝置)
Utility model patent
(實用新型專利)
PRC 21 February 2029
New type of watering device*
(一種新型灌溉裝置)
Utility model patent
(實用新型專利)
PRC 26 December 2028
Greenhouse
vent opening and closing
device* ( 大棚通風口開閉裝置)
Utility model patent
(實用新型專利)
PRC 22 May 2029
New type of planting device*
(一種新型種植裝置)
Utility model patent
(實用新型專利)
PRC 25 February 2031
Automatic blending and feeding
machine* ( 一種自動攪拌上料機)
Utility model patent
(實用新型專利)
PRC 25 February 2031
New type of sowing machine*
(一種新型播種機)
Utility model patent
(實用新型專利)
PRC 25 February 2031
New type of planting tray*
(一種新型種植盤)
Utility model patent
(實用新型專利)
PRC
25 February 2031
BUSINESS
–2 3 3–


--- page 243 ---
As at the Latest Practicable Date, we also h ad (i) nine registered trademarks and two
trademark registration applications in th eP R C ;( i i )t w or e g i s t e r e dt r a d e m a r k si nH o n g
Kong; and (iii) two registered domain names. For details of our intellectual properties,
please refer to the paragraph headed ‘‘B. Further information about business of our group
— 2. Intellectual property rights of our Group’’ in Appendix VI to this prospectus.
During the Track Record Period, we did not register ‘‘ 富景农业’’ as a trademark in the
PRC. To safeguard the Group’s legal rights in our brand ‘‘ 富景农业’’, we have submitted the
application for trademarks ‘‘ 富景农业’’ and ‘‘
’’ on 13 November 2023, and the estimated
time to complete the application is approxima tely 12 to 18 months, which is in line with the
typical time required for trademark registration. Our PRC Legal Advisers are of the view
that, in the absence of unforeseen circumstances, there is no administrative or legal
impediment to complete the registration of such trademarks for the following reasons:
(i) according to the search conducted on the official website of the Trademark Office,
‘‘富景农业’’ or ‘‘富景農業’’ has not been registered as a trademark under Class 31
(cereals and agricultural, horticultural, and forestry products not falling within
other categories; live animals; fresh fruits and vegetables; seeds; plants and
flowers; animal feed; malt) in the PRC;
(ii) according to the search conducted o n the Trademark Office’s online database,
there are two registered and currently valid trademarks that contain ‘‘ 富景’’ under
Class 31 in the PRC. To the best of our Directors’ knowledge, the business
operated by us and the owners of the registered and currently valid trademarks
that contain ‘‘富景’’ are different. Based on the understanding of the businesses of
the owners of these registered trademarks through telephone communication, the
owners do not operate business related to vegetables. Therefore, the registered
and currently valid trademarks that contain ‘‘ 富景’’ are not for use on goods
identical with or similar to those offered by us; and
(iii) the registered and currently valid trademarks that contain ‘‘ 富景’’ are text-graphic
combination trademarks and each of them has an overall layout arrangement and
combination and cannot be used separately. Our brand ‘‘ 富景农业’’ is only a text
mark without graphic combin ation. There is an obvious difference in the overall
vision. Therefore, our brand ‘‘ 富景农业’’ is not identical with or similar to these
registered trademarks according to Articles 14 and 15 of the Notice by the China
National Intellectual Property Administration of Issuing the Trademark
Infringement Judgment Standard ( 國家知識產權局關於印發〈商標侵權判斷標
準〉的通知) and will not cause confusion.
Based on the above, our Directors and the PRC Legal Advisers are of the view that our
continuous use of the brand ‘‘ 富景农业’’ will not infringe the intellectual property rights of
any third parties, and the risk of we facing any related trademark disputes or potential
disputes is remote, and the businesses operated by these owners do not pose a threat to our
business.
BUSINESS
–2 3 4–


--- page 244 ---
For details of the risks associated with the non-registration of ‘‘ 富景农业’’ as a
trademark in the PRC, please refer to the paragraph headed ‘‘Risk Factors — We did not
register ‘‘富景农业’’ as a trademark in the PRC during the Track Record Period and there is
no assurance that the trademark application w ill be successful. Our ability to compete may
be hampered if our rights to our brand are infringed by third-parties or, on the other hand,
if we are alleged or found to have infringed the intellectual property rights of others’’.
We rely on intellectual property laws in the PRC to protect our intellectual property
rights. We also rely on a combination of trade secrets, confidentiality procedures and
contractual provisions to protect our know-how and intellectual property rights. Our
employees who have access to our confidential information are generally required to enter
into confidentiality agreements with us, pur suant to which our employees undertake to keep
our trade secrets confidential during and after the termination of their employment with us.
Moreover, we have entered into confidentiality agreements with our current suppliers of
components of organic substrates in order to protect our rights in relation to the formula of
our organic substrates. In respect of our engagement of subcontractors, although our
subcontractors only involve in simple labour work, we have included a confidentiality
clause in our labour subcontracting agreements which require our subcontractors to keep
our trade secrets confidential. If any infringe ment of our intellectual property rights is
found, we will seek to take appropriate action to defend our rights. In addition, we
participate in the Qingdao Agricultural Produce Safety Monitoring Platform* ( 青島市農產
品質量安全監管平台) provided by Qingdao Agriculture Commission* ( 青島市農業委員會)
by affixing QR code on some of the pots in every batch of our potted vegetable produce
cultivated in Laixi Facility. Consumers may iden tify the cultivation particulars of the batch
and the name of producer and prove the genuineness of our potted vegetable produce by
scanning the QR code on the pots. Our Directors believe that the implementation of the said
identification and tracking system could avo id counterfeiting of our products and protect
our intellectual property rights.
Our testing expenses for testing of cultivation methods and techniques and developing
our know-how amounted to approximately RMB1.1 million, RMB1.7 million, RMB0.2
million and RMB0.1 million representing app roximately 0.9%, 1.1%, 0.1% and 0.1% of
our revenues in FY2020, FY2021, FY2022 and 9M2023, respectively. Our testing expenses
mainly represent substrates and raw materials used in testing our cultivation methods.
During the Track Record Period and up to the Latest Practicable Date, we did not
experience any infringement of our intellectual property rights having a material adverse
effect on our business, and we were not involved in any actual or alleged dispute, litigation
or legal proceedings for violation of intellectual property rights of third parties. Please refer
to the paragraph headed ‘‘Risk Factors — Risks relating to our business — We are exposed
to possible infringements of our intellectual property rights, or we could face claims for
infringement of the intellectual property r ights of others, which may materially and
adversely affect our sales, reputation, business operations and financial performance’’ in
this prospectus.
BUSINESS
–2 3 5–


--- page 245 ---
EMPLOYEES
As at the Latest Practicable Date, our Grou p had a total of 33 full-time employees in
the PRC, of whom 24, 5 and 4 were based in our Laixi Facility, Xi’an Facility and Dalian
Facility respectively. The following tabl e sets forth a breakdown of our employees by
function as at the Latest Practicable Date:
Function
Number of
employees
Procurement 1
Sales and marketing 1
Cultivation 11
Quality control 3
Technical 5
Finance and accounting 8
Human resources 1
Management and administration 3
Total 33
None of our full-time employees hired du r i n gt h eT r a c kR e c o r dP e r i o da n du pt ot h e
Latest Practicable Date was hired through empl oyment agencies. Our recruitment policy is
based on a number of factors including the level of knowledge and experience we require of
our staff. We provide introductory training at the time when members of our staff first join
us and thereafter regular on-the-job training, depending on his or her role. In addition, it is
our policy to provide training to our staff on an as-needed basis to enh ance their technical
and industry knowledge. We believe such initiatives have contributed to the increased
employee productivity.
Pursuant to the relevant PRC regulations, w e are required to participate in various
employee benefit plans including social insurance and housing provident funds for our
employees (except for direct casual labour). Save for the non-compliance incidents relating
to social insurance contributions and housing provident fund contributions during the
T r a c kR e c o r dP e r i o da sd i s c l o s e di nt h ep a r a g r a p hh e a d e d‘ ‘ N o n - c o m p l i a n c e ’ ’i nt h i s
section of the prospectus, we are advised by our PRC Legal Advisers that we have complied
with the applicable labour laws and regulatio ns in all material aspects during the Track
R e c o r dP e r i o da n du pt ot h eL a t e s tP r a c t i c a b l eD a t e .
We enter into a standard employment contract with all our employees which set out
terms such as remuneration and period of employment. During the Track Record Period,
our staff cost (including directors’ emol uments and the fees to subcontractors) was
approximately RMB31.6 million, RMB40. 1 million, RMB34.8 million and RMB30.7
million in FY2020, FY2021, FY2022 and 9M2023, respectively.
BUSINESS
–2 3 6–


--- page 246 ---
Although we have a relatively small number of employees during the Track Record
Period, we are relatively small in scale and have subcontracted all our labour work. As such,
we have internal control in place to ensure the proper segregation of duties and risk
management in each business function. There is no employee responsible for overseeing and
performing multiple business functions. For the routine business functions, the
responsibilities of different business func tions will be borne by different Executive
Directors for ensuring proper segregation of duties while for the non-routine business
decisions will involve board of Directors for a balanced decision and if any conflict of
interest arises, the respective Director will abst ain from voting in the respective resolution.
There are also regular meetings held between the Executive Directors to review and monitor
the business and financial performance agai nst the targets, the progress of receipts from
customers and payments to suppliers, the efficiency in the use of resources in comparison to
the budgets, and the operational matters to ensure we have complied with the regulations
that have material impact to our business. The aim is to enhance the communication and
accountability of the Executive D irectors so that significant strategic, financial, operational
and compliance risks or potential deviations are timely and properly identified and dealt
with in a proper manner, while significant issues are reported to the Board for their
attention. The management also compiles monthly reports to the Board to update the latest
financial performance, position and prospects of our Group. For further details, please
r e f e rt ot h es e c t i o nh e a d e d‘ ‘ D i r e c t o r sa n dS e n i o rM a n a g e m e n t ’ ’i nt h i sp r o s p e c t u s .
For the three business functions each with on ly one employee (i.e. procurement, sales
and marketing and human resources), we require the employee to have a high requirement
on the relevant experience and competency. S pecifically, the three relevant employees of
procurement, sales and marketing and human resources functions have worked with the
Group for over five years and all of them (i) possess at least 15 years of relevant work
experience; (ii) completed relevant occupational training for at least 10 hour per year; and
(iii) obtained university degrees or professional certificate. The three r elevant employees are
capable of performing their routine daily work duties based on our Directors’ belief and are
also required to report from time to time and obtain approvals from the Executive
Director(s) who are responsible for their respective functions. Nevertheless, our Executive
Directors are heavily involved in monitoring the performance of these employees to ensure
their works are in order and the smooth operation of these business functions. Since the
establishment of the Group in 2006, the Group had not experienced any operational
difficulty or hindrance in managing our business functions notwithstanding a relatively
small number of employees duri ng the Track Record Period.
During the Track Record Period, there was no material dispute with our employees in
the course of our operations. We believe that we maintain a positive working relationship
with our employees.
BUSINESS
–2 3 7–


--- page 247 ---
COMPETITION
China’s vegetable produce market and potted vegetable produce market are both
highly fragmented with around one mil lion to two million vegetable producers and
thousands of potted vegetable producers, respectively. In 2022, our Group, with a sales
revenue of RMB126.7 million, accounted for a pproximately 3.1% of total sales revenue of
potted vegetable producers in China and less than 0.01% of total sales revenue of vegetable
producers.
Entry barriers and the competitiveness of the potted vegetable produce market largely
lie in brand recognition, potted vegetable produce cultivation know-how, capital
requirements and logistics capabilities. Our Directors believe that we are able to compete
by leveraging our strengths as a market leader in Shandong province’s potted vegetable
produce market, our well-established distribution network and our developed techniques in
the potted vegetable produce cultivation. We will also further solidify our status in the
market through continuous efforts in testing cultivation methods and techniques and
improving our product quality.
For further details on our competitive landscape, please refer to the paragraph headed
‘‘Industry Overview — Competitive landscape of China’s vegetable produce and potted
vegetable produce markets’’ in this prospectus. For further details on our risks related to
competition, please refer to the paragraph headed ‘‘Risk Factors — Risks relating to the
industry which we operate in — We operate in a highly fragmented and competitive
industry and may face increasing competit ion, which may affect our market shares and
profit margins’’ in this prospectus.
ENVIRONMENTAL PROTECTION AND O CCUPATIONAL HEALTH AND SAFETY
We are committed to promoting corporate s ocial responsibility and sustainable
development and integrate them into our business operations. Our Directors believe that
other than being responsible for the interests of our Shareholders and maximising profits,
our Company must also assume responsibility for the society in order to achieve a cohesive
and sustainable relationship between our Company, the economy and the society.
Accordingly, our Company has adopted a series of policies in relation to environmental
protection, occupational health and safety and employee trainings. We plan to set targets
for Environmental, Social and Governance (the ‘‘ ESG’’) issues and to review our key
performance on a regular basis.
Our ESG Governance Structure
We regard ESG commitments as part of its responsibilities and is committed to take
ESG considerations into account in its decision-making process. We take a top-down
approach to ESG issues. The Board has overall responsibility for the our ESG approach
and strategy and has delegated certain execution of ESG strategy to a working group as
explained below. It is responsible for ensuring the effectiveness of the our risk management
and internal controls, assessing, prioritizing and managing significant ESG-related issues,
adopting ESG strategies and targets, and semi-annually reviewing progress in achieving our
targets.
BUSINESS
–2 3 8–


--- page 248 ---
To enhance the effectiveness of the our ESG efforts, we have established an ESG
working group (the ‘‘ Working Group’’) and hire ESG consultant (the ‘‘ESG Consultant’’).
The Working Group comprises core members from different departments of the Company
including head of sales, production, human resource, finance department and ESG
Consultant and is responsible for collectin g and analyzing ESG-related information,
determining and assessing the ESG risks of t he Company, reviewing and implementing
ESG-related policies, guidelines and measure s, and semi-annually reviewing the progress of
related targets. The Working Group also identifies, evaluates and prioritizes important
ESG issues through materiality assessments, which are further reviewed and approved by
the Board. In addition, the Working Group will report regularly to the Board on ESG-
related issues for the Board’s evaluation and s ubsequent implementation or revision of our
ESG strategy and management approach, and to ensure that appropriate risk management
is applied to the ESG issues.
For any material ESG issue was identified by the Working Group, the ESG
Consultant, would perform:
. Risk ranking process involves analysing the inherent likelihood and impact of the
material identified ESG risk in order to fa cilitate the management to prioritise the
identified ESG risk items and identify the responsible risk owners. The Working
Group is responsible for this function of the Company.
. Risk acceptance is a formal decision to accept the ESG risk. In this step, the ESG
Consultant should analyse the measures that put in the risk response table based
on risk priorities. Starting point is the r isk priority number as calculated from
probability and severity and the risk threshold as defined at the risk assessment
process.
. Once the decision to mitigate the sign ificant ESG risk has been made and the
strategy is identified, a mitigation plan should be formulated.
There are also regular meetings held between the Board, Working Group and the ESG
Consultant to review and monitor both the qualitative and quantitative performance
against the ESG targets, the efficiency in the use of our resources, and the operational
matters to ensure we have complied with the re gulations that have material impact to our
business.
BUSINESS
–2 3 9–


--- page 249 ---
Environmental protection
Our operations are subject to the current environmental protection laws and
regulations promulgated by th eP R Cg o v e r n m e n t .F o rd e t a i l s ,p l e a s er e f e rt ot h es e c t i o n
headed ‘‘Regulatory Overview — Laws and regulations relating to environmental
protection’’ in this prospectus. We are comm itted to minimising the effect of pollution as
a result of our operation. For example, we recycle and reuse pots for growing our potted
vegetable produce. Our overall environmental protection efforts are managed by our
guideline and we believe that our environmen tal protection measures are effective in
reducing the negative environmental impact.
There is no assurance that the relevant env ironmental laws and regulations will remain
unchanged. If the PRC government imposes more stringent environmental protection laws
and regulations, we may need to spend additional capital to upgrade our system to remain
in compliance or our cultivation operation may be interrupted. For more details, please
refer to ‘‘Risk Factors — Risks relating to the industry which we operate in — We are
subject to environmental regu lations and may be exposed to liability and potential cost for
environmental compliance’’ in this prospectus.
As advised by our PRC Legal Advisers, we had complied with the relevant PRC laws
and regulations in relation to environmental protection in all material aspects during the
Track Record Period and up to the Latest Practicable Date.
BUSINESS
–2 4 0–


--- page 250 ---
Emission and consumption
Air emission
The table below sets forth a breakdown of our gas emission from use of our motor
vehicles during the Track Record Period:
Year ended 31 December
Nine
months
ended 30
September
2020 2021 2022 2023
(kg) (kg) (kg) (kg)
Gas emissions
Nitrogen oxides (Note 1) 140.273 127.851 101.244 64.360
Sulphur oxides (Note 1) 0.424 0.325 0.257 0.165
Particulate matter (Note 1) 13.441 12.251 9.701 6.167
Total 154.138 140.427 111.202 70.692
Emission density (Note 2) 1.270 0.906 0.878 0.558
Notes:
(1) Refers to the gas emissions resulting from the c onsumption of fuel in our Group’s daily operations,
taking into account the relevant emission rates and driving distances.
(2) Refers to the emission of gas per million of revenue in the corresponding years/period.
Our Group emits gas amid our daily operations from the consumption of gaseous fuels,
such waste gas mainly include pollutants suc h as nitrogen oxides (NOx) and sulphur oxides
(SOx), and respiratory suspended particles such as particulate matter. In FY2020, FY2021,
FY2022 and 9M2023, our Group emitted a total of approximately 154.138 kg, 140.427 kg,
111.202 kg and 70.692 kg of waste gas, respectively. The increase in air emission in FY2020
are mainly due to use of more vehicles for our operation.
The decrease in air emission in FY2021 and FY2022 are mainly due to the use of
vehicles with lower emissions.
The emission density has decreased since FY2020 mainly due to i) the use of vehicles
with lower emissions, and ii) the enjoyment of economic benefits resulting from increasing
revenue.
BUSINESS
–2 4 1–


--- page 251 ---
The table below sets forth a breakdown of our greenhouse gas emission during the
Track Record Period:
Year ended 31 December
Nine months
ended
30 September
2020 2021 2022 2023
(kg of CO 2e) (kg of CO 2e) (kg of CO 2e) (kg of CO 2e)
Greenhouse gas emissions
Scope 1 : Direct emission (Note 1&2) 77,868 59,281 45,948 29,410
Scope 2 : Indirect emission (Note 1&3) 152,921 169,743 167,670 128,182
Scope 3 : Other indirect emission (Note 1&4) 8,936 11,926 10,077 6,978
Total 239,725 240,950 223,695 164,570
Emission density (Note 5) 1,975 1,555 1,766 1,357
Notes:
(1) The above greenhouse gas emissions are applicable to our Group and are classified into three scopes
according to the ‘‘Reporting Guidance on Environmental KPIs’’ issued by the Stock Exchange.
(2) Scope 1 emission refers to direct emissions fr om operations that are owned or controlled by our
Group.
(3) Scope 2 emission refers to energy indirect emi ssions resulting from the generation of purchase or
acquired electricity, heating, cool ing and steam consumed within our Group.
(4) Scope 3 emission refers to all other indirect em issions that occur outside our Group including both
upstream and downstream emissions.
(5) Emission density refers to the emission of greenhouse gas per million of revenue in the
corresponding years.
Our Group generates direct and indir ect emissions of greenhouse gases due to
consumption of fuel and electricity, usage of paper and business travel by our employees. In
FY2020, FY2021, FY2022 and 9M2023, there was approximately 239,725 kg, 240,950 kg,
223,695 kg and 164,570 kg of carbon dioxide equivalent greenhouse gases emitted from our
Group’s operation, respectively.
The increase in total greenhouse gas emissions in FY2020 and FY2021 are mainly due
to the expansion of the cultivation facilities during FY2020 and FY2021.
The decrease in the total greenhouse gas emissions for FY2022 is mainly due to the
more effective adoption of waste management and resource consumption policies. However,
as the emission is mainly due to the consumption of stationary electricity for administrative
purposes, therefore, when our revenue decreas es, emissions density increases. Hence, the
emission density is lower in FY2021 as we recorded higher revenue in FY2021.
BUSINESS
–2 4 2–


--- page 252 ---
Energy consumption
The table below sets forth a breakdown of our energy consumption during the Track
Record Period:
Year ended 31 December
Nine
months
ended 30
September
2020 2021 2022 2023
(kWh) (kWh) (kWh) (kWh)
Electricity consumed 137,990 153,170 151,299 115,667
Gasoline consumed 270,476 184,533 146,130 93,179
Diesel consumed 8,970 29,883 23,661 15,599
Total 417,436 367,586 321,090 224,445
Energy consumption density
(Note 1) 3,438.51 2,372.36 2,534.38 1,850.42
Note:
(1) Refers to the consumption of energy per mi llion of revenue in the corresponding years.
In FY2020, FY2021, FY2022 and 9M2023, our consumption of energy was
approximately 417,436 kWh, 367,586 kWh, 321,090 kWh and 224,445 kWh, respectively.
The increase in energy consumption in FY2020 and FY2021 are mainly due to the
continuous increase in the scale of our operation.
The decrease in the electricity consumption for FY2022 is mainly due to the more
effective adoption of resource consumption policy.
However, as the emission is mainly due to the consumption of stationary electricity for
administrative purposes. Therefore, when our revenue decreases, the emissions density
increases.
Waste management
There are three major types of wastes produced during cultivation: i) unsold vegetable;
ii) used pots; and iii) used organic substrates.
Unsold vegetable
Wastage of unsold vegetable from daily operation mainly came from i) defects and ii)
unnecessary movement during transportation. To reduce the waste of overproduction and
defects, we create and implement standard production procedures so that our planting team
have guidance for each task and do not spend more than the recommended time and usage
of materials on any one step. Also, our planting team are well trained to know the right
methods and quality expected. Furthermore, we have scheduled regular maintenance for
BUSINESS
–2 4 3–


--- page 253 ---
devices and machines. To reduce waste of transport, our staff at cultivation facilities should
keep aisles and the site clutter-free so that tr ansport vehicles can drive freely and staff do
not have to find alternative routes. In general, our scrap rate is between 3%-5%.
Unlike the first lockdown in 2020 when our cultivation facilities were still in operation
and our distributors were able to pick up potted vegetable produce from us and sold them
to residents in local residential estates thro ugh property management companies, during the
lockdown in 2022 distributors were not allowed to pick up potted vegetable produce from
us and no sales took place during the lockdown, resulting in direct loss of unsold vegetable
produce of approximately 557,000 pots during the lockdown. Most of the unsold potted
vegetable produce from our Laixi Facility was donated to the government for the
distribution to the local residents for their consumption during the lockdown period of the
COVID-19 epidemic in FY2022. Other unsol d vegetables will be reused by feeding the
vegetable waste to livestock or giving the vegetable culls to local food banks.
Used pots
We regularly reuse our pots by collecting them from our customers and cleaning them
for reuse. We also require our customers to return used pots to us, reducing the amount of
waste that ends up in landfills. There are insig nificant amount of pots are damaged and not
reusable due to wear and tear. Broken pots are returned to the pot manufacturer for
recycling.
Used organic substrates
Organic substrates are made primarily from raw materials such as cow manure, fungi
residue and peanut shells that are proportioned, mixed and processed through high
temperature fermentation. Organic substrates have long storage time. In addition, the
production of organic substrates is based on sales orders, and we maintain a low level of
inventory of organic substrates. Our use of org anic substrates is based on our cultivation
plan and we do not have any waste of organic substrates. We regularly collect used organic
substrate when collecting pots. We will send the used organic substrate to a recycler for
recycling. Our recycler is engaged in the tree planting business. It provides us with free
recycling of used organic substrates services by collecting used organic substrates from us
for free and extracting and reusing useful materials from the substrates. No income or
expense is generated or incurred by us for sending the used organic substrates to recycler.
BUSINESS
–2 4 4–


--- page 254 ---
The table below sets forth details of our waste during the Track Record Period:
Wastage
Year ended 31 December
Nine
months
ended 30
September
2020 2021 2022 2023
Pots (unit) 84,948 94,333 92,168 76,829
Scrap rate of pots 1.0% 0.9% 1.1% 0.9%
Unsold vegetable due to
overproduction, or defects
or damaged (pot) 316,233 419,301 331,304 295,025
Unsold vegetable due to
lockdown and travel
restriction (pot) — — 556,954 —
Scrap rate of unsold
vegetable 3.8% 3.9% 10.2% 3.5%
Water consumption
Our business is subject to environmental protection laws and regulations promulgated
by the PRC government. For example, we are required to meet appropriate standards for
the sake of prevention of the pollutions of soil, underground water and agricultural
products, and to discharge water pollutants in accordance with national and local
standards. We must discharge water pollutants in accordance with national and local
standards. For details, please refer to the section headed‘‘Regulatory Overview — Laws and
regulations relating to environmental protection’’ in this prospectus. If we breach any
environmental-related law s and regulations, or faces any accusation of negligence in
environmental protection, in addition to the potential fines and penalties, such incidents
may also adversely affect reputation and creditability of the Company. The environmental
related costs may increase, and the expansion of the production capacity may be
constrained if PRC’s environmental protection laws become more onerous, and any non-
compliance with relevant environmental prot ection laws could lead to the imposition of
fines and penalties.
In almost every agricultural operation, irrigation is an indispensable process for crops
to flourish, the Company’s agricultural business is no exception to this necessity. In order to
avoid excessive or unnecessary irrigation, we regularly check the moisture level in the soil.
Our main water supply for irrigation at Laixi Facility is water from the Chanzhi Reservoir,
while the main water supply for irrigation at Xi’an Facility and Dalian Facility is from
public supply of drinking water in Xi’an and Dalian.
BUSINESS
–2 4 5–


--- page 255 ---
According to the information publishe d by the Shandong Provincial People’s
Government, water resources in Shandong province are insufficient and unevenly
distributed. According to the Shandong Province Water Resources Bulletin 2022, the
water consumption per capita in Shandong province was approximately 214 m
3,o nt h e
other hand, the local water supply per capita in Shandong province only amounted to
approximately 140 m
3 (which include local surface water and underground water of
approximately 72 m 3 and approximately 68 m 3 respectively), demonstrating that water
resources generated from Shandong province is insufficient to meet the local demand.
Notwithstanding the scarcity of water resources in Shandong province, our Directors
consider the water supply for our cultivation in Laixi Facility is not affected as Laixi
Facility is strategically situated immediatel y next to and directly connected to the Chanzhi
Reservoir, the second largest reservoir in Shandong province with maximum capacity of
approximately 402 million m
3. In general, water supply of Chanzhi Reservoir will be
primarily for users with close proximity. Chanzhi Reservoir serves multiple purposes such
as flood control, irrigation and water supply, etc. Testing of the water quality of Chanzhi
Reservoir is regularly performed by Laixi Branch of the Qingdao Municipal Ecological and
Environment Bureau* ( 青島市生態環境局萊西分局), and the water quality exceeds the
agricultural level and meets the drinking water level according to the Surface Water
Environmental Quality Standards* ( 地表水環境質量標準) (GB3838–2002). Hence, our
Directors considered that the risk of water pollution that may affect the quality of water
supply in our Laixi Facility is low.
During the Track Record Period, our maximum annual water consumption for Laixi
Facility was approximately 330,000 m
3, representing only a minimal portion of the capacity
of Chanzhi Reservoir of approximately 402 million m 3. The quality of water extracted from
the Chanzhi Reservoir exceeds the agricultu ral level as explained above. In light of the
proximity of our Laixi Facility to a stable supply of high quality water resources for our
cultivation and regular testing of water qualit y performed by the government authority, our
Directors consider that the risk of potential water shortage and water pollution in
Shandong province on our business is minimal. In addition, taking into account (i) the
water resources per capita in Shaanxi provin ce and Liaoning province are approximately
925 m
3 and 1,333 m 3 respectively, which are higher than the water demand per capita in
Shaanxi province and Liaoning province are approximately 240 m 3 and 300 m 3 respectively
in 2022; and (ii) in respect of water environmen t quality ranking according to the Ministry
of Ecology and Environment ( 生態環境部), both Shaanxi province and Liaoning province
rank higher on water quality than Shandong province in 2022, our Directors considered
that the risks of potential water shortage and water pollution that may affect our Xi’an
Facility and Dalian Facility are minimal.
To further mitigate the risks of water shortage and water pollution in Shandong
province, we have also:
— retained a water pond in our Laixi Facilit y for collecting rain water which can be
further filtered and used as our additional water supply in case of severe water
shortage, which the water pond is sufficient to cover the water consumption of our
Laixi Facility for approx imately seven months;
BUSINESS
–2 4 6–


--- page 256 ---
— built a well our Laixi Facility for extracting underground water in case of severe
water shortage, which the well is sufficient to cover the water consumption of our
Laixi Facility for approximately two days; and
— engaged and will continue to engage a third-party inspection institution to
conduct testing of water quality. The purpose of this test is to ensure that the pH
value and residual level of heavy metals in our irrigation water comply with the
environmental requirements for producing pollution-free agricultural products. It
is our internal control policy to conduct regular testing of the water quality.
The water consumption during the Track Record Period are as follows:
KPI
Year ended 31 December
Nine months
ended
30 September
2020 2021 2022 2023
m3 m3 m3 m3
Water consumed (Note 1) 280,778 359,660 293,661 182,745
Water consumption density
(Note 2) 2,312 2,320 2,318 1,507
Notes:
1. The water consumed for the Laixi Facility was approximately 247,000 m 3, 330,000 m 3, 267,000 m 3
and 164,000 m 3 for each of the FY2020, FY2021, FY2022 and 9M2023 respectively.
2. Refer to the consumption of energy per mill ion of revenue in RMB in the corresponding years/
period.
Goal target achievement
Our Board will set targets for each material KPI at the beginning of each financial year
in accordance with the disclosure requirements of Appendix C2 to the Listing Rules and
other relevant rules and regulations upon the Li sting. The relevant targets on material KPI
will be reviewed on an annual basis. In setting targets for the KPIs, our Group has taken
into account their respective historical levels during the Track Record Period, and has
considered our future business expansion in a thorough and prudent manner with a view of
balancing business growth and environmental protection to achieve sustainable
development. The Working Group is responsib le for semi-annually reviewing progress in
achieving our targets.
BUSINESS
–2 4 7–


--- page 257 ---
We strive to improve the utilization rate of energy and resources, undertake energy
saving and consumption reduct ion activities to save water and electricity and reduce paper
consumption. As part of our commitment to environmental protection, we have set the
following environmental t argets for our operation:
Item
Target for
FY2022
Actual KPI
FY2022
Target for
the financial
year ended
31 December
2023
Greenhouse gas emission 238,541 223,695 236,155
Energy consumption 363,910 321,091 360,271
Water consumption 356,063 293,661 352,503
After reviewing the achievement of the KPI FY2022, we believe that we can achieve the
target in the financial year ended 31 December 2023. Our actual KPI for FY2022 is
considerably lower than our target for FY2022 mainly because of our lower revenue and
business activity level in FY2022. The goal target set for the financial year ended 31
December 2023 are expected to decr ease by 1% of goal target FY2022.
Basis of the goal target setting
We have established specific ESG-related goals, targets, and policies that focus on
reducing our air pollutant emission, reducing energy and water consumption.
To reduce our air pollutant emissions by approximately 5% by 2026 (i.e. 1% annually),
using 2021 as a baseline, we will implemen t a number of initiatives as follows:
. Planting more trees: Planting more trees is an effective way of reducing air
pollution since they absorb carbon dioxide and other pollutants from the
atmosphere;
. Continuing with the switch to low-emission vehicles; and
. Adopting the use of clean energy: We will consider installing solar panels in our
cultivation facilities to promote the use of renewable energy.
To reduce our energy consumption by 1%, we will implement a number of initiatives as
follows:
. Energy efficiency standards: We can mandate energy efficiency standards for
appliances, buildings, and vehicles. This will help reduce energy consumption by
ensuring that all new products consume less energy; and
. Adopting the use of clean energy: We will consider installing solar panels in our
cultivation facilities to promote the use of renewable energy.
BUSINESS
–2 4 8–


--- page 258 ---
To reduce our water consumption by 1%, we have implemented a number of policies
and initiatives as follows:
. Water-efficient technologies: The use of water-efficient technologies can help in
reducing water consumption. These technologies include low-flow water fixtures,
water-efficient irrigation systems, and water harvesting systems; and
. Efficient agriculture practices: Agriculture accounts for a significant amount of
water consumption. We will promote efficient agriculture practices such as drip
irrigation and water-efficient crops to reduce water consumption in the
agricultural sector.
The targets were set with reference to two comparable companies listed on the Hong
Kong Stock Exchange in the vegetable cultivation business. The ESG targets of these two
listed companies are reducing emission/consumption ranged from around 0.7% to 3%
annually in general. Thus our Directors consider that our ESG targets are within the market
range and reasonable.
Our progress towards achieving our ESG goals is reviewed semi-annually by Working
Group. We also work with ESG consultant to assess our performance and identify areas for
improvement.
Benefits of achieving the goal target
Financial impacts
There are several potential financial impacts on our Group that could be resulted from
actions taken for achieving ESG targets.
. Increase in investment: measures such a s tree planting and switching to low-
emission vehicle represent one-o ff investment cost to our Group;
. Cost savings: On the other hand, by becoming more efficient in our operations,
such as switching to low-emission vehic le, energy saving and water saving, will
reduce our on-going cost; and
. Improved reputation and selling price: Achieving targets can also lead to
improved brand recognition and reputation. This may make it easier for us to
attract new customers, retain existing customers, and may potentially increase our
selling price due to better branding.
BUSINESS
–2 4 9–


--- page 259 ---
Non financial impacts
There are several non-financ ial impacts on the Group that could be resulted from
achieving ESG targets as below:
. Increased awareness: Setting targets for ESG saving and taking of various
measures to achieve the targets create awareness among our management and
employees about the importance of water a nd energy conservation and the needs
for adherence to the best practice.
. Improved efficiency: Water/Energy-saving measures can lead to improved
efficiency in operations. For example, using recycled water for non-potable uses
can reduce the need for fresh water, which in turn reduces the energy required for
water treatment and distribution.
. Lower compliance risk: Our policy of r egularly reviewing and achieving ESG
targets will enable our Group to have better performance in terms of environment
protection and thus we will potentially be better prepared for more stringent
environment regulations that may be introduced in future.
Climate Change
Climate change can affect the agricultura l production by altering the temperature,
precipitation, pests, disease s, and water availability in our regions of operation. Our Board
has identified two main climatic issues th at affect our physical environment and our
operations: (i) extreme weather events, such as droughts, floods, heat waves, storms, and
hailstorm, in the short run that can damage our potted vegetable produce and greenhouses,
reduce yields and quality, and increase production costs and risks; and (ii) changes in
temperature and precipitation patterns, in the long run that can stimulate plant growth and
water use efficiency in some crops, but also increase their susceptibility to pests and
diseases. For instance, the occurrence of a severe hailstorm in Qingdao in May 2020 which
may be a result of climate change damaged seven of our greenhouses in our Laixi facility
and led to some damaged or unsellable pots of vegetable produce and a loss of potential
sales revenue in FY2020.
Climate change, in the long run, can also create opportunities for our business by
increasing the demand for climate-resilient crops and sustainable practices. A warming
climate may provide opportunities for agricul ture in certain regions with an expansion of
the growing season in response to milder an d shorter winters. This might increase
productivity and allow the use of new and potentially more profitable crops.
To mitigate the risks and capture the opportunities mentioned above, we have
developed a sustainable strategy based on our industrial cultivation method. This method
involves using enhanced greenhouses and our horticultural expertise and equipment to
create an ideal microclimate for our potted v egetable produce. We adjust factors such as
temperature, humidity, light duration and c arbon dioxide level to optimize the growth of
our plants. For example, we plan to install fib reglass water ducts in some of our existing
greenhouses. During and after the irrigation process, excess water can be drained as soon as
BUSINESS
–2 5 0–


--- page 260 ---
possible through the fibreglass water duct within the greenhouse to avoid build-up of
moisture within the greenhouse. By minimising build-up of moisture within the greenhouse,
we are able to minimise the risk of pest infestation. Our extensive use of greenhouse also
provides better protection for our crops from severe weather.
Our industrial cultivation method standa rdises the process, stabilises the yield,
improves the quality and reduces the exposure to environmental and natural risks. It
enables us to grow potted vegetables all year round with superior appearance, freshness and
size. This reduces the scrap rate and ensures a steady supply of high-quality products to our
customers. As a result, we can secure our reve nue and reputation, improve profitability by
increasing the operating efficiency.
Social Responsibility
We value diversity within our organization a nd treat all employees equally and with
respect in terms of employment, training, benefits, and professional and personal
development. While striving to provide equal career opportunities for each employee, we
also promote work-life balance and create a collaborative culture in the workplace for all
employees. For details, please refer to the paragraph headed ‘‘Employees’’ in this section of
the prospectus.
The safety and quality of our products are of paramount importance to our operations.
We have developed a comprehensive standard operation procedure to ensure the safe and
quality products provided to customers consistently. We have also designed and
implemented a rigorous quality assurance policy that covers the whole process of our
production. We adhere to strict our production standards by providing regular training for
our workers in order to update and maintain th e required technical and practical skills.
Also, in order to achieve the goal target, we have provided relevant training to educate
our staffs the importance of saving resources.
During the Track Record Period, we neither have any material incidents involving
personal injury or property damage, nor any material claims, litigations, fines or penalties
a sar e s u l to fm a t e r i a li n c i d e n t s .
Staff Composition
In FY2020, FY2021, FY2022 and 9M2023, we employed a total of 48 staff, 47 staff, 41
staff and 32 staff, including cultivating operational office and back office division. All staff
members are allocated in the PRC.
BUSINESS
–2 5 1–


--- page 261 ---
a) Employee’s Age and Gender Distribution
2020 2021 2022 9M2023
Age Group Male Female Male Fe male Male Female Male Female
19 — 30 6% 4% 11% 6% 2% 5% 0% 3%
31 — 45 31% 19% 28% 17% 32% 19% 25% 25%
46 — 60 15% 15% 15% 13% 15% 15% 16% 13%
= 6 1 / > 6 1 6 %4 %6 %4 %7 %5 %9 %9 %
Total 58% 42% 60% 40% 56% 44% 50% 50%
b) Employee’ s Geographical Distribution
2020 2021 2022 9M2023
Location Male Female Male Fe male Male Female Male Female
Hong Kong 0% 0% 0% 0% 0% 0% 0% 0%
PRC 58% 42% 60% 40% 56% 44% 50% 50%
Total 58% 42% 60% 40% 56% 44% 50% 50%
c) Employee’ s Position by Gender Distribution
2020 2021 2022 9M2023
Position Male Female Male Fe male Male Female Male Female
Senior Management 6% 2% 6% 2% 7% 2% 9% 3%
Middle level staff 8% 4% 9% 4% 7% 5% 9% 6%
Junior staff 44% 36% 45% 34% 42% 37% 32% 41%
Total 58% 42% 60% 40% 56% 44% 50% 50%
Employment and Labour Practices
We place a significant emphasis on developing human capital, providing competitive
remuneration and welfare packages. Promotio n opportunities and salary adjustments are
benchmarked against individual performance. Employees are entitled to benefits such as
annual leave, sick leave, maternity leave, marriage leave, funeral leave and medical coverage
in accordance with local regulations.
We emphasise on equal opportunities for all personnel in respect of hiring, pay rates,
training and development, promotion and oth er terms of employment. We are committed to
providing a work environment free from any form of discrimination on the basis of
ethnicity, gender, religion, age, disability or sexual orientation.
We have a wide diversity of cultures including employees with different genders, ages,
skills, educational backgrounds, industry experiences and other qualifications in order to
achieve the most suitable composition and balance.
BUSINESS
–2 5 2–


--- page 262 ---
The human resource policies and procedures of the Group’s PRC subsidiaries had been
developed in accordance with the Labour Law of the PRC and has been distributed to our
employees since joining the Company. The rem uneration policies are determined on the
basis of performance, qualification and experience of individual employee. The
remuneration generally includ es salaries and allowances.
Occupational health and safety
We hold regular worksite inspection to elim inate all potential workplace hazard that
may negatively affect the health and safety of ou r employees. Also, we hold safety trainings
for our employees to enhance their awareness of occupational health and safety issue.
Moreover, we have kept a proper system of recording and handling accidents. During the
Track Record Period, we did not experience significant operational accident as a result of
implementation of our comprehensive occupational safety measures.
Employee trainings
We place significant emphasis on employee trainings and development. We hold
training sessions to teach our employees on how to improve the quality of our products and
operate our cultivation equipment from time to time. We will continue to invest in the
education and training programmes for our employees with the purpose of upgrading their
skills and knowledge on the latest developme nt of the industry, market and technology.
Our continuing efforts in protecting the environment and the health and safety of our
employees have been recognised, as shown by v arious certificates that we have obtained. In
2020, we obtained GB/T 24001–2016 idt ISO 14001 : 2015 certificate for our environmental
management system. Moreover, in the same year, we obtained GB/T 45001–2020 idt ISO
45001 : 2018 certificate for our occupational health and safety management system.
Our Directors have the collective and overal l responsibility for establishing, adopting
and reviewing our policies in relation to environmental protection, occupational health and
safety and employee trainings as mentione d above, and evaluating, determining and
addressing the relevant risks involved at least once a year. Our Directors may assess or
engage Independent Third-Party(ies) to evaluate the relevant risks and review our existing
strategy, target and internal controls. Neces sary measures will then be taken to mitigate the
risks.
Supply Chain Management
We expect our major suppliers to adhere to the same environmental, social
responsibility, health and safety, and governance policies as our Group.
We also have the following measures in place to ensure our suppliers prioritize
environmental and social responsibility:
Supplier selection: Before entering into business with new or existing suppliers, we
carefully assess factors such as p roduct quality, price, reliability, delivery, capabilities, and
overall supply chain sustainability. We give priority to suppliers who offer environmentally
BUSINESS
–2 5 3–


--- page 263 ---
preferable products or demonstrate higher en vironmental performance. We will gather
information of the products directly from our suppliers or from online sources in assessing
whether the raw materials are envir onmentally preferable products.
Supplier evaluation: We conduct regular assessments of our suppliers based on
predetermined criteria, including the evaluation of production pollution through site visits
or interviews.
Monitoring and performance assessment : We continuously review our suppliers’
environmental performance to ensure ongoing c ompliance with sustainability requirements,
such as the Environmental Protection Law of the People’s Republic of China, on a semi-
annual basis.
Communication and education: Our procurement department is trained to thoroughly
consider all aspects of these policies when evaluating suppliers, and we ensure that
tendering procedures are clearly and effectively communicated to suppliers.
Community involvement
During the COVID-19 epidemic in FY2022, some of our potted vegetable produce
remains unsold due to the lockdown and travel restrictions. Those unsold potted vegetable
produce were donated to the residents in local residential estates during the lockdown in the
neighboring cities through the PRC government.
Governance
We are committed to complying with ESG reporting requirements upon Listing. We
expect to comply with the standards of Appen dix C2 to the Listing Rules to cover, among
others, (i) the appropriate risk governance on ESG matters, (ii) ESG governance structure
and ESG strategy formation procedures, (iii) ESG risk management and monitoring, and
(iv) the identification of key performance indicators, the relevant metrics and mitigating
measures.
INSURANCE
We have purchased food safety insurance for our products and property insurance for
our owned greenhouse facilities. Our Directors are of the view that our insurance coverage
is sufficient and adequate and is in lin e with customary industry practices.
During the Track Record Period, we have filed two property insurance claims. In
FY2020, we have filed a property insurance claim with the insurer for the damages of seven
greenhouses caused by the severe hailstorm occurred in May 2020 in Qingdao, Shandong
province for a sum of approximately RMB0.3 million. The damaged greenhouses had been
suspended for production for approximately one to three months in FY2020 due to the
incident depending on the degree of damage of the greenhouses. In FY2021, we have filed
property insurance claims with the insurer for the damages of four greenhouses caused by a
fire incident in January 2021 for a sum of approximately RMB30,000. The damaged
BUSINESS
–2 5 4–


--- page 264 ---
greenhouses had been suspended from productio n for approximately two to three months in
FY2021 due to the incident. Save for the above, we did not submit any material insurance
claims.
PROPERTIES
We hold and/or occupy certain properties in the PRC in connection with our business
operations.
Property valuation
BMI Appraisals, an independent property valuer, has valued our major owned
properties as of 31 December 2023. For the full property valuation report, please refer to
the property valuation report as set out in Appendix IV to this prospectus. Having
considered the implications of Rule 5.01A(ii) of the Listing Rules, the property interest not
subject to valuation is the property interest that does not form part of our property
activities and the carrying amount of such property interest is not above 15% of our total
assets.
Owned properties
As at the Latest Practicable Date, we held a total of two parcels of land in Laixi,
Qingdao. We owned the land use rights of one parcel of state-owned land (i.e. the Laixi
Land Parcel A) with an aggregate site area of approximately 214,804 sq.m. with various
agricultural structures constructed thereon located at Rizhuang Town, Laixi, Qingdao
which form part of our Laixi Facility for the cu ltivation of our potted vegetable produce.
We also owned the land use rights of one parcel of state-owned land (the ‘‘ Laixi Land and
Buildings for Investment Purpose ’’) with a site area of approximately 25,679 sq.m. and a
total of eight buildings constructed thereon with an aggregate gross floor area of
approximately 12,284 sq.m. located at Dia nbu Town, Laixi, Qingdao which was leased
by us to an Independent Third Party for the purpose of cold storage and related uses.
The following table sets forth the details of our owned properties:–
No. Description Location
Approximate
site area
(sq.m.)
Approximate total
gross floor area
( s q . m . )o ft h e
immovable buildings
Market value as at
31 December 2023
(RMB) Principal purpose
1. The Laixi Land
Parcel A
Nanbu Village,
Rizhuang Town,
Laixi, Qingdao,
Shandong Province
214,804 N/A 97,300,000 Cultivation
2. The Laixi Land and
Buildings for
Investment Purpose
Dongzhuangtou
Village,
Dianbu Town,
Laixi, Qingdao,
Shandong Province
25,679 12,284 23,700,000 Leased to an
Independent
Third Party
BUSINESS
–2 5 5–


--- page 265 ---
As advised by our PRC Legal Advisers, we have obtained all of the relevant land use
rights certificate and the real estate right certificate for the above properties (i.e. the land
use rights certificate for the Laixi Land Parcel A and the real estate right ownership
certificate for the Laixi Land and Buildings for Investment Purpose). For further details of
our property interests, please refer to the property valuation report as set out in Appendix
IV to this prospectus.
The Laixi Land Parcel A has been mortgaged in favour of a bank as security for the
credit facilities granted to our Group. The L aixi Land and Buildings for Investment
Purpose have been mortgaged in favour of a bank a s security for the credit facilities granted
to our Group. As at the Latest Practicable Date, the said property was leased to an
Independent Third Party at an annual rental of RMB400,000 until 31 August 2024.
On 20 March 2019, we entered into a lease agreement to lease out a small portion of the
Laixi Land Parcel A of approximately 66,667 sq.m. to an Independent Third Party
commencing from 1 April 2019 to 31 March 2024 at an annual rental of RMB240,000. The
said portion of the land is slopy and unsuitable for construction of greenhouses and is being
used by the Independent Third Party for planting of trees as at the Latest Practicable Date.
As confirmed by the Independent Third Party, the Independent Third Party use the portion
of the land to grow trees for sale. Our Directo rs believe that the leasing out of the said land
is beneficial to our Group as it could maximise the land use and allow us to capitalise on
our unusable land.
BUSINESS
–2 5 6–


--- page 266 ---
Leased properties
As at the Latest Practicable Date, we leased certain properties under five tenancy agreements with Independent Third Parties
and we leased one office premises under a tenancy agreement with a connected person. The particulars of such leased properties are
as follows:
No. Description Lessee Location
Approximatesite area/
gross floor
area(sq.m.) Rental Term Purpose
Laixi Facility
1. The Laixi Land Parcel B Fujing Agr iculture Nanbu Village, Rizhuang
Town, Laixi
34,467 RMB2 million
for 50 years
From 27 December 2010 to
26 December 2060
Cultivation
2. The Laixi Land Parcels D Fujing Agriculture Baogezhuang Village,
Hebeikuang Village,
Dongbaishi Mountain Village
and Xujiazhai Village,
Rizhuang Town, Laixi
76,667 RMB57,500 per annum From 1 July 2020
to 30 June 2030
Cultivation
3. The Laixi Land Parcel E Fujing Agriculture Maozhichan g Village, Laixi 10,667 RMB20,000 per annum From 2 July 2020
to 1 October 2029
Cultivation
Xi’an Facility
4. The Xi’an Land and
structures
Fujing Agriculture
(Xi’an branch)
Jingwu Village, Gaoling
District, Xi’an
13,333 RMB40,000
per annum for the first year;
and RMB45,000 per annum
from the second year
From 1 August 2019
to 31 July 2025
Cultivation
Dalian Facility
5. The Dalian Land and
structures
Fujing Agriculture Shanju Village, Sanshilipu,
Jinzhou District, Dalian
20,000 RMB70,000 per annum for
the first year; and
RMB50,000 per annum from
the second year
From 31 August 2019
to 30 September 2028
Cultivation
Office
6. Our office premises
(Note) Fujing Agriculture 3rd Floor, Block 68, No. 85
Beijing East Road, Laixi
560 RMB36,000
per annum
From 13 February 2021
to 12 February 2025
Office
Note: We rent the property in Laixi for our office use from Q ingdao Yongzheng Real Estate Development Co. Ltd.* ( 青島永正房地產開發有限公司)w h i c hi sa
connected person of our Group. For details, please refer to the section hea ded ‘‘Continuing Connected Transactions — Exempt continuing connected
transaction — Tenancy agreement in respect of our office premises’’ in this prospectus. As confirmed by our PRC Legal Advisers, the leasing of the offi ce
premises to our Group is valid, enforceable and le gally binding on the parties under the relevant applicable laws and regulations in the PRC.
BUSINESS
–2 5 7–


--- page 267 ---
Leasehold arrangement in relation to our Laixi Facility
On 27 December 2010, we entered into a lease agreement with the People’s
Government of Rizhuang Town of Laixi ( 萊西市日莊鎮人民政府)f o rt h el e a s eo fa
parcel of collectively-owned land located at Nanbu Village, Rizhuang Town, Laixi, i.e.
the Laixi Land Parcel B, with a site area of approximately 34,467 sq.m. for a period
commencing from 27 December 2010 to 26 December 2060. As advised by our PRC
Legal Advisers, the village committee should first obtain the consent from at least two-
thirds of the members of the rural collect ive economic organisation or villager
representatives of Nanbu Village before the entering of the lease agreement pursuant to
the relevant PRC regulations. A villager representative meeting was held in Nanbu
Village on 18 August 2015 which passed a resolution for ratifying the lease of the
collectively-owned land to our Group and the village committee of Nanbu Village has
issued a letter confirming the said lease on the same date. According to the Civil Code
of the PRC ( 中華人民共和國民法典), the lease term shall not exceed 20 years. The part
of lease term exceeding 20 years is invalid. O ur PRC Legal Advisers are of the view that
for those lease agreements with a lease term exceeding 20 years, the leased land can still
be effectively used within the 20-year lease period. After the initial 20-year lease
period, which will expire on 26 December 2030, we will negotiate and renew the lease
agreement according to the relevant national laws and regulations. As confirmed by
our PRC Legal Advisers, in the event that th e parties fail to renew the lease agreement,
our Group is entitled to ask for the return of the excessive rent paid by our Group
according to the Civil Code of the PRC. Our PRC Legal Advisers have confirmed that
the leasing of the said collectively-owned land to our Group for the initial 20-year
period up to 26 December 2030 is valid, enforceable and legally binding on the parties
under the relevant applicable la ws and regulations in the PRC.
To cope with our expansion in FY2020, on 1 July 2020, we entered into a lease
agreement with the People’s Government of Rizhuang Town of Laixi for the lease of
four parcels of collectively-owned lands i.e .t h eL a i x iL a n dP a r c e l sD ,w i t hat o t a ls i t e
area of approximately 76,667 sq.m. loca ted at various villages in Rizhuang Town of
Laixi for a period commencing from 1 July 2020 to 30 June 2030. Further and on 2 July
2020, we entered into a lease agreement with an Independent Third Party for the lease
of a parcel of land i.e. the Laixi Land Parcel E, with a site area of approximately 13,333
sq.m. located at Maozhichang Village of Laixi for a period commencing from 2 July
2020 to 1 October 2029. The site area of our Laixi Land Parcel E was slightly reduced
to approximately 10,667 sq.m. due to the resumption of land by the government for
road widening works adjacent to our Laixi Land Parcel E. Our PRC Legal Advisers
have confirmed that the leasing of the said lands to our Group is valid, enforceable and
legally binding on the parties under the relev ant applicable laws and regulations in the
PRC.
Leasehold arrangement in relation to our Xi’an Facility
On 1 August 2019, we entered into a lease agreement with an Independent Third
Party for the lease of the land with a site area of approximately 13,333 sq.m. with ten
greenhouses erected thereon located at Gao ling District, Xi’an (i.e. the Xi’an Land and
BUSINESS
–2 5 8–


--- page 268 ---
structures) for a term of one year. On 31 July 2020, the lease was renewed for a term of
five years to 31 July 2025. As at the Latest Practicable Date, the Independent Third
Party had not filed the lease agreement with the relevant government authority despite
of the requests we sent to the lessor reminding it to complete the record filing. As
advised by our PRC Legal Advisers, the abs ence of record filing will not affect the
validity of the lease agreement. Our PRC Legal Advisers further confirmed that our
Group is not responsible for the record filing and the relevant PRC rules and
regulations do not currently provide for an y penalties for failure to complete such
filing procedure and our Group shall not be responsible for any penalties or fines
arising thereof. As at the Latest Practicable Date, we confirmed that we have not
received any such request by the relevant government authority. Our PRC Legal
Advisers confirmed that the said lease is valid, enforceable and legally binding on the
parties under the relevant applicable laws and regulations in the PRC.
Leasehold arrangement in relation to our Dalian Facility
On 31 August 2019, we entered into a lease agreement with an Independent Third
Party for the lease of the land with a site area of approximately 20,000 sq.m. with 29
greenhouses and various structures erected thereon located at the Jinzhou District,
Dalian (i.e. the Dalian Land and structures ) for a term of nine years commencing from
31 August 2019 to 30 September 2028. Our PRC Legal Advisers have confirmed that
the said lease agreement is valid, enforceable and legally binding on the parties under
the relevant PRC laws and regulations.
Other property interests in relation to the Laixi Land Parcel C
Background of the title defects:
On 17 June 2006, we entered into the Land Reservation Agreement (土地預 約協
議) with the People’s Government of Rizhuang Town of Laixi ( 萊西市日莊鎮人民政府)
for, among others, reservation of a parcel of state-owned land ( 國有土地)f o rt h e
purpose of agricultural and ecological development for a period of 50 years, and we
began to use the said land (i.e. clearing the l and and conducting site formation) after
signing the Land Reservation Agreement. The following table sets forth a summary of
the principal terms of the Land Reservation Agreement:
Location: a parcel of state-owned land for agricultural and
ecological development, located within Rizhuang
Town, south of Huanhu Road, in front of Nanbu
Village and west of Haimengyuan (actual area
subject to measurement by the Lands and
Resources Bureau of Laixi* ( 萊西市國土資源局)).
Consideration: RMB26,000 per mu (the consideration will include
the compensation for land clearance, plant clearance
and all the fees necessary for the transfer of title of
the land)
BUSINESS
–2 5 9–


--- page 269 ---
Payment method: RMB1.0 million to be paid by our Group upon
signing of the agreement; the remaining balance to
be paid upon completion and issuance of the land use
right certificate
Obligation of the People’s
Government of
Rizhuang Town of
Laixi:
( i ) t oc o m p l e t et h et r a n s f e ro ft h es a i dl a n dt oo u r
Group by December 2006;
(ii) to commence clearance of the land within one
month upon receiving payment from our Group
and to handover the land to our Group before
November 2006; and
(iii) to procure the issuance of the land use rights
certificate with a term of 50 years to our Group.
Obligation of our Group: to pay the fee in accordance with the terms and
conditions of the Land Reservation Agreement
Consequence of default: the People’s Government of Rizhuang Town of Laixi
shall strictly follow the terms and conditions of the
Land Reservation Agreement. In the event that any
damage is suffered by our Group arising from the
default of the People’s Government of Rizhuang
Town of Laixi, it shall return all the money paid by
our Group and shall pay to our Group an amount
equivalent to the sum that our Group has paid as
compensation
However, instead of issuing the land use rights certificate to our Group, on 22
May 2013, the Municipal Government of Laixi ( 萊西市人民政府) issued the land use
rights certificate in respect of the relevant land to Qingdao Changyang Investment and
Development Co., Ltd.* ( 青島昌陽投資開發有限公司)( ‘ ‘Changyang Investment ’’), a
company wholly-owned by a subordinate department of the Municipal Government of
Laixi. As advised by our PRC Legal Advisers, according to the Provisional
Regulations of the Grant and Transfer of the Right of Use of State-owned Lands of
the PRC ( 中華人民共和國城鎮國有土地使用權出讓和轉讓暫行條例), the utilisation of
state-owned allocated lands should be approved by the relevant land department of the
municipal government at the city or county level (i.e. the Municipal Government of
Laixi instead of the People’s Government o f Rizhuang Town of Laixi). Nevertheless,
during 2006 to 2018, our Group had paid a total amount of approximately RMB4.4
million to the government in relation to the use of the relevant land by various
instalments.
To clarify the situation, the Lands and Resources Bureau of Laixi* (萊 西市國土資
源局) has issued an explanatory letter on 7 Au gust 2015 which confirmed that the use
of the relevant land by our Group is in compliance with the intended purpose and
utilisation plan of the relevant land. Further and in accordance to the Notice of
BUSINESS
–2 6 0–


--- page 270 ---
Optimisation Measures for the Management of State-owned land at Chanzhi Reservoir
(關於做好產芝水庫部分國有土地管理的通知) promulgated by the Municipal
Government of Laixi on 5 March 2020, the People’s Government of Rizhuang Town
of Laixi should be responsible for the daily management of the relevant state-owned
land. Pursuant to the said notice, on 23 March 2020, the People’s Government of
Rizhuang Town of Laixi signed the Supplemental Agreement with our Group which
confirms the use and occupation of the land with a site area of approximately 128,334
sq.m. by our Group and confirms that our Group had paid all the fees in relation to the
use of the said land under the Land Reservation Agreement. The following table sets
forth a summary of the principal terms of the Supplemental Agreement:
Location: a parcel of state-owned land with a site area of 192.5
mu, located within Rizhuang Town, south of Huanhu
Road and in front of Nanbu Village
Term of agreement: from 2006 to 2056, for a period of 50 years as specified
in the Land Reservation Agreement
Consideration: our Group is not required to pay any other
consideration during the term of the agreement
Rights of our Group: our Group may us e the relevant land for vegetable
cultivation, cultivation and sales of crops, research of
vegetable and crops and leisure agricultural tourism
etc. Our Group may also reasonably use the relevant
land including subletting the relevant land
R i g h to ft h eP e o p l e ’ s
Government of Rizhuang
Town of Laixi:
The People’s Government of Rizhuang Town of Laixi
may supervise the use of the relevant land to ensure its
reasonable use by our Group
Obligation of our Group: our Group shall reasonably use the relevant land. Our
Group bears the legal liabilities for any safety or
economic disputes arising during the use of the relevant
land
Furthermore, each of Laixi Land Parcel A, Laixi Land Parcel B and Laixi Land
Parcel C is located in close proximity to the Chanzhi Reservoir which is considered as
protected area pursuant to the Law of the PRC on the Prevention and Control of
Water Pollution ( 中華人民共和國水污染防治法) and the Regulations on the Prevention
and Control of Pollution in Drinking Water Source Protection Areas ( 飲用水水源保護
區污染防治管理規定), given its nature of being the source of drinking water. In
accordance with the Environmental Impact Assessment Law of the PRC ( 中華人民共和
國環境影響評價法), the Group is required to (i) file an environmental impact
assessment report; and (ii) pass the requisite inspection on relevant environmental
protection facilities before the commencement of any operation and production on
these lands. In this regard, we submitted, and the Qingdao Environmental Protection
Bureau approved, the environmental imp act assessment report in relation to our
BUSINESS
–2 6 1–


--- page 271 ---
production project in 2013. Major environmental protection measures taken by the
Group for this project include the construction of an artificial wetland system for
water purification so as to prevent pollution of the Chanzhi Reservoir. Nonetheless,
due to the unfamiliarity with the regulator y and timing requirements on inspection on
relevant environmental protection facilit ies of our staff who was responsible for
monitoring and managing the construction works on the protected area, the requisite
inspection did not take place until July 2018. As confirmed by our PRC Legal
Advisers, the inspection conducted in the said timeline would not have any impact to
our business operation on the relevant lands.
As advised by our PRC Legal Advisers, no additional measure or condition is
imposed on our Group for operating on the protected area.
Relevant government authority(ies) interviews and confirmation:
(i) Interview with and written confirmation issued by Natural Resources Bureau of
Laixi
Pursuant to the interview with the legal compliance officer (法 規辦主任)o f
Natural Resources Bureau of Laixi* ( 萊西市自然資源局) (as advised by our PRC Legal
Advisers, Natural Resources Bureau of Laixi h as taken up the responsibilities of Lands
and Resources Bureau of Laixi* ( 萊西市國土資源局) after the departmental reform of
the government and has become the competent authority to confirm the compliance of
the Provisional Regulations of the Grant and Transfer of the Right of Use of State-
owned Lands of the PRC) on 23 December 2020, it confirmed, among other things,
that (i) prior to the issuance of the land use ri ghts certificate to Changyang Investment,
no party was holding the land use rights certi ficate of the Laixi Land Parcel C; (ii) the
issuance of the land use rights certificate to Changyang Investment is for the proper
management of state-owned lands; and (iii) the use of the Laixi Land Parcel C by our
Group is in compliance with the relevant laws and regulations of the PRC.
We obtained a written confirmation from the Natural Resources Bureau of Laixi,
being the responsible land department of the Municipal Government of Laixi under the
Provisional Regulations of the Grant and Transfer of the Right of Use of State-owned
Lands of the PRC as advised by our PRC Legal Advisers, on 22 March 2021, which
confirmed that, among other things:
(i) Fujing Agriculture is entitled to us e the Laixi Land Parcel C for agricultural
production during the period as specified in the Land Reservation Agreement
and the Supplemental Agreement;
(ii) Fujing Agriculture has paid the relevant fees under the Land Reservation
Agreement to the People’s Government of Rizhuang Town of Laixi in full by
installments during the period between 2006 and 2018; provided that Fujing
Agriculture has obtained the consent of the People’s Government of
Rizhuang Town of Laixi and no objection is raised from Changyang
Investment, Fujing Agriculture is entitled to continue to use the Laixi Land
Parcel C in the future without paying any other fees;
BUSINESS
–2 6 2–


--- page 272 ---
(iii) the possibility of Fujing Agriculture being requested to stop using the Laixi
Land Parcel C is low; if Fujing Agriculture is requested to do so, the Natural
Resources Bureau of Laixi, the People’s Government of Rizhuang Town of
Laixi or Changyang Investment will provide reasonable compensation to
Fujing Agriculture;
(iv) the Natural Resources Bureau of Laixi fully implements the arrangements
relating to the Laixi Land Parcel C as specified in the Notice of Optimisation
Measures for the Management of State-owned land at Chanzhi Reservoir and
has no objection to the contents of the Land Reservation Agreement and the
Supplemental Agreement; and
(v) there is no illegality or irregularity in the use of the Laixi Land Parcel C by
Fujing Agriculture.
(ii) Interview with the People’s Government of Rizhuang Town of Laixi
Pursuant to the interview with the deputy governor ( 副鎮長)o ft h eP e o p l e ’ s
Government of Rizhuang Town of Laixi o n 23 December 2020, it confirmed that our
Group had paid all the fees which we are required to pay for the usage of the Laixi
Land Parcel C under the Land Reservation Agreement to the government by various
instalments from 2006 to 2018 and, as a result, we are not required to make any further
payment for our continuing use of the land since then. Moreover, it was confirmed that
the issuance of the land use rights certificate to Changyang Inv estment is due to the
proper management of state-owned lands but it does not affect the People’s
Government of Rizhuang Town of Laixi’s right to decide on how to manage the
relevant land and the letting-out of the rele vant land to any third party for reasonable
use. The People’s Government of Rizhuang Town of Laixi further confirmed that our
Group has the right to continue to use the relevant land without payment for any
penalties.
(iii) Interview with and written confi rmation issued by Changyang Investment
On 11 December 2020, Changyang Investment has issued a confirmation letter to
ratify the use of the relevant land by our Group during 22 May 2013 to 5 March 2020
(i.e. from the date Changyang Investment obtained the land use rights certificate to the
date of promulgation of the Notice of Optimisation Measures for the Management of
State-owned Land at Chanzhi Reservoir by the Municipal Government of Laixi), and
irrevocably agrees with the use of the l and by our Group and the arrangement
stipulated under the Notice of Optimisation Measures for the Management of State-
owned land at Chanzhi Reservoir and the Supplemental Agreement.
Pursuant to the interview with the deputy general manager ( 副總經理)o f
Changyang Investment on 23 December 2020 , it confirmed that the ownership of the
relevant land was assigned by the government to Changyang Investment for the proper
management of state-owned lands and Changyang Investment had not paid any
consideration for the said assignment. Changyang Investment further acknowledged
and confirmed that our Group has the righ t to use the relevant land pursuant to the
BUSINESS
–2 6 3–


--- page 273 ---
terms stipulated in the Land Reservation Ag reement and the Supplemental Agreement,
and that Changyang Investment will not letti ng-out the relevant land to any third party
during the period when our Group is using the land.
Views of our PRC Legal Advisers:
Based on the above information, under the authorisation of the Municipal
Government of Laixi, and in view of the co nfirmation letters issued by Natural
Resources Bureau of Laixi and Changyang Investment confirming and ratifying the
land use by our Group under the Land Reservation Agreement and the Supplemental
Agreement, our PRC Legal Advisers are of the view that if our Group continue to use
the relevant land for agricultural purpose in accordance to the terms of the said Land
Reservation Agreement and the Supplemental Agreement, the chance of being asked
by the relevant land department of the Municipal Government of Laixi to return the
land is relatively low.
Contingency arrangement for the cultivation facilities on our Laixi Land Parcel C
As confirmed by our Directors, the tot al gross floor area of our greenhouses
erected on Laixi Land Parcel C is approximately 28,333 sq.m., representing
approximately 17.6% of the total gross floor area of all of our greenhouses. Having
consulted and obtained the views from our PRC Legal Advisers, while our Directors
consider that the risk of being requested to r elocate our cultivation facilities away from
the Laixi Land Parcel C is remote, we have fo rmulated a contingency arrangement. In
the event that we are required by the govern ment to relocate our cultivation facilities
o nL a i x iL a n dP a r c e lC ,w es h a l lm a k eu s eo fthe existing available land in our Laixi
Facility and identify a new parcel of land near our Laixi Facility and construct
greenhouses on such lands to restore the reduction in production capacity caused by
the removal. Based on our past experiences in locating new lands for our expansion, we
do not foresee significant obstacles in finding another parcel of land for relocation.
During the period before we secure a new land for relocation, we may reallocate our
resources and cultivation capacity to our existing greenhouses on Laixi Land Parcel A,
Laixi Land Parcel B, Laixi Land Parcels D and Laixi Land Parcel E to take up the
production capacity originally carried out by the greenhouses on our Laixi Land Parcel
C.
BUSINESS
–2 6 4–


--- page 274 ---
LICENCES, PERMITS AND CERTIFICATES
We obtained product certificates for our potted vegetable produce. The following table
sets forth details of our product certificates we obtained during the Track Record Period:
No. Certificates Issuing Au thority Date of Issue Date of
expiry (Note 6)
Recipient
1. Certificate of Origin of
Pollution-free Agricultural
Products* ( 無公害農業品產地
認定證書)(Note 1)
Qingdao Agriculture
Commission*
(青島市農業委員會)
4 December
2017
November
2020
(Note 1)
Fujing
Agriculture
2. Certificate of Pollution-free
Agricultural Products*
(無公害農產品證書)
Centre for Quality and
Safety of Agricultural
Products of Ministry of
Agriculture of the PRC*
(中國農業部農產品質量
安全中心)
(Note 2)
14 December
2017
13 December
2020 (Note 2)
Fujing
Agriculture
3. Certificate of Pollution-free
Agricultural Products*
(無公害農產品證書)
(Note 3)
Qingdao Agricultural
Rural Bureau*
(青島市農業農村局)
(Note 4)
27 November
2018 (Note 5)
10 November
2024
Fujing
Agriculture
4. Certificate of Pollution-free
Agricultural Products*
(無公害農產品證書)
(Note 3)
Qingdao Agricultural
Rural Bureau*
(青島市農業農村局)
(Note 4)
2 December
2020
1 December
2023
Fujing
Agriculture
Notes:
1. As confirmed by our PRC Legal Advisers, pursuan t to the Notice of Optimisation Measures and the
Follow-up Actions for the Harmonisation of Certificates of Pollution-free Agricultural Products in
the PRC ( 關於做好有效期內全國統一認證無公害農產品後續跟進管理服務工作的通知)p r o m u l g a t e d
by Centre for Quality and Safety of Agricultural Products of Ministry of Agriculture of the PRC*
(中國農業部農產品質量安全中心) on 8 April 2018, the Certificate of Origin of Pollution-free
Agricultural Products held by our Group will be co mbined with Certificate of Pollution-free
Agricultural Products issued by Qing dao Agricultural Rural Bureau* ( 青島市農業農村局)o n2
December 2020.
2. As confirmed by our PRC Legal Advisers, pursuan t to the Notice of Adjusting the Approval Process
of Certification of Pollution-free Agricultural Products and Geographical Symbol of Agricultural
Products ( 關於調整無公害農產品認證、農產品地理標誌審查工作的通知)
promulgated by the
General Office of Ministry of Agriculture of the PRC on 29 December 2017, the Ministry of
Agriculture of the PRC delegated the responsibili ty for issuing Certificate of Pollution-free
Agricultural Products to the relevant agricul tural bureau at the prov incial agricultural
administrative departments and working ins titutions (i.e. the then Qingdao Agriculture
Commission* ( 青島市農業委員會) and Qingdao Agricultural Rural Bureau* ( 青島市農業農村局)
after the recent departmental reform).
BUSINESS
–2 6 5–


--- page 275 ---
3. The two Certificates of Pollution-free Agricult ural Products issued by Qing dao Agricultural Rural
Bureau* ( 青島市農業農村局) are for the Group’s different potted vegetable species (i.e. malabar
spinach for the certificate issued on 27 November 2018, and pak choi, Frise ´e and Indian lettuce for
the certificate issued on 2 December 2020). Due to th e expansion of the Laixi Facility, the Company
applied for and obtained another Certificate of Pollution-free Agricultural Products in 2020 in
addition to the Certificate of Po llution-free Agricultural Products issued on 27 November 2018. The
Certificates of Pollution-free Ag ricultural Products would typically specify the species, the area and
scale of production of the cultivation facility that qualified for the production of pollution-free
agricultural products.
4. As confirmed by our PRC Legal Advisers, Qingdao Agriculture Commission* (青 島市農業委員會）’s
responsibility of issuing Certificate of Polluti on-free Agricultural Products has been taken up by
Qingdao Agricultural Rural Bureau* ( 青島市農業農村局) after the recent departmental reform in
2019.
5. The Certificate of Pollution- free Agricultural Produc ts issued on 27 November 2018 was renewed on
11 November 2021.
6. Pursuant to the Implementation Notice issue d by the Office of Agricu ltural Rural Bureau* ( 農業農
村部辦公廳) on 24 September 2022, the Agricultural Rural Bureau will not accept any new
applications (including renewal) of Certificate of Pollution-free Ag ricultural Products with effective
from the date of the Implementation Notice. However, the existing Certificate of Pollution-free
Agricultural Products will still be valid before they expired.
As advised by our PRC Legal Advisers, we a re not required to possess any specific
licence, permit or certification to carry out our business activities of potted vegetable
produce cultivation under the relevant PRC laws and regulations, and during the Track
Record Period and up to the Latest Practicable date, we have obtained all the requisite
licences, qualifications and permits from the r elevant PRC regulatory authorities for our
operations in all material aspects. For a summary of such relevant PRC laws and
regulations, please refer to the paragrap hh e a d e d‘ ‘ R e g u l a t o r yO v e r v i e w—L a w sa n d
regulations relating to safety of agricultural products’’ in this prospectus.
BUSINESS
–2 6 6–


--- page 276 ---
NON-COMPLIANCE
Regulatory compliance
D u r i n gt h eT r a c kR e c o r dP e r i o da n du pt ot h eL a t e s tP r a c t i c a b l eD a t e ,our Directors confirm that we had c omplied with all applicable laws
and regulations in the PRC and Hong Kong in all ma terial aspects, and we had not been involved in any material non-compliance incidents that
had led to fines, enforcement actions or other penalties that could, individually or in the aggregate, have a material adverse effect on our
business, financial condition and results of operatio ns, save for the non-compliance incidents set out below:
No.
Non-compliance incident and reasons for
non-compliance Possible legal consequence and maximum liabilit ies Remedial actions Enhanced internal control measures taken
1. During the Track Record Period, we failed to
make contribution to social insurance in full in
respect of certain employees of our Group. The
aggregate amounts of unpaid social insurance
contribution were approximately RMB30,000,
RMB54,000, RMB53,000 and RMB5,000 for
FY2020, FY2021, FY2022 and 9M2023,
respectively.
Certain employees of our Group were not willing
to register or make payments for social
insurance in Laixi, Xi’an and Dalian where
Fujing Agriculture and our branch companies
are located for (i) having already participated
a n dm a d ec o n t r i b u t i o nt ot h eN e wR u r a lS o c i a l
Insurance Scheme* ( 新型農村社會養老保險)o r
New Rural Cooperative Medical System* ( 新型
農村合作醫療); or (ii) being registered elsewhere
with his former employers.
We were unable to make social insurance
contributions for certain employees because they
were not willing to contribute. Without their
consent, we were unable to make contributions
on their behalf or compel deductions from their
salaries.
As advised by our PRC Legal Advisers, according to the Social
Insurance Law of the PRC ( 中華人民共和國社會保險法), if an
employer fails to make timely social insurance contributions in full
amount in accordance with the relevant PRC laws and regulations, it
may be ordered by the relevant social insurance authority to pay the
overdue amount within the prescribed time limit with an overdue
fine at a daily rate of 0.05% of the overdue amount from the due
date within a prescribed time limit. Failing which, the relevant
administrative authorities may impose a fine of one to three times of
the overdue amount.
According to the certificate issued on 22 December 2023 by Human
Resources and Social Security Bureau of Laixi* ( 萊西市人力資源和社
會保障局), a competent authority as advised by our PRC Legal
Advisers, the said Bureau confirmed that Fujing Agriculture had
duly made all relevant social insurance contributions for our
employees in accordance with the relevant PRC laws and
regulations, that it would not demand us to make payment for the
past outstanding social insurance contributions or penalise us in
respect thereof, and that it had no records of Fujing Agriculture
being penalised for breach of any laws and regulations in the PRC
relating to social insurance or being involved in any disputes relating
to social insurance contribution in full since the incorporation of
Fujing Agriculture up to the date of the said certificate.
According to the certificate issued on 26 December 2023 by Jinpu
New Area Human Resources and Social Security Bureau of Dalian*
(大連金普新區人力資源和社會保障局), a competent authority as
advised by our PRC Legal Advisers, the said Bureau had no records
of our branch company in Dalian being penalised for breach of any
laws and regulations in the PRC relating to social insurance
contribution.
According to the certificate issued on 12 December 2023 by the
Medical Security Bureau of Laixi* ( 萊西市醫療保障局), a competent
authority as advised by our PRC Legal Advisers, the said Bureau
confirmed that Fujing Agriculture had duly made medical insurance
contributions for our employees in accordance with the relevant laws
and regulations, that Fujing Agriculture had complied with the
respective PRC laws, regulations and rules in respect of medical
insurance and that it had no records of Fujing Agriculture being
penalised for breach of any laws and regulations in the PRC relating
to medical insurance contribution.
S i n c eJ a n u a r y2 0 2 0 ,w eh a v ed u l yr e g i s t e r e d
with the relevant social insurance authorities
and made social insurance contributions in
f
ull for all our eligible employees in
accordance with the relevant PRC laws and
regulations, except for those employees who
have voluntarily waived their rights in
relation to the social insurance (in which
case we should make social insurance
contributions in full or pay any shortfall in
the social insurance contributions within a
prescribed period if required by the relevant
competent authorities) and have undertaken
in writing to bear all consequences and
liabilities resulting from or in connection to
our failure to register with the relevant
social insurance authorities and make social
insurance contribution for them. Such
employees were no longer employed by us as
at the Latest Practicable Date.
Pursuant to the Deed of Indemnity, our
Controlling Shareholders have undertaken to
fully indemnify us against, among other
things, any costs, expenses and losses which
we may incur in the event that we are
required by the relevant competent
authorities to pay any of the outstanding
social insurance contributions, overdue fines
and penalties or claimed by the employees
for compensation for this non-compliance
incident.
As advised by our PRC Legal Advisor,
based on the aforesaid confirmations from
the relevant competent authorities and the
remedial actions taken, we have fully
rectified this non-compliance as at the Latest
Practicable Date and the risk for us to be
penalised is low.
We have formulated written policies and
procedures to strengthen our internal control,
specifying that:
(a) the registration and account opening for
social insurance and housing provident
fund contributions of all employees will be
completed within the prescribed time limit;
(b) personnel of our human resources
department with relevant knowledge and
expertise will be responsible for the
calculation of social insurance and
housing provident fund contributions in
accordance with the relevant PRC laws
and regulations, which shall then be
checked by human resources manager to
ensure the correctness and compliance
with regulatory requirements;
(c) training will be provided to the relevant
personnel of our human resources
department on the social insurance and
housing provident fund contributions
requirements under the relevant PRC laws
and regulations; and
(d) Mr. Zhang, our chairman, and Ms. Guo
Zeqing, our executive Director and
financial controller, will regularly review
policies and procedures in relation to the
social insurance and housing provident
fund contributions to ensure compliance
with the regulatory requirements.
Our Directors confirm that our Group will
require a confirmation from any new
employees which we may employ that he/
she will be willing to contribute to social
insurance before they are employed as
employees of our Group.
BUSINESS
–2 6 7–


--- page 277 ---
No.
Non-compliance incident and reasons for
non-compliance Possible legal consequence and maximum liabilit ies Remedial actions Enhanced internal control measures taken
2. During the Track Record Period, we failed to
register with the relevant housing provident fund
authority in the PRC and go through the
formalities of opening housing provident fund
accounts on behalf of certain employees of our
Group and make contribution to housing
provident funds in full in respect of certain
employees of our Group. The aggregate amounts
of unpaid housing provident fund contribution
were approximately RMB62,000, RMB20,000,
RMB13,000 and RMB4,000 for FY2020,
FY2021, FY2022 and 9M2023 respectively.
Certain employees of our Group were not willing
to contribute to housing provident fund in Laixi,
Xi’an and Dalian where Fujing Agriculture and
our branch companies are located for (i) being
rural registered permanent residence with rural
residence land and thus having no needs to
purchase commercial housing; or (ii) being
registered elsewhere with their former employers.
We were unable to make social insurance
contributions for certain employees because they
were not willing to contribute. Without their
consent, we were unable to make contributions
on their behalf or compel deductions from their
salaries.
As advised by our PRC Legal Advisers, according to the
Administrative Regulations on Housing Provident Funds ( 住房公積
金管理條例), if an employer fails to register with the relevant
authority or go through the formalities of opening housing
provident fund accounts for its employees, the relevant authority
may order it to go through all the formalities within a prescribed
time limit. If such employer fails to do so, at the expiration of the
prescribed time limit, a fine of not less than RMB10,000 nor more
than RMB50,000 may be imposed upon such employer. Failure to
pay on time or pay in full its contributions, the relevant housing
provident fund authority may order it to make payment of
contributions within a prescribe d time limit. Failing which, the
relevant authority may apply to the court for mandatory
enforcement of retrieval of such payment.
According to the certificate issued on 23 December 2023 by the Laixi
Office of Housing Provident Fund Management Centre of Qingdao*
(青島市住房公積金管理中心萊西管理處), a competent authority as
advised by our PRC Legal Advisers, the said Centre confirmed that
Fujing Agriculture had duly gone through the formalities of opening
housing provident fund accounts and made contribution to housing
provident funds for our employees in accordance with the relevant
PRC laws and regulations, that it would not demand us to make
payment for the past outstanding contributions to housing provident
funds or penalise us in respect thereof, and it had not received any
complaint against Fujing Agriculture in relation to housing
provident funds.
According to the certificate issued on 22 December 2023 by the
Housing Provident Fund Management Centre of Dalian* ( 大連市住
房公積金管理中心), a competent authority as advised by our PRC
Legal Advisers, up to the date thereof, the said Centre had no
records of our branch company in Dalian being penalised for breach
of any laws and regulations in the PRC relating to housing
provident funds.
Since January 2020, we have duly gone
through the formalities of opening housing
provident fund accounts and made
contribution to housing provident funds for
all our eligible employees in accordance with
the relevant PRC laws and regulations,
except for those employees who have
voluntarily waived their rights in relation to
the housing provident funds (in which case
we should make contribution to housing
provident funds in full or pay any shortfall
in the housing provident funds contributions
within a prescribed period if required by the
relevant competent authorities) and have
u
ndertaken in writing to bear all
consequences and liabilities resulting from or
in connection to our failure to go through
the formalities of opening housing provident
fund accounts and make contribution to
housing provident funds for them. Save for
one of them which we have made
contribution to housing provident funds in
full for him since July 2023, these employees
were no longer employed by us as at the
Latest Practicable Date.
Pursuant to the Deed of Indemnity, our
Controlling Shareholders have undertaken to
fully indemnify us against, among other
things, any costs, expenses and losses which
we may incur in the event that we are
required by the relevant competent
authorities to pay any of the outstanding
housing provident funds contributions,
overdue fines and penalties or claimed by
the employees for compensation for this
non-compliance incident.
As advised by our PRC Legal Advisor,
based on the aforesaid confirmations from
the relevant competent authorities and the
remedial actions taken, we have fully
rectified this non-compliance as at the Latest
Practicable Date and the risk for us to be
penalised by the relevant PRC competent
authorities with respect to housing provident
funds contributions is low.
Please refer to the internal control measures
taken by our Group in relation to social
insurance contribution above.
BUSINESS
–2 6 8–


--- page 278 ---
Having considered the confirmation from t he relevant authorities, the advice of our
PRC Legal Advisers, the indemnities provi ded by our Controlling Shareholders and the
enhanced internal control measures taken by our Group, our Directors considered that no
provision is required to be made in our consolidated financial statements in relation to the
abovementioned non-compliance incidents as they would not have a material adverse effect
on our business, financial condition and results of operations in light of the above
considerations.
RISK MANAGEMENT AND INTERNAL CONTROL
Our Directors are responsible for the formu lation and overseeing the implementation
of our internal control measures and effectiveness of quality and risk management system.
To manage our external and internal risks and to ensure the smooth operations of our
business, we have engaged an internal control consultant to assist our Group to review and
provide recommendations on improving our internal control system. Our internal control
consultant reviewed and provided recommendations on our internal control system in
August 2020; and conducted follow up reviews in August 2022 and June 2023 based on the
recommendations, and concluded that all r emedial measures have been implemented. In
particular, we have adopted a series of internal control policies, procedures and
programmes designated to achieve effective and efficient operations, reliable financial
reporting and compliance with a pplicable laws an d regulations.
All Executive Directors are assigned for spe cific responsibilities and periodic reviews
and audits of the processes are conducted to identify any potential issues or gaps in
segregation of duties. For further details, plea se refer to the paragraph headed ‘‘Employees’’
in this section of the prospectus.
BUSINESS
–2 6 9–


--- page 279 ---
The major findings, together with the internal control enhanced measures based on the
recommendations from the internal control consultant, are set out below:
Major findings Recommendations
Corresponding rectification measures taken
by our Group
During the Track Record Period,
our Group did not provide
adequate social insurance
contributions and housing
provident fund for all of our
employees in the PRC. For
details, please refer to the
paragraph headed ‘‘Non-
compliance’’ in this section.
Our management should conduct a review
of the contributions for social insurance
and housing provident fund for our
subsidiaries in the PRC and establish
procedures to ensure that the housing
provident funds and all other social
insurance are properly and correctly paid
in accordance with laws and regulations
in the PRC, including but not limited to
the following:
. establishment of the social insurance
and housing provident funds
contribution management policy to
guide the adoption of payment basis,
calculation and declaration of social
insurance and housing provident funds
and regular review of employee
contribution status by the
administrative or human resources
staff by our management;
. checking the compliance status and
conducting risk assessment of the
current compliance status regarding
social insurance and housing provident
fund contributions by our human
resources staff and such work is to be
reviewed by our chief executive
officer; and
. training in relation to social insurance
and housing provident funds shall be
provided to employees in relevant
departments to strengthen employees’
knowledge of regulations.
For the rectification measures taken by
our Group, please refer to the paragraph
headed ‘‘Non-compliance’’ in this section
of the prospectus.
CCTVs are not installed in the
warehouse and not all
greenhouses are installed with
CCTVs.
The Company should carefully evaluate the
appropriateness and adequacy of the
physical safeguard over inventory,
including but not limited to the following:
We have formulated written policies and
procedures in strengthening the physical
safeguard over inventory, specifying
that:
BUSINESS
–2 7 0–


--- page 280 ---
Major findings Recommendations
Corresponding rectification measures taken
by our Group
Moreover, we did not engage
24-hour security guard for our
warehouse.
. CCTV should be installed in both
warehouse and greenhouse; and
. The security guard should perform 24-
hours monitoring.
. at the existing cultivation facilities,
there is a gate stationed by a 24-hour
security guard to perform the in-out
control of the potted vegetable
produce.
. monthly stock count will be performed.
. all inventory movement must be
recorded through a computer system.
The Company has commenced the
installation of CCTV, the installation is in
progress as at the Latest Practicable Date
a n di se x p e c t e dt ob ec o m p l e t e db e f o r e
Listing.
To monitor the ongoing implementation of our risk management policies and
corporate governance measures after Listing, we have adopted or will adopt, among
others, the following corporate governance and internal control measures:
. the establishment of an audit committee r esponsible for overseeing the financial
records, internal control procedures and risk management systems of our
Company;
. the appointment of Grande Capital Limited as our compliance adviser upon
Listing to advise us on compliance with the Listing Rules; and
. the engagement of external legal advisers to advise us on compliance with the
Listing Rules and to ensure we will not be in breach of any relevant regulatory
requirements or applicable laws, where necessary.
LEGAL PROCEEDINGS
We may from time to time be involved in disputes or legal proceedings arising from the
ordinary course of our business. As at the Latest Practicable Date, there were no litigation
or arbitration proceedings pending or threatened against us or any of our Directors which
could have a material adverse effect on our business, financial condition or results of
operations.
IMPACT OF THE OUTBREAK OF COVID-19 EPIDEMIC
China was hit by the outbreak of COVID-19 epidemic since January 2020 until the end
of 2022. The outbreak of the COVID-19 disease had prompted the PRC government to
place many provinces into lockdown at various time during this period, stipulate measures
aiming at reducing mobilities and close non-esse ntial businesses which affected our business
to different extent.
BUSINESS
–2 7 1–


--- page 281 ---
In early 2020, government policies were issu ed to require that during the prevention
and control of outbreak of COVID-19, normal supply of agricultural production materials
shall be ensured. The PRC government’s policies such as the ‘‘green channel’’ policy was
implemented to ensure the smooth transportation of fresh agricultural products to maintain
the normal market supply.
The following table sets forth the several outbreaks of COVID-19 epidemic which
affected the operation of our cultivation f acilities during the Track Record Period:
Affected period
and duration:
Facilities and
markets being
affected by the
COVID-19
epidemic:
Whether our cultivation activities
were interrupted, and impact
on our business operations:
Direct loss of potted vegetable
produce and the estimated loss of
potential sales revenue during the
lockdown:
1. February 2020 to
March 2020
(approximately
one month)
Laixi Facility and
Shandong
province
market
No, the lockdown and travel restrictions
were mainly imposed in the Qingdao
city. Our Laixi Facility, which is located
in suburban area was still in operation,
and we were encouraged by the
government to continue to supply
agricultural products to maintain the
normal market supply during the
COVID-19 epidemic. Hotels and
restaurants were temporarily closed. Our
distributors sold our potted vegetable
produce to residents in local residential
estates through property management
companies which mitigated the impact of
the lockdown measures and the closure
of hotels and restaurants.
N/A
2. 22 December 2020
to 15 January
2021
(approximately
24 days)
Dalian Facility
and Liaoning
province
market
Yes, the lockdown measures limited the
operation of our Dalian Facility and
caused temporary suspension of our
sales activities in Dalian. Hotels and
restaurants were temporarily closed. Our
suppliers had difficulties in reaching our
Dalian Facility.
Direct loss of unsold vegetable
produce: approximately
15,000 pots
Estimated direct loss of
potential sales revenue:
approximately RMB0.2
million
(Note 1)
BUSINESS
–2 7 2–


--- page 282 ---
Affected period
and duration:
Facilities and
markets being
affected by the
COVID-19
epidemic:
Whether our cultivation activities
were interrupted, and impact
on our business operations:
Direct loss of potted vegetable
produce and the estimated loss of
potential sales revenue during the
lockdown:
3. 23 December 2021
to 24 January
2022
(approximately
one month)
Xi’an Facility and
Shaanxi
province
market
Yes, lockdown and travel restrictions were
imposed in certain areas of Xi’an which
limited the operation of our Xi’an
Facility and caused the temporary
suspension of our sales activities. Hotels
and restaurants were temporarily closed.
Our suppliers outside of Xi’an had
difficulties in reaching our Xi’an Facility
and our subcontractors were also
affected due to the home isolation and
quarantine policy which restricted the
movement of local residents and supply
of workforce.
Direct loss of unsold vegetable
produce: approximately 9,000
pots
Estimated direct loss of
potential sales revenue:
approximately RMB0.1
million
(Note 2)
4. 5 March 2022 to
10 April 2022
(approximately
one month)
Laixi Facility and
Shandong
province
market
Yes, lockdown and travel restrictions were
imposed in Laixi. Our Laixi Facility was
suspended for more than a month which
caused the temporary suspension of our
sales activities in Shandong province.
Hotels and restaurants were temporarily
closed. Our distributors in Shandong
province were unable to pick up potted
vegetable produce from our Laixi
Facility; suppliers outside of Laixi also
had difficulties in reaching our Laixi
Facility and our subcontractors were
also affected due to the home isolation
and quarantine policy which restricted
the movement of local residents and
supply of workforce.
Direct loss of unsold vegetable
produce: approximately
549,000 pots
Estimated direct loss of
potential sales revenue:
approximately RMB8.2
million
(Note 3)
5. 14 March 2022 to
10 April 2022
Dalian Facility
and Liaoning
province
market
Yes, lockdown and travel restrictions were
imposed in the Jinpu New Area of
Dalian. Our Dalian Facility was
suspended which caused the temporary
suspension of our sales activities in
Liaoning province. Hotels and
restaurants were temporarily closed. Our
distributor in Dalian was unable to pick
up potted vegetable produce from our
Dalian Facility. Our suppliers outside of
Dalian had difficulties in reaching our
Dalian Facility and our subcontractors
were also affected due to the home
isolation and quarantine policy which
restricted the movement of local
residents and supply of workforce.
Direct loss of unsold vegetable
produce: approximately 8,000
pots
Estimated loss of potential sales
revenue: approximately
RMB0.1 million
(Note 1)
BUSINESS
–2 7 3–


--- page 283 ---
Notes:
1. The estimated loss of potential sales revenue is calc ulated based on the average selling price of our potted
vegetable produce in Liaoning province of approximately RMB16.0 per pot in FY2020, FY2021 and
FY2022
2. The estimated loss of potential sales revenue is calc ulated based on the average selling price of our potted
vegetable produce in Shaanxi province of approximately RMB16.0 per pot in FY2021 and FY2022
3. The estimated loss of potential sales revenue is calc ulated based on the average selling price of our potted
vegetable produce in Shandong province of approximately RMB15.0 per pot in FY2022
In February and March 2020, in light of the closure of some hotels and restaurants and
the government policy of home isolation and quarantine which restricted the movement of
local residents, as a temporary and extraord inary arrangement, our distributors sold
524,900 pots of our potted vegetable produce to residents in local residential estates through
property management companies, accounting for revenue of our Group of approximately
RMB7.8 million (or 6.5% of our total revenue in FY2020). This arrangement, together with
the fact that the COVID-19 epidemic happened at around the Chinese New Year holiday in
2020 which is not our peak season, mitigated the effect of the closure of hotels and
restaurants on our sales performance. Most restaurants and hotels were reopened and local
residents were allowed to dine out by the end of March 2020. To the best knowledge and
belief of our Directors, most of the restaurant and hotel end-user customers resumed
operation in March 2020. In view of the above and that our potted vegetable produce are
targeted to food and beverage industry rather than household daily consumption, such
temporary and extraordinary arrangement was ceased after March 2020, and we focus
instead on selling our potted vegetable produce through our distribution channel which
mainly aims at food and beverage industry.
The series of lockdown measures in Dalian and various areas in Shandong province
due to the COVID-19 epidemic in 2022 has temporary adverse impact on our business in
FY2022. Our revenue derived from Laixi Fac ility and the Dalian Facility has dropped by
approximately RMB26.8 million and RMB0.5 million, or 19.0% and 7.2% between FY2021
and FY2022 respectively. Consequently, our Group’s revenue dropped by approximately
RMB28.3 million or 18.2% between FY2021 and FY2022. Such loc kdowns have more
serious impact on our business and financial performance than lockdown in prior years due
to the following reasons:
(i) the lockdown affected our Laixi Facility and Shandong province market which
accounts for most of our revenue. Sales in Shandong province accounted for
approximately 87.1%, 91.2% and 90.3% of our revenue for FY2020, FY2021 and
FY2022 respectively;
(ii) the lockdown in our Laixi Facilities a nd Dalian Facilities that lasted for around
one month took place between March and April 2022. In comparison with the first
lockdown in 2020 that took place between February and March 2020 during our
slack season around the Chinese New Year holiday, the impact on our revenue is
more significant in 2022;
BUSINESS
–2 7 4–


--- page 284 ---
(iii) unlike the first lockdown in 2020 when our cultivation facilities were still in
operation and our distributors were able to pick up potted vegetable produce from
us and sold them to residents in local residential estates through property
management companies, during the lockdown in 2022 distributors were not
allowed to pick up potted vegetable produce from us and no sales took place
during the lockdown, resulting in direct loss of unsold vegetable produce of
approximately 557,000 pots and estimated direct loss of potential sales revenue of
approximately RMB8.3 million during the lockdown. Most of the unsold potted
vegetable produce from our Laixi Facility was donated to the government for the
distribution to the local residents for their consumption during the lockdown
period of the COVID-19 epidemic in FY2022. Our changes in fair value of
biological assets for FY2022 included approximately RMB4.6 million which
represented the unsold vegetable produce as a result of the temporary suspension
of our facilities due to the outbreak of COVID-19 epidemic during March 2022 to
April 2022; and
(iv) the COVID-19 epidemic was particularly serious in Shandong province in March
2022. Hence, during the initial period of our resumption of operation of Laixi
Facility in April 2022, some of the lockd own and travel restrictions were still
partially in force in various parts of Shandong province. Similarly, some of the
lockdown and travel restrictions were still partially in force in Dalian during the
initial period of our resumption of oper ation of Dalian Facility in April 2022. To
the best knowledge and belief of the execu tive Directors, due to the prolonged
lockdown in 2022 that restricted the operation of some of our end-user customers
in Shandong province and Dalian, it took several months for our overall sales to
pickup and gradually resume to normal level. Our revenue in August 2022 of
approximately RMB17.2 million, even tually exceeded our revenue of
approximately RMB16.1 million in August 2021.
Between March and July 2022, our revenue in Shandong province and Dalian fell short
of the revenue in the same period in 2021 by approximately RMB26.6 million and RMB1.0
million respectively. Such shortfall includes the estimated direct loss of potential sales
revenue for unsold potted vegetable produce of approximately RMB8.2 million and
RMB0.1 million for Laixi Facility and Dalian Facility respectively as explained in the table
on page 270 of this prospectus. Our Directors believe such shortfall is principally attributed
to the series of lockdown measures in Dalian and various areas in Shandong province due to
the COVID-19 epidemic in 2022. By August 2022, our sales have fully resumed and we
recorded a revenue of approximately RMB17.2 million in August 2022, which exceeded our
revenue of approximately RMB16.1 million in August 2021. We recorded a revenue of
approximately RMB54.2 million from September 2022 to December 2022, which is
comparable to the revenue of approximatel y RMB54.6 million we recorded during the same
period in 2021. As confirmed by the Directors, most of the hotels and restaurants end-user
customers of the Group’s distributors resumed normal operation since August 2022. The
Group’s operations and financial position since September 2022 was no longer materially
affected by the COVID-19 epidemic.
BUSINESS
–2 7 5–


--- page 285 ---
The PRC government has substantially lifte d its COVID-19 prevention and control
policies since December 2022. Our business continued to recover from the impact of
COVID-19 outbreak in 2023, as our business operation was no longer affected by COVID-
19 epidemic. We recorded a revenue of approximately RMB121.3 million in the nine months
ended 30 September 2023, which slightly exceed ed the revenue of approximately RMB117.2
million for the nine months ended 30 September 2021. Our Directors are of the view that it
is unlikely that the COVID-19 pandemic will have a material adverse impact on our
business going forward. Save as disclosed above, our Directors confirmed that there was no
material adverse impact on our operation, our sales to our customers, our suppliers and our
subcontractors in relation to our business due to the COVID-19 epidemic during the Track
Record Period and up to the Latest Practicable Date. We had adopted additional internal
control and hygiene measures since the outbr eak of COVID-19 epidemic. These measures
include monitoring of employees health condit ions and travel record, disinfection of office
areas, procurement of epidemic prevention materials such as masks, disinfection alcohol
spray, and thermometers, strengthening educ ation on epidemic prevention and control and
formulating emergency response guidelines.
BUSINESS
–2 7 6–


--- page 286 ---
OUR CONTROLLING SHAREHOLDERS
Immediately following completion of the C apitalisation Issue and the Share Offer
(assuming the Over-allotment Option is not exercised and without taking into account any
Shares which may be issued and allotted upon the exercise of any options and/or awards
granted under the Share Scheme), Wider International will own approximately 53.4% of the
entire issued share capital of our Company. Mr. Zhang, being the sole beneficial owner of
the entire issued share capital of Wider International, is indirectly holding approximately
53.4% of the entire issued share capital of our Company. Accordingly, Mr. Zhang and
Wider International will be our Controllin g Shareholders upon Listing. For details
regarding the shareholding interests of our Co ntrolling Shareholders, please refer to the
section headed ‘‘Substantial Shareholders’’ in this prospectus.
Wider International is an investment holding company incorporated in BVI. Mr.
Zhang is the founder of our Group and is also our executive Director and chairman of our
Board. For the biographical information of M r. Zhang, please refer to the section headed
‘‘Directors and Senior Management’’ in this prospectus.
RULE 8.10 OF THE LISTING RULES
Our Controlling Shareholders, Directors and their respective clo se associates do not
have any interest in a business apart from our business which competes or is likely to
compete, directly or indirectly, with our business that would require disclosure under Rule
8.10 of the Listing Rules.
INDEPENDENCE FROM OUR CON TROLLING SHAREHOLDERS
Our Directors are of the view that our Group is capable of carrying on our business
independently of, and does not place undue reliance on, our Controlling Shareholders and
their respective close associates, for the following reasons:
Management Independence
The day-to-day management and operati ons of our Group are the responsibility
of our executive Directors and senior management. Our Board consists of eight
Directors, of whom five are executive Directors and three are independent non-
executive Directors. For further information of our Directors, please refer to the
section headed ‘‘Directors and Senior Management’’ in this prospectus. Save for Mr.
Zhang, who is our executive Director and ult imate Controlling Shareholder, none of
our Directors and senior management members holds any directorship in Wider
International, our Controlling Shareholder. We consider that our Board and senior
management will function independently from our Controlling Shareholders because:
(a) each Director is aware of his or her fiduciary duties as a Director which
require, among others, that he or she acts for the benefit and in the best
interest of our Company and does not allow any conflict between his or her
duties as a Director and his or her personal interests;
RELATIONSHIP WITH CONTROLLING SHAREHOLDERS
–2 7 7–


--- page 287 ---
(b) our three independent non-executive Directors have extensive experience in
different areas and have been appointed in accordance with the requirements
under Listing Rules to ensure that the decisions of our Board are made only
after the due consideration of independent and impartial opinions;
(c) in the event that there is a potential conflict of the interest arising out of any
transaction to be entered into between our Group and our Directors or their
respective close associates, the intere sted 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;
(d) our Board acts collectively by majority decisions in accordance with the
Articles of Association and applicable laws, and no single Director will have
any decision-making power unless authorised by our Board;
(e) our Company has also established an internal control mechanism to identify
related party transactions to ensure that our Controlling Shareholders or
Directors with conflicting interests i n a proposed transaction will declare the
nature of their respective interests to our Board at their earliest convenience
and abstain from voting on the relevant resolutions;
(f) in order to allow the non-conflicting members of our Board to function
properly with the necessary professional advice, our Company will engage
Independent Third Party profession al advisers to advise our Board when
necessary, depending on the nature a nd significance of any proposed
transactions to be entered into between our Group and any of Directors
and/or their respective close associates; and
(g) the senior management team of our Group is independent from our
Controlling Shareholders.
Operational Independence
We consider that our Group can operate independently from our Controlling
Shareholders for the following reasons:
(a) we own or have the right to use all the o perational facilities relating to our
business and hold all relevant qualific ations, licences and permits necessary
to carry on our business;
(b) we have established our own organisational structure comprising individual
departments each with specific areas of responsibilities and have the ability
to formulate and implement operational decisions independently from our
Controlling Shareholders;
(c) we do not share our operational resources with our Controlling
Shareholders;
RELATIONSHIP WITH CONTROLLING SHAREHOLDERS
–2 7 8–


--- page 288 ---
(d) we communicate with and serve our clients independently and our
Controlling Shareholders have no interest in any of our customers,
suppliers or other business partners that are important to or material in
our operation; and
(e) our employees are independent from, and none of them is remunerated by,
our Controlling Shareholders and/or t heir respective close associates.
Our Company entered into a lease agr eement with Qingdao Yongzheng Real
Estate Development Co. Ltd.* ( 青島永正房地產開發有限公司) (a company owned
respectively as to 60% by Ms. Zhang, the sister of Mr. Zhang who is our ultimate
Controlling Shareholder, and 40% by Ms. Geng Juan who is cohabiting with Mr.
Zhang as his spouse) in respect of the premises situated at 3rd Floor, Block 68, No.85
Beijing East Road, Laixi, Qingdao, Shandong province ( 山東省青島萊西市北京東路85
號68棟第三層)( t h e‘ ‘Office Premises ’’) for office use, which is expected to continue
after the Listing. However, our Directors are of the view that we can still operate
independently from our Controlling Shareholders on the grounds that (i) such
transaction has been entered into and will continue to be on normal commercial terms
and in the ordinary course of business of our Company; and (ii) even if our Group
ceases to lease the Office Premises from Qi ngdao Yongzheng Real Estate Development
Co. Ltd.* (青 島永正房地產開發有限公司), our Group would still be able to find
suitable premises from Independent Third Parties in the same district as our office. For
details of the leasing of the Office Premises, please refer to the section headed
‘‘Continuing Connected Transactions’’ in this prospectus.
Financial Independence
We have our own accounting system and are able to make financial decisions
according to our own business needs. We do not share any bank accounts with our
Controlling Shareholders and/or their respective close associates.
During the Track Record Pe riod, bank borrowings by our Group amounting to
RMB10,000,000, RMB10,000,000, RMB10,000 ,000 and RMB9,995,000, respectively,
were secured by personal guarantee give nb yM r .Z h a n ga n dM s .G e n gJ u a n ,w h i c h
will be released upon Listing. For details of such bank borrowings, please refer to note
31 to the Accountants’ Report as set out in Appendix I to this prospectus.
Save as disclosed in the paragraph heade d ‘‘Financial Information — Related
party transactions’’ and note 40 to the Accountants’ Report as set out in Appendix I to
this prospectus, as at the Latest Practicable Date, we had no outstanding loans, current
account balances, financial assistance or financing in any other forms from our
Controlling Shareholders and/or their respective close associates.
RELATIONSHIP WITH CONTROLLING SHAREHOLDERS
–2 7 9–


--- page 289 ---
During the Track Record Period and up to the Latest Practicable Date, our
Group relied principally on cash generated from operations to carry on our business
and this is expected to continue after the Listing. In view of our internal resources and
the estimated net proceeds from the Share O ffer, our Directors believe that our Group
will have sufficient capital for our fina ncial needs and that our Group is financially
independent from our Controlling Shareholders.
DEED OF NON-COMPETITION
Non-competition
In order to avoid any future competition between our Group and our Controlling
Shareholders upon Listing, each of our Contr olling Shareholders, as covenantor (each a
‘‘Covenantor ’’, and collectively the ‘‘ Covenantors ’’), executed on 23 November 2023, the
Deed of Non-competition in favour of our Company, pursuant to which each of the
Covenantors undertakes jointly and severally and unconditionally and irrevocably that,
from the date of the Deed of Non-competition and ending on the occurrence of the earliest
of (i) the date on which any of the Covenantors ceases to hold directly or indirectly in
aggregate 30% or more of the entire issued share capital, or otherwise ceases to be a
Controlling Shareholder; or (ii) the date on which our Shares cease to be listed and traded
on the Main Board (other than suspension of trading of our Shares for any other reason)
(the ‘‘Restricted Period ’’), he or it will not, and will use his or its best endeavours to procure
his or its close associates and any company directly or indirectly controlled by him or it not
to, whether directly or indirectly, whether for profit, reward or otherwise, whether as
principal, agent, shareholder, director, partner, consultant, lender or otherwise and whether
on his or its own account or with each other or in conjunction with or on behalf of any
person, firm or company or through any entities (except in or through any member of our
Group), do any of the following:
(a) carry on, engage, participate or hold any right or interest in or render any services
to or otherwise be involved in any business which is in competition, directly or
indirectly, with or is likely to be in competition, directly or indirectly, with the
business which is presently or may be carried on by any member of our Group
from time to time (the ‘‘ Restricted Business ’’), whether as a shareholder, director,
officer, partner, agent, lender, employee, consultant or otherwise and whether for
profit, reward or otherwise; and
( b ) t a k ea n ya c t i o nw h i c hi n t e r f e r e sw i t ho rd i s r u p t so rm a yi n t e r f e r ew i t ho rd i s r u p t
with the business presently carried on by any member of our Group or any other
business that may be carried on by any member of our Group including, but not
limited to, solicitation of any of the then current customers, suppliers,
subcontractors, distributors (sub-dis tributors) or employees of any member of
our Group;
(c) at any time employ any person who has been a director, manager or employee of
or consultant to our Group who is or may be likely to be in possession of any
confidential information or trade secret s relating to our business without prior
written consent from our Company; or
RELATIONSHIP WITH CONTROLLING SHAREHOLDERS
–2 8 0–


--- page 290 ---
(d) exploit his or its knowledge or information obtained from our Group to compete
directly or indirectly with the Restricted Business,
on the condition that none of the clauses in the Deed of Non-competition shall preclude the
Covenantors from having any interest in any c ompany engaging in any Restricted Business
(the ‘‘Subject Company ’’) where: (i) the Covenantors hold not more than 5.0% of the entire
issued shares or stock of any class or debentures of the Subject Company which is or whose
holding company is listed on any recognised exchange (as defined under the SFO); or (ii)
any Restricted Business conducted or engaged in by the Subject Company (and assets
relating thereto) accounts for not more than 5.0% of the Subject Company’s consolidated
turnover or consolidated assets, as shown in the Subject Company’s latest audited accounts
provided that (i) there is a holder (together wh ere appropriate, with its close associates)
with a larger shareholding in the Subject Company than the aggregate shareholding held by
the Covenantors and/or their respective clo se associates at all times and (ii) the total
number of the Covenantors’ representatives on the board of directors of the Subject
Company is not significantly disproportionate in relation to their shareholding in the
Subject Company.
Each of the Covenantors also undertakes that he or it shall not directly or indirectly
appoint any executive director in the Subject Company and that the principal terms by
which he or it (or their respective close associates) subsequently invests, participates,
engages in or operates the Restricted Business are no more favourable than those offered to
the members of our Group.
Each of the Covenantors has confirmed to our Company that neither he or it nor any
of his or its close associates and/or companies controlled by him or it (other than members
of our Group) currently own, operate, participate, invest in or carry on, directly or
indirectly, whether as a director, shareholde r, partner, agent or otherwise, whether for
profit, reward or otherwise, the Restricted Business otherwise than through our Group.
New business opportunities
Pursuant to the Deed of Non-competition, sh ould any new investment, engagement or
other business opportunity relating to the Restricted Business (the ‘‘ New Business
Opportunity ’ ’ )b ei d e n t i f i e db yo rm a d ea v a i l a b l et oa n yo ft h eC o v e n a n t o r so rt h e i r
respective close associates, whether directly or indirectly, he or it shall, and shall procure his
or its close associates to, refer the New Business Opportunity to our Company in the
following manner:
(a) as soon as he or it becomes aware of any New Business Opportunity, he or it shall
give and shall procure that his or its close associates (excluding members of our
Group) to give written notice (the ‘‘ Offer Notice ’ ’ )t oo u rC o m p a n yw i t h i ns e v e n
days identifying the target company and the nature of the New Business
Opportunity, detailing all information available to him or it for us to consider
whether to pursue such New Business Op portunity (including details of any
investment or acquisition cost and the contact details of the third parties offering,
proposing or presenting the New Business Opportunity to him or it);
RELATIONSHIP WITH CONTROLLING SHAREHOLDERS
–2 8 1–


--- page 291 ---
(b) our Company is required to seek approval from our Board or a board committee
(in each case comprising, among others, independent non-executive Directors)
who do not have a material interest in the New Business Opportunity (the
‘‘Independent Board ’’) as to whether to pursue or decline the New Business
Opportunity. Any Director who has an actual or potential material interest in the
New Business Opportunity shall abstain from attending (unless their attendance is
specifically requested by the Independent Board) and voting at, and shall not be
counted in the quorum for, any meeting convened to consider such New Business
Opportunity;
(c) our Independent Board shall consider the financial impact of pursuing the New
Business Opportunity offered, whether the nature of the New Business
Opportunity is consistent with our strategies and development plans, the
general market conditions in the Restricted Business’s industry and any advice
from independent financial advisers, should the appointment of which be deemed
necessary by our Independent Board;
(d) if appropriate, our Independent Board may appoint independent financial
advisers to assist in the decision-making process in relation to such Business
Opportunity;
(e) our Independent Board shall, within 30 days of receipt of the Offer Notice, notify
the relevant Covenantor in writing of its intention to pursue or decline the New
Business Opportunity;
(f) the relevant Covenantor shall be entitled to but shall not be obliged to carry on,
engage, invest, participate or be interested in the New Business Opportunity on
the same, or less favourable, terms and cond itions in all material aspects as set out
in the Offer Notice if he/it has received a written notice from our Independent
Board declining the New Business Opportunity; and
(g) if there is any material change in the nature, terms or conditions of the New
Business Opportunity pursued by the relevant Covenantor, he or it shall refer the
New Business Opportunity as revised and s hall provide to our Company details of
all available information for our Company to consider whether to pursue the New
Business Opportunity as revised.
Other undertakings
In addition, pursuant to the Deed of Non- competition, each of the Covenantors
undertakes that, during the Restricted Period, he or it will:
(a) provide all information necessary to our Company and Directors for the annual
review by our independent non-executive Directors with regard to compliance
with the terms of the Deed of Non-competition and the enforcement of the
undertakings contained therein;
RELATIONSHIP WITH CONTROLLING SHAREHOLDERS
–2 8 2–


--- page 292 ---
(b) make an annual declaration and disclosure in compliance with such undertakings
in the annual reports of our Company;
(c) in the event of any disagreement as to whether or not any activity or proposed
activity of the Covenantors constitutes a Restricted Business, procure that the
matter be determined by our independent non-executive Directors whose majority
decision shall be final and binding; and
(d) our independent non-executive Directors will review, on an annual basis, the
compliance of each of the Covenantors wit h their respective non-competition
undertaking and in particular, the right of first refusal in relation to any Business
Opportunities and that our Company will disclose decisions on matters reviewed
by our independent non-executive Directors relating to the compliance with, and
the enforcement of, the Deed of Non-competition in our annual report or by way
of announcement to the public.
CORPORATE GOVERNANCE MEASURES
Our Company will adopt the following measures to resolve potential conflicts of
interests between our Company and our Cont rolling Shareholders, and to safeguard the
interests of our Shareholders as a whole:
(a) the Articles provide that, unless otherwise provided, a Director shall abstain from
voting on any resolution approving any contract or arrangement or any other
proposal in which such Director or any of his or its close associates has a personal
material interest nor shall such Director be counted in the quorum of the voting;
(b) our independent non-executive Directors will review, on an annual basis, the
compliance with the Deed of Non-compet ition by our Controlling Shareholders;
(c) our Controlling Shareholders undertake to provide all information requested by
our Company which is necessary for the annual review by our independent non-
executive Directors and the enforcem ent of the Deed of Non-competition;
(d) we will disclose decisions on matters reviewed by our independent non-executive
Directors relating to the compliance and enforcement of the Deed of Non-
competition, including why business opportunities referred by our Controlling
Shareholders were not taken up, either through our annual reports or by way of
announcements;
(e) our Controlling Shareholders undertake to provide, on an annual basis, a
declaration to our Company confirming that each of our Controlling
Shareholders and his or its close associates has not breached any of the terms
in the Deed of Non-competition;
RELATIONSHIP WITH CONTROLLING SHAREHOLDERS
–2 8 3–


--- page 293 ---
(f) our Company has also established an internal control mechanism to identify
related party transactions to ensure that our Controlling Shareholders or
Directors with conflicting interests in a proposed transaction will declare the
nature of their respective interests to our Board at their earliest convenience and
abstain from voting on the relevant resolutions; and
(g) we will seek professional advices from our compliance adviser, as long as our
Company maintains the engagement of the same, on compliance with continuing
obligations under the Listing Rules in a ccordance with the provisions of the
engagement agreement with our complianc e adviser and the requirements of the
Listing Rules.
RELATIONSHIP WITH CONTROLLING SHAREHOLDERS
–2 8 4–


--- page 294 ---
OVERVIEW
The following transaction between our G roup and the relevant connected person of
our Company shall continue after the Listing, which will constitute a continuing connected
transaction under the Listing Rules.
EXEMPT CONTINUING CO NNECTED TRANSACTION
Tenancy agreement in respect of our office premises
Connected person
Qingdao Yongzheng Real Estate Development Co. Ltd.* ( 青島永正房地產開發有限公
司)( ‘ ‘Yongzheng Real Estate ’’) is a company which principally engages in the business of
real estate development in the PRC. As at th e Latest Practicable Date, Yongzheng Real
Estate is owned as to 60% by Ms. Zhang, the sister of Mr. Zhang who is our executive
Director and Controlling Shareholder, and as to 40% by Ms. Geng Juan who is cohabiting
with Mr. Zhang as his spouse. Accordingly, Yo ngzheng Real Estate constitutes a connected
person of our Company under Chapter 14A of the Listing Rules.
Nature of transaction
During the Track Record Period, we leased t he Office Premises from Yongzheng Real
Estate and we intend to continue such leasing arrangement following the Listing.
O n3F e b r u a r y2 0 2 1 ,F u j i n gA g r i c u l t u r ea st h et e n a n ta n dY o n g z h e n gR e a lE s t a t ea s
the landlord entered into a tenancy agreement (the ‘‘ 2021 Tenancy Agreement ’’), pursuant to
which Fujing Agriculture agreed to lease the Office Premises from Yongzheng Real Estate
with a gross floor area of approximately 560 sq.m. for use as office for a term of two years
from 13 February 2021 to 12 February 2023 (both days inclusive). Pursuant to a tenancy
agreement entered into on 7 February 2023 (the ‘‘ 2023 Tenancy Agreement ’’), the lease was
renewed for a term of one year to 12 February 2024. Pursuant to another tenancy agreement
e n t e r e di n t oo n9J a n u a r y2 0 2 4( t h e‘ ‘2024 Tenancy Agreement’’), the lease was further
renewed for a term of one year to 12 February 2025. The annual rent payable by Fujing
Agriculture under the 2021 Tenancy Agreement, the 2023 Tenancy Agreement and the 2024
Tenancy Agreement (collectively, the ‘‘ Office Tenancy Agreements ’’) is RMB36,000. Such
annual rental was determined after arm’s leng th negotiations between the parties making
reference to the prevailing market rental.
For FY2020, FY2021, FY2022 and 9M2023, th e total rent incurred by our Group for
leasing the Office Premises from Yongzheng Real Estate amount to RMB36,000,
RMB36,000, RMB36,000 and RMB27,000, respectively. Based on the fixed annual rent
agreed under the Office Tenancy Agreements, our Directors estimate that the maximum
transaction amount involved will not exceed RMB36,000 per year upon Listing.
CONTINUING CONNECTED TRANSACTIONS
–2 8 5–


--- page 295 ---
Implication under the Listing Rules
As the transaction contemplated under the O ffice Tenancy Agreements shall continue
after the Listing, it will constitute a continuing connected transaction for the Company
under the Listing Rules.
Since each of applicable percentage ratios on an annual basis for the transaction
contemplated under the Office Tenancy Agreements is less than 0.1%, such transaction
constitutes a de minimis connected transaction under Rule 14A.76(1)(a) of the Listing Rules
and is therefore fully exempt from the reporting, annual review, announcement, circular
and independent Shareholders’ approval requirements under Chapter 14A of the Listing
Rules.
CONFIRMATION BY OUR DIRECTORS
BMI Appraisals, which is engaged by our Group as an independent property valuer,
has reviewed the Office Tenancy Agreements, collected and analysed the relevant rented
comparables in the vicinity, and confirmed that the annual rentals under the Office Tenancy
Agreements are consistent with the prevailin g market rates of similar properties in the
similar location and is fair and reasonable.
Having considered the above, our Directors ( including the independent non-executive
Directors) are of the view that the exempt continuing connected transaction disclosed above
has been entered into in the ordinary and usual course of our business, on normal
commercial terms, and are fair and reasonable and in the interests of our Company and our
Shareholders as a whole.
If the material terms of the Office Tenancy Agreements are altered to the extent that it
is no longer an exempt continuing connected transaction or if we enter into any new
agreements or arrangements with any connected persons in the future under which the
aggregate consideration involved exceed the limits for exempt continuing connected
transactions referred to in the Listing Rules, we will comply with the relevant requirements
in the Listing Rules accordingly.
CONFIRMATION BY THE SOLE SPONSOR
The Sole Sponsor, having reviewed the releva nt documentation and historical figures,
is of the view that the exempt continuing connected transaction disclosed above has been
e n t e r e di n t oi nt h eo r d i n a r ya n du s u a lc o u r s eof our business, on normal commercial terms,
and are fair and reasonable and in the interests of our Shareholders as a whole.
CONTINUING CONNECTED TRANSACTIONS
–2 8 6–


--- page 296 ---
OVERVIEW
Our Board consists of eight Directors, compr ising five executive Directors and three
independent non-executive Directors. Our Directors are supported by our senior
management in the day-to-day operations and management of our business.
The table below sets out certain informati on concerning our Directors and senior
management:
Directors
Name Age
Date of joining
our Group
Date of
appointment as
Director
Current position
in our Group
Roles and
Responsibilities
Relation
with other
Director(s)
and/or senior
management
Mr. Zhang
Yonggang
(張永剛)
48 4 December 2006 23 July 2019 Chairman and
Executive Director
and chief executive
officer
Devising overall
corporate strategies,
management and
business development
of our Group; and
overseeing sales and
marketing function
Nil
Mr. Cui Wei
(崔偉)
40 1 April 2012 27 May 2020 Executive Director Monitoring the
operation and
business development
of our Group; and
overseeing
procurement and
management function
Nil
Ms. Guo Zeqing ( 郭
澤清)
40 1 January 2010 27 May 2020 Executive Director
and financial
controller
Supervising overall
financial
management of our
Group; and
overseeing our
finance and
accounting function
Nil
Mr. Lyu Zhonghua
(呂鐘華)
43 26 December
2011
27 May 2020 Executive Dir ector Supervising the
implementation of
strategies and
managing human
resources and
administrative
function of our
Group
Nil
DIRECTORS AND SENIOR MANAGEMENT
–2 8 7–


--- page 297 ---
Name Age
Date of joining
our Group
Date of
appointment as
Director
Current position
in our Group
Roles and
Responsibilities
Relation
with other
Director(s)
and/or senior
management
Mr. Pang Jinhong
(逄金洪)
34 10 February 2013 27 May 2020 Execu tive Director Devising and
implementation of
strategies and
managing technical
and quality control
f u n c t i o n sa sw e l la s
the supervision of
our subcontracting
labours in respect of
our cultivation
function
Nil
Dr. Li Junliang
(李俊良)
61 16 November
2023
16 November
2023
(Note)
Independent non-
executive Director
Providing independent
advice to our Board
and serving as a
member of the audit
committee,
nomination
committee and
remuneration
committee
Nil
Mr. Lam Chik Tong
(林植棠)
50 16 November
2023
16 November
2023
(Note)
Independent non-
executive Director
Providing independent
advice to Board and
serving as the
Chairman of the
audit committee, and
am e m b e ro ft h e
nomination
committee and
remuneration
committee
Nil
Ms. Chow Wai Mee
May (周 煒美)
51 16 November
2023
16 November
2023
(Note)
Independent non-
executive Director
Providing independent
advice to our Board
and serving as the
chairlady of the
remuneration
committee and
member of the audit
committee and
nomination
committee
Nil
Note: All independment non-executive Directors were a ppointed on 16 November 2023 with effect from 26
February 2024.
DIRECTORS AND SENIOR MANAGEMENT
–2 8 8–


--- page 298 ---
Senior Management
Name Age
Date of joining
our Group
Date of
appointment as
senior
management
Current position
in our Group
Roles and
Responsibilities
Relation
with other
Director(s)
and/or senior
management
Mr. Au Yeung Ming
Yin Gordon ( 歐陽
銘賢)
48 28 January 2021 28 January 2021 Company secretary Responsible for
secretarial matters of
our Group
Nil
DIRECTORS AND SENIOR MANAGEMENT
Executive Directors
Mr. Zhang Yonggang ( 張永剛), aged 48, is our chairman, executive Director and chief
executive officer. Mr. Zhang founded ou rG r o u pi nD e c e m b e r2 0 0 6a n di sp r i m a r i l y
responsible for devising the overall corporate strategies, management and business
development of our Group and overseeing sales and marketing function and overall
business development of our Group. Mr. Zhang is also the director of Glory Team, Fujing
Holdings (HK), Xinfujing and Fu jing Agriculture and the legal representative of Fujing
Agriculture.
Mr. Zhang has over 17 years’ experience in the industry of cultivation and sales of
vegetable produce as he has been leading the management of our business. Prior to
establishing our Group, Mr. Zhang gained rich experience in corporate management as he
worked as general manager in Qingdao Yongyan Clothing Co. Ltd.* (青 島永燕服裝有限公
司), a company principally engaged in the business of production of clothes, from March
2003 to May 2015. He is also an entrepreneur, being the founder of Qingdao Yongzheng
Real Estate Development Co. Ltd.* ( 青島永正房地產開發有限公司), a company founded in
May 2006 which principally engaged in the business of real estate development in the PRC
and his role changed from general manager to supervisor since June 2015 for devoting more
time and resources in our Company.
Mr. Zhang was a director of the following company incorporated in PRC prior to its
dissolution by voluntary deregistration with details as follows:
Name of the company
Nature of business
immediately
prior to dissolution Date of dissolution
Reason for
dissolution
Qingdao Fujing Real
Estate Company
Limited* ( 青島富景
置業有限公司)
Development and
sales of real estate
18 April 2011 Ceased to have
business
DIRECTORS AND SENIOR MANAGEMENT
–2 8 9–


--- page 299 ---
Mr. Zhang confirmed that the above company was solvent immediately prior to its
dissolution and that there was no wrongful act on his part leading to the dissolution of the
above company by deregistration and he is not aware of any actual or potential claim that
has been or will be made against him as a result of the dissolution of the above company.
Mr. Zhang was awarded the Qingdao Model Worker Certificate* ( 青島市勞動模範證
書) issued by Qingdao Municipal Party Committee ( 中共青島市委員會) and Qingdao
Municipal Government ( 青島市人民政府) in April 2018 and was later awarded the
Advanced Worker of Shandong Rural Professional and Technical Association* ( 山東省農
村專業技術協會先進工作者) issued by Shandong Rural Professional Technology
Association* ( 山東農村專業技術協會) in June 2020. In January 2022, Mr. Zhang was
awarded the Star of Qilu Rural Area of 2021* (2021 年度齊魯鄉村之星) issued by the
General Office of the People’s Government of Shandong Province* ( 山東省人民政府辦公
廳).
Mr. Zhang has been appointed as the deputy to the People’s Congress of Qingdao* ( 青
島市人大代表), with effect from 12 April 2022.
Mr. Zhang graduated from Shandong Accounting Officers Secondary Specialised
School* ( 山東省會計幹部中等專業學校)
specialising in finance accounting in July 1992.
Mr. Cui Wei ( 崔偉), aged 40, is our executive Director. Mr. Cui joined our Group in
April 2012 and is primarily responsible for monitoring the operation and business
development of our Group and overseeing procurement and management function.
Mr. Cui has over 14 years’ experience in the agriculture industry. Prior to joining our
Group, Mr. Cui served as an administrati on assistant in Qingd ao Shenlan Fertiliser
Industry Company Limited* ( 青島深藍肥業有限公司), a company principally engaged in
production, development and sale of fert ilisers, from March 2010 to March 2012. He has
been appointed as a director of Fujing Agriculture from August 2015 to February 2020 and
a secretary to the board of directors of Fujin g Agriculture from August 2015 to May 2019.
He has also been appointed as a secretary to the chairman of Fujing Agr iculture since April
2012.
Mr. Cui was a director of the following company incorporated in PRC prior to its
dissolution by deregistration with details as follows:
Name of the company
Nature of business
immediately
prior to dissolution
Date of
dissolution Relation with our Group Reason for dissolution
QF Vegetables Never commenced
business
20 December
2016
Established on 14 September
2011 as a wholly-owned
subsidiary of Fujing
Agriculture for the
business of plantation,
preservation, cold storage
and inventory storage of
agricultural produce
Never commenced
business
DIRECTORS AND SENIOR MANAGEMENT
–2 9 0–


--- page 300 ---
Mr. Cui confirmed that the above company was solvent immediately prior to its
dissolution and that there was no wrongful act on his part leading to the dissolution of the
above company by deregistration and he is not aware of any actual or potential claim that
has been or will be made against him as a result of the dissolution of the above company.
For the reason of QF vegetables never commencing business, please refer to the paragraph
headed ‘‘History, Reorganisation and Corporate Structure — Corporate History and
Development — Deregistration of QF Vegetables’’ in this prospectus.
Mr. Cui graduated from Shandong Normal University ( 山東師範大學), the PRC, with
a bachelor’s degree in Management (specialis ing in Public Administration) in June 2007.
Ms. Guo Zeqing ( 郭澤清), aged 40, is our executive Director and financial controller.
Ms. Guo has over 17 years’ experience in financial management and is primarily responsible
for supervising overall financial management of our Group and overseeing our finance and
accounting function.
Ms. Guo was an accounting officer in Qingdao Baisheng Packing Company Limited*
(青島百盛包裝容器有限公司), a company principally engaged in production of containers,
from September 2006 to December 2007. She subsequently served in Qingdao Taixin
Mining Co. Ltd* ( 青島泰鑫礦業有限公司), a company principally engaged in filtering and
selection of iron ore, as chief accounting officer from January 2008 to December 2009. Ms.
Guo joined Fujing Agriculture since January 2010 as financial manager and our financial
controller since November 2015 when she was responsible for supervising the financial
matters of the company.
Ms. Guo obtained her bachelor’s degree in Management (specialising in Accounting)
from Laiyang Agricultural College* ( 萊陽農學院)(currently known as Qingdao Agricultural
University), the PRC, in July 2006.
Mr. Lyu Zhonghua ( 呂鐘華), aged 43, is our executive Director. Mr. Lyu joined our
Group in December 2011 and is primarily responsi ble for supervising the implementation of
strategies and managing human resources and adminstrative function of our Group.
Mr. Lyu has over 20 years of experience in ac counting and corporate administration.
Prior to joining our Group, he worked as business manager of the Laiyang Weekly
Shopping Centre Co., Ltd.* ( 萊陽維客購物中心有限公司), a company which operates a
department store, from May 2003 to April 2005. He was then employed as a financial
manager and assistant to the general manager of Qingdao Runsheng Agrochemical Co.
Ltd.* ( 青島潤生農化有限公司), a company principally engaged in pesticide production,
from September 2005 to August 2010. From March 2011 to June 2011, he served as a
manager of the administrative and human resources department in Qingdao Shenlan
Fertiliser Industry Co mpany Limited.* ( 青島深藍肥業有限公司),
 a company principally
engaged in production, development and sal e of fertilisers. In December 2011, Mr. Lyu
joined Fujing Agriculture as the manager of administrative and human resources
department.
DIRECTORS AND SENIOR MANAGEMENT
–2 9 1–


--- page 301 ---
Mr. Lyu obtained his diploma in Accounting Computerisation from Shandong Youth
Management Officers College* ( 山東省青年管理幹部學院) (currently known as Shandong
Youth University of Political Science ( 山東青年政治學院)), the PRC, in July 2001.
Mr. Pang Jinhong ( 逄金洪), aged 34, is our executive Director. Mr. Pang joined our
Group in February 2013 and is primarily responsible for devising and implementation of
strategies and managing technical and quality c ontrol functions as well as the supervision of
our subcontracting labours in respect of our cultivation function.
Mr. Pang has over 11 years of experience in production of agricultural products. Prior
to joining our Group, Mr. Pang served as a technician in Qingdao Zhonghe Agricultural
Technology Company Limited* ( 青島中禾農業科技有限公司), a company principally
engaged in cultivation and sale of vegetable produce and food, grain, arbours and
flowers from November 2011 to December 2012, during which he provided technical
support for the production of agricultural products and formulated production plans. He
h a sb e e na p p o i n t e da sat e c h n i c a ld i r e c t o rof Fujing Agriculture since February 2013.
Mr. Pang obtained his bachelor’s degree in Agricultural Economic Management from
Shenyang Agricultural University ( 瀋陽農業大學), the PRC, in June 2011.
Independent non-executive Directors
Dr. Li Junliang ( 李俊良), aged 61, was appointed as our independent non-executive
Director on 16 November 2023 with effect from 26 February 2024. He is a member of our
audit committee, nomination committee and remuneration committee.
Dr. Li has over 39 years of experience in teaching agricultural science. He has been
teaching in the Qingdao Agricultural University ( 青島農業大學) (formerly known as
Laiyang Agricultural College ( 萊陽農學院)) since July 1984. He worked as a teaching
assistant from July 1984 to June 1992, and was promoted to lecturer and assistant professor
in July 1992 and October 1998, respectively. Since February 2005, he has been working as a
professor in Qingdao Agricultural University. Between August 2005 and September 2016,
he was also appointed as an associate dean ( 副院長) in August 2005 and resigned in
September 2016.
Dr. Li was awarded with third prize in Shandong Provincial Science and Technology
Award* ( 山東省科學技術獎)
issued by People’s Government of Shandong Province ( 山東省
人民政府) in December 2011 for his study in the research and application of water and
fertiliser regulation and management in intensive vegetable production, and was later
awarded with first prize in Shandong Provincial Science and Technology Award* ( 山東省科
學技術獎) issued by People’s Government of Shandong Province ( 山東省人民政府)i n
February 2014 for his study in formation mechanism of apple and the research and
application of high-quality and high-efficiency cultivation techniques.
Dr. Li obtained his bachelor’s degree in Soil Science and Agricultural Chemistry from
Shandong Agricultural University ( 山東農業大學) in July 1984. Dr. Li obtained his master’s
degree in Corp Nutrition and Fertilisation ( 作物營養與施肥) from Beijing Agricultural
DIRECTORS AND SENIOR MANAGEMENT
–2 9 2–


--- page 302 ---
University ( 北京農業大學) (currently known as China Agricultural University) in July 1993.
He then obtained his doctoral degree in Agricultural Study from China Agricultural
University (中 國農業大學) in July 2001.
Mr. Lam Chik Tong ( 林植棠), aged 50, was appointed as our independent non-
executive Director on 16 November 2023 with effect from 26 February 2024. He is the
chairman of our audit committee and a member of our nomination committee and
remuneration committee. Mr. Lam is primarily responsible for providing independent
judgement on the strategy, performance, resources and standard of conduct of our Group.
Mr. Lam has over 18 years of professional experience in accounting and auditing. He
joined Shu Lun Pan Horwath Hong Kong CPA Limited (‘‘ SLPH ’’) as a semi-senior in the
audit & assurance division in December 2004 and was subsequently promoted to be a Senior
II in May 2005 and left as a senior I in May 200 9. He then joined BDO Limited as a Senior
Associate 3-Assurance in May 2009 when SLPH was merged with BDO Limited and left the
firm in November 2009. Thereafter, he joined Asian Alliance (HK) CPA Limited formerly
known as Zhonglei (HK) CPA Company Limited in March 2010 and has been one of the
directors of that company since August 2012. Mr. Lam has been the director of Lo and
Kwong C.P.A. Company Limited since November 2012.
Mr. Lam was a director of the following company incorporated in Hong Kong prior to
its dissolution by deregistration with details as follows:
Name of the company
Nature of business
immediately
prior to dissolution Date of dissolution
Reason for
dissolution
Giant Base Limited
毅基有限公司
Investment 13 December 2019 Ceased to have
business
Mr. Lam confirmed that the above company was solvent immediately prior to its
dissolution and that there was no wrongful act on his part leading to the dissolution of the
above company by deregistration and he is not aware of any actual or potential claim that
has been or will be made against him as a result of the dissolution of the above company.
Mr. Lam has been registered as a certified public accountants (i.e. member of the Hong
Kong Institute of Certified Public Accountants) since January 2011.
Mr. Lam obtained a bachelor’s degree in Business Administration in Accounting
(Honours) from the Open University of Hong Kong in June 2004. He then obtained his
master’s degree in Corporate Governance at The Hong Kong Polytechnic University in
September 2020.
Ms. Chow Wai Mee May ( 周煒美), aged 51, was appointed as our independent non-
executive Director on 16 November 2023 wi th effect from 26 February 2024. She is the
chairlady of our remuneration committee and member of our audit committee and
nomination committee.
DIRECTORS AND SENIOR MANAGEMENT
–2 9 3–


--- page 303 ---
Ms. Chow has over 18 years of professional experience in legal practice. She was
admitted to the role of a solicitor in Hong Ko ng in March 2005. Thereafter, she worked as a
solicitor in various law firms in Hong Kong. She established Chow Wong & Lawyers as one
of the founding partners in January 2016.
Ms. Chow obtained her bachelor’s degree in Arts (Honours) from the University of
Hong Kong in November 1995. Further, she obtained her bachelor’s degree in Laws
(Honours) through distance learning from the Manchester Metropolitan University, the
United Kingdom, in September 2004 and a master’s degree in Laws through distance
learning from Renmin Univer sity, the PRC, in August 2007.
SENIOR MANAGEMENT
Mr. Zhang is the chief executive officer of our Company. Please refer to the paragraph
headed ‘‘Directors and senior management — Executive directors’’ in this section of the
prospectus for his biography.
Ms. Guo Zeqing is the financial controller of our Company. Please refer to the
paragraph headed ‘‘Directors and senior manag ement — Executive directors’’ in this section
of the prospectus for her biography.
COMPANY SECRETARY
Mr. Au Yeung Ming Yin Gordon ( 歐陽銘賢), aged 48, was appointed as our company
secretary on 28 January 2021. He is responsibl e for the secretarial matters of our Group. He
has over 27 years of experience in the areas of accounting and auditing. Mr. Au Yeung has
worked in various companies with details as follows:
Name of company
Nature of business
of the company during
the working period Last position Working period
Amco United Holding Limited
(stock code: 630)
Manufacture and sale of
medical devices, plastic
moulding products
construction services,
money lending and
securities investment
business
Independent non-
executive director
Since March 2018
Cocoon Holdings Limited
(stock code: 428)
Investments in securities listed
on recognised stock
exchanges and unlisted
investments with potential
for earning growth and
capital appreciation
Company secretary Since February 2019
DIRECTORS AND SENIOR MANAGEMENT
–2 9 4–


--- page 304 ---
Name of company
Nature of business
of the company during
the working period Last position Working period
China Finance Investment
Holdings Limited (stock
code: 875)
Agricultural business Company
secretary
(Note)
Since May 2019
Values Cultural Investment
Limited (stock code: 1740)
(i) Licensing of broadcasting
rights of TV series; (ii)
investing in TV series as
non-executive producer; and
(iii) acting as distribution
agent of TV series
Company secretary Since January 2020
Derek Ng & Company Audit firm Accounting assistant From April 1996 to
April 2000
Beijing Sports and
Entertainment Industry
Group Limited (formerly
known as ASR Logistics
Holdings Limited) (stock
code: 1803)
Sports and entertainment-
related industry
Senior accounting
manager
From May 2000 to
January 2015
Huge China Holdings Limited
(currently known as
Cocoon Holdings Limited)
(stock code: 428)
Investments in securities listed
on recognised stock
exchanges and unlisted
investments with potential
for earning growth and
capital appreciation
Chief financial
officer and
company secretary
From May 2015 to
August 2017
On Real International
Holdings Limited (currently
known as Shanyu Group
Holdings Company
Limited) (stock code: 8245)
Designing, manufacturing and
selling two-way radios and
baby monitor products
Chief financial
officer and
company secretary
From August 2017 to
February 2019
Note:
Mr. Au Yeung has worked as a financial controller at Ch ina Finance Investment Holdings Limited (Stock
code: 875) from May 2019 to October 2021.
DIRECTORS AND SENIOR MANAGEMENT
–2 9 5–


--- page 305 ---
Name of company
Nature of business
of the company during
the working period Last position Working period
Success Dragon International
Holdings Limited (stock code:
1182)
Outsourced business process
management, information
technology services, golden-laden
carbon pressing business and
money lending business
Company secretary From October 2017 to
September 2019
L & A International Holdings
Limited (currently known as
Legendary Education Group
Limited) (stock code: 8195)
OEM business, retailing and
wholesaling of garment,
wholesaling of seafood, provision
of loan services and financial
quotient and investment education
and property investment business
Company secretary From November 2019 to
August 2020
Dadi International Group Limited
(stock code: 8130)
Publication, purchase and
distribution of books,
environmental protection business
and financial leasing and other
financial services
Company secretary,
authorised
representative and
process agent
Since February 2023
Mr. Au Yeung has been a member of the Hong Kong Institute of Certified Public
Accountants since October 2012. He obtained his degree in Bachelor of Business (Business
Administration) from the Royal Melbourne Institute of Technology (currently known as
RMIT University) in Australia in Septem ber 2006 and his postgraduate diploma in
Professional Accounting from the Hong Kong Baptist University in November 2009.
While Mr. Au Yeung is currently the company secretary for four other listed
companies and an independent non-executive director for one listed company, the Directors
are of the view that, and the Sole Sponsor concurs, Mr. Au Yeung will be able to devote
sufficient time to perform his duty as our company secretary, on the following basis:
(i) Mr. Au Yeung is mainly responsible for overseeing the secretarial matters of our
Group and is not expected to involve in formulating and executing business
strategies financial plans and day-to-day operations of the Group’s business;
(ii) Mr. Au Yeung is assisted by his team of staff, which consists of four colleagues, in
dealing with the day-to-day secretarial matters of our Group;
(iii) with over 27 years of experience in the areas of accounting and auditing and
knowledge on corporate governance developed through his employments in other
listed companies, Mr. Au Yeung’s experiences are expected to facilitate the proper
discharge of his duties and responsibilities as our company secretary;
(iv) Mr. Au Yeung has confirmed that none of the listed companies that he holds
current employments or directorship with has questioned or complained about his
time devoted to such listed companies; and he will devote sufficient time to act as
our company secretary notwithstanding such other concurrent employments and
directorship;
DIRECTORS AND SENIOR MANAGEMENT
–2 9 6–


--- page 306 ---
(v) our Company will provide sufficient resources and support to Mr. Au Yeung to
discharge his duties as the company secretary of our Company, in particular, we
will retain and consult external professional advisers after the Listing to assist our
Company and Mr. Au Yeung in dealing with matters on on-going compliance
obligations under the Listing Rules and ot her applicable laws and regulations in
Hong Kong as and when requested by Mr. Au Yeung;
(vi) the Sole Sponsor is given to understand from the enquiry and discussion with Mr.
Au Yeung on his expected time allocation in handling the secretarial matters of
the Group, that similar amount of working hours will be assigned to each of the
listed companies which Mr. Au Yeung holds the position of company secretary;
and
(vii) according to the review of the announcements published by the listed companies
which Mr. Au Yeung is currently contracted with employment, there is no
evidence suggesting Mr. Au Yeung of any unsatisfactory performance, breach of
fiduciary duties or failure to devote suffi cient time to discharge his duties as
company secretary, financial controller or independent non-executive director of
these companies.
Based on the above, our Directors are satisfied that, and the Sole Sponsor concurs, Mr.
Au Yeung will be able to devote sufficient time to act as company secretary of our
Company.
Other disclosure pursuant to Rule 13.51(2) of the Listing Rules
Save as disclosed above, each of our Directors (i) did not hold other positions in our
Company or other members of our Group as at the Latest Practicable Date; (ii) had no
other relationship with any Directors, senior management or substantial or Controlling
Shareholders of our Company as at the Latest Practicable Date save that Ms. Geng Qi, one
of our Shareholders, is the sister of Ms. Geng Juan, who is cohabiting with Mr. Zhang, our
Controlling Shareholder, as his spouse; and ( iii) did not hold any other directorships in
listed companies in the three years prior to the date of this prospectus. Immediately
following completion of the Share Offer and the Capitalisation Issue, save as the interests in
our Shares which are disclosed in the section headed ‘‘Substantial Shareholders’’ in this
prospectus, each of our Directors will not h ave any interest in our Shares within the
m e a n i n go fP a r tX Vo ft h eS F O .
Save as disclosed herein, to the best of the knowledge, information and belief of our
Directors having made all reasonable enquiries, there were no other matters with respect to
the appointment of our Directors that need to be brought to the attention of our
Shareholders and there was no information relating to our Directors that is required to be
disclosed pursuant to Rules 13.51(2)(h) to (v) of the Listing Rules as at the Latest
Practicable Date.
DIRECTORS AND SENIOR MANAGEMENT
–2 9 7–


--- page 307 ---
Confirmation from our Directors
Each of our Directors confirms that he or she (i) has obtained the legal advice referred
to under Rule 3.09D of the Listing Rules on 24 January 2024, and (ii) understands his or her
obligations as a director of a liste d issuer under the Listing Rules.
Each of our independent non-executive Directors has confirmed (i) his or her
independence as regards each of the factors referred to in Rules 3.13(1) to (8) of the Listing
Rules, (ii) he or she has no past or present financial or other interest in the business of the
Company or its subsidiaries or any connection with any core connected person of the
Company under the Listing Rules as at the Late st Practicable Date, and (iii) that there are
no other factors that may affect his or her independence at the time of his or her
appointment.
BOARD COMMITTEES
Our Board delegates certain responsibilities to various committees. In accordance with
our Articles of Association and the Listing Rules, we have formed three board committees,
namely the audit committee, remuneration committee and nomination committee.
Audit Committee
We have established an audit committee with written terms of reference in compliance
with Rule 3.21 of the Listing Rules and the Corporate Governance Code as set out in
Appendix C1 to the Listing Rules. The primary duties of the audit committee are to, among
other things, review and supervise the financial reporting systems and internal control
system of our Company, oversee the audit process, provide advice and comments to our
Board and perform other duties and responsibilities as may be assigned by our Board.
Our audit committee consists of three members, namely Mr. Lam Chik Tong, Dr. Li
Junliang and Ms. Chow Wai Mee May. The chairman of our audit committee is Mr. Lam
Chik Tong, who is our independent non-executive Director with the appropriate
professional qualifications.
Remuneration Committee
We have established a remuneration comm ittee with written terms of reference in
compliance with Rule 3.25 of the Listing Rules and the Corporate Governance Code as set
out in Appendix C1 to the Listing Rules. The primary duties of the remuneration committee
are to, among other things, establish, review and make recommendations to our Directors
on our policy and structure concerning remuneration of our Directors and senior
management and on the establishment of a formal and transparent procedure for
developing policies concerning such remuneration, determine the terms of the specific
remuneration package of each executive Director and senior management and review and
approve performance-based remuneration by reference to corporate goals and objectives
resolved by our Directors from time to time. Our Directors may also receive options and/or
awards to be granted under the Share Scheme.
DIRECTORS AND SENIOR MANAGEMENT
–2 9 8–


--- page 308 ---
Our remuneration committee consists of three members, namely Mr. Lam Chik Tong,
Dr. Li Junliang and Ms. Chow Wai Mee May. The chairlady of our remuneration
committee is Ms. Chow Wai Mee May, who is our independent non-executive Director.
Nomination Committee
We have established a nomination committee with written terms of reference in
compliance with the Corporate Governance Code as set out in Appendix C1 to the Listing
Rules. The primary duties of our nomination committee are to, among other things, review
the structure, size and composition of our Bo ard and Board diversity policy, assess the
independence of the independent non-executive Directors and make recommendations to
our Board on the appointment an d re-appointment of Directors and succession planning for
Directors.
Our nomination committee consists of four members, namely Mr. Zhang, Mr. Lam
Chik Tong, Dr. Li Junliang and Ms. Chow Wai Mee May. The chairman of our nomination
committee is Mr. Zhang, who is our executive Director.
BOARD DIVERSITY POLICY
In order to enhance the quality of the performance of our Board and to support the
attainment of our strategic objectives and sustainable development, we have adopted a
board diversity policy (the ‘‘ Board Diversity Policy ’’). Pursuant to the Board Diversity
Policy, we seek to achieve Board diversity through the consideration of a number of factors
when selecting candidates to our Board, incl uding but not limited to gender, skills, age,
professional experience, knowledge, cultural and education background, ethnicity and
length of service. Appointments will ultimately be based on merit and the contributions the
selected candidates will bring to our Board. Our Board believes that such merit-based
appointments will best enable our Company to serve our Shareholders.
Our Directors have a balanced mix of knowledge and skills, including in overall
management and strategic development, sales and marketing, finance and accounting, law,
consulting and corporate governance, as well as experience in the agriculture industry. Our
Company has three independent non-executive Directors with different genders, industries
backgrounds, representing more than one-third of the members of our Board. Furthermore,
our Board has a wide range of age, ranging from 34 years old to 61 years old.
Our nomination committee is responsible for reviewing the diversity of our Board.
After the Listing, our nomination committee will monitor the implementation of the Board
Diversity Policy, and review the Board Diversity Policy from time to time to ensure its
continued effectiveness. Our nominatio n committee will also include in our annual
corporate governance report a summary of the Board Diversity Policy together with
measurable objectives set for implementing the Board Diversity Policy, the progress made
towards achieving those objectives, as well as our Board’s composition from a diversity
perspective.
DIRECTORS AND SENIOR MANAGEMENT
–2 9 9–


--- page 309 ---
REMUNERATION POLICY
T h ed i r e c t o r ’ sf e ef o re a c ho fo u rD i r e c t o r si ss u b j e c tt oo u rB o a r d ’ sr e v i e wf r o mt i m e
to time in its discretion after taking into account the recommendation of our remuneration
committee. The remuneration package of each of our Directors is determined by reference
to market terms, seniority, experiences, duties and responsibilities of that Director within
our Group. Our Directors are entitled to statutory benefits as required by law from time to
time such as pension.
Prior to the Listing, the remuneration policy of our Group to reward its employees and
executives is based on their performance, qualifications, competence displayed and market
comparable. Remuneration package typically comprises salary, contribution to pension
schemes and discretionary bonuses relating to t h ep r o f i to ft h er e l e v a n tc o m p a n y .U p o na n d
after the Listing, the remuneration package of our Directors and the senior management
will, in addition to the above factors, be lin ked to the return to our Shareholders. The
remuneration committee will review annually the remuneration of all our Directors to
ensure that it is attractive enough to attrac t and retain a competent team of executive
members.
CORPORATE GOVERNANCE CODE
We acknowledge the importance of implementing a high standard of corporate
governance, which we believe is crucial to saf eguard the interests of our Shareholders. To
accomplish this, we expect to comply with the Corporate Governance Code set out in
Appendix C1 to the Listing Rules after the Listing except for the deviation from the code
provision C.2.1 of the Corporate Governance Code.
Pursuant to code provision C.2.1 of the Corporate Governance Code, the roles of
chairman and chief executive officer should be separated and should not be performed by
the same individual. However, having considered the nature and extent of our operations,
and Mr. Zhang’s familiarity with the operati ons of our Group, that all major decisions are
made in consultation with members of our Board and relevant Board committees, and that
there are three independent non-executive Directors on our Board offering independent
perspectives, our Directors are therefore of th e view that there are adequate safeguards in
place to ensure sufficient balance of powers and authorities between our Board and the
management of our Company and that it is in the best interest of our Group to have Mr.
Zhang taking up both roles notwithstanding the provision of C.2.1 of the Corporate
Governance Code.
COMPENSATION OF DIRECTOR S AND SENIOR MANAGEMENT
Our Directors and members of our senior management receive compensation from our
Company in the form of fees, salaries, allowances and other benefits in kind as well as
retirement benefits scheme contributions.
For each of FY2020, FY2021, FY2022 and 9M2023, the aggregate amount of
remuneration (including fees, salaries, allowances, retirement benefits scheme contributions
and other benefits in kind) paid to our Directors (of whom, only Mr. Zhang, Mr. Lyu
DIRECTORS AND SENIOR MANAGEMENT
–3 0 0–


--- page 310 ---
Z h o n g h u a ,M r .C u iW e i ,M s .G u oZ e q i n ga n dM r .P a n gJ i n h o n gr e c e i v e ds u c h
remuneration) was approximately RMB498,000, RMB797,000, RMB809,000 and
RMB594,000 respectively. Save as disclosed above, no other emoluments have been paid
or are payable, in respect of the Track Record Period by our Company to our Directors.
Among our five highest paid individuals for FY2020, FY2021, FY2022 and 9M2023,
three, three, two and three respectively of them were our Directors. The aggregate
compensation (including fees, salaries, allowa nces, retirement benefits scheme contributions
and other benefits in kind) paid to such three, three, two and three Directors for FY2020,
FY2021, FY2022 and 9M2023 were approx imately RMB409,000, RMB618,000,
RMB506,000 and RMB458,000 respectively. The aggregate compensation (including basic
salaries and allowances retirement benefits scheme contributions) paid to remaining
individuals during FY2020, FY2021, FY2022 and 9M2023 were approximately
RMB260,000, RMB298,000, RMB394,000 and RMB225,000 respectively.
During the Track Record Period, no remuneration was paid by us to, or received by,
our Directors or the five highest paid individuals as an inducement to join or upon joining
us or as compensation for loss of office. There was no arrangement under which a Director
waived or agreed to waive any remuneration during the Track Record Period.
Under the arrangements currently in fo rce, we estimate that the aggregate
remuneration payable to, and benefits in kind receivable by, our Directors (excluding
discretionary benefits or bonus or other fringe benefits) for the financial year ending 31
December 2023 will be appr oximately RMB930,000.
Our Board will review and determine the rem uneration and compensation packages of
our Directors and senior m anagement and will, followi ng the Listing, receive
recommendation from the remuneration committee which will take into account salaries
paid by comparable companies, time commitme nt and responsibilities of our Directors and
performance of our Company.
Save as disclosed in this prospectus, no other payments had been made, or are payable,
by any member of our Group to our Directors or the five highest paid individuals during the
Track Record Period.
For additional information on our Directors’ remuneration during the Track Record
Period as well as information on the five highes t paid individuals, please refer to note 14 to
the Accountants’ Report as set out in Appendix I to this prospectus.
SHARE SCHEME
Our Directors may also receive options and/or awards to be granted under the Share
Scheme. The principal terms of the Share Scheme are summarised in the paragraph headed
‘‘D. Share Scheme’’ in Appendix VI to this prospectus.
DIRECTORS AND SENIOR MANAGEMENT
–3 0 1–


--- page 311 ---
COMPLIANCE ADVISER
Our Company has appointed Grande Capital as our compliance adviser pursuant to
Rule 3A.19 of the Listing Rules.
Pursuant to Rule 3A.23 of the Listing Rule s, the material terms of the compliance
adviser’s agreement entered into between our Company and our compliance adviser are as
follows:
(a) our compliance adviser shall provide our Company with services including
guidance and advice as to compliance wit h the requirements of the Listing Rules
and other applicable laws, rules, cod es and guidelines, and accompany our
Company to any meetings with the Stock Exchange;
(b) our Company may terminate the appointm ent of our compliance adviser by giving
two months prior written notice to the compliance adviser. Our Company will
exercise such right in compliance wit hR u l e3 A . 2 6o ft h eL i s t i n gR u l e s .O u r
compliance adviser will have the right to terminate its appointment as compliance
adviser under certain specific circumstances and upon notification of the reason of
its resignation to the Stock Exchange; and
(c) during the period of appointment, our Company must consult with, and if
necessary, seek advice from our compliance adviser on a timely basis 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;
(iii) where we propose to use the proceeds of the Share Offer in a manner
different from that detailed in this prospectus or where our business
activities, developments or results materially deviate from any forecast,
estimate, or other information in this prospectus; and
(iv) where the Stock Exchange makes an inquiry of our Company regarding
unusual movements in the price or trading volume of our Shares.
The term of the appointment shall commen ce on the Listing Date and end on the date
on which we distribute our annual report in respect of our financial results for the first full
financial year commencing after the Listing Date.
DIRECTORS AND SENIOR MANAGEMENT
–3 0 2–


--- page 312 ---
SUBSTANTIAL SHAREHOLDERS
So far as our Directors are aware, immediately following the completion of the
Capitalisation Issue and the Share Offer (without taking into account any Share that may
be allotted and issued upon the exercise of the Over-allotment Option or any option and/or
award that may be granted under the Share Scheme), the following persons/entities will
have an interest or short position in our 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 who are, directly or indirectly, interested in 10% or more
of the number of any class of Shares carrying rights to vote in all circumstances at general
meetings of our Company and therefore will be regarded as substantial shareholders of our
Company under the Listing Rules:
Name of substantial
Shareholders
Capacity/Nature of
interest
Number of
Shares held
(Note 1)
Approximate
percentage of
shareholding
in our
Company
Wider International Beneficial owner 273,636,275 54.73%
Mr. Zhang (Note 2) Interest in a controlled
corporation
273,636,275 54.73%
Beauty Sources Beneficial owner 74,878,018 14.98%
Ms. Geng Qi
(Note 3) Interest in a controlled
corporation
74,878,018 14.98%
Notes:
1. All the above Shares are held in long position.
2. Wider International is wholly-owned by Mr. Zhang. By virtue of the SFO, Mr. Zhang is deemed to
be interested in the same number of Shares held by Wider International.
3. Beauty Sources is wholly-owned by Ms. Geng Qi. By virtue of the SFO, Ms. Geng Qi is deemed to be
interested in the same number of Shares held by Beauty Sources.
SUBSTANTIAL SHAREHOLDERS
–3 0 3–


--- page 313 ---
Save as disclosed above, our Directors are not aware of any persons/entities who will,
immediately following the completion of t he Capitalisation Issue and the Share Offer
(without taking into account any Share that may be allotted and issued upon the exercise of
the Over-allotment Option or any option and/or award that may be granted under the Share
Scheme), have an interest or a short position in our Shares or 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 number of any class of Shares carrying rights to vote in all circumstances in
the general meetings of our Company. Our Directors are not aware of any arrangement
which may at a subsequent date result in a change of control of our Company.
SUBSTANTIAL SHAREHOLDERS
–3 0 4–


--- page 314 ---
AUTHORISED AND ISSUED SHARE CAPITAL
The following is a description of the authorised and issued share capital of our
Company in issue and to be issued as fully paid or credited as fully paid immediately
following the completion of the Capitalisation Issue and the Share Offer:
Nominal value
US$
Authorised share capital:
10,000,000,000 Shares of US$0.01 each 100,000,000
Issued and to be issued, fully paid or credited as fully paid:
141,414 Shares in issue as at the date of this prospectus 1,414.14
399,858,586 Shares to be issued under the Capitalisation Issue
(Note)
3,998,585.86
100,000,000 Shares to be issued under the Share Offer 1,000,000
500,000,000 Total 5,000,000
Note: Pursuant to the written resolutions of our Shareholders passed on 11 March 2024, conditional
upon the share premium account of our Company bei ng credited as a result of the Share Offer, our
Directors were authorised to capitalise an amount of US$3,998,585.86 standing to the credit of the
share premium of our Company and to apply the same to pay up in full at par 399,858,586 Shares
for allotment and issue to our Shareholders whose names appear on the register of members of our
Company at the close of business on 11 March 2024 in proportion to their respective shareholding.
ASSUMPTIONS
The above table assumes that the Share Offer becomes unconditional and our Shares
are issued pursuant to the Capitalisation Issu e and the Share Offer. It does not take into
account any Shares (i) which may be issued pursuant to the exercise of the Over-allotment
Option; (ii) which may be issued pursuant to the exercise of any options and/or awards
which may be granted under the Share Scheme or under any other share option scheme of
our Company; or (iii) which may be issued or re purchased by our Company pursuant to the
general mandates granted to our Directors to issue or repurchase Shares as described below.
MINIMUM PUBLIC FLOAT
Pursuant to Rule 8.08(1)(a) of the Listing Rules, at the time of the Listing and at all
times thereafter, at least 25% of the total issued number of issued Shares of our Company
must be held by the public (as defined in the Listing Rules).
SHARE CAPITAL
–3 0 5–


--- page 315 ---
RANKINGS
The Offer Shares will be ordinary shares in the share capital of our Company and will
rank pari passu in all respects with all Shares in issue or to be issued as mentioned in this
prospectus and, in particular, will qualify in f ull for all dividends or other distributions
declared, made or paid on the Shares in respect of a record date which falls after the date of
this prospectus save for the entitlement under the Capitalisation Issue.
SHARE SCHEME
Our Company has conditionally adopted the Share Scheme on 11 March 2024, under
which the eligible persons may be granted options which entitle them to subscribe for
Shares and/or awards which give a conditional right to obtain the awarded shares, when
aggregated with Shares which may be issued pursuant to options and/or awards granted
under any other scheme, representing not exceeding 10% of the Shares in issue as at the date
of approval of the Share Scheme. For further details of the Share Scheme, please refer to the
paragraph headed ‘‘D. Share Scheme’’ in Appendix VI to this prospectus.
GENERAL MANDATE TO ISSUE SHARES
Subject to the conditions set forth in the paragraph headed ‘‘Structure and Conditions
of the Share Offer — Conditions of the share offer’’ in this prospectus being fulfilled, our
Directors have been granted a general unconditional mandate to exercise all powers of our
Company to allot, issue and deal with (other wise than by way of rights issue, an issue of
Shares pursuant to the exercise of the Over-allotment Option and options and/or awards
which may be granted under the Share Scheme or under any other share option scheme of
our Company, or pursuant to any scrip dividen d schemes or similar arrangements providing
for the allotment and issuance of the Shares in lieu of the whole or part of any dividend in
accordance with the Memorandum and the Articles, or upon the exercise of any
subscription or conversion rights attached to any warrants or convertibles of our
Company, or under the Capitalisation Issue or the Share Offer) the Shares which shall
not exceed:
(i) 20% of the total number of Shares of our Company in issue immediately following
completion of the Capitalisation Issue and the Share Offer but excluding any
Shares to be issued upon exercise of the Over-allotment Option and any options
and/or awards which may be granted under the Share Scheme; and
(ii) the total number of Shares repurchased by our Company under the general
mandate to repurchase Shares as described below.
This general mandate to issue Shares will remain in effect until the earliest of:
(i) the conclusion of the next annual general meeting of our Company;
(ii) the expiration of the period within which the next annual general meeting of our
Company is required by the Memorandum or Articles or the Companies Act or
any other applicable laws of the Cayman Islands to be held; or
SHARE CAPITAL
–3 0 6–


--- page 316 ---
(iii) the time when such mandate is revoked or varied by an ordinary resolution of our
Shareholders in general meeting;
For further details of this general manda te to issue Shares, please refer to the
paragraph headed ‘‘A. Further information about our company and our subsidiaries — 4.
Written resolutions of our shareholders passed on 16 November 2023 and 11 March 2024’’
in Appendix VI to this prospectus.
GENERAL MANDATE TO REPURCHASE SHARES
Subject to the conditions set forth in the paragraph headed ‘‘Structure and Conditions
of the Share Offer — Conditions of the Share Offer’’ in this prospectus being fulfilled, our
Directors have been granted a general unconditional mandate to exercise all powers of our
Company to repurchase Shares on the Stock Exchange or on any other stock exchange on
which the securities of our Company may be listed and which is recognised by the SFC and
the Stock Exchange for this purpose, such number of Shares as will represent up to 10% of
the total number of Shares of our Company in issue immediately following completion of
the Capitalisation Issue and the Share Offe r, but excluding any Shares to be issued upon
exercise of the Over-allotment Option and any options and/or awards which may be granted
under the Share Scheme.
This general mandate to repurchase Shar es remain in effect unt il the earliest of:
(i) the conclusion of the next annual general meeting of our Company;
(ii) the expiration of the period within which the next annual general meeting of our
Company is required by the Memorandum or Articles or the Companies Act or
any other applicable laws of the Cayman Islands to be held; or
(iii) the time when such mandate is revoked or varied by an ordinary resolution of our
Shareholders in general meeting.
For further details of this general mandate to repurchase, please refer to the paragraph
headed ‘‘A. Further information about our company and our subsidiaries — 4. Written
resolutions of our shareholders passed on 16 November 2023 and 11 March 2024’’ in
Appendix VI to this prospectus.
CIRCUMSTANCES UNDER WHICH A MEETING OF OUR COMPANY IS
REQUIRED
Our Company has only one class of Shares, namely ordinary shares, each of which
ranks pari passu with other Shares. The circumstances under which general meetings are
required are provided in the Articles, a summary of which is set forth in Appendix V to this
prospectus.
SHARE CAPITAL
–3 0 7–


--- page 317 ---
The following discussion and analysis of our financial condition and results of
operations should be read together with our consolidated financial information as of and in
each of FY2020, FY2021, FY2022 and 9M2023 with the accompanying notes to the
Accountants’ Report as set out in Appendix I to this prospectus. The financial statements
have been prepared in accordance with HKFRS. Prospective investors should read the whole
of the Accountants’ Report as set out in Appendix I to this prospectus and not rely merely on
the information contained in this section. The following discussion and analysis contain
forward-looking statements that involve risk and uncertainties. However, whether our actual
results and developments will meet our expect ations and projection depend on a number of
risks and uncertainties over which our Group does not have control. For additional
information regarding these risks and uncertain ties, please refer to the section headed ‘‘Risk
Factors’’ in this prospectus.
OVERVIEW
We are the largest producer of potted vegetable produce in Shandong province, with a
market share of 14.8% in terms of sales revenue in Shandong province in 2022. We are
principally engaged in the cultivation and sa les of potted vegetable produce, which are
cultivated and sold in pots. During the Track Record Period, our potted vegetable produce
was mainly leafy vegetable species which included 29 species, with vegetable species such as
crown daisy, rapeseed, Frise ´e, Indian lettuce, pak choi, lettuce, Chinese celery and tatsoi
being our principal products offered in the market during the Track Record Period.
Our products are offered in the market primarily under our brand ‘‘ 富景農業’’. During
the Track Record Period, we sold our products primarily in Shandong province. In 2019, we
extended our geographical coverage by commencing sales of our potted vegetable produce
in Xi’an, Shaanxi province and Dalian, Liaoning province. During FY2020, we further
expanded our Laixi Facility by a total site area of approximately 90,000 sq.m. for
cultivation of our potted vegetable produce. We sell our potted vegetable produce primarily
through a network of distributors in the PRC, which is consistent with industry practice.
Our distributors then on-sell our products to end-user customers, the majority of which are
hotels and restaurants in the PRC.
We have achieved a solid track record of growth in revenue and profit, save for
FY2022 and 9M2022 when our results were temporarily and adversely affected by COVID-
19 epidemic which seriously affected our Sha ndong province and Dalian markets during the
period. For FY2020, FY2021, FY2022, 9M2022 and 9M2023, we recorded a total revenue
of approximately RMB121.4 million, RMB154.9 million, RMB126.7 million, RMB88.6
million and RMB121.3 million, respectively, w hile our net profit for the same period was
approximately RMB43.8 million, RMB47. 3 million, RMB31.8 million, RMB19.7 million
and RMB41.1 million for FY2020, FY2021, FY2022, 9M2022 and 9M2023, respectively.
For further information about our business and operations, please refer to the section
headed ‘‘Business’’ in this prospectus.
FINANCIAL INFORMATION
–3 0 8–


--- page 318 ---
BASIS OF PRESENTATION
Our Company was incorporated in the Cayman Islands as an exempted company with
limited liability on 23 July 2019. In prepara tion for the Share Offer, we underwent the
Reorganisation, as detailed in the section headed ‘‘History, Reorgan isation and Corporate
Structure’’ in this prospectus. Following the Reorganisation, our Company became the
holding company of all the companies now comprising our Group.
The historical financial information of o ur Group has been prepared by our Directors
based on accounting policies which conform with Hong Kong Financial Reporting
Standards (including Hong Kong Accounting Standards and their interpretations) issued by
the Hong Kong Institute of Certified Public Accountants, on the basis of presentation as set
out in note 2 to the Accountants’ Report as set out in Appendix I to this prospectus.
KEY FACTORS AFFECTING OUR RESULTS OF OPERATION AND FINANCIAL
CONDITIONS
Our results of operations and financial conditions are affected by a number of factors,
many of which may be beyond our control, including those factors set forth in the section
headed ‘‘Risk Factors’’ in this prospectus and those set forth below.
Consumer demand for our potted vegetable produce in the PRC
Consumer demand for our potted vegetable produce in the PRC is one of the key
drivers of our revenue. In line with the increasing rate of vegetable consumption of residents
in China due to the increasing total population and disposable income, the sales volume of
potted vegetable produce increased from 107.8 million pots in 2017 to 239.4 million pots in
2022 with a CAGR of 17.3%. Meanwhile, the sales revenue of potted vegetable produce
increased from RMB1,520.8 million in 201 7 to RMB4,069.3 million in 2022 with a CAGR
of approximately 21.8%. Going forward, as potted vegetable produce is increasingly
popular in the PRC, the market is expected to keep an upward trend. The sales volume of
potted vegetable produce is likely to reach 329.4 million pots in 2027 with a CAGR of
approximately 6.6%. The sales revenue is a lso expected to grow to RMB6,591.0 million in
2027, representing a CAGR of approximately 10.1%. For details of the historical and
expected growth of the potted vegetable produce industry of the PRC, please refer to the
paragraph headed ‘‘Industry Overview — China’s vegetable and potted vegetable produce
markets’’ in this prospectus. The rising demand for potted vegetable produce in the PRC
may positively affect our results of operations.
On the other hand, since our growth depends, to a significant extent, on the continuous
growth in the demand for our potted vegetable produce, any future reduced demand or
downturn in the relevant sectors may mat erially and adversely affect our sales and
profitability. Furthermore, we are subject to t he changing consumer preferences. If there is
a change in market preference and if we fail to keep pace with these changes, we may not be
able to achieve the growth as expected.
Cost of raw materials and subcontractor labour cost
Our raw materials primarily include (i) components of organic substrates; (ii) seeds;
and (iii) fertilisers (such as foliar fertilisers) and biopesticides (such as matrine).
FINANCIAL INFORMATION
–3 0 9–


--- page 319 ---
In FY2020, FY2021, FY2022 and 9M2023, cost of raw materials represented
approximately 49.1%, 47.9%, 47.2% and 47.7% of our cost of sales, respectively. While
we are generally able to pass on increases in cost of raw materials of our products to our
customers by increasing the prices of our products accordingly and we have effective
mechanism to keep monitoring the supply and p rice trends of our raw materials, we cannot
assure that our key suppliers will not be interrupted and will be able to continue to supply
raw materials to us on commercially acceptable terms or that can meet our standards. Our
financial conditions and results of operations may accordingly be adversely affected.
Our subcontractor labour cost also affe cts our profitability. In FY2020, FY2021,
FY2022 and 9M2023, our subcontractor labou r cost amounted to approximately RMB28.3
million, RMB37.2 million, RMB30.3 million and RMB29.0 million, representing
approximately 41.6%, 41.7%, 40.9% and 41. 8% of our cost of sales respectively for the
same periods. While we strive to improve our operating efficiency and control cost, our
subcontractor labour cost may continue to grow with the increase in our business scale in
the foreseeable future.
Our ability to maintain our competitive advantages that differentiate us from our competitors
The potted vegetable produce market in China is a highly fragmented market with
thousands of potted vegetable producers.
Entry barriers and the competitiveness of the potted vegetable produce market largely
lie in brand recognition, potted vegetable produce cultivation know-how, capital
requirements and logistics capabilities. Our Directors believe that we are able to compete
by leveraging our strengths in China’s potted vegetable produce market, our well-
established distribution network and our developed techniques in the potted vegetable
produce cultivation. We will also further solidify our status in the market through
continuous efforts in testing of cultivation methods and techniques and improvements in
product quality.
For further details on our competitive landscape, please refer to the paragraph headed
‘‘Industry Overview — China’s vegetable and potted vegetable produce markets —
Competitive landscape of China’s vegetab le produce and potted vegetable produce
markets’’ in this prospectus. For further details on our risks related to competition,
please also refer to the paragraph headed ‘‘Risk Factors — Risks relating to the industry
which we operate in — We operate in a highly f ragmented and competitive industry and
may face increasing competition, which may affect our market shares and profit margins’’ in
this prospectus.
FINANCIAL INFORMATION
–3 1 0–


--- page 320 ---
Distribution network
Our sales volume is and will continue to be affected by the size of our distribution
network. Our major customers consist of dist ributors who are primarily involved in the on-
selling of our potted vegetable produce to end-user customers in their respective designated
regions. In FY2020, FY2021, FY2022 and 9M2023, sales to our distributors (which were all
based in the PRC) amounted to RMB121.0 m illion, RMB154.9 million, RMB126.7 million
and RMB121.3 million, respectively, representing approximately 99.7%, 100.0%, 100.0%
and 100.0% of our revenue during the same period, respectively. For details, please refer to
the paragraph headed ‘‘Business — Distribution and sales network — Our customers’’ in
this prospectus.
While we have established approximately three to nine years of business relationship,
failure to renew our distribution agreements with our distributors may adversely affect the
sales of our potted vegetable produce and thus our financial conditions and results of
operation. For details, please refer to the para g r a p hh e a d e d‘ ‘ R i s kF a c t o r s—R i s kr e l a t i n g
to our business — We rely on our distributors to sell our products. Any changes in our
relationships with our distributors may h ave a material and adverse effect on our sales,
results of operations and financial conditions’’ in this prospectus.
Changes in fair value of biological assets
Our biological assets as at the end of reporting period represent the potted vegetable
produce held by us and stated at fair value less estimated cost to sell as at the end of
reporting period. Our results have been, and we expect will continue to be, affected by
changes in the fair value of our biological assets. Between each reporting dates, our fair
value of biological assets is affected by our production and sale of these biological assets in
our business operation. At the end of each reporting period, we recognise fair value gains or
losses arising from changes in fair value of the p otted vegetable produce that remain unsold
as at the beginning and end of reporting period, that is the fair value changes of biological
assets. Such fair value changes are due to the changes in the physical attributes and market-
determined prices of biological assets.
During the Track Record Period, the fair value of our biological assets were assessed at
each reporting date by Savills, our independent valuer. The fair value of potted vegetables
that are planted and sold within the same financial period results in no changes in the
carrying amount and fair value of biological assets recognised during that reporting period.
As our biological assets are stated at fair value less estimated cost to sell as at the end of the
reporting period, the carrying amounts are a ffected by the number, maturity and therefore
the fair value of our potted vegetable produce as at the end of the reporting period. The
resultant changes in the fair value adjustment between each reporting period are recognised
as gain or loss in our consolidated statements of profit or loss.
In FY2020, our results of operations were positively affected by the gain arising from
the changes in fair value less cost to sell of biological assets of approximately RMB3.2
million. In FY2021, our results of operations were positively affected by the gain arising
from fair value changes less cost to sell of biological assets of approximately RMB3.4
million. In FY2022, our results of operations were negatively affected by the loss from fair
value changes less cost to sell of biological assets of approximately RMB2.1 million. In
9M2023, our results of operations were positively affected by the gain arising from fair
FINANCIAL INFORMATION
–3 1 1–


--- page 321 ---
value changes less cost to sell of biologic al assets of approximately RMB3.3 million.
Changes in fair value less cost to sell of biological assets represent fair value gains/losses on
our biological assets.
In applying valuation methods (including market and cost approaches), Savills has
relied on a number of assumptions, related to, among others, quantity held, sales volume
and market price of our potted vegetable produce and cost to sell. The fair value of our
potted vegetable produce could be affected by, among others, the accuracy of these
assumptions. Any changes in the assumptions may affect the fair value of our potted
vegetable produce significantly. Our management review the assumptions and estimates
periodically to identify any significant changes in fair value of our potted vegetable
produce. We expect that our results will continue to be affected by changes in the fair value
of our potted vegetable produce. For more information about the valuation methods
applied in valuing our potted vegetable produce, please refer to the paragraph headed
‘‘Valuation of biological assets’’ in this section of the prospectus.
Seasonality
During the Track Record Period, we exper ienced seasonality fluctuations in the
cultivation of our potted vegetable produce due to weather conditions. As we rely on
natural heat and light sources in the regulation of our greenhouse climate, our cultivation
volume decreased during colder seasons as the temperature inside our greenhouses is lower
and the illumination inside our greenhouses decr eases with the shorter length of insolation
duration during colder seasons, which in turn leads to slower maturation and longer growth
cycles of our potted vegetable produce in colder seasons. For further details of our
seasonality fluctuations, please refer to the p aragraph headed ‘‘Business — Distribution and
sales network — Seasonality’’ in this prospectus.
MATERIAL ACCOUNTING POLICY INFORMATION, CRITICAL JUDGEMENT AND
KEY ESTIMATES
We have identified material accounting policy information, critical judgement and key
estimates that are relevant to the preparation of our consolidated financial statements and
important for an understanding of our financ ial position and results of operation.
Our material accounting policy information are set out in note 4 to the Accountants’
Report as set out in Appendix I to this prospectus, which are important for understanding
our financial condition and results of operation.
Certain critical judgement and key estimates, which are continually evaluated and are
based on historical experience and other factors, including expectation of future events that
are believed to be reasonable under the circumstances, are discussed in note 5 to the
Accountants’ Report as set out in Appendix I to this prospectus.
FINANCIAL INFORMATION
–3 1 2–


--- page 322 ---
R E S U L T SO FO P E R A T I O N S
The following table sets forth selected items of our consolidated statements of profit or loss and other comprehensive income
for the periods indicated:
Year ended 31 December Nine months ended 30 September
2020 2021 2022 2022 2023
Results
before
biological
assets fair
value
adjustments
Biological
assets fair
value
adjustments Total
Results
before
biological
assets fair
value
adjustments
Biological
assets fair
value
adjustments Total
Results
before
biological
assets fair
value
adjustments
Biological
assets fair
value
adjustments Total
Results
before
biological
assets fair
value
adjustments
Biological
assets fair
value
adjustments Total
Results
before
biological
assets fair
value
adjustments
Biological
assets fair
value
adjustments Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB ’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(Unaudited) (Unaudited) (Unaudited)
Revenue 121,405 — 121,405 154,946 — 154,946 126,694 — 126,694 88,626 — 88,626 121,294 — 121,294
Cost of sales (65,828) (2,119) (67,947) (85,999) (3,174) (89,173) (70,80 4) (3,351) (74,155) (49,920) (3,351) (53,271) (66,785) (2,532) (69,317)
Gross profit 55,577 (2,119) 53,458 68,947 (3,174) 65,773 55,890 (3,3 51) 52,539 38,706 (3,351) 35,355 54,509 (2,532) 51,977
Other income 4,590 — 4,590 1,222 — 1,222 887 — 887 672 — 672 718 — 718
Changes in fair value of biological assets — 3,174 3,174 — 3, 351 3,351 — (2,053) (2,053) — (1,570) (1,570) — 3,299 3,299
(Allowance)/reversal of allowance for expected
credit losses (‘‘ECL’’) of trade receivables (118) — (118) (140) — (140) (160) — (160) (10) — (10) 61 — 61
Listing expenses (4,060) — (4,060) (7,625) — (7,625) (5,727) — (5,727) (4,315) — (4,315) (6,016) — (6,016)
Selling and distribution expenses (500) — (500) (457) — (457) (420) — (420) (307) — (307) (241) — (241)
Administrative and other expenses (11,583) — (11,583) (13,924) — (13,924) (12,354) — (12,354) (9,436) — (9,436) (8,019) — (8,019)
Profit from operation 43,906 1,055 44,961 48,023 177 48,200 38,116 (5,404) 32,712 25,310 (4,921) 20,389 41,012 767 41,779
Finance costs (1,183) — (1,183) (897) — (897) (900) — (900) (688) — (688) (662) — (662)
Profit before tax 42,723 1,055 43,778 47,126 177 47,303 37,216 (5,404) 31,812 24,622 (4,921) 19,701 40,350 767 41,117
Income tax expense ———————————————
Profit for the year/period 42,723 1,055 43,778 47,126 177 47,303 37,216 (5,404) 31,812 24,622 (4,921) 19,701 40,350 767 41,117
Other comprehensive (l oss)/income for the
year/period, net of tax:
Item that may be reclassified to profit or
loss:
Exchange differences on translating
foreign operations (1) — (1) 1 — 1 (3) — (3) (5) — (5) (6) — (6)
Total comprehensive income for the year/period 42,722 1,055 43,777 47,127 177 47,304 37,213 (5,404) 31,809 24,617 (4,921) 19,696 40,344 767 41,111
Earnings per share (RMB)
Basic and diluted 0.110 .120 .080 .050 .10
FINANCIAL INFORMATION
–3 1 3–


--- page 323 ---
D E S C R I P T I O NO FS E L E C T E DS T A T E M E N T SO FP R O F I TO RL O S SI T E M S
Revenue
During the Track Record Period, we derived all of our revenue from the sales of our
potted vegetable produce, and approximately 87.1%, 91.2%, 90.3%, 90.4% and 91.6% of
our revenue was derived from the sales of our potted vegetable produce in Shandong
province during FY2020, FY2021, FY 2022, 9M2022 and 9M2023, respectively.
The sales revenue of our potted vegetable produce was affected by both the sales
volume and selling price of our potted vegetab le produce in the corr esponding periods.
During the Track Record Period, we sold our potted vegetable produce primarily through a
network of distributors in the PRC, which is consistent with industry practice. Our
distributors then on-sold our products to over 1,000 end-user customers in Shandong,
Liaoning and Shaanxi provinces in the PRC, the majority of which are hotels and
restaurants. To a lesser-extent, we also sold our products to end-user customers through
WeMall. The following table sets forth a breakdown of our sales volume and average selling
price by sales channels during the Track Record Period:
Year ended 31 December Nine months ended 30 September
2020 2021 2022 2022 2023
Sales
volume
Average
selling
price
Sales
volume
Average
selling
price
Sales
volume
Average
selling
price
Sales
volume
Average
selling
price
Sales
volume
Average
selling
price
(’000 pots) (RMB) (’000 pots) (RMB) (’000 pots ) (RMB) (’000 pots) (RMB) (’000 pots) (RMB)
(Note) (Note) (Note) (Note) (Note)
(unaudited)
Potted vegetable produce
Sales to distributors 8,004 15.1 10, 273 15.1 8,395 15.1 5,873 15.1 8,044 15.1
Direct sales to end-user
customers 18 20.5 —* 20.0 —* 19.7 —* 19.9 —* 20.2
Total/overall 8,022 15.1 10,273 15.1 8,395 15.1 5,873 15.1 8,044 15.1
Note: Average selling price represents total revenue div ided by sales volume during the respective period.
* The total sales volume attributable to direct sa les to end-user customers in FY2021, FY2022, 9M2022
and 9M2023 represents the online sales to end-user customers of approximately 400 pots, 100 pots, 100
pots and 100 pots, respectively.
FINANCIAL INFORMATION
–3 1 4–


--- page 324 ---
Our revenue increased from approximately RMB121.4 million in FY2020 to
approximately RMB154.9 million in FY2021. Such increase in our revenue in the said
period was primarily attributable to the increase in the sales volume of our potted vegetable
produce from approximately 8.0 million pots in FY2020 to approximately 10.3 million pots
in FY2021 due to (i) the deployment of 40 enha nced greenhouses in our Laixi Facility in
July 2020 and August 2020 leading to an increase in our productivity; and (ii) the increase in
popularity of our potted vegetable produce in the corresponding period. On the other hand,
the average selling price per pot of our potted vegetable produce remained to be stable at
approximately RMB15.1 in FY2020 and FY2021.
Our revenue decreased from approxi mately RMB154.9 million in FY2021 to
approximately RMB126.7 million in FY2022. Su ch decrease in revenue in the said period
was primarily attributable to the decrease in the sales volume of our potted vegetable
produce from approximately 10.3 million pots i n FY2021 to approximately 8.4 million pots
in FY2022 due to the resurgence of COVID-19 cases in Shandong province between March
2022 to April 2022 which had led to a temporary suspension of business activities of our
Laixi Facility during the lockdown period. The said incident led to the direct loss of
approximately 549,000 unsellable pots of our vegetable produce, the estimated cost of
which was approximately RMB4.5 million. It is estimated that it led to a loss of potential
sales revenue of approximately RMB8.2 million based on the average selling price of our
potted vegetable produce in Shandong province of approximately RMB15.0 per pot in
FY2022.
Our revenue increased from approximately RMB88.6 million in 9M2022 to
approximately RMB121.3 million in 9M2023. Such increase in revenue in the said period
was primarily attributable to the increase in the sales volume of our potted vegetable
produce from approximately 5.9 million pots in 9M2022 to approximately 8.0 million pots
in 9M2023 as our business operation was no longer affected by COVID-19 epidemic in
9M2023. On the other hand, the average selling price per pot of our potted vegetable
produce remained to be stable at approximately RMB15.1 in 9M2022 and 9M2023. We
maintain long-term relationships with our 12 distributors, which maintain stable
relationships with our end-user customers, unlike the general wholesale market for
vegetable products with a vast number of different producers and purchasers. Any price
volatility of our potted veget able produce poses many un certainties for customers,
particularly hotels and restaurants, in terms of cost control and operational management.
Besides, the COVID-19 epidemic lasted from 2020 to 2022, which created uncertainties over
the market and business environment. Accordingly, we decided to maintain a stable selling
price of our products during the Track Record Period.
FINANCIAL INFORMATION
–3 1 5–


--- page 325 ---
The following table sets forth our revenue generated by sales channel of our operations
for the periods indicated:
Year ended 31 December Nine months ended 30 September
2020 2021 2022 2022 2023
RMB’000
%o f
total
revenue RMB’000
%o f
total
revenue RMB’000
%o f
total
revenue RMB’000
%o f
total
revenue RMB’000
%o f
total
revenue
(unaudited)
Sales to distributors 121,028 99.7 154,937 100.0 126,692 100.0 88,624 100.0 121,292 100.0
Direct sales to end-user
customers (Note) 377 0.3 9 —* 2 —* 2 —* 2 —*
Total 121,405 100.0 154,946 100.0 126,694 100.0 88,626 100.0 121,294 100.0
Note: Total revenue attributable to direct sales to end-user customers in each of FY2020, FY2021,
FY2022 and 9M2023 includes revenue attributable to the online sales to end-user customers of
approximately RMB8,000, RMB9,000, RMB 2,000 and RMB2,000, respectively.
* represents percentage ratio of less than 0.1%.
The following table sets forth our revenue generated by geographical location of our
customers for the periods indicated:
Year ended 31 December Nine months ended 30 September
2020 2021 2022 2022 2023
RMB’000
%o f
total
revenue RMB’000
%o f
total
revenue RMB’000
%o f
total
revenue RMB’000
%o f
total
revenue RMB’000
%o f
total
revenue
(unaudited)
Shandong province
Qingdao 74,787 61.6 99,547 64.3 81,911 64.6 57,322 64.7 79,601 65.7
Yantai 24,496 20.2 32,726 21.1 26,966 21.3 18,735 21.1 27,429 22.6
Weifang 6,454 5.3 9,018 5.8 5,591 4.4 4,070 4.6 4,028 3.3
Shaanxi province
Xi’an 8,704 7.2 6,206 4.0 5,316 4.2 3,932 4.4 4,517 3.7
Liaoning province
Dalian 6,964 5.7 7,449 4.8 6,910 5.5 4,567 5.2 5,719 4.7
121,405 100.0 154,946 100.0 126,694 100.0 88,626 100.0 121,294 100.0
During the Track Record Period, we sold our products primarily to distributors
located in Shandong province where we derived approximately 87.1%, 91.2%, 90.3% and
91.6% of our revenue during FY2020, FY2021, FY2022 and 9M2023, respectively. In 2019,
we extended our geographical coverage b y commencing sales of our potted vegetable
produce in Xi’an, Shaanxi province and Dalian, Liaoning province.
FINANCIAL INFORMATION
–3 1 6–


--- page 326 ---
Our revenue attributable to our sales in Shandong province increased by
approximately RMB35.6 million from approximately RMB105.7 million in FY2020 to
approximately RMB141.3 million in FY2021. Suc h increase was principally attributable to
(i) the deployment of 40 enhanced greenhouses in our Laixi Facility in July 2020 and August
2020 leading to an increase in our productivity; and (ii) the increase in popularity of our
potted vegetable produce. The overall increase in revenue from approximately RMB121.4
million to approximately RMB154.9 million was partially offset by the decrease in
cultivation volume resulting from (i) the wear and tear of three enhanced greenhouses in our
Xi’an Facility; and (ii) the loss of unsold potte d vegetable produce and the potential sales
revenue during the lockdown of our Xi’an Fac ility as a result of the outbreak of COVID-19
epidemic in Xi’an in December 2021 and thus sales in Shaanxi province decreased by
approximately RMB2.5 million.
Our revenue attributable to our sales in Shandong province decreased by
approximately RMB26.8 million from approximately RMB141.3 million in FY2021 to
approximately RMB114.5 millio n in FY2022. Such decrease was principally attributable to
(i) the decrease in sales in Qingdao by approx imately RMB17.6 million, and (ii) the decrease
in sales in Yantai by approximately RMB5. 8 million, and (iii) the decrease in sales in
Weifang by approximately RMB3.4 million resulting from the temporary suspension of
business activities of our Laixi Facility caused by the lockdown measures as a result of the
resurgence of COVID-19 cases in Shandong p rovince between March 2022 to April 2022.
The overall decrease in revenue by RMB 28.2 million from approximately RMB154.9
million in FY2021 to approximately RMB1 26.7 million in FY2022 was principally
attributable to the decrease in sales of our potted vegetable produce in Shandong
province from approximatel y RMB141.3 million in FY2021 to approximately RMB114.5
million in FY2022 for the above reasons.
Our revenue attributable to our sales in Shandong province increased by
approximately RMB31.0 million from appr oximately RMB80.1 million in 9M2022 to
approximately RMB111.1 million in 9M2023. Suc h increase was principally attributable to
(i) the increase in sales in Qingdao by approximately RMB22.3 million, and (ii) the increase
in sales in Yantai by approximately RMB8. 7 million as our business operation was no
longer affected by COVID-19 epidemic in 9M2023. The overall increase in revenue by
RMB32.7 million from approximately RMB88 .6 million in 9M2022 to approximately
RMB121.3 million in 9M2023 was principally attributable to the increase in sales of our
potted vegetable produce in Shandong provi nce from approximately RMB80.1 million in
9M2022 to approximately RMB111.1 mil lion in 9M2023 for the above reasons.
Cost of sales
Our cost of sales primarily consists of raw materials, labour and cultivation overheads.
Our raw materials primarily include (i) componen ts of organic substrates; (ii) seeds; and (iii)
fertilisers (such as foliar fertilisers) and biope sticides (such as matrine). Our labour cost
represents subcontracting labour cost. Cultivation overheads primarily represent
depreciation of property, plant and equipment , depreciation of right-of-use assets, utility
expenses and other cultivation related cost. In addition, the cost of unsold vegetable
produce (other than those arising from the temporary suspension of our Laixi Facility and
FINANCIAL INFORMATION
–3 1 7–


--- page 327 ---
Dalian Facility from March 2022 to April 2022) during the Track Record Period was
charged to the cost of sales in the consolidated statements of profit or loss and other
comprehensive income of the Group in the relevant periods.
The following table sets forth a breakdown of our cost of sales for the periods
indicated:
Year ended 31 December Nine months ended 30 September
2020 2021 2022 2022 2023
RMB’000
%o fc o s t
of sales RMB’000
%o fc o s t
of sales RMB’000
%o fc o s t
of sales RMB’000
%o fc o s t
of sales RMB’000
%o fc o s t
of sales
(unaudited)
Raw materials
Components of organic
substrates 31,267 46.0 40,100 45.0 3 2,727 44.1 22,920 43.0 31,258 45.1
Seeds 1,265 1.9 1,549 1.7 1,386 1.9 1,013 1.9 988 1.4
Fertilisers and biopesticides 834 1.2 1,069 1.2 873 1.2 612 1.1 834 1.2
33,366 49.1 42,718 47.9 34,986 47.2 24,545 46.0 33,080 47.7
Subcontracting labour cost 28,285 41.6 37,168 41.7 30,315 40.9 21,238 39.9 28,999 41.8
Cultivation overheads 4,177 6.2 6,113 6.8 5,503 7.4 4,137 7.8 4,706 6.8
Biological assets fair value
adjustments 2,119 3.1 3,174 3.6 3,351 4.5 3,351 6.3 2,532 3.7
Total 67,947 100.0 89,173 100.0 74,155 100.0 53,271 100.0 69,317 100.0
In FY2020, FY2021, FY2022, 9M2022 and 9M2023, our cost of sales was
approximately RMB67.9 million, RMB89. 2 million, RMB74.2 million, RMB53.3 million
and RMB69.3 million, representing approximately 56.0%, 57.6%, 58.5%, 60.1% and
57.1%, respectively, of our revenue from operations for the same periods. The change in our
cost of sales during the Track Record Period was in line with the change in our sales volume
in the respective period.
The cost of raw materials was the largest component of our cost of sales and accounted
for approximately 49.1%, 47.9%, 47.2%, 46.0% and 47.7% of the total cost of sales in
FY2020, FY2021, FY2022, 9M2022 and 9M2023, respectively. The increase in our cost of
raw materials from FY2020 to FY2021 was in lin e with the increase in our sales volume in
the corresponding period. Further, the decrease in our cost of raw materials from FY2021
to FY2022 was in line with the decrease in our sales volume in the corresponding period.
Further, the increase in our cost of raw materials from 9M2022 to 9M2023 was in line with
the increase in our sales volume in the corresponding period. During the Track Record
Period, components of organic substrates and seeds were the two largest components of our
cost of raw materials. In FY2020, FY2021, FY2022, 9M2022 and 9M2023, components of
organic substrates accounted for approximately 46.0%, 45.0%, 44.1%, 43.0% and 45.1% of
our total cost of sales whereas seeds accounted for approximately 1.9%, 1.7%, 1.9%, 1.9%,
and 1.4% of our total cost of sales, respectiv ely. The subcontractor labour cost was the
second largest component of our cost of sales and accounted for approximately 41.6%,
41.7%, 40.9%, 39.9% and 41.8% of our total cost of sales in FY2020, FY2021, FY2022,
9M2022 and 9M2023, respectively.
FINANCIAL INFORMATION
–3 1 8–


--- page 328 ---
Our subcontractor labour cost increased by approximately 31.4% from approximately
RMB28.3 million in FY2020 to approximately R MB37.2 million in FY2021 mainly because
our sales volume increased by approximately 28.1% from approximately 8.0 million pots in
FY2020 to approximately 10.3 million pots in FY2021.
Our subcontractor labour cost decreased by approximately 18.4% from approximately
RMB37.2 million in FY2021 to approximately R MB30.3 million in FY2022 mainly because
our sales volume decreased by approximately 18.3% from approximately 10.3 million pots
in FY2021 to approximately 8.4 million pots in FY2022.
Our subcontractor labour cost increased by approximately 36.5% from approximately
RMB21.2 million in 9M2022 to approximately RMB29.0 million in 9M2023 mainly because
our sales volume increased by approximately 37.0% from approximately 5.9 million pots in
9M2022 to approximately 8.0 million pots in 9M2023.
The following table sets forth the sensitivi ty analysis on the impact of hypothetical
fluctuations on (i) labour cost; and (ii) cost of raw materials on our net profit for the Track
Record Period, assuming all other factors affecting our profit margin remain unchanged:
(1) Hypothetical fluctuation on labour cost
Increase/
decrease
by 10%
Increase/
decrease
by 15%
Increase/
decrease
by 20%
Change in net profit (RMB’000)
FY2020 2,829 4,243 5,657
FY2021 3,717 5,576 7,434
FY2022 3,032 4,547 6,063
9M2022 2,124 3,186 4,248
9M2023 2,900 4,350 5,800
(2) Hypothetical fluctuation on cost of raw materials
Increase/
decrease
by 10%
Increase/
decrease
by 15%
Increase/
decrease
by 20%
Change in net profit (RMB’000)
FY2020 3,337 5,005 6,673
FY2021 4,272 6,408 8,544
FY2022 3,499 5,248 6,997
9M2022 2,455 3,682 4,909
9M2023 3,308 4,962 6,616
FINANCIAL INFORMATION
–3 1 9–


--- page 329 ---
Gross profit
Our gross profit increased by approximately RMB12.3 million (or 23.0%) from
approximately RMB53.5 million in FY2020 to approximately RMB65.8 million in FY2021.
Such increase was primarily the result of the increase in our revenue by approximately
RMB33.5 million (or 27.6%) in the corresponding period, mainly attributable to the
increase in the sales volume of our potted vegetable produce.
Our gross profit decreased by approximately RMB13.3 million (or 20.2%) from
approximately RMB65.8 million in FY2021 t o approximately RMB52.5 million in FY2022.
Such decrease was primarily the result of the decrease in our revenue by approximately
RMB28.3 million (or 18.2%) in the corresponding period, mainly attributable to the
decrease in the sales volume of our potted vegetable produce due to lockdown measures in
light of COVID-19 epidemic. The COVID-19 ep idemic had led to a temporary drop of our
Group’s revenue in FY2022. For details, pleas e refer to the paragraph headed ‘‘Business —
Impact of the outbreak of COVID-19 epidemic’’ in this prospectus.
Our gross profit increased by approximately RMB16.6 million (or 47.0%) from
approximately RMB35.4 million in 9M2022 to approximately RMB52.0 million in 9M2023.
Such increase was primarily the result of the increase in our revenue by approximately
RMB32.7 million (or 36.9%) in the corresponding period, mainly attributable to the
increase in the sales volume of our potted vegetable produce.
Other income
Other income consists of (i) interest income; (ii) rental income; (iii) government grants;
and (iv) compensation received. The following table sets forth our other income for the
periods indicated:
Year ended 31 December
Nine months ended 30
September
2020 2021 2022 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(unaudited)
Interest income 19 8 17 17 44
Rental income 640 640 640 480 480
Net foreign exchange gains — — 3 5 6
Government grants 3,627 544 227 170 170
Compensation received 304 30 — — 18
Total 4,590 1,222 887 672 718
In FY2020, FY2021, FY2022, 9M2022 and 9M 2023, our other income amounted to
approximately RMB4.6 million, RMB1.2 million, RMB0.9 million, RMB0.7 million and
RMB0.7 million, respectively.
FINANCIAL INFORMATION
–3 2 0–


--- page 330 ---
Rental income represents mainly the rental income derived from renting our cold
storage at Dianbu Town, Laixi and a portion of the self-owned land in our Laixi Facility to
Independent Third Parties. For details, please refer to the paragraph headed ‘‘Business —
Properties — Owned properties’’ in this prospectus.
Government grants represent subsidies from relevant government authorities of
approximately RMB3.6 million, RMB0.5 m illion, RMB0.2 million and RMB0.2 million
during the Track Record Period in relation to, among others, agricultural development and
supporting the listing of local enterprises provided by the Municipal Government of Laixi
of RMB3.0 million in FY2020.
Compensation received mainly represents the compensation paid by our insurance
company covering our losses resulted from the heavy hail which took place in Qingdao in
May 2020 and a fire incident in January 2021.
Changes in fair value of biological assets less cost to sell
Our biological assets consist of potted vegetable produce held by us and stated at fair
value less estimated cost to sell as at the end of reporting period. During the Track Record
Period, the fair value of our biological assets we re assessed at each reporting date by Savills,
our independent valuer. The resultant gain or loss arising from the changes in the fair value
adjustment between each reporting period are recognised in our consolidated statements of
profit or loss.
In FY2020, we recorded a gain arising from the changes in fair value of biological
assets less cost to sell of approximately RMB3.2 million. The gain represents the difference
between the fair value of the biological assets an d the original cost of the biological assets as
at 31 December 2020.
In FY2021, we recorded a gain arising from changes in fair value of biological assets
less cost to sell of approximately RMB3.4 m illion. The gain represents the difference
between the fair value of the biological assets an d the original cost of the biological assets as
at 31 December 2021.
In FY2022, we recorded a loss from changes in fair value of biological assets less cost
to sell of approximately RMB2.1 million. In FY2022, our changes in fair value of biological
assets included the unsold vegetable produce of approximately RMB4.6 million as a result
of the temporary suspension of our facilitie s due to the outbreak of COVID-19 epidemic
from March 2022 to April 2022. Most of the unsold potted vegetable produce from our
Laixi Facility was donated to the government for the distributi on to the local residents for
their consumption during the lockdown period of the COVID-19 epidemic in FY2022. For
details, please refer to the paragraph headed ‘‘Business — Impact of the outbreak of
COVID-19 epidemic’’ in this prospectus. T he remaining gain of approximately RMB2.5
million represents the difference between the fair value of the biological assets and the
original cost of the biological assets as at 31 December 2022.
In 9M2022, we recorded a loss from changes in fair value of biological assets less cost
to sell of approximately RMB1.6 million. In 9M 2022, our changes in fair value of biological
assets included the unsold vegetable produce of approximately RMB4.6 million as a result
of the temporary suspension of our facilitie s due to the outbreak of COVID-19 epidemic
FINANCIAL INFORMATION
–3 2 1–


--- page 331 ---
from March 2022 to April 2022. The remain ing gain of approximately RMB3.0 million
represents the difference between the fair val ue of the biological assets and the original cost
of the biological assets as at 30 September 2022.
In 9M2023, we recorded a gain from changes in fair value of biological assets less cost
to sell of approximately RMB3.3 million. The gain represents the difference between the fair
value of the biological assets and the original cost of the biological assets as at 30 September
2023.
For more information about the valuation method adopted by Savills, please refer to
the paragraph headed ‘‘Valuation of biological assets’’ in this section of the prospectus.
Allowance/Reversal of allowance for expected credit losses (‘‘ECL’’) of trade receivables
Our allowance for ECL mainly represents the loss allowance of our trade receivables,
net of reversal. We use provision matrix to calculate ECL of our trade receivables. The
provision rates used in the provision matrix are based on our internal credit ratings as
grouping of various debtors that have similar loss patterns. The provision matrix is based
on our historical default rates taking into con sideration forward-looking information that
is reasonable and supportable available without undue cost or effort. The provision of ECL
is sensitive to changes in estimates.
In FY2020, FY2021, FY2022, 9M2022 and 9M2023, we recorded an allowance for
ECL of trade receivables of a pproximately RMB0.1 million, RMB0.1 million, RMB0.2
million, RMB0.01 million and a reversal of allowance for ECL of trade receivables of
approximately RMB0.1 million, respectively.
Selling and distribution expenses
Selling and distribution expenses consist of salary, depreciation, office expenses,
advertising fees, motor vehicle se x p e n s e sa n do t h e re x p e n s e s .
The following table sets forth a breakdown of our selling and distribution expenses of
our operations for the periods indicated:
Y e a re n d e d3 1D e c e m b e r N i n em o n t h se n d e d3 0S e p t e m b e r
2020 2021 2022 2022 2023
RMB’000
% of total
selling and
distribution
expenses RMB’000
%o ft o t a l
selling and
distribution
expenses RMB’000
%o ft o t a l
selling and
distribution
expenses RMB’000
% of total
selling and
distribution
expenses RMB’000
% of total
selling and
distribution
expenses
(unaudited)
Salary 237 47.5 234 51.2 221 52.6 168 54.7 106 44.0
Depreciation 139 27.7 162 35.4 182 43.3 137 44.7 132 54.8
Office expenses 1 0.2 15 3.3 14 3.3 1 0.3 1 0.4
Advertising fees 12 2.4 8 1.8 — — — — 1 0.4
Motor vehicles expenses 54 10.7 28 6.1 — — — — — —
Other expenses 57 11.5 10 2.2 3 0.8 1 0.3 1 0.4
Total 500 100.0 457 100.0 420 100.0 307 100.0 241 100.0
FINANCIAL INFORMATION
–3 2 2–


--- page 332 ---
In FY2020, FY2021, FY2022, 9M2022 and 9M2023, our selling and distribution
expenses amounted to approximately RMB 0.5 million, RMB0.5 million, RMB0.4 million,
RMB0.3 million and RMB0.2 million, respectively. As a percentage of total revenue, our
selling and distribution expenses accounted for approximately 0.4%, 0.3%, 0.3%, 0.3% and
0.2% in FY2020, FY2021, FY2022, 9M2022 and 9M2023, respectively. During FY2020,
FY2021 and FY2022, salary was the largest component of our selling and distribution
expenses, which mainly represents the salary payment to our salesmen.
Administrative and other expenses
Administrative and other expenses consist of salary, legal, professional and auditing
fees, depreciation of property, plant and equipment, depreciation of investment properties,
depreciation of right-of-use a ssets, entertainment and trave lling expenses, write-off of
property, plant and equipment and other expenses.
The following table sets forth a breakdown of our administrative and other expenses of
our operations for the periods indicated:
Year ended 31 December Nine months ended 30 September
2020 2021 2022 2022 2023
RMB’000
% of total
administrative
and other
expenses RMB’000
%o ft o t a l
administrative
and other
expenses RMB’000
% of total
administrative
and other
expenses RMB’000
%o ft o t a l
administrative
and other
expenses RMB’000
%o ft o t a l
administrative
and other
expenses
(unaudited)
Salary 2,492 21.5 2,596 18.7 2,502 20.3 1,866 19.8 1,693 21.1
Legal, professional and
auditing fees 259 2.2 1,252 9.0 1,312 10.6 1,073 11.4 831 10.4
Depreciation of property, plant
and equipment 3,762 32.5 3,900 28.0 4,363 35.3 3,282 34.8 3,239 40.4
Depreciation of investment
properties 295 2.6 295 2.1 295 2.4 221 2.3 391 4.9
Depreciation of right-of-use
assets 464 4.0 493 3.5 496 4.0 372 3.9 348 4.3
Entertainment and travelling
expenses 879 7.6 831 6.0 404 3.3 296 3.1 240 3.0
Loss on disposal of property,
plant and equipment — — — — 214 1.7 214 2.3 — —
Loss on write-off of property,
plant and equipment — — 33 0.2 382 3.1 382 4.0 — —
Other expenses 3,432 29.6 4,524 32.5 2,386 19.3 1,730 18.4 1,277 15.9
Total 11,583 100.0 13,924 100.0 12,354 100.0 9,436 100.0 8,019 100.0
In FY2020, FY2021, FY2022, 9M2022 and 9M2023, our administrative and other
expenses amounted to approximately RMB11.6 million, RMB13.9 million, RMB12.4
million, RMB9.4 million and RMB8.0 million, respectively. As a percentage of total
revenue, our administrative and other expenses accounted for approximately 9.5%, 9.0%,
9.8%, 10.6% and 6.6% in FY2020, FY2021, FY2022, 9M2022 and 9M2023, respectively.
Depreciation expenses accounted for the largest component of our administrative and other
expenses during the Track Record Period. The other expenses include, among others, motor
vehicles expenses, repair and maintenance fees and sundry expenses.
FINANCIAL INFORMATION
–3 2 3–


--- page 333 ---
Listing expenses
Listing expenses amounted to approx imately RMB5.3 million, RMB4.1 million,
RMB7.6 million, RMB5.7 million, RMB4.3 million and RMB6.0 million for the period
before the Track Record Period, FY2020, FY2021, FY2022, 9M2022 and 9M2023,
respectively. The change in our Listing expenses during the Track Record Period is in line
with the phase of work of the professional parties engaged for the purpose of our
application for Listing in the corresponding periods.
Finance cost
Our finance cost represents interest on ba nk borrowings and lease liabilities. Our
finance cost decreased from approximately RMB1.2 million in FY2020 to approximately
RMB0.9 million in FY2021 since we obtained ban k loans with more favourable terms. The
effective interest rates of our bank borrowings as at 1 January 2020 was relatively high at
6.09% per annum, which were later replaced by bank borrowings with lower effective
interest rates ranging from 3.85% per annum to 4.55% per annum during FY2020.
Meanwhile, the effective interest rates of our bank borrowings throughout FY2021 ranged
from 3.95% per annum to 4.55% per annum. In FY2022, our finance cost remained to be
stable at approximately RMB0.9 million. The effective interest rates of our bank
borrowings throughout FY2022 ranged from 3.75% per annum to 4.55% per annum. In
9M2022 and 9M2023, our finance cost remained to be stable at approximately RMB0.7
million and RMB0.7 million. The effective interest rates of our bank borrowings
throughout 9M2023 ranged from 3.45% per annum to 4.40% per annum.
Income tax expense
We are not subject to taxation in the Cayman Islands and the British Virgin Islands.
No provision for Hong Kong Profits Tax is required since we have no assessable profits in
Hong Kong during the Track Record Period.
Our income tax expense remained nil during the Track Record Period. Our effective
tax rate remained nil for the same period. According to the Article 27 of the EIT Law and
Article 86 of the Regulations of Enterprise Income Tax Law, enterprise income from
agriculture, forestry, husbandry and fishery projects may be reduced or exempted from
taxation. Pursuant to the abovementioned provisions and with the approval of Dianbu
Branch of the State Taxation Bu reau of Laixi City, Fujing Agric ulture’s enterprise income
from agriculture has been exempted from taxation for the period from 1 May 2010 to 1 May
2050. For details, please refer to the paragraph headed ‘‘Regulatory Overview — Laws and
regulations relating to taxation’’ in this prospectus.
Our Directors confirmed that, during the Track Record Period and up to the Latest
Practicable Date, we did not have any dispute or unresolved tax issue with any tax
authority.
FINANCIAL INFORMATION
–3 2 4–


--- page 334 ---
Profit for the year
As a result of the foregoing, our net profit i ncreased by approximately RMB3.5 million
(or 8.0%) from approximately RMB43.8 m illion in FY2020 to approximately RMB47.3
million in FY2021. Meanwhile, our net profit d ecreased by approximately RMB15.5 million
(or 32.8%) from approximately RMB47.3 m illion in FY2021 to approximately RMB31.8
million in FY2022 mainly due to the series of lockdown measures in Dalian and various
areas in Shandong province due to the COVID-19 epidemic in 2022 which had a temporary
adverse impact on our business in FY2022 as discussed above and in the paragraph headed
‘‘Business — Impact of the outbreak of COVID-19 epidemic’’ in this prospectus.
Meanwhile, our net profit increased by approximately RMB21.4 million (or 108.7%)
from approximately RMB19.7 million in 9M2022 to approximately RMB41.1 million in
9M2023, which was primarily attributable to the increase in the sales volume of our potted
vegetable produce as our business operation was no longer affected by COVID-19 epidemic
in 9M2023.
PERIOD TO PERIOD COMPARISON OF OUR RESULTS OF OPERATIONS
9M2022 compared to 9M2023
Revenue
Please refer to the paragraph headed ‘‘Descr iption of selected statements of profit or
loss items — revenue’’ in this section of the prospectus for the description of changes in
revenue of our Group in 9M2022 and 9M2023.
Cost of sales
Please refer to the paragraph headed ‘‘Descr iption of selected statements of profit or
loss items — Cost of sales’’ in this section of the prospectus for the description of changes in
cost of sales of our Group in 9M2022 and 9M2023.
Gross profit and gross profit margin
Please refer to the paragraphs headed ‘‘Description of selected statements of profit or
loss items — Gross profit’’ and ‘‘Financial Information — Key Financial Ratios — Gross
profit margin’’ in this section of the prospectus for the description of changes in gross profit
and gross profit margin of our Group in 9M2022 and 9M2023.
Other income
Our other income remained to be stab le at approximately RMB0.7 million and
RMB0.7 million in 9M2022 and 9M2023, respectively.
Allowance/Reversal of allowance for ECL
Our allowance for ECL of trade receivables remained to be minimal at approximately
RMB10,000 in 9M2022 and we have a reversal of allowance for ECL of trade receivables of
approximately RMB0.1 million in 9M2023, respectively.
FINANCIAL INFORMATION
–3 2 5–


--- page 335 ---
Selling and distribution expenses
O u rs e l l i n ga n dd i s t r i b u t i o ne x p e n s e sr e m a i n e dt ob er e l a t i v e l ys t a b l ea ta p p r o x i m a t e l y
RMB0.3 million in 9M2022 and approximately RMB0.2 million in 9M2023.
Administrative and other expenses
Our administrative and other expenses decreased by approximately RMB1.4 million
(or 15.0%) from approximately RMB9.4 million in 9M2022 to approximately RMB8.0
million in 9M2023. Such decrease was primarily attributable to (i) the loss on write-off of
property, plant and equipment of approximately RMB0.4 million in 9M2022; and (ii) the
decrease in other expenses by approximately RMB0.5 million (or 26.2%) in 9M2023.
Finance costs
Our finance costs remained to be stable at approximately RMB0.7 million and
RMB0.7 million in 9M2022 and 9M2023, respectively.
Income tax expense
Our income tax expense remained to be nil and nil in 9M2022 and 9M2023,
respectively. Our effective tax rate remain ed to be nil and nil for the same period. Please
refer to the paragraph headed ‘‘Description of selected statements of profit or loss items —
Income tax expense’’ in this section of the prospectus for the description of tax exemptions
granted to us due to the nature of our business.
Profit for the period
Our profit for the period increased by ap proximately RMB21.4 million (or 108.7%)
from approximately RMB19.7 million in 9M2022 to approximately RMB41.1 million in
9M2023, which mainly resulted from (i) the increase in our revenue by approximately
RMB32.7 million (or 36.9%) from 9M2022 to 9M2 023 mainly attributab le to the increase in
our sales volume of our potted vegetable produce as our business operation was no longer
affected by COVID-19 epidemic in 9M2023. Our revenue and sales volume for 9M2022 was
significantly lower due to the temporary suspension of our Laixi Facility and Dalian
Facility as a result of the resurgence of COVID -19 cases and the lockdown measures during
March 2022 and April 2022. Meanwhile, our net profit margin increased from
approximately 22.2% in 9M2022 to approximately 33.9% in 9M2023 as our business
operation was no longer affected by COVID-19 epidemic in 9M2023.
FY2022 compared to FY2021
Revenue
Please refer to the paragraph headed ‘‘Descr iption of selected statements of profit or
loss items — Revenue’’ in this section of the prospectus for the description of changes in
r e v e n u eo fo u rG r o u pi nF Y 2 0 2 1a n dF Y 2 0 2 2 .
FINANCIAL INFORMATION
–3 2 6–


--- page 336 ---
Cost of sales
Please refer to the paragraph headed ‘‘Descr iption of selected statements of profit or
loss items — Cost of sales’’ in this section of the prospectus for the description of changes in
cost of sales of our Group in FY2021 and FY2022.
Gross profit and gross profit margin
Please refer to the paragraph headed ‘‘Descr iption of selected statements of profit or
loss items — Gross profit’’ and ‘‘Key Finan cial Ratios — Gross profit margin’’ in this
section of the prospectus for the description of changes in gross profit and gross profit
margin of our Group in FY2021 and FY2022.
Other income
Our other income decreased by approxi mately RMB0.3 million (or 27.4%) from
approximately RMB1.2 million in FY2021 to approximately RMB0.9 million in FY2022.
Such decrease was primarily attributable to the decrease in government grants by
approximately RMB0.3 million (or 58.3%), a majority of which was granted in FY2021
on one-off basis being subsidy provided by the Municipal Government of Laixi for
supporting the listing of local enterprises.
Allowance for ECL
Our allowance for ECL of trade receivables remained to be minimal at approximately
RMB0.1 million in FY2021 and approximatel y RMB0.2 million in FY2022, respectively.
Selling and distribution expenses
O u rs e l l i n ga n dd i s t r i b u t i o ne x p e n s e sr e m a i n e dt ob er e l a t i v e l ys t a b l ea ta p p r o x i m a t e l y
RMB0.5 million in FY2021 and approximately RMB0.4 million in FY2022.
Administrative and other expenses
Our administrative and other expenses decreased by approximately RMB1.6 million
(or 11.3%) from approximately RMB13.9 m illion in FY2021 to approximately RMB12.4
million in FY2022. Such decrease was primarily attributable to the decrease in our other
expenses by approximately RMB2.1 million (or 47.3%) in FY2022, which was partially
offset by the increase in our depreciation of property, plant and equipment by
approximately RMB0.5 million (or 11.9%) in FY2022.
Finance cost
Our finance cost remained to be stable at approximately RMB0.9 million and RMB0.9
million in FY2021 and FY2022, respectively.
FINANCIAL INFORMATION
–3 2 7–


--- page 337 ---
Income tax expense
Our income tax expense remained to be nil and nil in FY2021 and FY2022,
respectively. Our effective tax rate remain ed to be nil and nil for the same period. Please
refer to the paragraph headed ‘‘Description of selected statements of profit or loss items —
Income tax expense’’ in this section of the prospectus for the description of tax exemptions
granted to us due to the nature of our business.
Profit for the year
Our profit for the period decreased by approximately RMB15.5 million (or 32.8%)
from approximately RMB47.3 million in FY2021 to approximately RMB31.8 million in
FY2022, which mainly resulted from (i) the decrease in our revenue by approximately
RMB28.3 million (or 18.2%) from FY2021 to FY2022 mainly attributable to the decrease in
our sales volume due to the temporary suspension of our Laixi Facility as a result of the
resurgence of COVID-19 cases and the lockd own measures during March 2022 and April
2022; and (ii) the decrease in our other inc ome by approximately RMB0.3 million (or
27.4%) in the corresponding period. Meanw hile, our net profit margin decreased from
approximately 30.5% to approximately 25.1%. The series of lockdown measures in Dalian
and various areas in Shandong province due to the COVID-19 epidemic in 2022 has
temporary adverse impact on our business in FY2022.
FY2021 compared to FY2020
Revenue
Please refer to the paragraph headed ‘‘Descr iption of selected statements of profit or
loss items — revenue’’ in this section of the prospectus for the description of changes in
r e v e n u eo fo u rG r o u pi nF Y 2 0 2 0a n dF Y 2 0 2 1 .
Cost of sales
Please refer to the paragraph headed ‘‘Descr iption of selected statements of profit or
loss items — Cost of sales’’ in this section of the prospectus for the description of changes in
cost of sales of our Group in FY2020 and FY2021.
Gross profit and gross profit margin
Please refer to the paragraph headed ‘‘Descr iption of selected statements of profit or
loss items — Gross profit’’ and ‘‘Key Finan cial Ratios — Gross profit margin’’ in this
section of the prospectus for the description of changes in gross profit and gross profit
margin of our Group in FY2020 and FY2021.
Other income
Our other income decreased by approxi mately RMB3.4 million (or 73.4%) from
approximately RMB4.6 million in FY2020 to approximately RMB1.2 million in FY2021.
Such decrease was primarily attributable to the decrease in government grants by
FINANCIAL INFORMATION
–3 2 8–


--- page 338 ---
approximately RMB3.1 million (or 85.0%), a majority of which was an one-off subsidy
granted by the Municipal Government of Laixi for supporting the listing of local enterprises
in FY2020.
Allowance for ECL
Our allowance for ECL of trade receivables remained to be minimal at approximately
RMB0.1 million in FY2020 and approximatel y RMB0.1 million in FY2021, respectively.
Selling and distribution expenses
O u rs e l l i n ga n dd i s t r i b u t i o ne x p e n s e sr e m a i n e dt ob er e l a t i v e l ys t a b l ea ta p p r o x i m a t e l y
RMB0.5 million and RMB0.5 million in F Y2020 and FY2021, respectively.
Administrative and other expenses
Our administrative and other expenses inc reased by approximately RMB2.3 million (or
20.2%) from approximately RMB11.6 million in FY2020 to approximately RMB13.9
million in FY2021. Such increase was primarily at tributable to (i) the increase in our legal,
professional and auditing fees by approximately RMB1.0 million (or 383.4%) due to
payment of the supplemental service fees to our professional advisers; and (ii) increase in
our other expenses by approximately RMB1.1 million (or 31.8%) in FY2021.
Finance cost
Our finance cost decreased from approxi mately RMB1.2 million to approximately
RMB0.9 million in FY2020 and FY2021, respectively. Such decrease was mainly because we
obtained bank loans with more favourable terms. The effective interest rates of our bank
borrowings as at 1 January 2020 was relatively high at 6.09% per annum, which were later
replaced by bank borrowings with lower effect ive interest rates ranging from 3.85% per
annum to 4.55% per annum during FY2020. Mean while, the effective interest rates of our
bank borrowings throughout FY2021 ranged from 3.95% per annum to 4.55% per annum.
Income tax expense
Our income tax expense remained to be nil and nil in FY2020 and FY2021,
respectively. Our effective tax rate remain ed to be nil and nil for the same period. Please
refer to the paragraph headed ‘‘Description of selected statements of profit or loss items —
Income tax expense’’ in this section of the prospectus for the description of tax exemptions
granted to us due to the nature of our business.
Profit for the year
Our profit for the year increased by approximately RMB3.5 million (or 8.0%) from
approximately RMB43.8 million in FY2020 to approximately RMB47.3 million in FY2021,
which mainly resulted from the increase in our revenue by approxim ately RMB33.5 million
(or 27.6%) from FY2020 to FY2021 mainly attrib utable to the increase in our sales volume;
effect of which was partially offset by (i) the increase in our Listing expenses by
FINANCIAL INFORMATION
–3 2 9–


--- page 339 ---
approximately RMB3.6 million (or 87.8%) and (ii) the decrease in our other income by
approximately RMB3.4 million (or 73.4%) in the c orresponding period . Meanwhile, our net
profit margin decreased from approxi mately 36.1% to approximately 30.5%.
LIQUIDITY AND CAPITAL RESOURCES
Overview
During the Track Record Period, we met our liquidity requirements principally
through our cash flow from operations. Our use of cash is mainly for the financing of our
operations and working capital requirements going forward. We do not expect any material
changes to the underlying drivers of our source of cash and uses of cash, except for the net
proceeds from the Share Offer which will be used according to our future plans as set out in
the section headed ‘‘Future Plans and Use of Proceeds’’ in this prospectus.
FINANCIAL INFORMATION
–3 3 0–


--- page 340 ---
Cash flow
The following table sets forth a summary of our cash flows information for the periods
indicated:
Year ended 31 December
Nine months ended
30 September
2020 2021 2022 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(unaudited)
Net cash generated from operating
activities 51,612 33,818 50,235 42,959 42,200
N e tc a s hu s e di ni n v e s t i n g
activities (55,222) (16,812) (1,091) (1,091) (22,965)
Net cash generated from/(used in)
financing activities 5,495 (1,012) (1,025) (770) (719)
Net increase/(decrease) in cash and
cash equivalents 1,885 15,994 48,119 41,098 18,516
Effect of foreign exchange rate
changes — 1 (3) (3) —
Cash and cash equivalents at the
beginning of the year/period 5,083 6,968 22,963 22,963 71,079
Cash and cash equivalents at the
end of the year/period 6,968 22,963 71,079 64,058 89,595
Cash flows generated from operating activities
We derive our cash inflow from operating activities principally from the receipt of
payments for the sale of our products. Our cash outflow from operating activities is
principally for purchases of raw materials, salaries and employee benefits and cultivation
overheads.
In 9M2023, we had a net cash generated from operating activities of approximately
RMB42.2 million, which was mainly attributab le to our operating profit before working
capital changes of approximately RMB49.5 m illion, adjusted for increase in accruals and
other payables of approximately RMB1.1 million. These cash inflow were partially offset by
the increase in trade receivables of approxima tely RMB4.9 million and the decrease in trade
payables of approximately RMB3.4 million durin g the same period. Our net cash generated
from operating activities during 9M2023 remained stable as compared to our net cash
generated from operating activities during 9M2022.
FINANCIAL INFORMATION
–3 3 1–


--- page 341 ---
In 9M2022, we had net cash generated from operating activities of approximately
RMB43.0 million, which was mainly attributab le to our operating profit before working
capital changes of approximately RMB34.2 million, adjusted for increase in trade payables
of approximately RMB8.3 million, decrease in prepayments and other receivables of
approximately RMB2.7 million, and decrease in trade receivables of approximately
RMB2.3 million. These cash inflow were partially offset by the increase in biological
assets of approximately RMB4. 2 million during the same period.
In FY2022, we had a net cash generated from operating activities of approximately
RMB50.2 million, which was mainly attributab le to our operating profit before working
capital changes of approximately RMB49.9 m illion, adjusted for decrease in prepayments
and other receivables of approximately RMB2.8 million and increase in trade payables of
approximately RMB10.2 million. These cash inflo w were partially offset by the increase in
trade receivables of approximately RMB7.0 million during the same period. We had higher
net cash generated from operating activities during FY2022 than in FY2021 mainly because
of the increase in trade payables during FY2022.
In FY2021, we had a net cash generated from operating activities of approximately
RMB33.8 million, which was mainly attributab le to our operating profit before working
capital changes of approximately RMB59.0 m illion. These cash inflows were partially offset
by (i) the increase in trade receivables b y approximately RMB15.6 million; and (ii) the
increase in our prepayments and other receivables of approximately RMB6.0 million during
the same period.
In FY2020, we had net cash generated from operating activities of approximately
RMB51.6 million, which was primarily attributable to our operating profit before working
capital changes of approximately RMB53.1 m illion. These cash inflows were partially offset
by the decrease in our accruals and other payables by approximately RMB1.1 million
during the same period.
Cash flows used in investing activities
Our cash outflow for investing activities primarily consisted of (i) payments for
property, plant and equipment; (ii) payments for right-of-use assets; and (iii) interest
received from bank deposit.
In 9M2023, our net cash used in investing activities amounted to approximately
RMB23.0 million, which was primarily due to p ayments of approximately RMB12.2 million
for the renovation of our Laixi Land and Buildings for Investment Purpose and payments
of approximately RMB10.8 mi llion for renovation of our pro perty, plant and equipment
conducted during the same period; whereas in 9M2022, our net cash used in investing
activities amounted to approximately RMB1.1 million.
In FY2022, our net cash used in investing a ctivities amounted to approximately
RMB1.1 million, which was primarily due to our payment for purchase of property, plant
and equipment of approximately RMB1.5 million for the cultivation of our potted
vegetable produce, which was partially offset by the proceeds from disposals of property,
plant and equipment of approximately R MB0.4 million during the same period.
FINANCIAL INFORMATION
–3 3 2–


--- page 342 ---
In FY2021, our net cash used in investing a ctivities amounted to approximately
RMB16.8 million, which was primarily due to our payment for purchase of property, plant
and equipment of approximately RMB16.8 million for the renovation of the office premises
and other maintenance and improvement works in our Laixi Facility during the same
period.
In FY2020, our net cash used in investing a ctivities amounted to approximately
RMB55.2 million, which was primarily due to our purchase of property, plant and
equipment of approximately RMB55.1 million for the expansion of our cultivation capacity
during the same period.
Cash flows (used in)/generated from financing activities
Our cash inflows for financing activities primarily consisted of (i) bank borrowings;
and (ii) contribution from our pre-IPO investor. Our cash outflows for financing activities
primarily consisted of (i) repayments of bank borrowings; (ii) principal elements of lease
liabilities; and (iii) interest payment.
In 9M2023, our net cash used in financing activities amounted to approximately
RMB0.7 million, which was primarily attribut able to the interest paid of approximately
RMB0.7 million during the same period; where as in 9M2022, we recorded a net cash used in
financing activities amounted to approxi mately RMB0.8 million, which was primarily
attributable to the interest paid of approxi mately RMB0.7 million during the same period.
In FY2022, our net cash used in financing activities amounted to approximately
RMB1.0 million, which was primarily attribut able to the interest paid of approximately
RMB0.8 million during the same period.
In FY2021, our net cash used in financing activities amounted to approximately
RMB1.0 million, which was primarily attribut able to the interest paid of approximately
RMB0.8 million during the same period.
In FY2020, our net cash ge nerated from financing activities amounted to
approximately RMB5.5 million, which was primarily due to raising of additional bank
borrowings of RMB5.0 million and investment into our subsidiary by Mr. Xie Xing of
approximately RMB1.8 million. This cash inflows was partially offset by our interest
payment of approximately RMB1. 1 million during the same period.
FINANCIAL INFORMATION
–3 3 3–


--- page 343 ---
CURRENT ASSETS AND CURRENT LIABILITIES
The following table sets forth details of our current assets and current liabilities as at
the dates indicated:
As at 31 December
As at 30
September
As at
31 January
2020 2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(unaudited)
Current Assets
Biological assets 9,395 9,781 8,371 8,876 9,082
Inventories 31 199 1,557 1,331 1,747
Trade receivables 31,121 46,590 53,444 58,376 64,901
Prepayments and other
receivables 3,052 9,075 6,252 6,701 8,372
Amount due from the ultimate
holding company 6 6 6 6 6
Amounts due from Shareholders 3 3 3 3 3
Bank and cash balances 6,968 22,963 71,079 89,595 89,501
50,576 88,617 140,712 164,888 173,612
Current liabilities
Trade payables 9,149 5,323 15,552 12,177 10,540
Accruals and other payables 3,295 1,719 1,546 2,628 3,907
Amount due to a Director 20 30 30 30 30
Bank borrowings 20,000 20,000 20,000 19,995 19,995
Lease liabilities 80 124 98 106 109
Deferred income 227 227 227 227 227
32,771 27,423 37,453 35,163 34,808
Net current assets 17,805 61,194 103,259 129,725 138,804
As at 31 December 2020, 31 December 2021, 31 December 2022, 30 September 2023
and 31 January 2024, we had net current assets of approximately RMB17.8 million,
RMB61.2 million, RMB103.3 million, RMB129.7 million and RMB138.8 million,
respectively.
We recorded net current as sets of approximately RMB61.2 million as at 31 December
2021 as compared with net current assets of approximately RMB17.8 million as at 31
December 2020. Such change was primarily attr ibutable to (i) the increase in our trade
receivables by approximately RMB15.5 million (or 49.7%); (ii) the increase in our bank and
cash balances by approximately RMB16.0 million (or 229.5%); and (iii) the increase in our
prepayments and other receivables by ap proximately RMB6.0 million (or 197.3%).
FINANCIAL INFORMATION
–3 3 4–


--- page 344 ---
We recorded net current assets of approx imately RMB103.3 million as at 31 December
2022 as compared with net current assets of approximately RMB61.2 million as at 31
December 2021. Such change was primarily attributable to the increase in our bank and
cash balances by approximately RMB48.1 millio n (or 209.5%) which was mainly due to the
settlement of our trade receivab les in the corresponding period.
We recorded net current assets of approxim ately RMB129.7 million as at 30 September
2023 as compared with net current assets of approximately RMB103.3 million as at 31
December 2022. Such change was primarily attributable to the increase in our bank and
cash balances by approximat ely RMB18.5 million (or 26.0%) which was mainly due to the
settlement of our trade receivab les in the corresponding period.
We recorded net current assets of approximately RMB138.8 million as at 31 January
2024 as compared with net current assets of approximately RMB129.7 million as at 30
September 2023. Such change was primarily attributable to the increase in our trade
receivables by approximately RMB6.5 million (or 11.2%) which was mainly due to the
increase in sales revenue and trade receivables in the fourth quarter of 2023.
The amount due from the ultimate holding company are non-trade in nature and will
be settled prior to Listing.
ANALYSIS OF SELECTED STATEMEN T OF FINANCIAL POSITION ITEMS
Biological assets
Our biological assets represent the potted vegetable produce stated at fair value less
estimated cost to sell as at the end of reporting period. The fair value has been assessed by
Savills, a firm of independent qualified professional valuers not connected with us, which
has appropriate qualifications and experiences in valuation of biological assets, with
reference to market prices, scrap rate, specie s, growing conditions and cost incurred. We are
required under HKFRS to recognise such changes under ‘‘changes in fair value of biological
assets’’. This item represents fair value changes of our biological assets due to the changes in
physical attributes and market prices of our biological assets, in particular, our potted
FINANCIAL INFORMATION
–3 3 5–


--- page 345 ---
vegetable produce at the end of each of the Track Record Period. The following table sets
forth the value of our biological assets as at the dates indicated:
At 31 December
At 30
September
2020 2021 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000
Value of biological assets
At 1 January, comprising:
Original cost before fair valuation
adjustment 4,605 6,221 6,430 5,839
Fair value adjustment 2,119 3,174 3,351 2,532
6,724 9,395 9,781 8,371
Adjusted for:
Increase due to plantation 67,444 86,208 74,798 66,523
Decrease due to sales (65,828) (85,999) (70,804) (66,785)
Fair value adjustment on the closing
balance of biological assets 3,174 3,351 2,532 3,299
Less: Unsold vegetable produce — — (4,585) —
Less: Fair value adjustment on the opening
balance of biological assets (2,119) (3,174) (3,351) (2,532)
Biological assets fair value adjustments 1,055 177 (5,404) 767
At 31 December/30 September 9,395 9,781 8,371 8,876
Value of biological assets at 31 December/
30 September, comprising:
Original cost before fair value adjustment 6,221 6,430 5,839 5,577
Fair value adjustment 3,174 3,351 2,532 3,299
9,395 9,781 8,371 8,876
According to our Group’s accounting policies, (i) a biological asset shall be measured
at the end of each reporting period at its fair value less costs to sell, except where the fair
value cannot be measured reliably; and (ii) agri cultural produce harvested from an entity’s
biological assets shall be measured at its fair value less costs to sell at the point of harvest.
Our biological assets represent the potted vegetable produce stated at fair value less
estimated cost to sell as at the end of the reporting period. Between each reporting dates,
our fair value of biological assets is affected by our production and sale of these biological
assets in our business operation. As our biological assets are stated at fair value less
estimated cost to sell as at the end of the reporting period, the carrying amounts are affected
by the number, maturity and therefore the fair value of our potted vegetable produce as at
the end of the reporting period.
FINANCIAL INFORMATION
–3 3 6–


--- page 346 ---
The resultant changes in the fair value adjustment between each reporting period are
recognised as gain or loss and charged to ‘‘changes in fair value of biological assets’’ in our
consolidated statements of profit or loss. The fair value adjustment represented the
difference between the fair value less estimated cost to sell of biological assets and the
original cost of biological assets as at the end of each reporting period.
As the potted vegetable produce was sold to the customers in pots filled with organic
substrates, the potted vegetable was sold while still fresh and living and has not been
harvested upon sales, there is no need to revalue potted vegetable produce upon sales. While
the Group’s biological asset at the end of each reporting period is measured at its fair value
less costs to sell, the fair value of potted veg etables that are planted and sold within the
same financial period results in no changes in fair value of biological assets recognised
during that reporting period. The ‘‘gain’’ on these potted vegetables that are planted and
sold within the same financial period are recognised in our gross profit.
During the first week of growing period, our potted vegetable produce typically does
not yet sprout and does not have observable sign ificant biological transformation above the
organic substrate. Cost approach is adopted for these newly planted potted vegetable
produce. The cost of direct raw materials, labour cost, and other related expenses have been
considered in the calculation of the fair values of our potted vegetable produce. After the
first week of growing period but before reaching the mature period, our potted vegetable
produce typically has observable significant b iological transformation since planting with
sprout and leaves visible above the organic substrate. Based on our historical record, more
than 65% of our total cost have been incurred after the first week of growing period. Unit
fair value of growing potted vegetable produce is estimated based on market price for
mature potted vegetable produce less remaining cultivation cost and associated profit,
adjusted for expected scrappage prior to rea ching maturity. Market approach is adopted
since observable biological transformation has taken place. During the mature period, our
potted vegetable produce has reached the salea ble state and market approach is adopted.
The fair values of our biological assets as at the end of respective years are calculated to be
the product of unit market value and the quantity held, deducting the reasonable cost
r e l a t e dt os a l e s .
In FY2022, our changes in fair value of biological assets included the unsold vegetable
produce of approximately RMB4.6 million as a re sult of the temporary suspension of our
facilities due to the outbreak of COVID-19 epidemic from March 2022 to April 2022. Most
of the unsold potted vegetable produce fr om our Laixi Facility was donated to the
government for the distribution to the local residents for their consumption during the
lockdown period of the COVID-19 epidemic in FY2022.
The fair value of our biological assets increased by approximately RMB0.4 million (or
4.1%) from approximately RMB9.4 million as at 31 December 2020 to approximately
RMB9.8 million as at 31 December 2021, primarily due to the increase in the number of our
potted vegetable produce in our cultivation facilities as at 31 December 2021. This was
mainly attributable to the inc rease in the number of potted vegetables under cultivation on
31 December 2021 as compared to that of 31 Dec ember 2020, of which a larger portion is in
the growing and mature stage.
FINANCIAL INFORMATION
–3 3 7–


--- page 347 ---
The fair value of our biological assets decreased slightly by approximately RMB1.4
million (or 14.4%) from approximately RMB9.8 million as at 31 December 2021 to
approximately RMB8.4 million as at 31 December 2022, primarily due to the decrease in the
number of potted vegetable produce in our cu ltivation facilities as at 31 December 2022.
The fair value of our biological assets increased slightly by approximately RMB0.5
million (or 6.0%) from approximately RMB8.4 million as at 31 December 2022 to
approximately RMB8.9 million as at 30 Septemb er 2023, primarily due to the increase in the
number of potted vegetable produce in growing and mature stage in our cultivation
facilities as at 30 September 2023.
For more information about the valuation method adopted by Savills, please refer to
the paragraph headed ‘‘Valuation of biological assets’’ in this section of the prospectus.
Inventories
Our inventories primarily consist of pots and agricultural materials which mainly
include seeds, fertilisers and biopesticides which were not utilised at the end of each of the
Track Record Period. The following table sets forth the breakdown of our inventories as at
the dates indicated:
At 31 December
At 30
September
2020 2021 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000
Pots and
agricultural
materials 31 199 1,557 1,331
Due to the nature of our business (i.e. we do not harvest our potted vegetable produce
upon selling of the same), and that our potted vegetable produce is not reclassified from
biological assets to inventories when it becomes mature as it is not harvested, our inventory
level is low. While it is our policy to keep low raw material inventory level in general, we
have however gradually made more purchases and kept more inventories since FY2021 to
reduce the risk of supply interruption after years of the pandemic from 2020 to 2022, with
intermittent lockdowns in various regions. Our purchasing strategies also helped us keep
our raw material cost stable at a reasonable lev el in spite of the increasing price trend of raw
materials in general as explained in the paragraph headed ‘‘Industry Overview — Historical
price trend of raw materials and potted vegetable produce’’ in this prospectus. Our
inventories increased by approximately RMB168,000 from approximately RMB31,000 as at
31 December 2020 to approximately RMB199,000 as at 31 December 2021 primarily
because we had purchased some of the components of organic substrates in FY2021 which
were not yet utilised near the year end. Our inve ntories increased by a pproximately RMB1.4
million to approximately RMB1.6 million as at 3 1 December 2022 primarily because we had
purchased a relatively large amount of the comp onents of organic substrates to prepare for
FINANCIAL INFORMATION
–3 3 8–


--- page 348 ---
the cultivation during the fourth quarter of F Y2022. Our inventories decreased slightly by
approximately RMB0.2 million to approximately RMB1.3 million as at 30 September 2023
primarily because of utilisation of raw materials.
The following table sets out the ageing analysis of the inventories:
Ageing analysis At 31 December
At 30
September
2020 2021 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000
0–180 days 23 199 1,557 1,329
181–365 days — — — 2
Over 1 year 8 — — —
31 199 1,557 1,331
The following table sets out the average inventory turnover day(s) for the Track
Record Period:
Year ended 31 December
Nine months
ended 30
September
2020 2021 2022 2023
Average inventory
turnover days
(Note) 0.6 0.5 4.3 5.9
Note: Average inventory turnover day(s) for each of the years ended 31 December 2020, 2021 and 2022
and the nine months ended 30 September 2023 are equal to the average inventories divided by cost
of sales, before fair value adjustment, and mul tiplied by the number of days in the relevant year/
period. Average inventories is equal to the average of inventory at the beginning of the year/period
and inventory at the end of the year/period.
The average inventory turnover day(s) remained stable at 0.6 days and 0.5 days
between FY2020 and FY2021, and increased to 4.3 days for FY2022, primarily because we
have made more purchases and kept more inventories since FY2022 to reduce the risk of
supply interruption. Our inventory turnover day for 9M2023 is higher at 5.9 days because
we maintained a comparatively higher inve ntory of over RMB1.3 million as at both 31
December 2022 and 30 September 2023 and our average inventory for 9M2023 is higher.
Despite our higher inventory turnover day for FY2022 and 9M2023, our inventory turnover
day is lower than 10 days in line with our general policy to keep low raw material inventory
level.
As at the Latest Practicable Date, all of our inventories as at 30 September 2023 were
subsequently utilised.
FINANCIAL INFORMATION
–3 3 9–


--- page 349 ---
Trade receivables
Our trade receivables primarily consist of receivables associated with the sales of our
potted vegetable produce to our customers. The following table sets forth the breakdown of
our trade receivables as at the dates indicated:
At 31 December
At 30
September
2020 2021 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000
Trade receivables 32,339 46,591 53,605 58,476
Allowance for
ECL (1,218) (1) (161) (100)
31,121 46,590 53,444 58,376
During the Track Recorded Period, we grant our distributors and end-user customers
generally a credit period of 60 days to 120 days and 180 days respectively depending on their
credit history, historical sales performance, est imated future purchases, relationship history
with us and business scale.
Our trade receivables increased by approximately RMB14.3 million (or 44.1%) from
approximately RMB32.3 million as at 31 Dec ember 2020 to approximately RMB46.6
million as at 31 December 2021, in line with the increase in our sales of approximately
27.6% in the corresponding period. Our trade receivables increased by approximately
RMB7.0 million (or 15.1%) to approximately RMB53.6 million as at 31 December 2022,
primarily due to the slight increase in our sales revenue in the fourth quarter of FY2022 of
approximately RMB38.1 million as compare d to the sales revenue of approximately
RMB37.7 million in the fourth quarter of FY2021. Since the third quarter of the year is our
peak season, our trade receivab les increased by approximately RMB4.9 million (or 9.1%) to
approximately RMB58.5 million as at 30 September 2023, primarily due to the increase in
our sales revenue in the third quarter of 2023 of approximately RMB50.0 million as
compared to our sales revenue in the fourth quarter of FY2022 of approximately RMB38.1
million. Our allowance for ECL dropped from approximately RMB1.2 million as at 31
December 2020 to approximately RMB1,000 as at 31 December 2021 mainly because we
wrote off certain long outstanding trade r eceivables of approx imately RMB1.4 million
during FY2021. Our allowance for ECL increased slightly to approximately RMB0.2
million as at 31 December 2022. Our allowance for ECL remained to be relatively stable at
approximately RMB0.1 million as at 30 September 2023.
FINANCIAL INFORMATION
–3 4 0–


--- page 350 ---
An ageing analysis of our trade receivables at the end of each reporting period, based
on the invoice date and net of allowance for ECL, is as follows:
At 31 December At 30 September
2020 2021 2022 2023
Trade
receivables
Trade
receivables
Trade
receivables
Trade
receivables
Less:
amount
subsequently
settled up to
the Latest
Practicable
Date
Remaining
balances up
to
the Latest
Practicable
Date
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
0–90 days 30,540 36,609 37,550 48,558 (37,913) 10,645
91–180 days 383 9,981 15,894 9,818 (9,818) —
181–365 days 198 — — — — —
Over 1 year — — — — — —
31,121 46,590 53,444 58,376 (47,731) 10,645
A majority of our trade receivables as at 31 December 2020, 31 December 2021, 31
December 2022 and 30 September 2023 were aged within 90 days, as most of the credit
period granted to our distributors and end-user customers were due within 60 days to 120
days and 180 days respectively from the date of billing.
As at the Latest Practicable Date, approximately RMB47 .7 million, or 81.7% of trade
receivables as at 30 September 2023 were subsequently settled. Our Group did not record
any bad debt during the Track Record Period, our Directors are of the view that there is no
recoverability issue for our trade receivabl es and sufficient allowance for doubtful debts
provision has been provided for.
The following table sets forth our average trade receivables turnover days for the
periods indicated:
Year ended 31 December
Nine months
ended
30 September
2020 2021 2022 2023
Average trade receivables
turnover days
(Note) 99.2 93.0 144.3 126.1
Note: Average trade receivables turnover day(s) in each of FY2020, FY2021, FY2022 and 9M2023 are
equal to the average trade receivables divided by revenue and multiplied by 366 days in FY2020,
365 days in FY2021, 365 days in FY2022 and 273 days in 9M2023. Average trade receivables is
equal to the average of trade receivables at the beginning of the year/period and trade receivables
at the end of the year/period.
FINANCIAL INFORMATION
–3 4 1–


--- page 351 ---
There was no material change in our trade receivables turnover days in FY2020 and
FY2021. In light of the uncertainty over the b usiness environment in relation to the
lockdown measures in various regions in Ch ina during the COVID-19 epidemic, we have
been more flexible in enforcing our credit te rms for distributors in FY2022 which ranged
from 60 to 120 days. Therefore our average trade receivables turnover day for FY2022
increased to 144.3 days and was higher than our credit term range. Besides, our revenue for
FY2022 was lower than usual due to the lockdown measures in Dalian and various areas in
Shandong province in March and April 2022, with monthly average revenue of only
approximately RMB10.6 million, as compared with the monthly average revenue of
approximately RMB12.9 million for FY2021. Wi th a substantially lowe r average revenue,
our average trade receivables turnover day for FY2022 was also higher than usual.
As the PRC government has substantially lifted its COVID-19 prevention and control
policies since December 2022, we have pressed our distributors for faster settlement of trade
receivables and enforced our credit terms in 2023, leading to the lower trade receivables
turnover days of approximately 126.1 days for 9M2023 as compared to 144.3 days for
FY2022. However, it is still higher than our credit terms for distributors which ranged from
60 to 120 days mainly because of our high trade receivable balances as at 31 December 2022
which led to higher average trade receivable b alances for the 9M2023. As confirmed by the
Directors, there is no recoverability issue for our trade receivables as at the Latest
Practicable Date and sufficient allowance h as been made for the trade receivables during
the Track Record Period.
Prepayments and other receivables
The following table sets forth a summary of our balance of prepayments and other
receivables as at the dates indicated:
At 31 December
At 30
September
2020 2021 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000
Non-current assets:
Prepayments for
renovation of
property, plant and
equipment — — — 6,000
Current assets:
Prepayments 434 4,503 334 690
Prepaid Listing
expenses 1,672 4,082 5,412 5,380
Other receivables 946 490 506 631
3,052 9,075 6,252 12,701
Our prepayments increased from RMB0.4 million as at 31 December 2020 to RMB4.5
million as at 31 December 2021, primarily d ue to the increase in the purchase of the
components of organic substrate near the end of FY2021 for the purpose of stocking up
FINANCIAL INFORMATION
–3 4 2–


--- page 352 ---
some components of organic substrate as our contingency plan to avoid any delay in
production that may be caused by any unforeseeable events in the market, and to hedge the
risk of fluctuation of the cost of the raw materials. Our prepayment as at 31 December 2021
consist of prepayment of the components of organic substrate of approximately RMB4.2
million. Our prepayments decreased from approximately RMB4.5 million as at 31
December 2021 to RMB0.3 million as at 3 1 December 2022 mainly because our
prepayment for the purchase of the components of organic substrate as at 31 December
2021 has been utilised. Our prepayments increased slightly from approximately RMB0.3
million as at 31 December 2022 to RMB0.7 million as at 30 September 2023.
Our prepayments of renovation of property, plant and equipment in the amount of
approximately RMB6.0 million were made primarily for the renovation of the greenhouses
in the Group’s cultivation facilities. Our Group commenced such renovation work in May
2023. Such renovation work is still ongoing as at the Latest Practicable Date.
Our prepaid Listing expenses amounted t o approximately RMB1.7 million, RMB4.1
million, RMB5.4 million and RMB5.4 million as at 31 December 2020, 31 December 2021,
31 December 2022 and 30 September 2023, respectively. The change in our prepaid Listing
expenses during the Track Record Period is in line with the phase of work of the
professional parties engaged for the purpose of our application for Listing in the
corresponding periods.
Our other receivables mainly represented the outstanding rental receivables due from
our tenant for the Laixi Land and Buildings for Investment of approximately RMB0.9
million, RMB0.5 million, RMB0.5 million and RMB0.6 million as at 31 December 2020, 31
December 2021, 31 December 2022 and 3 0 September 2023 respectively.
Trade payables
Our trade payables primarily relate to our subcontracting labour cost and purchase of
raw materials from our suppliers with general credit terms of no more than one month. We
normally settle such payables by bank transfers.
FINANCIAL INFORMATION
–3 4 3–


--- page 353 ---
The following table sets forth our trade payables as at the dates indicated:
At 31 December
At 30
September
2020 2021 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000
Trade payables 9,149 5,323 15,552 12,177
Our trade payables decreased by approximately RMB3.8 million (or 41.8%) from
approximately RMB9.1 million as at 31 December 2020 to approximately RMB5.3 million
as at 31 December 2021, primarily due to our timel y settlement of trade payables. Our trade
payables increased by approximately RMB10.2 million (or 192.2%) to approximately
RMB15.6 million as at 31 December 2022, primar ily due to the late settlement of the labour
subcontracting fee due to the COVID-19 epidemic in FY2022. Our trade payables decreased
slightly by approximately RMB3.4 million (or 21.7%) to approximately RMB12.2 million
as at 30 September 2023, primarily due to o ur timely settlement of trade payables.
An ageing analysis of our trade payables at the end of each reporting period, based on
invoice date, is as follows:
At 31 December
At 30
September
2020 2021 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000
0–90 days 8,333 5,282 13,139 11,969
91–180 days 797 — 2,372 167
181–365 days 3 22 — —
Over 1 year 1 61 94 14 1
9,149 5,323 15,552 12,177
As at the Latest Practicable Date, approximately RMB12.2 million, or 100% of our
trade payables outstanding as at 30 September 2023 were subsequently settled.
FINANCIAL INFORMATION
–3 4 4–


--- page 354 ---
The following table sets forth our average trade payables turnover days for the periods
indicated:
Year ended 31 December
Nine months
ended
30 September
2020 2021 2022 2023
Average trade payables
turnover days (Note) 46.3 29.6 51.4 54.6
Note: Average trade payables turnover day(s) in each of FY2020, FY2021, FY2022 and 9M2023 are
equal to the average trade payables divided by c ost of sales and multiplied by 366 days in FY2020,
365 days in FY2021, 365 days in FY2022 and 273 days in 9M2023. Average trade payables is equal
to the average of trade payables at the beginning of the year/period and trade payables at the end
of the year/period.
Our average trade payables turnover days decreased from 46.3 days in FY2020 to 29.6
days in FY2021. Such decrease was primarily due to our timely settlement of trade
payables.
Our average trade payable turnover days increased from 29.6 days in FY2021 to 51.4
days in FY2022. Such increase was primarily due to the fact that (i) we made purchase of
the components of organic substrate and incurred more cost of labour near the end of
FY2022 leading to the higher trade payable balances as at 31 December 2022 and (ii) the
decrease in cost of sales in FY2022.
Our trade payables for 9M2023 of 54.6 days were higher than our trade payables credit
terms of generally no more than one month. The higher trade payables for 9M2023 were
primarily due to the longer time required for our administrative procedure as a result of the
temporary shortage of our accounting staff caused by the prolonged leave taken by one of
the staff in our accounts department in 9M2023. Therefore, our payment to our suppliers
and subcontractors was slower in 9M2023 and our average trade payable turnover days
increased from 51.4 days in FY2022 to 54.6 days in 9M2023. However, the average trade
payables turnover days has returned to normal level as at the Latest Practicable Date.
FINANCIAL INFORMATION
–3 4 5–


--- page 355 ---
Accruals and other payables
The following table sets forth our accruals and other payables as at the dates indicated:
At 31 December
At 30
September
2020 2021 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000
Accruals 391 412 512 492
Other payables 2,904 1,307 1,034 2,136
3,295 1,719 1,546 2,628
Our accruals primarily consist of accrued salaries of our employees. Our accruals
remained to be relatively stable at appr oximately RMB0.4 million, RMB0.4 million,
RMB0.5 million and RMB0.5 million as a t 31 December 2020, 31 December 2021, 31
December 2022 and 30 September 2023, respectively.
Our other payables primarily consist of construction cost payables relating to the
construction of our greenhouses and the relevant site formation cost and payables for
listing and professional fee. Our other p ayables decreased by approximately RMB1.6
million (or 55.0%) from approximately RMB2.9 million as at 31 December 2020 to
approximately RMB1.3 million as at 31 Decembe r 2021, which were primarily attributable
to the settlement of our construction cost associated with the improvement and expansion
works of our Laixi Facilities in early 2021. Our other payables de creased slightly by
approximately RMB0.3 million (or 21.0%) to approximately RMB1.0 million as at 31
December 2022 which was mainly due to payab le for listing and professional fee of
approximately RMB0.5 million as at 31 December 2022. Our other payables increased by
approximately RMB1.1 million (or 106.6%) t o approximately RMB2.1 million as at 30
September 2023 which was mainly due to the fact that we incurred more listing and
professional fee near the end of 9M2023.
FINANCIAL INFORMATION
–3 4 6–


--- page 356 ---
Deferred income
During the Track Record Period, our deferred income principally represents
government grants in relation to agricultural development, greening purposes, subsidising
the interest payment of our borrowings in 2018 and supporting the listing of local
enterprises provided by the Municipal Government of Laixi in FY2020. The following table
sets forth our deferred income as at the dates indicated:
At 31 December
At 30
September
2020 2021 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000
Government grants:
At 1 January 3,995 3,953 3,727 3,500
Additions 3,585 318 — —
Amortisation (3,627) (544) (227) (170)
At 31 December/
30 September 3,953 3,727 3,500 3,330
RELATED PARTY TRANSACTIONS
With respect to the related party transacti on set forth in the Accountants’ Report as set
out in Appendix I to this prospectus, our Directors confirm that the transaction was
conducted on normal commercial terms or such terms that were no less favourable to our
Group than those available to Independent Third Parties and were fair and reasonable and
in the interest of our Shareholders as a whole.
SUFFICIENCY OF WORKING CAPITAL
Our Directors are of the opinion that after taking into account the existing financial
resources available to our Group including internally generated funds from operating
activities, existing bank facilities and the e stimated net proceeds from the Share Offer, our
Group has sufficient working capital for its present requirements for the next 12 months
from the date of this prospectus.
FINANCIAL INFORMATION
–3 4 7–


--- page 357 ---
CAPITAL EXPENDITURES
Capital expenditures during the Track Record Period
The following table sets forth our capital expenditures for the periods indicated:
Year ended 31 December
Nine
months
ended 30
September
2020 2021 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000
Additions to property, plant
and equipment 44,354 14,420 1,522 4,787
Additions to investment
properties — — — 12,222
Our capital expenditures for FY2020, FY2021, FY2022 and 9M2023 represented
additions of property, plant and equipment primarily made for the site formation and the
construction, renovation of greenhouses in our cultivation fa cilities, the renovation of the
office premises in our Laixi Facility and the renovation of our Laixi Land and Buildings for
Investment Purpose during the Track Record Period.
Besides, we have also made prepayment of approximately RMB 6.0 million mainly for
renovation of our Laixi Land and Buildings for Investment Purpose as at 30 September
2023.
Planned capital expenditures
Save for the planned usage of the net proceeds from the Share Offer as disclosed in the
section headed ‘‘Future Plans and Use of Proceeds’’ in this prospectus and the additions to
property, plant and equipment and our investment properties necessary for our business
operations which will be made by our Group from time to time, including periodic repair,
upgrade, renovation and replacement, we had no material planned capital expenditure as at
the Latest Practicable Date.
We expect to fund our capital expenditure principally through the net proceeds raised
from the Share Offer, bank borrowings and cash generated from our operating activities.
We believe that these sources of funding wil l be sufficient to finance our contractual
commitments and capital expenditure needs for the next 12 months from the date of this
prospectus.
FINANCIAL INFORMATION
–3 4 8–


--- page 358 ---
CONTRACTUAL COMMITMENTS
Capital Commitments
As at 31 December 2020, 31 December 2021, 31 December 2022 and 30 September
2023, the capital commitments of our Group in respect of the payments for purchase of
property, plant and equipment contracted but not yet incurred were nil, nil, nil and RMB6.5
million, respectively.
INDEBTEDNESS
The following table sets forth a breakdown of our indebtedness as at the dates
indicated:
At 31 December
At 30
September
At 31
January
2020 2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(unaudited)
Current portion
Amount due to a Director 20 30 30 30 30
Bank borrowings 20,000 20,000 20,000 19,995 19,995
Lease liabilities 80 124 98 106 109
20,100 20,154 20,128 20,131 20,134
Non-current portion
Lease liabilities 641 553 454 394 349
20,741 20,707 20,582 20,525 20,483
As at 31 December 2020, 31 December 2021, 31 December 2022, 30 September 2023
and 31 January 2024, the amount due to a Director were approximately RMB20,000,
RMB30,000, RMB30,000, RMB30,000 and RMB30,000, respectively. The amounts due to a
Director are non-trade in nature and will be settled prior to Listing.
Bank borrowings
As at 31 December 2020, 31 December 2021, 31 December 2022, 30 September 2023
and 31 January 2024, our total outstanding b alance of bank loans was approximately
RMB20.0 million, RMB20.0 million, RMB20.0 million, RMB20.0 million and RMB20.0
million, respectively.
FINANCIAL INFORMATION
–3 4 9–


--- page 359 ---
The following table sets forth a breakdown of our bank borrowings as at the dates
indicated:
At 31 December
At 30
September
At 31
January
2020 2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(unaudited)
Bank borrowings,
secured 20,000 20,000 20,000 19,995 19,995
During the Track Record Period, we primarily used our bank borrowings for general
working capital. As at 31 January 2024, we d id not have any unutilised banking facilities.
Our bank borrowings remained to be stable at RMB20.0 million, RMB20.0 million,
RMB20.0 million, RMB20.0 million and RMB20.0 million as at 31 December 2020, 31
December 2021, 31 December 2022, 30 September 2023 and 31 January 2024, respectively.
As at 31 December 2020, 31 December 2021, 31 December 2022, 30 September 2023
and 31 January 2024, our bank borrowings of RMB20.0 million were secured by, among
others, (i) personal guarantees provided by Mr. Zhang and Ms. Geng Juan; (ii) investment
properties of our Group (i.e. the Laixi Land and Buildings for Investment) with net carrying
amount of approximately R MB6.7 million, RMB6.4 million, RMB6.1 million, RMB18.0
million and RMB17.6 million as at 31 December 2020, 31 December 2021, 31 December
2022, 30 September 2023 and 31 January 2024, re spectively; and (iii) right-of-use assets (i.e.
the Laixi Land Parcel A) with net carryin g amount of approximately RMB19.7 million,
RMB19.2 million, RMB18.7 million, RMB1 8.3 million and RMB18.1 million as at 31
December 2020, 31 December 2021, 31 Decembe r 2022, 30 September 2023 and 31 January
2024, respectively of our Group.
The personal guarantees provided by Mr. Zhang and Ms. Geng Juan will be released
upon Listing.
As at 31 December 2020, 31 December 2021, 31 December 2022, 30 September 2023
and 31 January 2024, our bank borrowings w ere denominated in RMB and due within one
year, whereas the effective interest rates of our bank borrowings per annum were from
3.85% to 4.55%, from 3.95% to 4.55%, from 3.75% to 4.55%, from 3.45% to 4.40% and
from 3.45% to 4.40%, respectively.
There are no material covenants relating to our outstanding bank borrowings which
would impact or restrict our ability to undertake additional debt or equity financing. Our
Directors confirmed that our Group had not had any material default with regard to our
trade or other payables or any bank borrowing s, and had not breached any covenants in our
bank borrowings during the Track Record Period and up to the Latest Practicable Date.
Our Directors also confirmed that during the Track Record Period and up to the Latest
Practicable Date, we had not experienced any difficulty in obtaining credit facilities or
FINANCIAL INFORMATION
–3 5 0–


--- page 360 ---
withdrawal of facilities, request for early repayment, default in payments or breach of
financial covenants of bank borrowings. Our Directors further confirmed that we did not
have any plan to raise material external debt financing as at the date of this prospectus.
Lease liabilities
The following table sets forth our lease liabilities as at the dates indicated:
Present value of minimum lease payments
As at 31 December
At 30
September
At 31
January
2020 2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(unaudited)
Within one year 80 124 98 106 109
In the second to fifth years,
inclusive 369 362 354 287 349
After five years 272 191 100 107 —
Present value of lease obligations 721 677 552 500 458
Less: Amount due for
settlement within
12 months (shown under
current liabilities) (80) (124) (98) (106) (109)
Amount due for settlement after 12
months 641 553 454 394 349
Our Group leases office and cultivation facilities for operations. Lease contracts are
e n t e r e di n t of o rf i x e dt e r mo fu pt o5 0y e a r s .L e a s et e r m sa r en e g o t i a t e do na ni n d i v i d u a l
basis and contain a wide range of different terms and conditions. In determining the lease
term and assessing the length of the non-cancellable period, our Group applies the
definition of a contract and determines the period for which the contract is enforceable.
Except as disclosed above, as at 31 January 2024, being the latest practicable date for
the purpose of this indebtedness statement, we did not have any outstanding mortgages,
charges, debentures, loan capital, bank overdrafts, loans, debt securities or other similar
indebtedness, finance leases or hire purchase commitments, liabilities under acceptances or
acceptance credits or any guarantees. We confirm that there had not been any material
adverse change in our indebtedness position since 31 January 2024.
CONTINGENT LIABILITIES
At 31 December 2020, 31 December 2021, 3 1 December 2022 and 30 September 2023,
our Group did not have any contingent liabilities.
FINANCIAL INFORMATION
–3 5 1–


--- page 361 ---
KEY FINANCIAL RATIOS
The following table sets forth certain financial ratios as at the dates or for the periods
indicated:
As at/For the year ended 31 December
As at/For the
nine months
ended 30
September
2020 2021 2022 2023
Profitability Ratios
Turnover growth (Note 1) 3.3% 27.6% (18.2)% 36.9%
Gross profit margin (Note 2) 44.0% 42.4% 41.5% 42.9%
N e tp r o f i tg r o w t h(Note 3) 12.2% 8.1% (32.7)% 108.7%
N e tp r o f i tm a r g i n(Note 4) 36.1% 30.5% 25.1% 33.9%
Return on assets (Notes 5&6) 17.6% 16.3% 9.6% 11.1% (Note 6)
Return on equity (Notes 6&7) 20.7% 18.3% 11.0% 12.4% (Note 6)
Liquidity Ratios
Current ratio
(Note 8) 1.5 times 3.2 times 3.8 times 4.7 times
Quick ratio (Note 9) 1.5 times 3.2 times 3.7 times 4.7 times
Solvency Ratios
Interest coverage ratio (Note 10) 38.0 times 53.7 times 36.3 times 63.1 times
N e td e b tt oe q u i t yr a t i o(Note 11) 6.5% -0.9%
(Note 13)
-17.4%
(Note 13)
-20.8%
(Note 13)
Gearing Ratio (Note 12) 9.8% 8.0% 7.1% 6.2%
Notes:
1. Turnover growth represents the difference between revenue for the current year/period and prior
year/period, divided by the revenue for the prior year/period and multiplied by 100%.
2. The gross profit margin represents the gross profit divided by the revenue for the respective year/
period multiplied by 100%. For details, please re fer to the paragraphs headed ‘‘Description of
selected statements of profit or loss items — Gr oss profit ’’ and ‘‘Key Financial Ratios — Gross
profit margin’’ in this section of the prospectus.
3. Net profit growth represents the difference betw een net profit for the current year/period and prior
year/period, divided by the net profit for the prior year/period and multiplied by 100%.
4. The net profit margin represents the net profit di vided by the revenue for the respective year/period
multiplied by 100%.
5. Return on assets represents net profit divided by total assets as at the respective year/period end and
multiplied by 100%.
6. Return on equity and return on assets are ca lculated on a full year basis except for 9M2023.
7. Return on equity represents net profit divided by total equity as at the respective year/period end
and multiplied by 100%.
FINANCIAL INFORMATION
–3 5 2–


--- page 362 ---
8. Current ratio represents total current assets divided by total current liabilities as at the respective
year/period end.
9. Quick ratio represents total current assets less inve ntories divided by total cu rrent liabilities as at the
respective year/period end.
10. Interest coverage ratio represents profit before income tax and interest expenses divided by interest
expenses for the respective year/period.
11. Net debt to equity ratio represents net debt divi ded by total equity as at the respective year/period
end. Net debt is calculated as the total interes t-bearing debt including borrowings and lease
liabilities less bank and cash balances.
12. Gearing ratio represents the to tal interest-bearing debt includi ng borrowings and lease liabilities
divided by total equity as at the respect ive year/period end multiplied by 100%.
13. We recorded a negative net debt to equity ratio for FY2021, FY2022 and 9M2023 as the Group is in
a net cash position deriving the same periods.
Turnover growth
Our revenue increased from approximately RMB121.4 million in FY2020 to
approximately RMB154.9 million in FY2021. Such increase in our revenue in the said
period was primarily attributable to the increase in the sales volume of our potted vegetable
produce from approximately 8.0 million pots in FY2020 to approximately 10.3 million pots
in FY2021 due to (i) the deployment of 40 enha nced greenhouses in our Laixi Facility in
July 2020 and August 2020 leading to an increase in our productivity; and (ii) the increase in
popularity of our potted vegetable produce in the corresponding period. On the other hand,
the average selling price of our potted vegetable produce remained to be stable at
approximately RMB15.1 per pot in FY2020 and approximately RMB15.1 per pot in
FY2021.
Our revenue decreased from approxi mately RMB154.9 million in FY2021 to
approximately RMB126.7 million in FY2022. Su ch decrease in revenue in the said period
was primarily attributable to the decrease in the sales volume of our potted vegetable
produce from approximately 10.3 million pots i n FY2021 to approximately 8.4 million pots
in FY2022 due to the resurgence of COVID-19 cases in Shandong province between March
2022 to April 2022 which had led to a temporary suspension of business activities of our
Laixi Facility during the lockdown period. The said incident led to the direct loss of
approximately 549,000 unsellable pots of our vegetable produce, the estimated cost of
which was approximately RMB4.6 million. It is estimated that it led to a loss of potential
sales revenue of approximately RMB8.3 million based on the average selling price of our
potted vegetable produce in Shandong province of approximately RMB15.1 per pot in
FY2022.
Our revenue increased from approximately RMB88.6 million in 9M2022 to
approximately RMB121.3 million in 9M2023. Such increase in revenue in the said period
was primarily attributable to the increase in the sales volume of our potted vegetable
produce from approximately 5.9 million pots in 9M2022 to approximately 8.0 million pots
FINANCIAL INFORMATION
–3 5 3–


--- page 363 ---
in 9M2023 as our business operation was no longer affected by COVID-19 epidemic in
9M2023. On the other hand, the average selling price per pot of our potted vegetable
produce remained to be stable at approximately RMB15.1 in 9M2022 and 9M2023.
Gross profit margin
Our gross profit margin slightly decrea sed from approximately 44.0% in FY2020 to
approximately 42.4% in FY2021 mainly because of the increase in cultivation overheads
from approximately RMB4.2 million for FY2020 to RMB6.1 million for FY2021 which are
predominantly depreciation charges. Such increase in cultivation overheads was due to the
significant capital expenditure on our cultivation facilities including greenhouses and
infrastructure which amounted to appro ximately RMB44.4 million and RMB14.4 million
for FY2020 and FY2021 respectively. Had the cu ltivation overheads in FY2021 remained at
the same level as in FY2020, our gross profit margin would have increased by 1.2% to
43.7%.
Our gross profit margin decreased from approximately 42.4% in FY2021 to
approximately 41.5% in FY2022 mainly because our revenue decreased by approximately
18.2% due to the temporary suspension of our cultivation facilities in FY2022, yet our
cultivation overheads remain at a similar lev el. As a result, our cultivation overheads
accounted for a larger proportion of cost of sales in FY2022, leading to lower gross profit
margin in FY2022.
Our gross profit margin increased from approximately 39.9% in 9M2022 to
approximately 42.9% in 9M2023 mainly because of the increase in revenue from the sale
of our potted vegetable produce by approx imately RMB32.7 million (or 36.9%) from
9M2022 to 9M2023, which overwhelmed the increase in our cost of sales by approximately
RMB16.0 million (or 30.1%) during the same period. Moreover, due to the temporary
suspension of business activities of our Laixi Facility and Dalian Facility during the
lockdown period between March and April 2022, our revenue decreased significantly during
the period, leading to a lower gross profit margin for 9M2022.
N e tp r o f i tg r o w t h
Our profit for the period increased by approximately RMB3.5 million (or 8.1%) from
approximately RMB43.8 million in FY2020 to approximately RMB47.3 million in FY2021,
which mainly resulted from the increase in our revenue by approxim ately RMB33.5 million
(or 27.6%) from FY2020 to FY2021 mainly attrib utable to the increase in our sales volume;
effect of which was partially offset by (i) the increase in our Listing expenses by
approximately RMB3.6 million (or 87.8%) and (ii) the decrease in our other income by
approximately RMB3.4 million (or 73.4%) in the corresponding period.
Our profit for the period decreased by approximately RMB15.5 million (or 32.7%)
from approximately RMB47.3 million in FY2021 to approximately RMB31.8 million in
FY2022, which mainly resulted from (i) the decrease in our revenue by approximately
RMB28.3 million (or 18.2%) from FY2021 to FY2022 mainly attributable to the decrease in
our sales volume due to the temporary suspension of our Laixi Facility as a result of the
resurgence of COVID-19 cases and the lockd own measures during March 2022 and April
FINANCIAL INFORMATION
–3 5 4–


--- page 364 ---
2022; and (ii) the decrease in our other inc ome by approximately RMB0.3 million (or
27.4%) in the corresponding period. The serie so fl o c k d o w nm e a s u r e si nD a l i a na n dv a r i o u s
areas in Shandong province due to the COVID-19 epidemic in 2022 has temporary adverse
impact on our business in FY2022.
We recorded a profit for the period of approximately RMB41.1 million in 9M2023,
compared to a net profit of approximatel y RMB19.7 million recorded in 9M2022, which
was primarily due to the increase in our revenue as a result of our increase in the volume of
our actual cultivation output during the corresponding period as our business operation
was no longer affected by COVID-19 epidemic in 9M2023. Our revenue and sales volume
for 9M2022 was significantly lower due to the t emporary suspension of our Laixi Facility
and Dalian Facility as a result of the resur gence of COVID-19 cases and the lockdown
measures during March 2022 and April 2022.
N e tp r o f i tm a r g i n
Our net profit margin decreased fro m approximately 36.1% in FY2020 to
approximately 30.5% in FY2021. Such decrease was primarily the result of (i) the
increase in our Listing expenses of approximately RMB3.6 million (or 87.8%) and (ii) the
decrease in our other income by approximately RMB3.4 million (or 73.4%); effect of which
was partially offset by the increase in our revenue by approximately RMB33.5 million (or
27.6%) from FY2020 to FY2021 mainly attributable to the increase in our sales volume in
the corresponding period.
Our net profit margin decreased fro m approximately 30.5% in FY2021 to
approximately 25.1% in FY2022. Such decrease was primarily the result of the decrease
in our revenue of approximately RMB28.3 million (or 18.2%) from FY2021 to FY2022 due
to the temporary adverse impact of the COVID-19 epidemic which seriously affected our
Laixi Facility and Dalian Facility and Shan dong province market during FY2022.
We have a net profit margin of 33.9% in 9M2023, which is higher than the net profit
margin of 25.1% in FY2022. Our net profit margin for FY2022 was particularly low
primarily because of the decrease in our revenue of approximately RMB28.3 million (or
18.2%) from FY2021 to FY2022 due to the temporary adverse impact of the COVID-19
epidemic which seriously affected our Laix i Facility and Dalian Facility and Shandong
province market during FY2022.
P l e a s er e f e rt ot h ep a r a g r a p hh e a d e d‘ ‘ P e r i o dt op e r i o dc o m p a r i s o no fo u rr e s u l t so f
operations’’ in this section of the prospectus for more details of our net profit margin.
Return on assets
Our return on assets decreased from approximately 17.6% in FY2020 to approximately
16.3% in FY2021. Such decrease was primarily due to the increase in our total assets mainly
resulting from (i) the increase of our bank and cash balances by approximately RMB16.0
million (or 229.5%); and (ii) the increase o f our trade receivables by approximately
RMB15.5 million (or 49.7%) from FY2020 to FY2021.
FINANCIAL INFORMATION
–3 5 5–


--- page 365 ---
Our return on assets decreased from approximately 16.3% in FY2021 to approximately
9.6% in FY2022. Such decrease was primarily due to (i) the decrease in our net profit of
approximately RMB15.5 million (or 32.8%); and (ii) the increase in our total assets mainly
resulting from the increase of our bank and cash balances by approximately RMB48.1
million (or 209.5%) from FY2021 to FY2022.
O u rr e t u r no na s s e t sf o r9 M 2 0 2 3w a sa p p r o x i m a t e l y1 1 . 1 % ,w h i c hw a sh i g h e rt h a no u r
return on assets of approximately 9.6% for FY 2022, primarily due to the increase in our net
profit in 9M2023 despite the fact that our return on assets for 9M2023 was calculated based
on the net profit recorded in 9M2023 as contrary to the full year net profit for the
calculation of the return on assets for FY2022.
Return on equity
Our return on equity decreased from 20.7% in FY2020 to 18.3% in FY2021. Such
decrease was primarily due to the increase in our total equity by approximately RMB47.3
million (or 22.4%) from FY2020 to FY2021.
Our return on equity decreased from approximately 18.3% in FY2021 to
approximately 11.0% in FY2022. Such decrease was primarily due to (i) the decrease in
our net profit of approximately RMB15.5 million (or 32.8%); and (ii) the increase in our
total equity by approximately RMB31.8 m illion (or 12.3%) from FY2021 to FY2022.
Our return on equity for 9M2023 was approxi mately 12.4%, which was higher than our
return on equity of approximately 11.0% for FY2022, primarily due to the increase in our
net profit in 9M2023 despite the fact that our return on equity for 9M2023 was calculated
based on the net profit recorded in 9M2023 as contrary to the full year net profit for the
calculation of the return on equity for FY2022.
Current ratio
Our current ratio was approximately 1.5 times, 3.2 times, 3.8 times and 4.7 times as at
31 December 2020, 31 December 2021, 31 D ecember 2022 and 30 September 2023,
respectively. Our current ratio increased from approximately 1.5 times as at 31 December
2020 to approximately 3.2 times as at 31 December 2021 primarily because of (i) the
increase in our trade receivables by approximately RMB15.5 million (or 49.7%); (ii) the
increase in our bank and cash balances by a pproximately RMB16.0 million (or 229.5%);
and (iii) the increase in our prepayments and ot her receivables by a pproximately RMB6.0
million (or 197.3%) in the corre sponding period. Our current ratio increased further to
approximately 3.8 times as at 31 December 2022 primarily because of the increase in our
bank and cash balances by approximately RMB48.1 million (or 209.5%) in the
corresponding period. Our current ratio increased further to approximately 4.7 times as
at 30 September 2023, primarily because of the increase in our bank and cash balances by
approximately RMB18.5 million (or 26 .0%) in the corresponding period.
Quick ratio
Our quick ratio was approximately 1.5 times, 3.2 times, 3.7 times and 4.7 times as at 31
December 2020, 31 December 2021, 31 December 2 022 and 30 September 2023, respectively.
Our quick ratio increased from approximately 1.5 times as at 31 December 2020 to
approximately 3.2 times as at 31 December 2021 primarily because of (i) the increase in our
trade receivables by approximately RMB15.5 million (or 49.7%); (ii) the increase in our
FINANCIAL INFORMATION
–3 5 6–


--- page 366 ---
bank and cash balances by approximately R MB16.0 million (or 229.5%); and (iii) the
increase in our prepayments and other receivables by approximately RMB6.0 million (or
197.3%) in the corresponding period. Our quick ratio increased further to approximately
3.7 times as at 31 December 2022 primarily because of the increase in our bank and cash
balances by approximately RMB48.1 million ( or 209.5%) in the corresponding period. Our
quick ratio increased further to approximately 4.7 times as at 30 September 2023, primarily
because of the increase in our bank and cash balances by approximately RMB18.5 million
(or 26.0%) in the corresponding period.
Interest coverage ratio
Our interest coverage ratio was approximately 38.0 times, 53.7 times, 36.3 times and
63.1 times as at 31 December 2020, 31 Decembe r 2021, 31 December 2022 and 30 September
2023, respectively. Our interest coverage ratio increased from approximately 38.0 times as
at 31 December 2020, to approximately 53. 7 times as at 31 December 2021, which was
primarily due to the decrease in our interest expenses by approximately RMB0.3 million (or
24.2%) in FY2021 compared to FY2020. Our interest coverage ratio decreased from
approximately 53.7 times as at 31 December 2021, to approximately 36.3 times as at 31
December 2022, which was primarily due to the decrease of our profit before income tax
and interest expenses by approximately RM B15.5 million (or 32.1%) in the corresponding
period. Our interest coverage ratio then rebounded to approximately 63.1 times as at 30
September 2023 primarily due to the increase in our profit before income tax and interest
expenses by approximately RMB21.4 million (or 104.9%) as compared to the profit before
income tax and interest expenses for the 9M2022.
Net debt to equity ratio
Our net debt to equity ratio was approximately 6.5% as at 31 December 2020. Net debt
to equity ratio is not applicable to our Group as at 31 December 2021, 31 December 2022
and 30 September 2023 as our Group recorded net cash as at 31 December 2021, 31
December 2022 and 30 September 2023.
Gearing ratio
Our gearing ratio was approximately 9.8%, 8.0%, 7.1% and 6.2% as at 31 December
2020, 31 December 2021, 31 December 2022 and 3 0 September 2023, respectively. Our
gearing ratio decreased slightly from approximately 9.8% as at 31 December 2020 to
approximately 8.0% as at 31 December 2021, which was primarily due to the increase in our
total equity by approximately RMB47.3 m illion (or 22.4%) during the same period. Our
gearing ratio decreased slightly to approximately 7.1% as at 31 December 2022, which was
primarily due to the increase in our total equity by approximately RMB31.8 million (or
12.3%) during the same period. Our gearing ra tio decreased slightly to approximately 6.2%
as at 30 September 2023, which was primarily due to the increase in our total equity by
approximately RMB41.1 million (or 14.2%) during the same period.
OFF-BALANCE SHEET COMMITMENTS AND ARRANGEMENTS
As at the Latest Practicable Date, save as disclosed in notes 37 and 38 to the
Accountants’ Report as set out in Appendix I to this prospectus, we had not entered into
any off-balance sheet transactions.
FINANCIAL INFORMATION
–3 5 7–


--- page 367 ---
QUALITATIVE AND QUANTITATIVE DISCLOSURE ABOUT MARKET RISKS
Our activities expose us to a variety of financi al risks: foreign currency risk, credit risk,
interest rate risk and liquidity risk. Our overall risk management programme focuses on the
unpredictability of financial markets and seek s to minimise potential adverse effects on our
financial performance.
Details of the risk to which we are exposed are set out in note 6 to the Accountants’
Report as set out in Appendix I to this prospectus.
Categories of financial instruments
Our Group
At 31 December
At 30
September
2020 2021 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000
Financial assets:
Financial assets at amortised
cost 39,044 70,052 125,038 148,611
Financial liabilities:
Financial liabilities at
amortised cost 32,464 27,072 37,128 34,830
Fair value
The carrying amounts of the financial assets and financial liabilities of our Group and
our Company at amortised cost as reflected in our consolidated statements of financial
position approximate their respective fair values.
DIVIDEND POLICY
We may distribute dividends in the form of cash, shares or a combination of cash and
shares. Our Board formulates our profit distribution plan based on our results of
operations, cash flows, financial condition, future business prospects, statutory and
regulatory restrictions on the payment of dividends and other factors that our Board deems
relevant. All of our Shareholders have equal rights to dividends and other distributions
proportionate to their shareholding.
During the Track Record Period, we did not declare or pay any dividends to our equity
holders. As members of our Group did not declar e or pay any dividend since its inception,
the dividend declared represents the return to shareholders accumulated since the inception
of the Group.
FINANCIAL INFORMATION
–3 5 8–


--- page 368 ---
Going forward, we will re-evaluate our di vidend policy in light of our financial
position and the prevailing ec onomic climate. The determination to pay dividends will be
based upon our earnings, cash flow, financial condition, capital requirements, statutory
fund reserve requirements and any other conditions that our Directors deem relevant. The
payment of dividends may also be limited by le gal restrictions and by financing agreements
that we may enter into in the future.
Our Company does not intend to adopt fixed dividend policy specifying a dividend
payout ratio after Listing. The declaration, payment and amount of dividends will be
subject to our discretion. There shall be n o assurance that our Company will be able to
declare or distribute any dividend in the amount set out in any plan of our Board or at all.
Our historical dividends may not be indicative of the amount of our future dividends.
DISTRIBUTABLE RESERVES
As at 30 September 2023, the Company had no reserves available for distribution to
our Shareholders. The Companies Act provides that share premium account of an exempted
company incorporated in the Cayman Islands, such as our Company, may be applied in
such manner as it may from time to time determine, subject to the provisions, if any, of its
memorandum and articles of association, provided that no distribution or dividend may be
paid to its members out of the share premium account unless, immediately following the
date on which the distribution or dividend is proposed to be paid, such company shall be
able to pay its debts as they fall due in the ordinary course of business.
LISTING EXPENSES
Our total estimated Listing expenses primarily consist of our estimated underwriting
commissions for the Share Offer in addition to our professional fees paid in relation to the
Share Offer.
Assuming the Over-allotment Option is not exercised and assuming an Offer Price of
HK$1.18, being the mid-point of our indicative price range for the Share Offering, our total
Listing expenses is estimated to be appr oximately RMB54.8 million (equivalent to
approximately HK$60.4 million), representing approximately 51.2% of the gross
proceeds from the Share Offer. The Listing expenses comprise (i) underwriting-related
expenses of approximately RMB6.4 million ( equivalent to HK$7.1 million); (ii) non-
underwriting-related expenses of RMB 48.4 million (equivalent to HK$53.3 million),
including (a) fees and expenses of legal advisers and reporting accountants of
approximately RMB25.1 million (equivale nt to HK$27.7 million); and (b) other non-
underwriting-related fees and expenses of approximately RMB23.3 million (equivalent to
HK$25.6 million). Our Listing expenses of app roximately RMB14.3 million (equivalent to
approximately HK$15.8 million) is directly a ttributable to the issue of the Offer Shares in
the Share Offer which was and is expected to be accounted for as a deduction from equity in
accordance with relevant accounting sta ndards. Our remaining Listing expenses of
RMB40.5 million (equivalent to HK$44.3 million) were or are expected to be charged as
expenses to our consolidated statements of profit or loss and other comprehensive income,
of which approximately RMB5.3 million (equivalent to approximately HK$5.8 million),
approximately RMB4.1 million (equivalen t to approximately HK$4.4 million),
FINANCIAL INFORMATION
–3 5 9–


--- page 369 ---
approximately RMB7.6 million (equivalen t to approximately HK$8.4 million),
approximately RMB5.7 million (equivalent to approximately HK$6.3 million) and
approximately RMB6.0 million (equivalent to approximately HK$6.6 million) was
charged for the period before Track R ecord Period, FY2020, FY2021, FY2022 and
9M2023 respectively, while the balance of ap proximately RMB11.8 million (equivalent to
approximately HK$13.1 million) is expected to be charged in the remaining months in the
year ended 31 December 2023 and the year ending 31 December 2024. Our above total
estimated Listing expenses are the latest practicable estimates for reference only. The final
amount to be recognised may differ from these estimates.
Our Directors consider that our financial r esults will be adversely affected by the
expenses in relation to the Share Offer for the year ending 31 December 2023.
VALUATION OF BIOLOGICAL ASSETS
The independent valuers
We have engaged Savills, a firm of independent qualified professional valuers, to
determine the fair value of our biological assets as at 31 December 2020, 31 December 2021,
31 December 2022 and 30 September 2023, respectively. The key members of Savills
comprised Ms. Sofia Luo, Mr. Yue Xu and Mr. Tony Tung.
Ms. Sofia Luo, Senior Associate Directo r at Savills, is specialised in accounting
compliance valuation, biological asset valuati on and derivative and is currently responsible
for the business valuation for initial public offering, financial reporting, merger and
acquisition, and project finance. She has provided various business and biological asset
valuation services to numerous listed and unlisted companies of different industries
primarily resided in the PRC, such as China Tontine Wines Group Limited (a company
l i s t e do nt h eS t o c kE x c h a n g ew i t hs t o c kc o d e0 3 8 9 ) ,C O F C OM e a tH o l d i n g sL i m i t e d( a
company listed on the Stock Exchange with stock code 1610) and PuraPharm Corporation
Limited (a company listed on the Stock Exchange with stock code 1498), for financial
reporting purpose.
Mr. Yue Xu, Associate Director at Savills, holds the Chartered Financial Analyst,
Financial Risk Manager and Certified Management Accountants’ designations. He is also a
member of the Royal Institute of Chartered Su rveyors. He has over 8 years’ experiences in
business valuation, including company valuation, merger consideration allocation,
intangible assets, and valuation of financial instruments to various listed and unlisted
companies in different industries in the PRC and Hong Kong, such as Tycoon Group
Holdings Limited (a company listed on the Stock Exchange with stock code 3390) for
transactional purpose, and PuraPharm Corporation Limited (a company listed on the Stock
Exchange with stock code 1498) for financial reporting purpose.
Mr. Tony Tung, Valuation Manager at Savills, is a member of the Hong Kong Institute
of Certified Public Accountants and holds the Chartered Financial Analyst and the
Financial Risk Manager designations. He ha so v e r6 - y e a re x p e r i e n c ei nb u s i n e s sa n d
financial instrument valuation to numerous listed and unlisted companies of different
industries in the PRC and Hong Kong and 10-year experience in auditing.
FINANCIAL INFORMATION
–3 6 0–


--- page 370 ---
Based on market reputation and relevant background research, our Directors and the
Sole Sponsor are satisfied that Savills is independent from us and is competent in
conducting a valuation on our biological assets.
Valuation method
The market approach considers prices recently paid for similar assets, with adjustments
made to market prices to reflect condition and utility of the appraised assets relative to the
market comparative. Assets for which there is an established market may be valued by this
approach.
The cost approach considers the cost to reproduce or replace in new condition the
assets appraised in accordance with current mark et prices for similar assets, with allowance
for accrued depreciation or obsolescence presen t, whether arising from physical, functional
or economic causes.
The Sole Sponsor held discussions with Savills in relation to the valuation procedures,
valuation techniques and information required to prepare their valuation report. The Sole
Sponsor further compared the valuation in technique chosen with those used in other
similar transactions and market practice.
In the valuation by Savills, market and co st approaches are adopted to value our
potted vegetable produce as at the valuation dates. In terms of the biological nature of our
potted vegetable produce, the whole life cycle can be classified as growing period and
mature period. We employed industrial cultivation method for our potted vegetable
produce. The cultivation process of our potted vegetable produce until the point of sales
takes approximately 22 to 31 days. Potted vegetable produce has longer growth cycles in
colder seasons. The following table set forth the growing period and mature period of our
potted vegetable produce (assuming that they are growing in optimal cultivation
conditions) as at the valuation dates:
Valuation dates Growing period Mature period
31 December 2020,
31 December 2021 and
31 December 2022
1 day to 27 days 28 days or above
30 September 2023 1 day to 20 days 21 days or above
FINANCIAL INFORMATION
–3 6 1–


--- page 371 ---
During the first week of growing period, our p otted vegetable produce typically does not
yet sprout and does not have observable signi ficant biological tran sformation above the
organic substrate. Cost approach is adopte d for these newly planted potted vegetable
produce. The cost of direct raw materials, subcontracting labour cost, and other related
expenses have been considered in the calculati on of the fair values for our potted vegetable
produce. After the first week of growing period but before reaching the mature period, the
potted vegetable produce typically has observable significant biological transformation since
planting with sprout and leaves visible above t he organic substrate. Ba sed on our historical
record, more than 65% of our total cost have been incurred after the first week of growing
period. Unit fair value of growing potted veg etable produce is estimated based on market
price for mature potted vegetable produce le ss remaining cultivation cost and associated
profit, adjusted for expected scrappage prior to reaching maturity. Market approach is
adopted since observable biological transformation has taken place. During the mature
period, the potted vegetable produce has reached the saleable state and market approach is
adopted. The fair values of our biological assets as at the end of respective years are
calculated to be the product of unit fair value a nd the quantity held, deducting the reasonable
cost related to sales.
Key assumptions and inputs
The key assumptions and inputs include the classification of cultivation methods, scrap
rate, market price of potted vegetable produce and cost. Savills also assumes that historical
trend and data will be maintained and there will be no material change in the existing
political, legal, technological, fiscal or econo mic condition which may adversely affect our
business. Our Directors confirmed, and the Sole Sponsor concurred, that the components
used by Savills in the valuation process are consistent with ma rket factors and assumptions
used in the measurement.
The key assumptions and inputs for determining the fair value of our biological assets
include the following:
. accounting and operating records at our Company are accurate. Cost, quality and
quantity of our biological assets are properly reflected in the information kept and
provided by our Company;
. in accordance with HKFRS 13, potential blockage discount due to the volume of
potted vegetable produce held by our Company is not considered as it is the
characteristics of the holding rather than the characteristics of our biological
assets;
. in the absence of a future or forward market of potted vegetable produce as
confirmed by our Company, prevailing market prices for our mature potted
vegetable produce based on transaction with Independent Third Parties at and
near as at each valuation date is considered the best estimate of price receivable
when our biological assets are sold upon maturity;
FINANCIAL INFORMATION
–3 6 2–


--- page 372 ---
. cost to be incurred in completing the planting cycle for our growing potted
vegetable produce will not deviate sign ificantly from that of our mature potted
vegetable produce as at each valuation date respectively;
. our biological assets are properly planted by appropriate methods and are
properly cultivated under appropriate environment such that they will grow in a
normal condition and meet the relevant quality requirements;
. there will be no major changes in existing political, legal, technological, tax, fiscal
or economic conditions in the country or district where the business is in
operation;
. the long term inflation rate, interest rate and currency exchange rate will not
differ materially from those then pre vailing as at each valuation date;
. our Company will retain sufficient man agement and technical personnel to
maintain our ongoing operations;
. there will be no major business disruptions through diseases, riots, international
crisis, industrial disputes, industrial accidents or severe weather conditions, other
than those prevailing as at the valuation dates, that will significantly affect our
biological assets;
. our businesses are unaffected by any statutory notice and the operation of our
business does not give, or will not give, rise to a contravention of any statutory
requirements. All applicable laws and reg ulations were and will be complied with;
. our business is not and will not be subject to any unusual or onerous restrictions
or encumbrances which may render our Company defaulted against our
outstanding commitment or obligation; and
. any potential bad debt of our Company w ill not materially significantly affect
value of our biological assets.
As the cultivation process of our potted vegetable produce until the point of sales takes
approximately 22 to 31 days only (affected by seasonal factors and weather conditions), all
our biological assets as at 31 December 20 20, 31 December 2021, 31 December 2022 and 30
September 2023 have been subsequently sold if applicable as at the date of the valuation
report, thus, taking into account the information of the subsequent sales of our biological
assets, our Directors consider that the above key assumptions and inputs are reasonable.
FINANCIAL INFORMATION
–3 6 3–


--- page 373 ---
The representatives of Sole Sponsor and Sav ills conducted the physical inspection for
the quality and quantity of our biological a ssets as at 31 December 2020, 31 December 2021,
31 December 2022 and 30 September 2023 without experiencing any limitation in material
aspect. In particular, Savills has performed th e following work with respect to the valuation
of our biological assets:
. Savills conducted inspection of our culti vation facilities and physically counted
the number of potted vegetable produce on various dates and compared with the
same of the historical record, checked and cultivation status of our potted
vegetable produce; took photos of our potted vegetable produce to observe their
physical appearance;
. Savills obtained and reviewed that o ur Company has kept proper record of
quantity of our biological assets; and
. Savills conducted market research to assess if the historical selling prices of the
potted vegetable produce sold by us were in line with market transactions.
The valuation conducted by Savills is su bject to the caveat that Savills relied
substantially on the accuracy, completeness and reasonableness of the various assumptions
and other data provided by us in preparation of the valuation report. There is no assurance
that there will be no significant deviation in t he future. Please refer to the paragraph headed
‘‘Risk Factors — Risks relating to our business — Our results of operations are subject to
changes in fair value of biological assets, which are subject to a few assumptions. Any
increase in the selling prices of our biological a ssets will increase both our sales revenue and
changes in fair value of biological assets, and vice versa’’ in this prospectus.
T h eS o l eS p o n s o rd i s c u s s e dw i t hS a v i l l si nr e l a t i o nt ot h ev a l u a t i o nb a s e sa n d
assumptions and understands that Savills has c onducted the biological asset valuation in
accordance with Hong Kong Accounting Standard 41 — Agriculture, issued by the Hong
Kong Institute of Certified Public Accountants. The key assumptions, as detailed above, are
made based on the historical actual operation performance of our Company and market
data. Savills has obtained and discussed with us and our Reporting Accountants regarding
the historical actual operation data from us, and considered and reviewed whether they are
appropriate and reasonable to be used in the valuation. Our Directors confirm that the
assumptions adopted are consistent with industry practice and in line with the actual figures
during the Track Record Period.
Further, our Reporting Accountants have performed the procedures in accordance
with the Hong Kong Standards on Auditing. Our Reporting Accountants have made
inquiries regarding the source data used and procedures undertaken by Savills in the
valuations and obtained an understanding on the assumptions and methods used. Based on
the procedures undertaken, our Reporting Accountants are satisfied that the valuation
technique chosen and the source data used in the valuation are appropriate and reasonable.
The Sole Sponsor has held discussions with Savills in relation to the valuation methodology
and assumptions adopted, the valuation techniques and the inputs used in the valuation by
Savills to understand their valuation process a nd reviewed the qualification and relevant
valuation experience of Savills and its profe ssional valuers. The Sol e Sponsor has further
FINANCIAL INFORMATION
–3 6 4–


--- page 374 ---
compared the valuation technique chosen, bases and assumptions of the valuation with
those used in other similar transactions and market practice. In addition, the Sole Sponsor
has discussed with our Reporting Accountants re garding the valuation of biological assets
by Savills and noted that our Reporting A ccountants had performed procedures in
accordance with the relevant auditing standards. Given the above, the Sole Sponsor is
satisfied that the valuation methodology and major inputs used in the valuation of the
biological assets of our Company are appropriate and reasonable.
Sensitivity analysis
The following tables illustrate the sensitivity of the fair value of our biological assets
that would arise if the weighted average market price of potted vegetable produce had
changed during the periods indicated, assuming all other variables remained constant. The
fair value of our biological assets increases when the market price increases, and decreases
when the market price decreases.
Market price of our potted vegetable produce was maintained at approximately
RMB15 per pot to RMB16 per pot during the Track Record Period.
Change in market price –30% –15% 15% 30%
(Decrease)/Increase in fair valve
(RMB’000)
For the year ended 31 December 2020 (2,477) (1,239) 1,239 2,477
For the year ended 31 December 2021 (2,537) (1,268) 1,268 2,537
For the year ended 31 December 2022 (2,018) (1,009) 1,009 2,018
For the nine months ended 30 September
2023 (2,345) (1,172) 1,172 2,345
Stock-take and internal control
Stock-take
We perform a full stock-take of our potte d vegetable produce every month at our
cultivation facilities to ensure the physical existence and monitor the physical condition of
our biological assets. For each full stock-ta ke, we prepare a detailed stock-take plan with
instructions. The team of a full stock-take includes four members, normally staff from our
finance staff and staff member of our cultivatio n facilities. The result of each full stock-take
is documented on a stock count sheet which is signed by all members and the responsible
person of each cultivation facility who participated in the stock-take. The stock count sheet
will be submitted to and kept by our finance st aff. Any variance between the results of the
stock-take and the inventory record shall be reported to our management. The results of the
stock-take will be recorded after the approval of our management. If the variance between
the results of the full stock-take and the i nventory record exceed ten pots for each
greenhouse, a new full stock-take needs to be performed. During the Track Record Period,
there was no material damage or death of our biological assets.
FINANCIAL INFORMATION
–3 6 5–


--- page 375 ---
Internal control and management system
We have maintained a comprehensive policy for biological asset management. Our
biological asset management policy covers, am ong others, purchase and inspection of raw
materials, monitoring the cultivation proces s, accounting records, record keeping and
stock-take. To facilitate the implementation of our biological asset management policy, we
plan to employ an electronic information management system developed by a third-party
developer to keep comprehensive record of our biological assets.
UNAUDITED PRO FORMA STATEMENT OF ADJUSTED CONSOLIDATED NET
TANGIBLE ASSETS
For details of our unaudited pro forma statement of adjusted consolidated net tangible
assets, please refer to the section headed ‘‘Unaudited Pro Forma Financial Information’’ as
set out in Appendix II to this prospectus.
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 and trading position since 30 September 2023 and
there has been no event since 30 Septembe r 2023 which would materially affect the
information shown in the Accountants’ Report as set out in Appendix I to this prospectus.
DISCLOSURE REQUIRED UNDER THE LISTING RULES
As at the Latest Practicable Date, our Directors confirmed that there were no
circumstances that would give rise to a disclo sure requirement under Rules 13.13 to 13.19 of
the Listing Rules.
PROPERTY INTERESTS AND PROPERTY VALUATION REPORT
The value of our property interests as of 31 December 2023 as valued by BMI
Appraisals Limited, an independent property valuer, was RMB121 million. There was a net
revaluation deficit, representing the deficien cy in market value of the properties below their
net book value as of 31 December 2023. We considered that there is no impairment on these
properties as the value in use of these properties are higher than the carrying amount as of
31 December 2023. Management of the Company considered there is no impairment
indicator on these properties as these properties are profit generating. Further details of our
property interests and the text of the letter a nd valuation certificates of these property
interests prepared by BMI Appraisals Limited are set out in Appendix IV to this prospectus.
FINANCIAL INFORMATION
–3 6 6–


--- page 376 ---
Disclosure of the reconciliation of the valuation of the interests in properties
attributable to us as of 31 December 2023 and such property interests in our
consolidated statements of financial posit ion as of 30 September 2023 as required under
Rule 5.07 of the Listing Rules is set forth below:
RMB’000
Net book value of following properties as at 30 September 2023 :
Properties in property, plant and equipment 156,999
Properties in investment properties 17,966
Properties in right-of-use assets 20,835
195,800
Less: Depreciation on properties in property, plant and equipment for
the period from 1 October 2023 to 31 December 2023 (2,036)
Less: Depreciation on properties in investment properties for the period
from 1 October 2023 to 31 December 2023 (243)
Less: Depreciation on properties in r ight-of-use assets for the period
from 1 October 2023 to 31 December 2023 (150)
Add: Additions on properties in property, plant and equipment for
period from 1 October 2023 to 31 December 2023 5,000
Net book value of properties as at 31 December 2023 : 198,371
Valuation deficit (77,371)
Valuation as at 31 December 2023 121,000
FINANCIAL INFORMATION
–3 6 7–


--- page 377 ---
BUSINESS OBJECTIVES AND STRATEGIES
Our business objectives are to strengthen our position in the business of potted
vegetable produce cultivation in the PRC and further expand our business operations with a
view to achieving sustainable growth in our business. For a detailed description of our
business strategies, please refer to the paragraph headed ‘‘Business — Our business
strategies’’ in this prospectus.
REASONS FOR THE SHARE OFFER
Our Directors believe that the Share Offer will be beneficial to our Company and its
Shareholders as a whole, notwithstanding the expenses involved in the Share Offer process
and the dilution effect to our Controlling Sha reholders, taking into consideration of the
reasons below:
— a listing status on the Stock Exchange can enhance our corporate profile and
business reputation, and would be beneficial for us to explore new markets and
compete against our competitors. We will have the required funding to support
our business growth and expedite the expansion of our business operations;
— with our business strategy of expanding and improving our cultivation capacity in
our existing geographical market and est ablishing a new cultivation facility in a
new geographical market, we will have a long term need of substantial amount of
financial resources to support our business growth and development;
— more stringent internal control and corporate governance culture could be
instilled through the Share Offer process and continuous compliance with the
Listing Rules requirements. These are important to us to maintain our position as
a leading potted vegetable producer and will facilitate the healthy development of
our Group in the industry environment;
— our Directors have considered but believe that other means of financing should
not be used to support our long-term business growth, in view that a high gearing
ratio would not be entirely favourable to our business growth, whereas equity
financing would not require us to retain a portion of our business income for loan
repayment and thus gives us greater flexibility and capability for business
development and dividend payment to create greater value for our Shareholders;
and
— our Company could establish an efficient a nd sustainable fund-raising platform
through Listing, thereby enabling us to ga in direct access to the capital market to
fund our existing operations and future expansion.
FUTURE PLANS AND USE OF PROCEEDS
–3 6 8–


--- page 378 ---
USE OF PROCEEDS
Assuming that the Over-allotment Option i s not exercised at all, based on the Offer
Price of HK$1.18 per Offer Share, being the mid -point of the proposed Offer Price range of
HK$1.28 to HK$1.08 per Offer Share, the net proceeds of the Share Offer, after deduction
of underwriting fees and other expenses payable by our Company in relation to the Share
Offer, are estimated to be HK$57.6 million (equivalent to approximately RMB52.3 million).
Our Company currently intends to use the net proceeds from the Share Offer as follows:
For the period
from the Latest
Practicable
Date to
31 December
2024
For the
period from
1 January
2025 to
31 December
2025
For the
period from
1 January
2026 to
31 December
2026 Total
Approximate
% of the total
net proceeds
(RMB’million) (RMB’million) (RMB’million) (RMB’million)
Expansion of our cultivation capacity
— Improvement and expansion of
cultivation facilities at existing
geographical markets 17.5 10.1 1.5 29.1 55.7
— Establishing new cultivation facilities
in new geographical markets 9.1 2.3 — 11.4 21.8
Setting up a dedicated organic substrates
production facility 7.4 — — 7.4 14.1
Strengthening our operating efficiency
through upgrade of information
technology system 4.4 — — 4.4 8.4
Total 38.4 12.4 1.5 52.3 100.0
For details of how we intend to implement th e proceeds raised from Listing, please
r e f e rt ot h ep a r a g r a p hh e a d e d‘ ‘ B u s i n e s s—O ur business strategies’’ in this prospectus.
If the final Offer Price is set at the highest or lowest point of the indicative Offer Price
range, the net proceeds of the Share Offer will increase or decrease by approximately
HK$9.4 million, respectively. In such event, the net proceeds will be used in the same
proportions as disclosed above irrespective of whether the Offer Price is determined at the
highest or lowest point of the indicative Offer Price range.
If the Over-allotment Option is exercis ed in full, the additional net proceeds of
approximately HK$17.7 million (assuming that the final Offer Price is set at the mid-point
of the indicative Offer Price range) receiv ed from the Share Offer will be allocated in
accordance with the above allocations on a pro rata basis. For details of the Over-allotment
Option, please refer to the paragraph headed ‘‘Structure and Conditions of the Share Offer
— Over-allotment option’’ in this prospectus.
FUTURE PLANS AND USE OF PROCEEDS
–3 6 9–


--- page 379 ---
We will issue an announcement in accordance with the Listing Rules requirement if
there is any material change in the use of proceeds as described above.
Investors should be aware that any part of the business plans of our Group may or may
not proceed according to the time frame as described under the paragraph headed
‘‘Implementation Plans’’ in this section of the prospectus due to various factors such as
changes in customers’ demand and changes in market conditions. We will only place the net
proceeds from the Share Offer which are not immediately required for the disclosed
purposes in short-term interest-bearing accounts at licensed b anks or authorized financial
institutions (as defined under the Securities and Futures Ordinance, or the applicable laws
in the relevant jurisdiction for non-Hong Kong based deposits, as the case may be). Under
such circumstances, our Directors will evaluate carefully the situations and will hold the
funds as short-term deposits in authorised banks and/or financial institutions. In the event
that we would require financing in addition to the net proceeds from the Share Offer for our
business plans, the shortfall will be financed by our internal resources and/or bank
financing, as appropriate.
IMPLEMENTATION PLANS
Our implementation plans are set forth below for the period from the Latest
Practicable Date to 31 December 2026. Investors should note that the following
implementation plans are formulated on the bases and assumptions referred to in the
paragraph headed ‘‘Bases and key assumptions’’ in this section of the prospectus. These
bases and assumptions are inherently subject to uncertainties and unpredictable factors, in
particular the risk factors set forth in the secti on headed ‘‘Risk Factors’’ in this prospectus.
Our actual course of business may vary from our business strategies set out in this
prospectus. There is no assurance that our plans will materialise in accordance with our
expected time frame or that our objectives will be accomplished.
While the actual course of events may invariably encounter unforeseeable changes and
fluctuations, we shall use our best endeavours to anticipate changes, yet allowing for
flexibility to implement the following plans. In the event of any material modifications to
the use of proceeds as described above, we will issue announcement in accordance with the
Listing Rules and disclose in our annual report for the relevant year as required by the
Stock Exchange.
FUTURE PLANS AND USE OF PROCEEDS
–3 7 0–


--- page 380 ---
For the period from the Latest Practicable Date to 31 December 2024
Business strategies Implementation plans Estimated cost
(approximate)
Expansion of our
cultivation capacity
— Construction of ten greenhouses
at our Jinan Facility
RMB11.4 million
— Upgrading ten greenhouses at our
Laixi Facility
RMB5.1 million
— Upgrading five greenhouses at
our Xi’an Facility
RMB1.0 million
— Construction of new cultivation
facilities with eight greenhouses
at Langfang, Hebei province
RMB9.1 million
Strengthening our
operating efficiency and
recruitment of
employees
— Installation of ERP system RMB4.4 million
Setting up a dedicated
organic substrates
production facility
— Set up of new organic substrates
production facility
RMB7.4 million
For the period from the 1 January 2025 to 31 December 2025
Business strategies Implementation plans Estimated cost
(approximate)
Expansion of our
cultivation capacity
— Construction of five new
greenhouses at our Jinan Facility
RMB5.7 million
— Upgrading five greenhouses at
our Laixi Facility
RMB2.5 million
— Upgrading two greenhouses at
our Xi’an Facility
RMB0.4 million
— Construction of two new
greenhouses at our Dalian
Facility
RMB1.5 million
— Construction of new cultivation
facilities with two greenhouses at
Langfang, Hebei province
RMB2.3 million
FUTURE PLANS AND USE OF PROCEEDS
–3 7 1–


--- page 381 ---
For the period from the 1 January 2026 to 31 December 2026
Business strategies Implementation plans Estimated cost
(approximate)
Expansion of our
cultivation capacity
— Upgrading 11 greenhouses at our
Laixi Facility
RMB1.5 million
BASES AND KEY ASSUMPTIONS
The future plans set out by our Directors are based on the following bases and
assumptions:
— there be no material adverse change/disaster in the existing government policies or
political, legal, fiscal, market or econ omic conditions in the PRC and Hong Kong;
— there be no material changes in legislation or regulations or rules in the operating
regions which will adversely affect our business;
— there be no material change in the bases (such as inflation, interest rate and
foreign exchange rate) or rates of taxation and duties in the PRC and Hong Kong
or in any other places in which any member of our Group operates or will operate
or is incorporated;
— we will have sufficient financial resources to meet the planned capital and business
development requirements during the period to which our business objective
relates;
— the respective offering financial institutions will not withdraw any of the existing
available facilities;
— there be no material change in the interest rate of our bank borrowings;
— there be no change to the existing accounting policies from those stated in the
consolidated audited financial statements of our Group for the Track Record
Period;
— the Share Offer be completed in accordance with and as described in the section
headed ‘‘Structure and Conditions of the Share Offer’’ in this prospectus;
— our Directors and key senior management will continue to be involved in the
development of our existing and future development and we will be able to retain
our key management personnel;
— there be no change in the effectiveness of the certifications, licences, permits or
approvals obtained by us;
FUTURE PLANS AND USE OF PROCEEDS
–3 7 2–


--- page 382 ---
— there be no change in the funding requirement for the business strategies described
in this prospectus from the amount as estimated by our Directors;
— we will not be materially and adversely affected by the risk factors as set out in the
section headed ‘‘Risk Factors’’ in this prospectus;
— there be no disasters, natural, politic al or otherwise, which would materially
disrupt our business or operations or cause substantial loss, damage or
destruction to our properties or facilities;
— there be no material changes in the market demand and the competitive landscape
of potted vegetable produce market; and
— w eb ea b l et oc o n t i n u eo u ro p e r a t i o n si ns u b s t a n t i a l l yt h es a m em a n n e ra sw eh a v e
been operating during the Track Record Period.
FUTURE PLANS AND USE OF PROCEEDS
–3 7 3–


--- page 383 ---
UNDERWRITERS
Public Offer Underwriters
Grande Capital Limited
CMBC Securities Company Limited
Cinda International Capital Limited
BOCOM International Securities Limited
ABCI Securities Company Limited
CCB International Capital Limited
ICBC International Securities Limited
Haitong International Securities Company Limited
Zhongtai International Securities Limited
China Galaxy International Securities (Hong Kong) Co., Limited
Eddid Securities and Futures Limited
Alliance Capital Partners Limited
Caitong International Securities Company Limited
Ruibang Securities Limited
Victory Securities Company Limited
Patrons Securities Limited
Fosun International Securities Limited
SBI China Capital Financial Services Limited
Sheung Yuan Securities Limited
UNDERWRITING ARRANGEMENTS AND EXPENSES
Public Offer
Public Offer Underwriting Agreement
Pursuant to the Public Offer Underwritin g Agreement, our Company is offering the
Public Offer Shares for subscription by the public in Hong Kong on and subject to the terms
and conditions of this prospectus.
Subject to, among other conditions, the granting the listing of, and permission to deal
in, our Shares in issue and to be issued as mentioned in this prospectus by the Listing
Committee and to certain other conditions set out in the Public Offer Underwriting
Agreement, the Public Offer Underwriters have agreed severally to apply or procure
applications, on the terms and conditions of this prospectus and the Public Offer
Underwriting Agreement, for their respective applicable proportions of the Public Offer
Shares which are being offered but are not taken up under the Public Offer.
The Public Offer Underwriting Agreement is conditional on and subject to the Placing
Underwriting Agreement having been signed and becoming unconditional and not having
been terminated in accordance with its terms.
UNDERWRITING
–3 7 4–


--- page 384 ---
Grounds for termination
The Joint Overall Coordinators and the Joint Global Coordinators, at their sole and
absolute discretion, may, for themselves and on behalf of the Public Offer Underwriters,
upon the giving of notice in writing to us and/or the other warrantors (including our
Controlling Shareholders and all our execut ive Directors), terminate the Public Offer
Underwriting Agreement with immediate eff ect if any of the following events occurs at or
prior to 8 : 00 a.m. on the Listing Date:
(1) there has come to the notice of the Joint Overall Coordinators and the Joint
Global Coordinators that:
(a) any statement, estimate, forecast or expression of opinion, intention or
expectation contained in this prospectus or any other documents which have
been approved by our Company issued or used by or on behalf of our
Company in connection with the Sh are Offer (collectively, the ‘‘ Offer
Documents ’’) (including any supplement or amendment thereto), was, when it
was issued, or has become, untrue, incomplete, incorrect or misleading in any
material respect or that any forecast, expression of opinion, intention or
expectation expressed in any Offer Docum ents, in any material respect, is not
fair and honest and based on reasonable assumptions, when taken as a whole;
or
(b) any matter has arisen or has been discovered which would or might, had it
arisen or been discovered immediately before the date of this prospectus,
constitute a misstatement or omission in any material aspect; or
(c) any of the representations, warra nties, indemnities, agreements and
undertakings given by our Company or the other warrantors in the Public
Offer Underwriting Agreement is (or would when repeated be) untrue,
inaccurate or misleading or having been breached; or
(d) any breach of any of the obligations or undertakings imposed upon any party
(other than any of the Joint Overall Coordinators or the Joint Global
Coordinators or the Underwriters) to an y of the Underwriting Agreements or
the agreement between ourselves and the Joint Overall Coordinators and the
Joint Global Coordinators (for themselves and on behalf of the Underwriters
and the Capital Market Intermediaries) to record our agreement of the Offer
Price; or
(e) any material adverse change or prospective material adverse change in the
condition, business, assets and liabilities, properties, results of operations, in
the financial or trading position or prospects of any member of our Group;
or
UNDERWRITING
–3 7 5–


--- page 385 ---
(f) approval by the Listing Committee of the listing of, and permission to deal
in, the Shares is refused or not granted, other than subject to customary
conditions, or if granted, the approval is subsequently withdrawn, qualified
(other than by customary conditions) or withheld; or
(g) our Company withdraws any of the Offer Documents (and/or any other
documents used in connection with the contemplated subscription of the
Offer Shares) or the Share Offer; or
(h) any matter, event, act or omission wh ich gives or is likely to give rise to any
liability of any of our Company or the other warrantors pursuant to the
indemnities given by us or any of the other warrantors in the Public Offer
Underwriting Agreement; or
(i) any person (other than the Public O ffer Underwriters) has withdrawn or
sought to withdraw its consent to being named in any of the Offer
Documents or to the issue of any of the Offer Documents; or
( 2 ) t h e r es h a l ld e v e l o p ,o c c u r ,e x i s t ,o rc o m ei n t oe f f e c t :
(a) any change or development involving a prospective material change in, or
any event or series of events resulting or likely to result in or representing any
material change or development in local, national, regional or international
financial, political, military, industrial, legal, economic, currency market,
fiscal or regulatory or market matte rs or conditions and matters and/or
disaster or any monetary or trading settlement systems (including, without
limitation, conditions in stock and bond markets, money and foreign
exchange markets and inter-bank markets, 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 a revaluation or a devaluation of the Renminbi
against any foreign currencies) in or affecting Hong Kong, the PRC, the
Cayman Islands, the BVI, or any other jurisdiction relevant to our Group
(each a ‘‘Relevant Jurisdiction ’’); or
(b) any new law or regulation or any change or development involving a
prospective change in any existing law or regulation, or any change or
development involving a prospective change in the interpretation or
application thereof by any court or other competent authority in or
affecting any Relevant Jurisdiction; or
(c) any event or series of events in the nature of force majeure (including,
without limitation, acts of government, strikes, lock-outs, fire, explosion,
flooding, civil commotion, acts of war, riot, public disorder, acts of terrorism
(whether or not responsibility has been claimed), acts of God, economic
sanctions, outbreak of disease or epidemic (including without limitation
Severe Acute Respiratory Syndrome, avian influenza A (H5N1), swine
influenza (H1N1) and COVID-19), in or affecting any of the Relevant
Jurisdictions; or
UNDERWRITING
–3 7 6–


--- page 386 ---
(d) any local, national, regional or international outbreak or escalation of
h o s t i l i t i e s( w h e t h e ro rn o tw a ri so rh a sb e e nd e c l a r e d )o ro t h e rs t a t eo f
emergency or calamity or crisis in or affecting any of the Relevant
Jurisdictions; or
(e) (A) any suspension or limitation on trading in shares or securities generally
on the Stock Exchange, the New York Stock Exchange, the Nasdaq Stock
Market, the London Stock Exchange, the Shanghai Stock Exchange, the
Shenzhen Stock Exchange, the Tokyo Stock Exchange, or (B) a general
moratorium of commercial banking activities in any of the Relevant
Jurisdictions declared by the relevant authorities, or a disruption in
commercial banking activities or foreign exchange trading or securities
settlement or clearance services in or affecting any of the Relevant
Jurisdictions; or
(f) any material adverse change or development or event involving a prospective
material adverse change in taxation or exchange controls (or the
implementation of any exchange control), currency exchange rates or
foreign investment regulations in any of the Relevant Jurisdictions; or
(g) any imposition of economic sanctions, in whatever form, directly or
indirectly, by any of the Relevant Jurisdictions; or
(h) any material adverse change or development or event involving a prospective
material adverse change in our Group’s assets, liabilities, profit, losses,
performance, condition, business, fina ncial, earnings, trading position or
prospects; or
(i) the commencement by any judicial or regulatory body or organisation of any
public action against our Company or a Director or the other warrantors in
the Public Offer Underwriting A greement or an announcement by any
judicial or regulatory body or organisation that it intends to take any such
action; or
(j) other than with the approval of the Joint Overall Coordinators and the Joint
Global Coordinators, the issue or requirement to issue by our Company of a
supplementary prospectus or offering document pursuant to the Companies
(Winding Up and Miscellaneous Provisions) Ordinance, the Companies
Ordinance or the Listing Rules in circumstances where the matter to be
disclosed is, in the sole opinion of the Joint Overall Coordinators and the
Joint Global Coordinators materially adverse to the marketing for or
implementation of the Share Offer; or
(k) an order or a petition is presented for the winding up or liquidation of our
Company or any of its subsidiaries, or our Company or any of its subsidiaries
makes any compromise or arrangement with our Company’s or any of its
subsidiaries’ creditors or enter into a scheme of arrangement or any
resolution is passed for the winding-up of our Company or any of its
UNDERWRITING
–3 7 7–


--- page 387 ---
subsidiaries or a provisional liquida tor, receiver or manager is appointed
over all or part of the assets or undertaking of our Company or any of its
subsidiaries or anything analogous thereto occurs in respect of our Company
or any of its subsidiaries; or
(l) a valid demand by any creditor for repayment or payment of any of our
Company’s indebtedness or those of any of its subsidiaries or in respect of
which our Company or any of its subsidiaries is liable prior to its stated
maturity, or any loss or damage sustained by our Company or any of its
subsidiaries (howsoever caused and whether or not the subject of any
insurance or claim aga inst any person); or
(m) any litigation or claim being threa tened or instigated against our Company
or any of its subsidiaries or our Directors or our Controlling Shareholders of
material importance,
a n dw h i c h ,i na n yo ft h ea b o v ec a s e s :
(a) is or may or will be or is likely to be adverse to, or affect, the business or
financial or trading position or prospects of our Company or its subsidiaries
as a whole; or
(b) has or may have or will have or is likely to have an adverse effect on the
success of the Share Offer and/or make i t impracticable or inadvisable for
any part of the Public Offer Underwrit ing Agreement, the Public Offer or the
Share Offer to be performed or implemented as envisaged; or
(c) makes or may make or will or is likely to make it inadvisable or inexpedient
to proceed with the Public Offer and/or the Share Offer or the delivery of the
Offer Shares on the terms and in the manner contemplated by this
prospectus.
UNDERTAKINGS TO THE STOCK EXCHANGE UNDER THE LISTING RULES
Undertakings by our Company
Pursuant to Rule 10.08 of the Listing Rules, we have undertaken to the Stock
Exchange that, except pursuant to the Share Offer, the Over-allotment Option and the
Share Scheme as described and contained in this prospectus, no further Shares or securities
convertible into our equity securities (whether or not of a class already listed) may be issued
by us or form the subject of any agreement to such an issue by us within six months from the
Listing Date (whether or not such issue of Shares or securities will be completed within six
months from the Listing Date), except for the circumstances as permitted by Rule 10.08(1)
to (4) of the Listing Rules.
UNDERWRITING
–3 7 8–


--- page 388 ---
Undertakings by our Controlling Shareholders
Pursuant to Rule 10.07 of the Listing Rules, each of our Controlling Shareholders has
undertaken to the Stock Exchange and our Comp any respectively that, except pursuant to
and save as permitted under the Listing Rules, he/she/it shall not and shall procure that the
relevant registered holder(s) shall not:
(i) 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 ‘‘ 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 our Shares in respect of which he/she/it is
shown by this prospectus to be the beneficial owner （as defined in Rule 10.07(2)
of the Listing Rules); and
(ii) in the period of six months commencing on the date on which the First Six-month
Period expires (the ‘‘ 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 our Shares referred to in paragraph (i) above
if, immediately following such disposal or upon the exercise or enforcement of
such options, rights, interests or encu mbrances, he/she/it would cease to be a
controlling shareholder or a group of controlling shareholders (as defined in the
Listing Rules) of our Company.
Each of our Controlling Shareholders has further undertaken to the Stock Exchange
that within the period commencing from the date by reference to which disclosure of the
shareholding of such persons is made in this prospectus and ending on the date which is 12
months from the Listing Date, he/she/it shall:
(a) when he/she/it pledges or charges any Shares beneficially owned by him/her/it in
favour of an authorised institution (as defined in the Banking Ordinance (Chapter
155 of the Laws of Hong Kong)) pursuant to Note (2) to Rule 10.07(2) of the
Listing Rules, immediately inform us of such pledge or charge together with the
number of Shares so pledged or charged; and
(b) when he/she/it receives indications, either verbal or written, from the pledgee or
chargee that any of the pledged or charged Shares will be disposed of, immediately
inform us of such indications.
Our Company will inform the Stock Exch ange in writing as soon as we have been
informed of the above matters (if any) by our Controlling Shareholders and disclose such
matters by way of a press announcement which is published in accordance with Rule 2.07C
of the Listing Rules as soon as possible.
UNDERWRITING
–3 7 9–


--- page 389 ---
UNDERTAKINGS PURSUANT TO THE PUBLIC OFFER UNDERWRITING
AGREEMENT
Undertakings by our Company
Pursuant to the Public Offer Underwriting Agreement, our Company has undertaken
to each of the Sole Sponsor, the Joint Overall Coordinators, the Joint Global Coordinators,
the Joint Bookrunners, the Joint Lead Managers, the Capital Market Intermediaries and
the Public Offer Underwriters that, except pu rsuant to the Capitalisation Issue, the Share
Offer, the Over-allotment Option and the options and/or awards which may be granted
under the Share Scheme or as otherwise with prior written consent of the Joint Overall
Coordinators and the Joint Global Coordinator (for themselves and on behalf of the Public
Offer Underwriters and the Capital Market Intermediaries) (which consent not to be
unreasonably withheld or delayed) and unless in compliance with the requirements of the
Listing Rules, our Company will not, at any time during the First Six-month Period:
(i) offer, accept subscription for, pledge, is sue, sell, lend, mortgage, assign, charge,
contract to issue or sell, sell any option o r contract to sell, grant or agree to grant
any option or award, right or warrant to purchase or subscribe for, lend or
otherwise transfer or dispose of, either directly or indirectly, conditionally or
unconditionally, any such share capital or other securities of our Company or any
interest therein (including but not limited to any securities that are convertible
into or exchangeable for, or that represent the right to receive any such capital or
securities or any interest therein); 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 such share capital or
securities of our Company or any interest therein; or
(iii) enter into any transaction with the same economic effect as any transaction
described in paragraphs (i) or (ii) above; or
(iv) agree or contract to, or publicly announce any intention to enter into, any
transaction described in paragraphs (i) or (ii) above, whether any such transaction
described in (i) or (ii) or (iii) above is to be settled by delivery of Shares or other
securities, in cash or otherwise.
Undertakings by our Controlling Shareholders
Pursuant to the Public Offer Underwriti ng Agreement, each of our Controlling
Shareholders has undertaken to each of our Company, the Sole Sponsor, the Joint Overall
Coordinators, the Joint Global Coordinators, the Joint Bookrunners, the Joint Lead
Managers, the Capital Market Intermediar ies and the Public Offer Underwriters that
during the First Six-month Period, he/it shall not, and shall procure that the relevant
registered holder(s) and his/its associates and companies controlled by him/it and any
nominee or trustee holding in trust for him/it shall not, without the prior written consent of
the Joint Overall Coordinators and the Joint Global Coordinators (for themselves and on
behalf of the Public Offer Underwriters and the Capital Market Intermediaries) (which
UNDERWRITING
–3 8 0–


--- page 390 ---
consent not to be unreasonably withheld or delayed) and unless pursuant to the Stock
Borrowing Agreement or otherwise in compliance with the requirements of the Listing
Rules:
(i) offer, pledge, charge (other than any pledge or charge of our Company’s issued
share capital after the Share Offer (assuming the Over-allotment Option is not
exercised) in favour of an authorised institution as defined in the Banking
Ordinance (Chapter 155 of the Laws of Hong Kong) for a bona fide commercial
loan, sell, sell any option or contract t o purchase, purchase any option or award
or contract to sell, grant or agree to grant any option or award, right or warrant
to purchase or subscribe for, lend or otherwise transfer or dispose of, either
directly or indirectly, conditionally or un conditionally, any share capital or other
securities of our Company or any interest therein (including, but not limited to
any securities that are convertible into or exchangeable for, or that represent the
right to receive, any such capital or securities or any interest therein); 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 such capital or
securities or any interest therein; or
(iii) enter into any transaction with the same economic effect as any transaction
described in paragraphs (i) or (ii) above; or
(iv) agree or contract to, or publicly announce any intention to enter into, any
transaction described in paragraphs (i), (ii) or (iii) above, whether any such
transaction is to be settled by delivery of such capital or securities, in cash or
otherwise.
Each of our Controlling Shareholders has also undertaken to each of our Company,
the Sole Sponsor, the Joint Overall Coordinators, the Joint Global Coordinators, the Joint
Bookrunners, the Joint Lead Managers, the Capital Market Intermediaries and the Public
Offer Underwriters that during the Second Six-month Period, he/it will not enter into any of
the transactions specified in (i), (ii) or (iii) above or agree or contract to or publicly
announce any intention to enter into any such transaction if, immediately following such
transfer or disposal, he/it will cease to be a controlling shareholder (as defined in the Listing
Rules) of our Company.
Each of our Controlling Shareholders has also undertaken to each of our Company,
the Sole Sponsor, the Joint Overall Coordinators, the Joint Global Coordinators, the Joint
Bookrunners, the Joint Lead Managers, the Capital Market Intermediaries and the Public
Offer Underwriters that until the expiry of the Second Six-month Period, in the event that
he/it enters into any such transactions or agrees or contracts to, or publicly announces any
intention to enter into any such transactions, he/it will take all reasonable steps to ensure
that he/it will not create a disorderly or false market in the securities of our Company.
Pursuant to the Public Offer Underwriti ng Agreement, each of our Controlling
Shareholders has further undertaken to each of our Company, the Sole Sponsor, the Joint
Overall Coordinators, the Joint Global Coordinators, the Joint Bookrunners, the Joint
UNDERWRITING
–3 8 1–


--- page 391 ---
Lead Managers, the Capital Mark et Intermediaries and the Public Offer Underwriters that
from the date of the Public Offer Underwriting Agreement up to and including the expiry of
the Second Six-month Period, he/it will:
(a) if and when he/it pledges or charges any securities or interests in the securities of
our Company, immediately inform our Company, the Joint Overall Coordinators
and the Joint Global Coordinators in writing of such pledge or charge together
with the number of securities and nature of interest so pledged or charged; and
(b) if and when he/it receives indications, either verbal or written, from any pledgee
or chargee that any of the pledged or charged securities or interests in the
securities of our Company will be sold, transferred or disposed of, immediately
inform our Company, the Joint Overall Coordinators and the Joint Global
Coordinators in writing of such indications. Our Company will inform the Stock
Exchange as soon as we have been informed of the matters referred to above (if
any) by any of our Controlling Shareholders and disclose such matters by way of a
press announcement to be published in accordance with Rule 2.07C of the Listing
R u l e sa ss o o na sp o s s i b l e .
VOLUNTARY UNDERTAKINGS
Voluntary Undertaking by Mr. Xie Xing
Mr. Xie Xing has voluntarily undertaken to our Company, the Sole Sponsor, the Joint
Overall Coordinators and the Joint Global Coordinators (for themselves and on behalf of
the Public Offer Underwriters and Capital Market Intermediaries) that, without the prior
written consent of the Company, he shall not dispose of, nor enter into any agreement to
dispose of or otherwise create any options, rights, interests or encumbrances in respect of,
any of his Shares in the Company during the period commencing from the date of this
prospectus up to and including the date which is 6 months from the Listing Date.
Voluntary Undertakings by the shareholders of Beauty Sources, Vortex Festive, Caring
Plentiful, Well Resourced, Great Winner and Yuen Sang Tai
Each of Ms. Geng Qi, Mr. Li Changbai, Mr. Cui Wei, Ms. Zhang and Ms. Bi Ailing,
who are the shareholders of Beauty Sources, Vortex Festive, Caring Plentiful, Well
Resourced, Great Winner and Yuen Sang Tai, has voluntarily undertaken to our Company,
the Sole Sponsor, the Joint Overall Coordinators and the Joint Global Coordinators (for
themselves and on behalf of the Public Offer Underwriters and Capital Market
Intermediaries) that during the period commencing from the date of this prospectus up
to and including the date which is 6 months from the Listing Date, unless with the prior
written consent of the Company, each of them shall not:
(i) 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 Shares in
respect of which he/she is shown by this prospectus to be the beneficial owner; or
UNDERWRITING
–3 8 2–


--- page 392 ---
(ii) dispose of, nor enter into any agreement to dispose of or otherwise create any
options, rights, interests or encumbrances in respect of, any of any of his/her
shares in the respective BVI company mentioned above.
In addition, each of the above individual shareholders has voluntarily undertaken to
our Company, the Sole Sponsor, the Joint Overall Coordinators and the Joint Global
Coordinators (for themselves and on behalf of the Public Offer Underwriters and Capital
Market Intermediaries) that during the peri od commencing from the date of this prospectus
up to and including the date which is 6 months from the Listing Date, unless with the prior
written consent of the Company, each of them shall procure the respective BVI company
mentioned above not to:
(i) dispose of, nor enter into any agreement to dispose of or otherwise create any
options, rights, interests or encumbrances in respect of, any of his/her Shares in
respect of which he/she is shown by this prospectus to be the beneficial owner; or
(ii) issue any new shares or engage in any act that would change the current share
capital structure of the respective BVI company mentioned above which would
result in the change in the percentage of his/her shareholding in such company.
Public Offer Underwriters’ interests in our Company
Save as disclosed in this section and save for their respective interests and obligations
under the Public Offer Underwriting Agreement, none of the Public Offer Underwriters is
interested beneficially or otherwise in any shares in any member of our Group or has any
right (whether legally enforceable or not) or option to subscribe for, or to nominate persons
to subscribe for, any shares in any member of our Group.
THE PLACING
In connection with the Placing, it is expected that our Company will enter into the
Placing Underwriting Agreement with, among other parties, the Placing Underwriters.
Under the Placing Underwriting Agreement, the Placing Underwriters would, subject to
certain conditions set out therein, agree severally to apply or procure applications for their
respective applicable proportions of the Placing Shares.
Our Company is expected to grant to the Pl acing Underwriters the Over-allotment
Option, exercisable by the Joint Overall Coordinators and the Joint Global Coordinators
on behalf of the Placing Underwriters at any time from the Listing Date until the date which
is 30 days from the last date of lodging application under the Share Offer, to require our
Company to allot and issue up to and not more than 15,000,000 additional new Shares
(representing 15% of the total number of the Offer Shares initially available under the
Share Offer) at the Offer Price to cover, among others, over-allocations (if any) in the
Placing.
UNDERWRITING
–3 8 3–


--- page 393 ---
COMMISSIONS AND EXPENSES
The Capital Market Intermediaries will receive an underwriting commission of 2.0% of
the aggregate Offer Price of all the Offer Shares( i n c l u d i n gt h eO f f e rS h a r e st ob ei s s u e d
pursuant to the Over-allotment Option) (collectively, the ‘‘ Gross Proceeds ’’). The Joint
Overall Coordinators will receive 2.5% of the Gross Proceeds as the Joint Overall
Coordinators’ fee (together with the underwriting commission, the ‘‘ Fixed Fees ’’). In
addition, our Company may, at our sole and absolute discretion, pay to any one or more
Capital Market Intermediaries an additional incentive fee of up to 1.5% of the Gross
Proceeds (the ‘‘Discretionary Fees ’’). Assuming the Discretionary Fees are paid in full, the
ratio of Fixed Fees and Discretionary Fees p ayable is therefore approximately 3 : 1. The
Fixed Fees and Discretionary Fees, financial advisory and documentation fees, listing fees,
the Stock Exchange trading fee, the SFC transac tion levy, the AFRC transaction levy, legal
and other professional fees together with printing and other expenses relating to the Share
Offer, assuming an Offer Price of HK$1.18 per Offer Share (being the mid-point of the
indicative Offer Price range of HK$1.28 and HK$1.08), full payment of the Discretionary
Fees and that the Over-allotment Option is not being exercised, are estimated to amount to
approximately RMB54.8 million in total (equivalent to approximately HK$60.4 million).
Indemnity
Our Company and our Contro lling Shareholders have agreed to indemnify the Capital
Market Intermediaries and the Public Offer Und erwriters against certain losses which they
may suffer, including but not limited to losses arising from the performance of their
obligations under the Public Offer Underwr iting Agreement and any breach by us of the
Public Offer Underwriting Agreement.
UNDERWRITERS’ INTERESTS IN OUR COMPANY
Save for their obligations under the Underwriting Agreements, none of the
Underwriters is interested legally or bene ficially in any shares of any member of our
Group nor has any right or option (whether legally enforceable or not) to subscribe for or
purchase or to nominate persons to subscribe f or or purchase securities in any member of
our Group nor any interest in the Share Offer.
INDEPENDENCE OF THE SOLE SPONSOR
Grande Capital, being the Sole Sponsor, satisfies the independence criteria applicable
to sponsors as set out in Rule 3A.07 of the Listing Rules.
RESTRICTIONS ON THE OFFER SHARES
No action has been taken to permit a public offering of the Offer Shares other than in
Public Offer, or the distribution of this pro spectus in any jurisdiction other than Hong
Kong.
UNDERWRITING
–3 8 4–


--- page 394 ---
Accordingly, this prospectus may not be used for the purpose of, and does not
constitute, an offer or invitation in any jurisd iction or in any circumstances in which such
an offer or invitation is not authorised or to any person to whom it is unlawful to make such
an offer or invitation. In particular, the Offer Shares have not been offered or sold, and will
not be offered or sold, directly or indirectly, in the PRC.
UNDERWRITING
–3 8 5–


--- page 395 ---
THE SHARE OFFER
This prospectus is published in connection with the Public Offer as part of the Share
Offer.
The Share Offer consists of (subject to reallocation and the Over-allotment Option):
. the Public Offer of 10,000,000 Public Of fer Shares (subject to reallocation as
mentioned below) in Hong Kong as described under the paragraph headed ‘‘The
Public Offer’’ in this section of the prospectus; and
. the Placing of 90,000,000 Placing Shares (subject to reallocation and the Over-
allotment Option as mentioned below) as described under the paragraph headed
‘‘The Placing’’ in this section of the prospectus.
Investors may apply for the Offer Shares under the Public Offer or indicate an interest,
if qualified to do so, for the Offer Shares under the Placing, but may not do both.
Reasonable steps will be taken to identify an d reject applications in the Public Offer from
investors who have received Placing Share s in the Placing, and to identify and reject
indications of interest in the Placing from in vestors who have applied for the Public Offer
Shares in the Public Offer. The Public Offer is open to members of the public in Hong Kong
as well as to institutional and professional investors in Hong Kong.
The number of Offer Shares to be offered under the Public Offer and the Placing
respectively may be subject to reallocation as described in the paragraph headed ‘‘Pricing
and allocation’’ in this section of the prospectus.
If (i) there is any change to the offer size due to the changes in (a) the number of Offer
Shares initially offered in the Share Offer (other than described in this prospectus) or (b) the
Offer Price outside the indicative Offer Price ra nge as stated in this prospectus; and/or (ii) if
our Company becomes aware of any material adverse change after the issue of this
prospectus and before the commencement of dealing in our Shares on the Stock Exchange
as prescribed under Rule 11.13 of the Listing Rules, we are required to cancel the Share
Offer and relaunch the offer with a supplemental prospectus or a new prospectus giving
investors at least 3 business days to consider the new information.
PRICING AND ALLOCATION
Determining the Offer Price
The Placing Underwriters are soliciting f rom prospective investors indications of
interest in acquiring our Shares in the Placi ng. Prospective investors will be required to
specify the number of Offer Shares under the Placing 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 about Tuesday, 26 March 2024.
STRUCTURE AND CONDITIONS OF THE SHARE OFFER
–3 8 6–


--- page 396 ---
The Offer Price is expected to be fixed by agreement between the Joint Overall
Coordinators and the Joint Global Coordinators (for themselves and on behalf of the
Underwriters) and our Company on the Price Determination Date, when market demand
for the Offer Shares will be determined. The Price Determination Date is expected to be on
or about Tuesday, 26 March 2024. If, for any r eason, the Price Determination Date is
changed, our Company will as soon as practicable cause to be published on the websites of
our Company and the Stock Exchange at http://fujingnongye.com and www.hkexnews.hk ,
respectively.
If, for any reason, our Company, the Joint Overall Coordinators and the Joint Global
Coordinators (for themselves and on behalf of the Underwriters) are unable to reach agreement
on the Offer Price on or before the Price Determ ination Date, the Share Offer will not proceed
and will lapse.
Offer Price range
The Offer Price will be not more than HK$1.28 per Offer Share and will be not less
than HK$1.08 per Offer Share.
Price payable on application
Applicants for the Public Offer Shares under the Public Offer may be required to pay,
on application (subject to application chann els), the maximum indicative Offer Price of
HK1.28 per Public Offer Share plus 1% brokerage, a 0.0027% SFC transaction levy, a
0.00015% AFRC transaction levy and a 0.00565% Stock Exchange trading fee, amounting
to a total of HK$2,585.81 for one board lot of 2,000 Shares. If the Offer Price, as finally
determined in the manner described belo w, is less than the maximum Offer Price of
HK$1.28 per Public Offer Share, appropriate refund payments (including the brokerage,
SFC transaction levy, AFRC transaction l evy and the Stock Exchange trading fee
attributable to the surplus application monies) will be made to successful applicants without
any interest (subject to application channels).
Pricing outside the indicative Offer Price range
If the final Offer Price is outside the indic ative Offer Price range, our Company is
required to cancel the Share Offer and relaun ch the offer at the revised offer price and the
process under the Main Board Listing Rule 11.13 will apply.
Announcement of final Offer Price and basis of allocations
The applicable final Offer Price, the level of i ndications of intere st in the Placing and
the level of applications in the Public Offer and the basis of allocations of the Public Offer
Shares are expected to be published on Wednesday, 27 March 2024 on websites of our
Company and the Stock Exchange at http://fujingnongye.com and www.hkexnews.hk ,
respectively.
STRUCTURE AND CONDITIONS OF THE SHARE OFFER
–3 8 7–


--- page 397 ---
Results of allocations in the Public Offer, including the Hong Kong identity card/
passport/Hong Kong business registration numbers of successful applicants (where
applicable) and the number of Public Offe r Shares successfully applied by giving
electronic application instructions to HKSCC or by applying online through the HK eIPO
White Form Service Provider under the HK eIPO White Form service, will be made available
through a variety of channels as described in the paragraph headed ‘‘How to Apply for
Public Offer Shares — B. Publication of results’’ in this prospectus.
UNDERWRITING
The Public Offer is fully underwritten by the Public Offer Underwriters under the
terms of the Public Offer Underwriting Agreement and is subject to our Company and the
Joint Overall Coordinators and the Joint Global Coordinators (for themselves and on
behalf of the Public Offer Underwriters) agreeing on the Offer Price.
Our Company expects to enter into the Placing Underwriting Agreement relating to the
Placing on or about the Price Determination Date. These underwriting arrangements,
including the Underwriting Agreements, are summarised in the section headed
‘‘Underwriting’’ in this prospectus.
CONDITIONS OF THE SHARE OFFER
Acceptance of all applications for the Offer Shares will be conditional upon, among
others:
. the Listing Committee granting the approval of the listing of, and permission to
deal in, our Shares in issue and to be issued pursuant to the Share Offer (including
our Shares which may be made available pursuant to the Capitalisation Issue, the
exercise of the Over-allotment Option and any Shares which may fall to be issued
upon the exercise of the options and/or awards which may be granted under the
Share Scheme);
. the Offer Price having been duly agreed on or around the Price Determination
Date;
. the execution and delivery of the Placing Underwriting Agreement on or around
the Price Determination Date; and
. the obligations of the Underwriters under each of the Placing Underwriting
Agreement and the Public Offer Under writing Agreement having become
unconditional and not having been terminated in accordance with the terms of
the respective agreements,
in each case on or before the dates and times specified in such Underwriting Agreements
(unless and to the extent such conditions are waived on or before such dates and times) and
in any event not beyond the 30th day after the date of this prospectus.
STRUCTURE AND CONDITIONS OF THE SHARE OFFER
–3 8 8–


--- page 398 ---
The consummation of each of the Public Offer and the Placing is conditional upon,
among others, the other becoming unconditional and not having been terminated in
accordance with its terms.
If the above conditions are not fulfilled or waived, prior to the dates and times
specified, the Share Offer will lapse and the Sto ck Exchange will be not ified immediately.
Notice of the lapse of the Public Offer will cause to be published by our Company on the
websites of our Company and the Stock Exchange at http://fujingnongye.com and
www.hkexnews.hk , respectively, on the next day following such lapse. In such event, all
application monies will be returned, without interest, on the terms set out in the section
headed ‘‘How to Apply for the Public Offer Shares’’ in this prospectus. In the meantime, all
application monies will be held in separate bank account(s) with the receiving bank or other
bank(s) in Hong Kong licensed under the Banking Ordinance (Chapter 155 of the Laws of
Hong Kong) (as amended).
Share certificates for the Offer Shares are expected to be issued on Wednesday, 27
March 2024 but will only become valid evidence of title at 8 : 00 a.m. on Thursday, 28 March
2024, provided that (i) the Share Offer has become unconditional in all respects; and (ii) the
right of termination as described in the paragraph headed ‘‘Underwriting — Underwriting
Arrangements and Expenses — Public Offer — Grounds for termination’’ in this prospectus
has not been exercised.
THE PUBLIC OFFER
Number of Shares initially offered
Our Company is initially offering 10,000,0 00 Shares at the Offer Price, representing
10% of the 100,000,000 Shares initially available under the Share Offer, for subscription by
the public in Hong Kong. Subject to reallocation as mentioned below, the number of Shares
offered under the Public Offer will represent 2.0% of the total issued share capital of our
Company immediately after completion of the Capitalisation Issue and the Share Offer
(assuming that none of the Over-allotment Opt ion is exercised). The Public Offer is open to
members of the public in Hong Kong as well as to institutional, professional and other
investors. Professional investors generally inc lude brokers, dealers, 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
Public Offer is subject to the conditions as set out in the paragraph headed ‘‘Conditions of
the Share Offer’’ in this section of the prospectus.
Allocation
Allocation of Public Offer Shares to investors under the Public Offer will be based
solely on the level of valid applications recei ved under the Public Offer. When there is over
subscription under the Public Offer, alloca tion of the Public Offer Shares may involve
balloting, which would mean that some applicants may receive a higher allocation than
others who have applied for the same number of Public Offer Shares, and those applicants
who are not successful in the ballot may not receive any Public Offer Shares.
STRUCTURE AND CONDITIONS OF THE SHARE OFFER
–3 8 9–


--- page 399 ---
The total number of Public Offer Shares initially being offered for subscription under
the Public Offer (after taking into account any reallocation in the number of Offer Shares
allocated between the Public Offer and the Placing) will be divided equally (subject to
adjustment of odd lot size) into two pools for allocation purposes: Pool A and Pool B, both
of which are available on a fair basis to successful applicants. All valid applications that
have been received for Public Offer Shares wit ha na g g r e g a t es u b s c r i p t i o np r i c eo fH K $ 5
million (excluding brokerage fee, SFC transaction levy, AFRC transaction levy and the
Stock Exchange trading fee) or less will fall into Pool A and all valid applications that have
been received for Public Offer Shares with an a ggregate subscription price of more than
HK$5 million (excluding brokerage fee, SFC transaction levy, AFRC transaction levy and
Stock Exchange trading fee) and up to the total value of Pool B, will fall into Pool B.
Applicants should be aware that applicatio ns in Pool A and Pool B are likely to receive
different allocation ratios. If Public Offer Shares in one pool (but not both pools) are
undersubscribed, the surplus Public Offer Shares will be transferred to the other pool to
satisfy demand in that other pool and be alloca ted accordingly. Applicants can only receive
an allocation of Public Offer Shares from either Pool A or Pool B but not from both pools
and may only apply for Public Offer Shares in either Pool A or Pool B. In addition, multiple
or suspected multiple applications within either pool or between pools will be rejected. No
application will be accepted from applicants fo r more than 5,000,000 Public Offer Shares.
Reallocation
If both the Public Offer Shares and the Placing Shares are undersubscribed, the Share
Offer shall not proceed unless the Underwriters would subscribe or procure subscribers to
subscribe for their respective applicable proportions of the Offer Shares being offered which
are not taken up under the Share Offer on the terms and conditions in this prospectus and
the Underwriting Agreements.
If the Placing Shares are fully subscribed or oversubscribed and
(a) if the number of Offer Shares validly applied for under the Public Offer represents
15 times or more but less than 50 times the number of the Offer Shares initially
available for subscription under the Public Offer, then 20,000,000 Offer Shares
will be reallocated to the Public Offer from the Placing, so that the total number
of the Offer Shares available under the Public Offer will be increased to
30,000,000 Offer Shares, representing 30% of the number of the Offer Shares
initially available under the Share Offer;
(b) if the number of Offer Shares validly applied for under the Public Offer represents
50 times or more but less than 100 times the number of the Offer Shares initially
available for subscription under the Public Offer, then 30,000,000 Offer Shares
will be reallocated to the Public Offer f rom the Placing, so that the number of the
Offer Shares available under the Public O ffer will be increased to 40,000,000 Offer
Shares, representing 40% of the number of the Offer Shares initially available
under the Share Offer; and
STRUCTURE AND CONDITIONS OF THE SHARE OFFER
–3 9 0–


--- page 400 ---
(c) if the number of Offer Shares validly applied for under the Public Offer represents
100 times or more the number of the Offe r Shares initially available for
subscription under the Public Offer, then 40,000,000 Offer Shares will be
reallocated to the Public Offer from the Placing, so that the number of the
Offer Shares available under the Public O ffer will be increased to 50,000,000 Offer
Shares, representing 50% of the number of the Offer Shares initially available
under the Share Offer.
In each case, the additional Offer Share s reallocated to the Public Offer will be
allocated between Pool A and Pool B and the number of Offer Shares allocated to the
Placing will be correspondingly reduced in suc h manner as the Joint Overall Coordinators
and the Joint Global Coordinators (for themselves and on behalf of the Underwriters) deem
appropriate.
If the Public Offer Shares are not fully su bscribed, and provided that the Placing
Shares are fully subscribed, the Joint Overall Coordinators and the Joint Global
Coordinators (for themselves and on behalf of the Underwriters) will have the discretion
(but shall not be under any obligation) to reallocate all or any of the unsubscribed Public
Offer Shares originally included in the Public Offer to the Placing in such amount as they
deem (for themselves and on behalf of the Underwriters) appropriate to satisfy the demand
under the Placing.
Pursuant to Chapter 4.14 of the Guide for New Listing Applicants:
(a) if the Placing Shares are undersubscrib ed and if the Public Offer Shares are fully
subscribed or oversubscribed, irrespective of the number of times the number of
Offer Shares initially available for subscription under the Public Offer; or
(b) if the Placing Shares are fully subscribed or oversubscribed, and if the Public
Offer Shares are fully subscribed or oversubscribed but the number of Offer
Shares validly applied for under the Public Offer represents less than 15 times of
the number of Offer Shares initially available for subscription under the Public
Offer,
then, up to 10,000,000 Offer Shares may be reallocated from the Placing to the Public
Offer to satisfy valid applications under th e Public Offer, so that the total number of
Offer Shares available for subscription under the Public Offer shall be not more than
double the initial allocation to the Pub lic Offer (i.e. 20,000,000 Offer Shares,
representing 20% of the total number of Offer Shares initially available under the
Share Offer), and in the event of such realloca tion of Offer Shares, the final Offer Price
will be fixed at the bottom-end of the indicative Offer Price range (i.e. HK$1.08 per
O f f e rS h a r e )a ss t a t e di nt h i sp r o s p e c t u s .
In addition, the Joint Overall Coordinators and the Joint Global Coordinators (for
t h e m s e l v e sa n do nb e h a l fo ft h eU n d e r w r i t e r s) may in their sole and absolute discretion
reallocate Offer Shares from the Placing to t he Public Offer to satisfy valid applications
under the Public Offer.
STRUCTURE AND CONDITIONS OF THE SHARE OFFER
–3 9 1–


--- page 401 ---
The Offer Shares to be offered in the Public Offer and the Placing may, in certain
circumstances, be reallocated as between these offerings at the discretion of the Joint
Overall Coordinators and the Joint Global Coordinators (for themselves and on behalf of
the Underwriters).
Applications
The Joint Overall Coordinators and the Joint Global Coordinators (for themselves and
on behalf of the Underwriters) may require any investor who has been offered Offer Shares
under the Placing, and who has made an application under the Public Offer to provide
sufficient information to the Joint Bookrunners so as to allow them to identify the relevant
applications under the Public Offer and to ensure that they are excluded from any
application for Offer Shares under the Public Offer.
Each applicant under the Public Offer will al so be required to give an undertaking and
confirmation in the application submitted by him/her/it that he/she/it and any person for
whose benefit he/she/it is making the application have not applied for or taken up, or
indicated an interest for, and will not apply for or take up, or indicate an interest for, any
Offer Shares under the Placing, and such applic ant’s application is liable to be rejected if the
said undertaking or confirmation is breached or untrue (as the case may be) or it has been
or will be placed or allocated Offer Shares under the Placing.
References in this prospectus to applications, application monies or to the procedure
for application relate solely to the Public Offer.
THE PLACING
Number of Offer Shares offered
The number of Shares to be initially offered for subscription under the Placing will be
90,000,000 Shares, representing 90% of the Offer Shares under the Share Offer. The Placing
is subject to the Public Offer being unconditional. The Placing Shares are expected to be
fully underwritten by the Placing Underwriters subject to the Offer Price being agreed on or
before the Price Determination Date.
Allocation
The Placing Underwriters are soliciting fro m prospective professional, institutional
and other investors, indications of interest in subscribing for the Placing Shares.
Prospective professional, institutional and other investors will be required to specify the
number of Placing Shares they would be prepared to subscribe for at the Offer Price. This
process is known as ‘‘book building’’.
Allocation of Placing Shares is based on a n umber of factors, including the level and
timing of demand, the 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 our Shares after Listing. Such allocation is generally
STRUCTURE AND CONDITIONS OF THE SHARE OFFER
–3 9 2–


--- page 402 ---
intended to result in a distribution of Placing Shares on a basis which would lead to the
establishment of a broad shareholder base to the benefit of our Company and our
Shareholders as a whole.
Reallocation
The total number of Offer Shares to be issued pursuant to the Placing may change as a
result of the clawback arrangement and/or the r eallocation of the Offer Shares between the
Public Offer and the Placing as described in the paragraph headed ‘‘The Public Offer —
Reallocation’’ in this section.
OVER-ALLOTMENT OPTION
In connection with the Share Offer, our Company has granted the Over-allotment
Option to the Placing Underwriters, exercisa ble by the Joint Overall Coordinators and the
Joint Global Coordinators (for themselves and on behalf of the Placing Underwriters)
under the Placing Underwriting Agreement.
The Joint Overall Coordinators and the Joint Global Coordinators (for themselves or
on behalf of the Placing Underwriters) can exe rcise the Over-allotment Option, which will
be exercisable at any time from the Listing Date to the 30th day from the last day for
lodging applications under the Share Offer. Pursuant to the Over-allotment Option, our
Company may be required to allot and issue up to an aggregate of 15,000,000 additional
Shares representing 15% of the Offer Shares initially available under the Share Offer. These
Shares will be allotted and issued at the Offer Price.
If the Over-allotment Option is exercised in full, the additional 15,000,000 Shares and
the 100,000,000 Shares initially offered in the Share Offer will represent approximately
2.9% and approximately 19.4% of enlarged share capital of our Company respectively
immediately after completion of the Capitalisation Issue, the Share Offer and the exercise in
full of the Over-allotment Option.
STABILISATION
Stabilisation is a practice used by underw riters in some markets to facilitate the
distribution of securities. To stabilise, th e underwriters may bid for, or purchase, the new
securities in the secondary market during a specified period of time to retard and, if
possible, prevent any decline in the market pr ice of the securities below the offer price. In
Hong Kong, activity aimed at reducing the market price is prohibited and the price at which
stabilisation is effected is not permitted to exceed the offer price.
In connection with the Share Offer, the Stab ilising Manager, or any person acting for
it, on behalf of the Underwriters may over-a llocate or effect transactions with a view to
stabilising or maintaining the market price of the Shares at such price s, in such amounts and
in such manner as the Stabilising Manager may determine at a level higher than that which
might otherwise prevail in the open market fo r a limited period after the Listing Date. Any
market purchases of Shares will be effected in compliance with all applicable laws and
regulatory requirements. However, there is n o obligation on the Stabilising Manager or any
STRUCTURE AND CONDITIONS OF THE SHARE OFFER
–3 9 3–


--- page 403 ---
person acting for it to conduct any such stabilising activity, which if commenced, will be
done at the absolute discretion of the Stab ilising Manager and may be discontinued at any
time. Any such stabilising activity is required to be brought to an end within 30 days of the
last day for the lodging of applications under the Public Offer. The number of Shares that
may be over-allocated will not exceed the number of Shares that may be issued under the
Over-allotment Option, namely, 15,000,00 0 Shares, which is 15% of the number of Offer
Shares initially available under the Share Offer.
Stabilising action permitted in Hong Kong pursuant to the Securities and Futures
(Price Stabilising) Rules (Chapte r 571W of the Laws of Hong Kong) (the ‘‘ Securities and
Futures (Price Stabilising) Rules ’’) includes: (i) over-allocation for the purpose of preventing
or minimising any reduction in the market price of our Shares; (ii) selling or agreeing to sell
our Shares so as to establish a short position in them for the purpose of preventing or
minimising any reduction in the market price of our Shares; (iii) purchasing or subscribing
for, or agreeing to purchase or subscribe for, our Shares pursuant to the Over-allotment
Option in order to close out any position established under (i) or (ii) above; (iv) purchasing,
or agreeing to purchase, any of our Shares for the sole purpose of preventing or minimising
any reduction in the market price of our Share s; (v) selling or agreeing to sell any Shares in
order to liquidate any position held as a result of those purchases; and (vi) offering or
attempting to do anything described in (ii), (iii), (iv) or (v) above.
Specifically, prospective applicants for and investors in our Shares should note that:
. the Stabilising Manager, or any person act ing for it, may, in connection with the
stabilising action, maintain a long position in our Shares;
. there is no certainty regarding the extent to which and the time period for which
the Stabilising Manager, or any person acting for it, will maintain such a long
position;
. liquidation of any such long position b y the Stabilising Manager (or any person
acting for it) and selling in the open ma rket, may have an adverse impact on the
market price of our Shares;
. no stabilising action can be taken to su pport the price of our Shares for longer
than the stabilising period which will begin on the Listing Date, and is expected to
expire on the 30th day after the last day for lodging applications under the Public
Offer. After this date, when no further s tabilising action may be taken, demand
for, and therefore the price of, our Shares could fall;
. the price of our Shares cannot be assured to stay at or above the Offer Price either
during or after the stabilising period by taking of any stabilising action; and
. stabilising bids or transactions effected in the course of the stabilising action may
be made at any price at or below the Offer P rice, which means that stabilising bids
or transactions effected may be made at a price below the price paid by applicants
for, or investors in, our Shares.
STRUCTURE AND CONDITIONS OF THE SHARE OFFER
–3 9 4–


--- page 404 ---
Our Company will ensure or procure that a public announcement in compliance with
the Securities and Futures (Price Stabilising) Rules will be made within seven days of the
expiration of the stabilising period. Such stabilisation action, if commenced, may be
effected in all jurisdictions where it is permissible to do so, in each case in compliance with
all applicable laws, rules and regulatory requirements, including the Securities and Futures
(Price Stabilising) Rules, as amended, made under the SFO.
All stabilising actions will be taken in accord ance with the laws, rules and regulation in
place in Hong Kong on stabilisation.
STOCK BORROWING AGREEMENT
The Stabilising Manager, or any person act ing for it may choose to borrow 15,000,000
Shares from Wider International, under the Stock Borrowing Agreement, or acquire Shares
from other sources, including the exercising of the Over-allotment Option. The Stock
Borrowing Agreement will not be subject to t he restrictions of Rule 10.07(1)(a) of the
Listing Rules provided that the requirements set out in Rule 10.07(3) of the Listing Rules
are to be complied with as follows:
. such stock borrowing arrangement with Wid er International is fully described in
this prospectus and must be for the sole purpose of covering any short position
prior to the exercise of th e Over-allotment Option;
. the maximum number of Shares borrowed f rom Wider International under the
Stock Borrowing Agreement will be limited to the maximum number of Shares
which may be issued upon full exercise of the Over-allotment Option;
. the same number of Shares so borrowed must be returned to Wider International
or its nominees within three business day after the earlier of (i) the last day on
which the Over-allotment Option may be exercised; and (ii) the date on which the
Over-allotment Option is exercised in full;
. the stock borrowing arrangement under the Stock Borrowing Agreement will be
effected in compliance with all applicable laws, listing rules and regulatory
requirements; and
. no payment will be made to Wider Internati onal by the Stabilising Manager or its
authorised agents in relation to such stock borrowing arrangement.
SHARES WILL BE ELIGIBLE FOR CCASS
All necessary arrangements have been ma de enabling our Shares to be admitted into
CCASS. If the Stock Exchange grants the listing of, and permission to deal in, our Shares
and our Company complies with the stock admission requirements of HKSCC, our Shares
will be accepted as eligible securities by HKSCC for deposit, clearance and settlement in
CCASS with effect from the Listing Date or an y 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
STRUCTURE AND CONDITIONS OF THE SHARE OFFER
–3 9 5–


--- page 405 ---
to the General Rules of HKSCC and HKSCC Operational Procedures in effect from time to
time. Investors should seek the advice of their stockbroker or other professional advisor for
details of the settlement arrangements as such arrangements will affect their rights and
interests.
DEALING ARRANGEMENTS
Assuming that the Public Offer becomes unconditional at or before 8 : 00 a.m. in Hong
Kong on Thursday, 28 March 2024, it is expected that dealings in our Shares on the Stock
Exchange will commence at 9 : 00 a.m. on Thursday, 28 March 2024. Our Shares will be
traded in board lots of 2,000 Shares. The stock code of our Shares will be 2497.
STRUCTURE AND CONDITIONS OF THE SHARE OFFER
–3 9 6–


--- page 406 ---
IMPORTANT NOTICE TO INVESTORS:
FULLY ELECTRONIC APPLICATION PROCESS
We have adopted a fully electronic application process for the Public Offer. We will not
provide printed copies of this prospectus to the public in relation to the Public Offer.
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://fujingnongye.com. If you require a printed copy of this prospectus, you may download
and print from the website addresses above.
The contents of the electronic version of this prospectus are identical to the printed
prospectus as registered with the Registrar of Companies in Hong Kong pursuant to
Section 342C of the Companies (Winding Up and Miscellaneous Provisions) Ordinance.
Set out below are procedures through which you can apply for the Public Offer Shares
electronically. We will not provide any physi cal channels to accept any application for the
Public Offer Shares by the public.
If you are an intermediary, broker or agent , please remind your customers, clients or
principals, as applicable, that this prospectu s is available online at the website addresses
above.
If you have any question about the application online via the HK eIPO White Form
Service for the Public Offer Shares, you may call the enquiry hotline of our Hong Kong
Branch Share Registrar, Tricor Investor Services Limited at (852) 3907 7333 on the
following dates:
Wednesday, 20 March 2024 — 9 : 00 a.m. to 6 : 00 p.m.
Thursday, 21 March 2024 — 9 : 00 a.m. to 6 : 00 p.m.
Friday, 22 March 2024 — 9 : 00 a.m. to 6 : 00 p.m.
Monday, 25 March 2024 — 9 : 00 a.m. to 12 : 00 noon
A. APPLICATION FOR PUBLIC OFFER SHARES
1. Who Can Apply
You can apply for Public Offer Shares if you or the person(s) for whose benefit you are
applying for:
. a r e1 8y e a r so fa g eo ro l d e r ;a n d
. h a v eaH o n gK o n ga d d r e s s(for the online application through the HK eIPO
White Form service only).
HOW TO APPLY FOR PUBLIC OFFER SHARES
–3 9 7–


--- page 407 ---
Unless permitted by the Listing Rules, you cannot apply for any Public Offer Shares if
you or the person(s) for whose benefit you are applying for:
. are an existing Shareholder or close associates; or
. are a Director or any of his/her close associates.
2. Application Channels
The Public Offer period will begin at 9 : 00 am on Wednesday, 20 March 2024 and end at
12 : 00 noon on Monday, 25 March 2024 (Hong Kong time).
To apply for Public Offer Shares, you may use one of the following application
channels:
Application Channel Platform Target Investors Application Time
HK eIPO White Form
service
www.hkeipo.hk or the
IPO App
Enquiries:
+852 3907 7333
Investors who would
like to receive a physical
Share certificate. Public
Offer Shares successfully
applied for will be
allotted and issued in
your own name.
From 9 : 00 am on
Wednesday, 20 March
2024 to 11 : 30 am on
Monday, 25 March,
2024, Hong Kong time.
The latest time for
completing full payment
of application monies
will be 12 : 00 noon on
Monday, 25 March
2024, Hong Kong time.
HKSCC EIPO channel Your 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
Share certificate. Public
Offer Shares successfully
applied for will be
a l l o t t e da n di s s u e di nt h e
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 Public Offer Shares.
HOW TO APPLY FOR PUBLIC OFFER SHARES
–3 9 8–


--- page 408 ---
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 Public 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.
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 Public 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 re levant HKSCC Participants) to apply for
Public 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 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 applicatio n 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 Public Offer.
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 Public Offer Shares or for any
breach of the terms and conditions of this prospectus.
HOW TO APPLY FOR PUBLIC OFFER SHARES
–3 9 9–


--- page 409 ---
3. Information Required to Apply
You must provide the following information with your application:
For Individual Applicants For Corporate Applicants
. Full name(s) 2 as shown on your identity
document
. 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 number
. Full name(s)
2 as shown on your identity
document
. Identity document’s issuing country or
jurisdiction
. Identity document type, with order of priority:
i. Legal Entity Identifier (‘‘ LEI’’)
registration document; or
ii. Certificate of incorporation; or
iii. Business registration certificate; or
iv. Other equivalent document; and
. 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. You are also required to
declare that the identity information provided b y you follows the requirements as described in Note
2 below. In particular, where you cannot prov ide a HKID number, you must confirm that you do
not hold a HKID card.
2. The applicant’s full name as shown on their iden tity document must be used. If an applicant’s
identity document contains both an English and C hinese 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 str ictly 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 cor porate applicants, a LEI number must be used if an
entity has a LEI certificate.
3. If the applicant is a trustee, the client identific ation data (‘‘CID’’) of the trustee, as set out above,
will be required. If the applicant is an investment f und (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.
HOW TO APPLY FOR PUBLIC OFFER SHARES
–4 0 0–


--- page 410 ---
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 t he 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.
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 cont rol over that company, then the application will be
treated as being for your benefit and you shoul d 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 HKSCC EIPO channel, and making an application under
a power of attorney, we, the Joint Overall Coordinators and Joint Global Coordinators, as
our agent, 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 informati on may result in you r application being
rejected.
HOW TO APPLY FOR PUBLIC OFFER SHARES
–4 0 1–


--- page 411 ---
4. Permitted Number of Public Offer Shares for Application
Board lot size :2 , 0 0 0
Permitted number of
Public Offer Shares
for application and
amount payable on
application/
successful allotment
: Public 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$1.28 per Share.
If you are applying through the HKSCC EIPO channel,
you are required to pre-fund your application based on
the amount specified by your broker or custodian, as
determined based on the applicable laws and regulations
in Hong Kong.
By instructing your broker or custodian to apply for the
Public 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 nomin ee 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
D e s i g n a t e db a n kf o ry o u rb r o k e ro rc u s t o d i a n .
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 Shares you have selected.
You must pay the respective maximum amount payable
on application in full upon application for Public Offer
Shares.
HOW TO APPLY FOR PUBLIC OFFER SHARES
–4 0 2–


--- page 412 ---
No. of Public Offer
Shares applied for
Maximum
Amount payable (2)
on application/
successful
allotment
No. of Public Offer
Shares applied for
Maximum
Amount payable (2)
on application/
successful
allotment
HK$ HK$
2,000 2,585.81 200,000 258,581.75
4,000 5,171.64 300,000 387,872.65
6,000 7,757.45 400,000 517,163.52
8,000 10,343.28 500,000 646,454.40
10,000 12,929.09 600,000 775,745.28
12,000 15,514.90 700,000 905,036.15
14,000 18,100.72 800,000 1,034,327.05
16,000 20,686.54 900,000 1,163,617.92
18,000 23,272.35 1,000,000 1,292,908.80
20,000 25,858.18 1,500,000 1,939,363.20
30,000 38,787.27 2,000,000 2,585,817.60
40,000 51,716.35 2,500,000 3,232,272.00
50,000 64,645.45 3,000,000 3,878,726.40
60,000 77,574.53 3,500,000 4,525,180.80
70,000 90,503.61 4,000,000 5,171,635.20
80,000 103,432.70 4,500,000 5,818,089.60
90,000 116,361.79 5,000,000
(1) 6,464,544.00
100,000 129,290.88
(1) Maximum number of Public Offer Shares you ma y apply for and this is 50% of the Public Offer
Shares initially offered.
(2) The amount payable is inclusive of brokerage, SFC transaction levy, the Stock Exchange trading fee
and AFRC transaction levy. If your application is s uccessful, brokerage will be paid to the Exchange
Participants (as defined in the Listing Rules) or to the Hong Kong Branch Share Registrar (for
applications made through the application channe l of the Hong Kong Branch Share Registrar) while
the SFC transaction levy, the Stock Exchange tr ading fee and the AFRC transaction levy will be
paid to the SFC, the Stock Exchange and the AFRC, respectively.
5. Multiple Applications Prohibited
You 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. Application for
Public 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.
HOW TO APPLY FOR PUBLIC OFFER SHARES
–4 0 3–


--- page 413 ---
Multiple applications made either through (i) the HK eIPO White Form service ,( i i )
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 for any Placing Shares.
6. Terms and Conditions of An Application
By applying for Public 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 Joint Overall Coordinators and the Joint Global Coordinators, as our agents,
to execute any documents for you and to do on your behalf all things necessary to
register any Public 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 Public 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 and the IPO App or the
designated website of the HK eIPO White Form service ( o ra st h ec a s em a yb e ,t h e
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 Public 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 Relevant Persons, the Hong Kong Branch Share Registrar and
HKSCC will not be liable for any information and representations not in this
prospectus and any supplement to it;
HOW TO APPLY FOR PUBLIC OFFER SHARES
–4 0 4–


--- page 414 ---
(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 Hong
Kong Branch 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;
(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 Hong Kong Branch
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 you will not be allocated public offer shares’’ in this
section;
(xi) agree that your application or HKSCC Nominees’ application, any acceptance of
it and the resulting contract will be gove rned 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 indirec tly 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 Shares registered in your name or otherwise held by you;
(xiv) warrant that the information you have provided is true and accurate;
HOW TO APPLY FOR PUBLIC OFFER SHARES
–4 0 5–


--- page 415 ---
(xv) confirm that you understand that we, the Joint Overall Coordinators and Joint
Global Coordinators will rely on your declarations and representations in
deciding whether or not to allocate any Public Offer Shares to you and that you
m a yb ep r o s e c u t e df o rm a k i n gaf a l s ed e c l a r a t i o n ;
(xvi) agree to accept Public 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.
B. PUBLICATION OF RESULTS
Results of Allocation
You can check whether you are successfully allocated any Public Offer Shares
through:
Platform Date/Time
Applying through HK eIPO White Form service or HKSCC EIPO channel :
Website and the
IPO App
The designated results of allocation at
www.tricor.com.hk/ipo/result (alternatively:
www.hkeipo.hk/IPOResult )o r‘ ‘ I P O
Results’’ function in the IPO App with a
‘‘search by ID’’ function.
24 hours, from 11 : 00 p.m. on
Wednesday, 27 March 2024 to
12 : 00 midnight on Tuesday, 2
April 2024 (Hong Kong time)
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 Offer
Shares conditionally allotted to them,
among other things, will be displayed on
the designated results of allocation website
at www.tricor.com.hk/ipo/result or
www.hkeipo.hk/IPOResult .
HOW TO APPLY FOR PUBLIC OFFER SHARES
–4 0 6–


--- page 416 ---
Platform Date/Time
The Stock Exchange’s website at
www.hkexnews.hk and our website at
http://fujingnongye.com which will provide
links to the above mentioned websites of
the Hong Kong Branch Share Registrar.
No later than 11 : 00 p.m. on
Wednesday, 27 March 2024
(Hong Kong time).
Telephone +852 3691 8488 — the allocation results
telephone enquiry line provided by the
Hong Kong Branch Share Registrar
between 9 : 00 a.m. and 6 : 00 p.m.,
from Thursday, 28 March 2024 to
Friday, 5 April 2024 (Hong Kong
time) on a business day
For those applying through HKSCC EIPO channel, you may also check with your broker or custodian
from 6 : 00 p.m. on Tuesday, 26 March 2024 (Hong Kong time)
HKSCC Participants can log into FINI and review the allotment result from 6 : 00 p.m.
on Tuesday, 26 March 2024 (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 Share Offer, the level of app lications in the Public Offer and the basis of
allocations of Public Offer Shares on the Stock Exchange’s website at www.hkexnews.hk
and our website at http://fujingnongye.com by no later than 11 : 00 p.m. on Wednesday, 27
March 2024 (Hong Kong time).
C. CIRCUMSTANCES IN WHICH YOU WILL NOT BE ALLOCATED PUBLIC
OFFER SHARES
You should note the following situations in which Public 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:
Your application or the application mad e 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 Joint Overall Coordinators, the Joint Global Coordinators, the Hong Kong
Branch 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.
HOW TO APPLY FOR PUBLIC OFFER SHARES
–4 0 7–


--- page 417 ---
3. If the allocation of Public Offer Shares is void:
The allocation of Public Offer Shares will be void if the Stock Exchange does not grant
permission to list the 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 Listing Committee of 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. You may refer
to the paragraph headed ‘‘A. Applicatio n for Public 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;
‧ we, the Joint Overall Coordinators or the Joint Global Coordinators believe that
by accepting your application, it or we would violate applicable securities or other
laws, rules or regulations.
5. If there is money settlement failure for allotted Shares:
Based on the arrangements between HKSCC Participants and HKSCC, HKSCC
Participants will be required to hold suffici ent application funds on deposit with their
Designated bank before balloting. After balloting of Public Offer Shares, the Receiving
Bank will collect the portion of these funds required to settle each HKSCC Participant’s
actual Public 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 rect ify or procure to rectify the failure.
However, if it is determined that such settl ement obligation cannot be met, the affected
Public Offer Shares will be reallocated to the Share Offer. Public 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 Public Offer Shares due to the
money settlement failure by such HKSCC Participant. None of us, the Relevant Persons,
the Hong Kong Branch Share Registrar and HKSCC is or will be liable if Public Offer
Shares are not allocated to you due to the money settlement failure.
HOW TO APPLY FOR PUBLIC OFFER SHARES
–4 0 8–


--- page 418 ---
D. DESPATCH/COLLECTION OF SHARE CERTIFICATES AND REFUND OF
APPLICATION MONIES
You will receive one Share certificate for all Public Offer Shares allotted to you under
the Public Offer (except pursuant to applications made through the HKSCC EIPO channel
where the Share certificates will be deposited into CCASS as described below).
No temporary document of title will be issued in respect of the Shares. No receipt will
be issued for sums paid on application.
Share certificates will only become valid at 8 : 00 a.m. on Thursday, 28 March 2024
(Hong Kong time), provided that the Share Offer has become unconditional and the right of
termination described in the section headed ‘‘Underwriting’’ in this prospectus has not been
exercised. Investors who trade Shares prior to the receipt of Share certificates or the Share
certificates becoming valid do so entirely at their own risk.
The right is reserved to retain any Share certificate(s) and (if applicable) any surplus
application monies pending clearance of application monies.
HOW TO APPLY FOR PUBLIC OFFER SHARES
–4 0 9–


--- page 419 ---
The following sets out the re levant procedures and time:
HK eIPO White Form service HKSCC EIPO channel
Despatch/collection of Share certificate (1)
For application of
1,000,000 Public Offer
Shares or
more
Collection in person for 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 Thursday, 28 March
2024 (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
m u s tb e a ral e t t e ro f
authorization from your
corporation stamped with your
corporation’s chop.
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
Both individuals and
authorised representatives must
produce, at the time of
collection, evidence of identity
acceptable to the Hong Kong
Branch Share Registrar.
Note: If you do not collect your
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
(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 issue d after a super typhoon in force in Hong Kong in the
morning on Wednesday, 27 March 2024 rendering it impossible for the relevant share certificates to be
dispatched to HKSCC in a timely manner, the Company shall procure the Hong Kong Branch Share
Registrar to arrange for delivery o f the supporting documents and share certificates in accordance with
the contingency arrangements as agreed between them. You may refer to ‘‘E. Severe weather
arrangements’’ in this section.
HOW TO APPLY FOR PUBLIC OFFER SHARES
–4 1 0–


--- page 420 ---
HK eIPO White Form service HKSCC EIPO channel
For application of less
than 1,000,000 Public
Offer Shares
Your Share certificate(s) will be
sent to the address specified in
your application instructions
by ordinary post at your own
risk
Time: on or before Wednesday,
27 March 2024
Refund mechanism for surplus application monies paid by you
Date Thursday, 28 March 2024 Subject to the arrangement
between you and your broker
or custodian
Responsible party Hong Kong Branch Share
Registrar
Your broker or custodian
Application monies paid
through single bank
account
e-Auto Refund payment
instructions to your designated
bank account
Your 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
HOW TO APPLY FOR PUBLIC OFFER SHARES
–4 1 1–


--- page 421 ---
E. SEVERE WEATHER ARRANGEMENTS
The Opening and Closing of the Application Lists
The application lists will not open or close on Monday, 25 March 2024 if, there is:
. a tropical cyclone warning signal number 8 or above;
. a black rainstorm warning; and/or
. an ‘‘Extreme Conditions’’ announcement issued after a super typhoon,
(collectively, ‘‘Severe Weather Signals ’’),
in force in Hong Kong at any time between 9 : 00 a.m. and 12 : 00 noon on Monday, 25
March 2024.
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://fu jingnongye.com of the revised timetable.
If a Severe Weather Signal is hoisted on Wednesday, 27 March, 2024, the Hong Kong
Branch Share Registrar will make appropriate arrangements for the delivery of the share
certificates to the CCASS Depository’s service counter so that they would be available for
trading on Thursday, 28 March 2024.
If a Severe Weather Signal is hoisted on Wednesday, 27 March, 2024, for application of
less than 1,000,000 Hong Kong Offer Shares, the despatch of physical Share certificate(s)
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 Wednesday, 27 March, 2024 or on
Thursday, 28 March, 2024).
If a Severe Weather Signal is hoisted on Thursday, 28 March, 2024, for application of
1,000,000 Hong Kong Offer Shares or more, physical Share certificate(s) will be available
for collection in person at the Hong Kong Share Registrar’s office after the Severe Weather
Signal is lowered or cancelled (e.g. in the a fternoon of Thursday, 28 March, 2024 or on
Tuesday, 2 April, 2024).
Prospective investors should be aware that if they choose to receive physical share
certificates issued in their own name, there may be a delay in receiving the share certificates.
HOW TO APPLY FOR PUBLIC OFFER SHARES
–4 1 2–


--- page 422 ---
F. ADMISSION OF THE SHARES INTO CCASS
If the Stock Exchange grants the listing of, and permission to deal in, the Shares on the
Stock Exchange and we comply with the stock admission requirements of HKSCC, the
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 our Shares
or any other date HKSCC chooses. Settlement of transactions between Exchange
Participants (as defined in the Listing Rule s) 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 Shares to be admitted into
CCASS.
You should seek the advice of your broker or other professional advisor for details of
the settlement arrangement as such arrangem ents 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 Hong Kong Branch Share Registrar, the receiving
bank(s) 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 inform ation. 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, Public Offer Shares, of the policies and practices of the Company and the Hong Kong
Branch 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 Public Offer Shares to ensure
that personal data supplied to the Company or its agents and the Hong Kong Branch Share
Registrar is accurate and up-to-date when applying for Public Offer Shares or transferring
Public Offer Shares into or out of their names or in procuring the services of the Hong
Kong Branch Share Registrar.
Failure to supply the requested data or supplying inaccurate data may result in your
application for Public Offer Shares being rejected, or in the delay or the inability of the
Company or the Hong Kong Branch Share Regist rar to effect transfers or otherwise render
HOW TO APPLY FOR PUBLIC OFFER SHARES
–4 1 3–


--- page 423 ---
their services. It may also prevent or delay registration or transfers of Public Offer Shares
which you have successfully applied for and/or the despatch of Share certificate(s) and/or
refund cheque(s) to which you are entitled.
It is important that applicants for and ho lders of Public Offer Shares inform the
C o m p a n ya n dt h eH o n gK o n gB r a n c hS h a r eR e g istrar immediately of any inaccuracies in
the personal data supplied.
3. Purposes
Your personal data may be used, held, processed, and/or stored (by whatever means)
for the following purposes:
. processing your application and refund cheque and e-Auto Refund payment
instruction(s), where applicable, verif ication of compliance with the terms and
application procedures set out in this prospectus and announcing results of
allocation of Public Offer Shares;
. compliance with applicable laws and reg ulations in Hong Kong and elsewhere;
. registering new issues or transfers into or out of the names of the holders of the
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 Shares and identifying any
duplicate applications for the Shares;
. facilitating Public Offer Shares balloting;
. establishing benefit entitlements of holders of the 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 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 Hong Kong Branch Share Registrar to discharge their
obligations to applicants and holders of the Shares and/or regulators and/or any
other purposes to which applicants and holders of the Shares may from time to
time agree.
HOW TO APPLY FOR PUBLIC OFFER SHARES
–4 1 4–


--- page 424 ---
4. Transfer of personal data
Personal data held by the Company and the Hong Kong Branch Share Registrar
relating to the applicants for and holders of P ublic Offer Shares will be kept confidential
but the Company and the Hong Kong Branch 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(s) and
overseas principal share registrar;
. HKSCC or HKSCC Nominees, who will use the personal data and may transfer
the personal data to the Hong Kong Branch 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 Public Offer Shares request a deposit into
CCASS);
. any agents, contractors or third-party se rvice providers who offer administrative,
telecommunications, computer, payment or other services to the Company or the
Hong Kong Branch 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, r ules or regulations, including for the
purpose of the Stock Exchange’s admini stration of the Listing Rules and the
SFC’s performance of its statutory functions; and
. any persons or institutions with which the holders of Public 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 Hong Kong Branch Share Registrar will keep the personal data
of the applicants and holders of Public Offer S hares 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 ac cordance with the Personal Data (Privacy)
Ordinance (Chapter 486 of the Laws of Hong Kong).
HOW TO APPLY FOR PUBLIC OFFER SHARES
–4 1 5–


--- page 425 ---
6. Access to and correction of personal data
Applicants for and holders of Public Offer Shares have the right to ascertain whether
the Company or the Hong Kong Branch 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 Hong
Kong Branch Share Registrar have the right to c harge 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 Hong Kong Branch 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 c ompany secretary, or the Hong Kong Branch
Share Registrar for the attention of the privacy compliance officer.
HOW TO APPLY FOR PUBLIC OFFER SHARES
–4 1 6–


--- page 426 ---
The following is the text of a report, set out on pages I-1 to I-61, received from the
Company’s independent joint reporting accountants, Crowe (HK) CPA Limited and
McMillan Woods (Hong Kong) CPA Limited, C ertified Public Acco untants, Hong Kong,
for the purpose of incorporation in this prospectus.
長青（香港）會計師事務所有限公司
McMillan Woods (Hong Kong) CPA Limited
香港灣仔駱克道188號兆安中心24樓
2 4 / F . ,S i uO nC e n t r e ,
188 Lockhart Road, Wan Chai,
Hong Kong
ACCOUNTANTS’ REPORT ON HISTORICAL FINANCIAL INFORMATION TO THE
DIRECTORS OF FUJING HOLDINGS CO., LIMITED AND GRANDE CAPITAL
LIMITED
INTRODUCTION
We report on the historical financial inform ation of Fujing Holdings Co., Limited (the
‘‘Company’’) and its subsidiaries (hereinafter c ollectively referred to as the ‘‘Group’’) set out
on pages I-4 to I-61, which comprises the consolidated statements of financial position as at
31 December 2020, 2021 and 2022 and 30 September 2023 and the statements of financial
position of the Company as at 31 December 2020, 2021 and 2022 and 30 September 2023
and the consolidated statements of profit or loss and other comprehensive income, the
consolidated statements of changes in equity and the consolidated statements of cash flows
of the Group for each of the years ended 31 December 2020, 2021 and 2022 and the nine
months ended 30 September 2023 (the ‘‘Track Record Period’’) and a summary of material
accounting policy information and other explan atory information (together, the ‘‘Historical
Financial Information’’). The Historical Fin ancial Information set out on pages I-4 to I-61
forms an integral part of this report, whic h has been prepared for inclusion in the
prospectus of the Company dated 20 March 2024 (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 (the ‘‘Stock Exchange’’).
DIRECTORS’ RESPONSIBILITY FOR THE 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 2 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.
APPENDIX I ACCOUNTANTS’ REPORT
–I - 1–


--- page 427 ---
REPORTING ACCOUNTAN TS’ 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 (th e ‘‘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 ac countants consider internal control relevant
to the entity’s preparation of the Historical F inancial Information that gives a true and fair
view in accordance with the basis of preparation and presentation set out in note 2 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 inc luded evaluating the appropriateness of
accounting policies used and the reasonableness of accounting estimates made by the
directors of the Company, as well as evaluating the overall presentation of the Historical
Financial Information.
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 purposes of the
accountants’ report, a true and fair view of the Group’s consolidated financial position as at
31 December 2020, 2021 and 2022 and 30 Septe mber 2023, of the Company’s financial
position as at 31 December 2020, 2021 and 202 2 and 30 September 2023 and of the Group’s
consolidated financial performance and c onsolidated cash flows for the Track Record
Period in accordance with the basis of preparation and presentation set out in note 2 to the
Historical Financial Information.
REVIEW OF STUB PERIOD COMPARA TIVE FINANCIAL INFORMATION
We have reviewed the stub period comparative financial information of the Group
comprising the consolidated statement of pro fit or loss and other comprehensive income,
the consolidated statement of changes in equity and the consolidated statement of cash
flows for the nine months ended 30 September 2022 and other explanatory information (the
‘‘Stub Period Comparative Financial Information’’). The directors of the Company are
responsible for the preparation and presentation of the Stub Period Comparative Financial
Information in accordance with the basis of preparation and presentation set out in note 2
to the Historical Financial In formation. Our responsibility i s to express a conclusion on the
APPENDIX I ACCOUNTANTS’ REPORT
–I - 2–


--- page 428 ---
Stub Period Comparative 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 applyi ng 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 Comparative Financial
Information, for the purpose of the accountants’ report, is not prepared, in all material
aspects, in accordance with the basis of preparation and presentation set out in note 2 to the
Historical Financial Information.
REPORT ON MATTERS UNDER THE RULES GOVERNING THE LISTING OF
SECURITIES ON THE STOCK EXCHANGE (THE ‘‘LISTING RULES’’) AND THE
COMPANIES (WINDING UP AND MISCEL LANEOUS PROVISIONS) ORDINANCE
ADJUSTMENTS
In preparing the Historical Financial Information, no adjustments to the Underlying
Financial Statements as defined on page I-4 have been made.
DIVIDENDS
We refer to note 15 to the Historical Financial Information which states that no
dividend has been paid by the group entities comprising the Group in respect of the Track
Record Period.
NO STATUTORY FINANCIAL STATEMENTS FOR THE COMPANY
No statutory financial statements have been prepared for the Company since its date of
incorporation.
Crowe (HK) CPA Limited
Certified Public Accountants
Hong Kong, 20 March 2024
Chung Wai Chuen Alfred
Audit Engagement Director
Practising Certificate Number: P05444
McMillan Woods (Hong Kong) CPA Limited
Certified Public Accountants
Hong Kong, 20 March 2024
Lo Ka Ki
Audit Engagement Director
Practising Certificate Number: P06633
APPENDIX I ACCOUNTANTS’ REPORT
–I - 3–


--- page 429 ---
HISTORICAL FINANCIAL INFORMATION OF THE GROUP
Preparation of 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 Track Record Period, on
which the Historical Financial Information is based, were prepared by the directors of the
Company in accordance with accounting policies which conform with Hong Kong Financial
Reporting Standards (‘‘HKFRSs’’) issued by the Hong Kong Institute of Certified Public
Accountants (the ‘‘HKICPA’’) and were audited by Crowe (HK) CPA Limited and
McMillan Woods (Hong Kong) CPA Limited und er separate terms of engagement with the
Company in accordance with Hong Kong Standards on Auditing issued by the HKICPA
(the ‘‘Underlying Finan cial Statements’’).
The Historical Financial Information is pre sented in Renminbi (‘‘RMB’’) and all values
are rounded to the nearest thousand (RMB’000) except when otherwise indicated.
APPENDIX I ACCOUNTANTS’ REPORT
–I - 4–


--- page 430 ---
CONSOLIDATED STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
Year ended 31 December Nine months ended 30 September
2020 2021 2022 2022 2023
Results
before
biological
assets fair
value
adjustments
Biological
assets fair
value
adjustments Total
Results
before
biological
assets fair
value
adjustments
Biological
assets fair
value
adjustments Total
Results
before
biological
assets fair
value
adjustments
Biological
assets fair
value
adjustments Total
Results
before
biological
assets fair
value
adjustments
Biological
assets fair
value
adjustments Total
Results
before
biological
assets fair
value
adjustments
Biological
assets fair
value
adjustments Total
Notes RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 R MB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(Unaudited) (Unaudited) (Unaudited)
Revenue 9 121,405 — 121,405 154,946 — 154,946 126,694 — 126,694 88,626 — 88,626 121,294 — 121,294
Cost of sales (65,828) (2,119) (67,947) (85,999) (3,174) (89,173) (70,80 4) (3,351) (74,155) (49,920) (3,351) (53,271) (66,785) (2,532) (69,317)
Gross profit 55,577 (2,119) 53,458 68,947 (3,174) 65,773 55,890 (3,3 51) 52,539 38,706 (3,351) 35,355 54,509 (2,532) 51,977
Other income 10 4,590 — 4,590 1,222 — 1,222 887 — 887 672 — 672 718 — 718
Changes in fair value of biological assets — 3,174 3,174 — 3, 351 3,351 — (2,053) (2,053) — (1,570) (1,570) — 3,299 3,299
(Allowance)/reversal of allowance for expected
credit losses (‘‘ ECL’ ’ )o ft r a d er e c e i v a b l e s 6(b) (118) — (118) (140) — (140) (160) — (160) (10) — (10) 61 — 61
Listing expenses (4,060) — (4,060) (7,625) — (7,625) (5,727) — (5,727) (4,315) — (4,315) (6,016) — (6,016)
Selling and distribution expenses (500) — (500) (457) — (457) (420) — (420) (307) — (307) (241) — (241)
Administrative and other expenses (11,583) — (11,583) (13,924) — (13,924) (12,354) — (12,354) (9,436) — (9,436) (8,019) — (8,019)
Profit from operations 43,906 1,055 44,961 48,023 177 48,200 38,116 (5,404) 32,712 25,310 (4,921) 20,389 41,012 767 41,779
Finance costs 11 (1,183) — (1,183) (897) — (897) (900) — (900) (688) — (688) (662) — (662)
Profit before tax 42,723 1,055 43,778 47,126 177 47,303 37,216 (5,404) 31,812 24,622 (4,921) 19,701 40,350 767 41,117
Income tax expense 12 ———————————————
Profit for the year/period 13 42,723 1,055 43,778 47,126 177 47,303 37,216 (5,404) 31,812 24,622 (4,921) 19,701 40,350 767 41,117
Other comprehensive (loss)/income for the year/
period, net of tax:
Item that may be reclassified to profit or
loss:
Exchange differences on translating foreign
operations (1) — (1) 1 — 1 (3) — (3) (5) — (5) (6) — (6)
Total comprehensive income for the year/period 42,722 1,055 43,777 47,127 177 47,304 37,213 (5,404) 31,809 24,617 (4,921) 19,696 40,344 767 41,111
Earnings per share (RMB)
Basic and diluted 16 0.11 0.12 0.08 0.05 0.10
APPENDIX I ACCOUNTANTS’ REPORT
–I - 5–


--- page 431 ---
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
At 31 December
At 30
September
20232020 2021 2022
Notes RMB’000 RMB’000 RMB’000 RMB’000
Non-current assets
Property, plant and equipment 18 167,631 172,278 162,756 159,890
Investment properties 19 6,725 6,430 6,135 17,966
Right-of-use assets 20 23,519 22,768 22,003 21,453
Intangible assets 21 ————
Prepayments 26 ——— 6 , 0 0 0
197,875 201,476 190,894 205,309
Current assets
Biological assets 23 9,395 9,781 8,371 8,876
Inventories 24 31 199 1,557 1,331
Trade receivables 25 31,121 46,590 53,444 58,376
Prepayments and other
receivables 26 3,052 9,075 6,252 6,701
Amount due from the ultimate
holding company 27 6666
Amounts due from shareholders 27 3333
Bank and cash balances 28 6,968 22,963 71,079 89,595
50,576 88,617 140,712 164,888
Current liabilities
Trade payables 29 9,149 5,323 15,552 12,177
Accruals and other payables 30 3,295 1,719 1,546 2,628
Amount due to a director 27 20 30 30 30
Bank borrowings 31 20,000 20,000 20,000 19,995
Lease liabilities 32 80 124 98 106
Deferred income 33 227 227 227 227
32,771 27,423 37,453 35,163
Net current assets 17,805 61,194 103,259 129,725
Total assets less current liabilities 215,680 262,670 294,153 335,034
Non-current liabilities
Lease liabilities 32 641 553 454 394
Deferred income 33 3,726 3,500 3,273 3,103
4,367 4,053 3,727 3,497
NET ASSETS 211,313 258,617 290,426 331,537
Capital and reserves
Share capital 35 10 10 10 10
Reserves 36(a) 211,303 258,607 290,416 331,527
TOTAL EQUITY 211,313 258,617 290,426 331,537
APPENDIX I ACCOUNTANTS’ REPORT
–I - 6–


--- page 432 ---
STATEMENTS OF FINANCIAL POSITION OF THE COMPANY
At 31 December
At 30
September
20232020 2021 2022
Notes RMB’000 RMB’000 RMB’000 RMB’000
Non-currents asset
Investments in subsidiaries 22 —* —* —* —*
Current assets
Amount due from the
ultimate holding company 27 6666
Amounts due from
shareholders 27 3333
Bank and cash balances 28 —131
91 01 21 0
Current liability
Amount due to a subsidiary 27 —* 2 7 7
Net current assets 9853
Total assets less current
liabilities 9853
NET ASSETS 9853
Capital and reserves
Share capital 35 10 10 10 10
Reserves 36(b) (1) (2) (5) (7)
TOTAL EQUITY 9853
* Represents amount less than RMB1,000.
APPENDIX I ACCOUNTANTS’ REPORT
–I - 7–


--- page 433 ---
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
Share
capital
(note 35)
Share
premium
(note
36(c)(i))
Merger
reserve
(note
36(c)(ii))
Foreign
currency
translation
reserve
(note
36(c)(iii))
Statutory
reserve
(note
36(c)(iv))
Retained
profits Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
At 1 January 2020 (note 35(a)) 70,000 397 — — 9,266 86,095 165,758
Issue of shares (note 35(c)) 1 0—————1 0
Contribution from a pre-IPO
investor 1,768 — — — — — 1,768
Group reorganisation (note 2) (71,768) (397) 72,165 — — — —
Total comprehensive income
for the year — — — (1) — 43,778 43,777
Appropriations — — — — 4,378 (4,378) —
Changes in equity for the year (69,990) (397) 72,165 (1) 4,378 39,400 45,555
At 31 December 2020 and
1 January 2021 10 — 72,165 (1) 13,644 125,495 211,313
Issue of shares (note 35(d)) — * —————— *
Total comprehensive income
for the year — — — 1 — 47,303 47,304
Appropriations — — — — 4,738 (4,738) —
Changes in equity for the year —* — — 1 4,738 42,565 47,304
At 31 December 2021 and
1 January 2022 10 — 72,165 — 18,382 168,060 258,617
Total comprehensive income
for the year — — — (3) — 31,812 31,809
Appropriations — — — — 3,189 (3,189) —
Changes in equity for the year — — — (3) 3,189 28,623 31,809
At 31 December 2022 and
1 January 2023 10 — 72,165 (3) 21,571 196,683 290,426
Total comprehensive income
for the period — — — (6) — 41,117 41,111
Appropriations — — — — 4,115 (4,115) —
Changes in equity for the period — — — (6) 4,115 37,002 41,111
At 30 September 2023 10 — 72,165 (9) 25,686 233,685 331,537
At 1 January 2022 10 — 72,165 — 18,382 168,060 258,617
Total comprehensive income
for the period (unaudited) — — — (5) — 19,701 19,696
Appropriations (unaudited) — — — — 1,975 (1,975) —
Changes in equity for the period
(unaudited) — — — (5) 1,975 17,726 19,696
At 30 September 2022 (unaudited) 10 — 72,165 (5) 20,357 185,786 278,313
* Represents amount less than RMB1,000.
APPENDIX I ACCOUNTANTS’ REPORT
–I - 8–


--- page 434 ---
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year ended 31 December
Nine months ended
30 September
2020 2021 2022 2022 2023
Note RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
Profit before tax 43,778 47,303 31,812 19,701 41,117
Adjustments for:
Interest income (19) (8) (17) (17) (44)
Depreciation of property, plant and equipment 7,932 9,740 10,034 7,507 7,653
Depreciation of investment properties 295 295 295 221 391
Depreciation of right-of-use assets 860 822 765 574 550
Finance costs 1,183 897 900 688 662
Biological assets fair value adjustments (1,055) (177) 5,404 4,921 (767)
Allowance/(reversal of allowance) for ECL of trade
receivables 118 140 160 10 (61)
Loss on disposal of property, plant and equipment — — 214 214 —
Loss on write-off of property, plant and equipment — 33 382 382 —
Operating profit before working capita l changes 53,092 59,045 49,949 34,201 49,501
(Increase)/decrease in b iological assets (1,616) (209) (3,994) (4,202) 262
Decrease/(increase) in inventories 153 (168) (1,358) (1,323) 226
Decrease/(increase) in trade receivables 1,143 (15,609) (7,014) 2,295 (4,871)
(Increase)/decrease in p repayments and other
receivables (1,119) (6,023) 2,823 2,719 (449)
Increase in amount due from the ultimate holding
c o m p a n y ( 7 ) ————
Increase in amounts due from shareholders (3) — — — —
Increase/(decrease) in trade payable s 1,121 (3,826) 10,229 8,267 (3,375)
(Decrease)/increase in accruals and other payables (1,130) 824 (173) 1,172 1,076
Decrease in deferred income (42) (226) (227) (170) (170)
Increase in amount due to a director 20 10 — — —
Net cash generated from operating activities 51,612 33,818 50,235 42,959 42,200
CASH FLOWS FROM INVESTING ACTIVITIES
Payments for investment properties — — — — (12,222)
Payments for property, plant and equipment (55,056) (16,820) (1,522) (1,522) (10,787)
Payments for right-of-use assets (185) — — — —
Proceeds from disposal of property, plant and equipment — — 414 414 —
Interest received 19 8 17 17 44
Net cash used in investing activities (55,222) (16,812) (1,091) (1,091) (22,965)
CASH FLOWS FROM FINANCING ACTIVITIES
Bank borrowings raised 20,000 20,000 10,000 10,000 19,995
Repayments of bank borrowings (15,000) (20,000) (10,000) (10,000) (20,000)
Principal elements of lease liabilities (100) (115) (125) (82) (52)
Contribution from a pre-IPO investor 1,768 — — — —
Interest paid (1,130) (824) (836) (639) (620)
Interest on lease liabilities (53) (73) (64) (49) (42)
Issue of shares 10 — — — —
Net cash generated from/(used in) financing activities 5,495 (1,012) (1,025) (770) (719)
NET INCREASE IN CASH AND CASH
EQUIVALENTS 1,885 15,994 48,119 41,098 18,516
Effect of foreign exchange rate changes — 1 (3) (3) —
CASH AND CASH EQUIVALENTS AT THE
BEGINNING OF THE YEAR/PERIOD 5,083 6,968 22,963 22,963 71,079
CASH AND CASH EQUIVALENTS AT THE END OF
THE YEAR/PERIOD 6,968 22,963 71,079 64,058 89,595
ANALYSIS OF CASH AND CASH EQUIVALENTS
Bank and cash balances 28 6,968 22,963 71,079 64,058 89,595
APPENDIX I ACCOUNTANTS’ REPORT
–I - 9–


--- page 435 ---
NOTES TO THE HISTORICAL FINANCIAL INFORMATION
1. GENERAL INFORMATION
The Company was incorporated as an exempted comp any in the Cayman Islands with limited liability
under the Companies Act, Cap. 22 (Act 3 of 1961, as consolidated and revised) of the Cayman Islands on 23 July
2019. The address of its registered office is Cricket Square, Hutchins Drive, PO Box 2681, Grand Cayman KY1-
1111, Cayman Islands.
The Company is an investment holding company and ha s not carried out any business operations since the
date of its incorporation. The principal activities of its subsidiaries are set out in note 22 to the Historical
Financial Information.
In the opinion of the directors of the Company, as at 30 September 2023, Wider International Group
Limited, a company incorporated in the British Virgin Is lands (the ‘‘BVI’’), is the immediate and ultimate parent
of the Company and Mr. Zhang Yonggang (‘‘Mr. Zhang’’), a director of the Company, is the ultimate
controlling party of the Company.
2. GROUP REORGANISATION AND BASIS OF PREPARATION AND PRESENTATION
Pursuant to the Group reorganisation (the ‘‘Group Reorganisation’’) as more fully explained in the
paragraph headed ‘‘Reorganisation’’ of the section heade d ‘‘History, Reorganisation and Corporate Structure’’
to this Prospectus, the Company became the holding company of the companies now comprising the Group on 8
February 2021. The companies now comprising the Group has been under the common control of Mr. Zhang
immediately prior to and after the Group Reorgani sation. The Group now comprising the Company and its
subsidiaries resulting from the Group Reorganisation is regarded a s a continuing entity. The Group
Reorganisation did not result in any change in econom ic substance and control of the Group. In substance,
there is no real change in the control of the Group before and after the completion of the Group Reorganisation,
and accordingly the Historical Fina ncial Information for the Track Record Period has been prepared as a
continuation of the existing companies using principles of merger accounting. The consolidated statements of
profit or loss and other comprehensive income, the c onsolidated statements of changes in equity and the
consolidated statements of cash flows are prepared as if the current group structure had been existence
throughout the Track Record Period. The consolidated st atements of financial position of the Group as at 31
December 2020, 2021 and 2022 and 30 September 2023 presen ted the assets and liabili ties of the companies now
comprising the Group, as if the current group structure h ad been in existence at those dates. The consolidated
statements of financial positio n of the Group as at 31 December 2020, 2021 and 2022 and 30 September 2023
have been prepared to present the assets and liabiliti es of the subsidiaries using the existing book values. No
adjustments are made to reflect fair values, or recognis e any new assets or liabilities as a result of the Group
Reorganisation. All intra-group transactions and b alances have been eliminated in full on combination.
The Historical Financial Information has been prepared in accordance with HKFRSs issued by the
HKICPA. HKFRSs comprise Hong Kong Financial Repor ting Standards; Hong Kong Accounting Standards
(‘‘HKASs’’); and Interpretations. The Historical Financial Informati on also complies with the applicable
disclosures required by the Listing Rules and with the disclosure requirements of the Hong Kong Companies
Ordinance.
The Stub Period Comparative Financ ial Information has been prepared in accordance with same basis and
accounting policies adopted in respect o f the Historical Financial Information.
APPENDIX I ACCOUNTANTS’ REPORT
–I - 1 0–


--- page 436 ---
As at the date of this report, the Company had direct an d indirect interests in the following subsidiaries
now comprising the Group:
Name of subsidiary
Date of
incorporation/
establishment
Place of
incorporation/
establishment
Particulars of
issued/paid-up
capital
Percentage of ownership
interest/voting power/profit sharing
Principal activities/
place of operation
At 31 December At 30
September
At the
date of
this report
2020 2021 2022 2023
Directly held:
Glory Team International Group
Limited (‘‘Glory Team’’)
8 August 2019 BVI United State
dollar (‘‘US$’’)
US$1
100% 100% 100% 100% 100% Investment holding, Hong
Kong
Prosperity Plentiful Holdings Limited
(‘‘Prosperity Plentiful (BVI)’’)
16 May 2019 BVI US$1 100% 100% 100% 100% 100% Investment holding, Hong
Kong
Indirectly held:
Fujing Holdings (Hong Kong)
Co., Limited
(‘‘Fujing Holdings (HK)’’)
9 October 2019 Hong Kong Hong Kong
dollars (‘‘HK$’’)
HK$1
100% 100% 100% 100% 100% Investment holding, Hong
Kong
Prosperity Plentiful Holdings
(Hong Kong) Co., Limited
(‘‘Prosperity Plentiful (HK)’’)
6 June 2019 Hong Kong HK$1 100% 100% 100% 100% 100% Investment holding, Hong
Kong
Qingdao Xinfujing Technology
Company Limited*
(青島鑫富景科技有限公司)
(‘‘Xinfujing’’)
6 May 2020 The People’s
Republic
of China
(the ‘‘PRC’’)
— 100% 100% 100% 100% 100% Investment holding, the
PRC
Qingdao Fujing Agriculture
Development Company Limited*
(青島富景農業開發有限公司)
(‘‘Fujing Agriculture’’)
4 December 2006 The PRC RMB70,707,080 100% 100% 100% 100% 100% Growing, processing and
selling of potted
vegetables, the PRC
* English name is for identification purpose only
All subsidiaries of the Group have adopted 31 December as their financial year end date.
No audited statutory financial statements have been prepared for Glory Team and Prosperity Plentiful
(BVI) since their respective dates of incorporation as t hey are incorporated in jurisdictions where there are no
statutory requirements.
The statutory audited financial st atements of Prosperity Plentiful (HK) and Fujing Holdings (HK) for the
years ended 31 December 2020, 2021 and 2022 have been prepared in accordance with HKFRSs issued by the
HKICPA and was audited by Choi Mei Bik, Certified Public Accountant (Practising), certified public
accountants registered in Hong Kong.
The statutory audited financial statements of Fujing Agriculture for the years ended 31 December 2020,
2021 and 2022 have been prepared in accordance with the relevant accounting principles and financial
regulations applicable to companies established in the PRC and were audited by 青島信通有限責任會計師事務
所 and 青島茂生會計師事務所, certified public accountants registered in the PRC.
No statutory audited financial statements have been prepared for Xinfujing since its date of
incorporation.
APPENDIX I ACCOUNTANTS’ REPORT
–I - 1 1–


--- page 437 ---
3. ADOPTION OF NEW AND REVISED HKFRSs
(a) Application of new and revised HKFRSs
For the purpose of preparing and presenting the Historical Financial Information for the Track
Record Period, the Group has early adopted all the new and revised HKFRSs issued by the HKICPA that
are effective for its accounting period beginning on 1 January 2023, together with the relevant transitional
provision, throughout the Track Record Period.
(b) Revised HKFRSs in issue but not yet effective
Up to the date of issue of these financial statements, the HKICPA has issued a number of
amendments to HKFRSs which are not yet effective for its accounting period beginning on 1 January 2023
and which have not been adopted in these financial st atements. These amendments include the following
which may be relevant to the Group.
Amendments to HKAS 1 Classification of Liabilities as Current or Non-current 1
Amendments to HKFRS 10 and
HKAS 28
Sale or Contribution of Assets between an Investor and its
Associate or Joint Venture 3
Amendments to HKFRS 16 Lease Liability in a Sale and Leaseback 1
Amendments to HKAS 1 Non-current Liabilities with Covenants 1
Hong Kong Interpretation 5
(Revised)
Presentation of Financial Statements — Classification by the
Borrower of a Term Loan that contains a Repayment on
Demand Clause 1
Amendments to HKAS 7 and
HKFRS 7
Supplier Finance Arrangements 1
Amendments to HKAS 21 Lack of Exchangeability 2
1 Effective for annual periods beginning on or after 1 January 2024
2 Effective for annual periods beginning on or after 1 January 2025
3 No mandatory effective date yet determined but available for adoption
The directors of the Company anticipate that the a pplication of these revised HKFRSs will not have
material impact on the Group’s consolidated fi nancial performance and financial position.
4. MATERIAL ACCOUNTING POLICY INFORMATION
The Historical Financial Information has been prepared under the historical cost convention, unless
mentioned otherwise in the accounting policies below (e.g. biological assets that are measured at fair value less
cost to sell).
The preparation of the Historical Financial Inform ation in conformity with HKFRSs requires the use of
certain critical accounting estimates . It also requires management to exercise its judgements in the process of
applying the accounting policies. The areas involving a higher degree of judgement or complexity, or areas
where assumptions and estimates are sig nificant to the Historical Financial Information, are disclosed in note 5.
The material accounting policy information applied in the preparation of the Historical Financial
Information is set out below.
APPENDIX I ACCOUNTANTS’ REPORT
–I - 1 2–


--- page 438 ---
(a) Consolidation
The Historical Financial Information includes t he financial statements of the Company and its
subsidiaries made up to 31 December/30 September. Subsidiaries are entities over which the Group has
control. The Group controls an entity when it is ex posed, or has rights, to variable returns from its
involvement with the entity and has the ability to af fect those returns through its power over the entity.
The Group has power over an entity when the Group has e xisting rights that give i t the current ability to
direct the relevant activities, i.e. activities that significantly affect the entity’s returns.
When assessing control, the Group considers its pot ential voting rights as well as potential voting
rights held by other parties. A pote ntial voting right is considered only if the holder has the practical
ability to exercise that right.
Subsidiaries are consolidated from the date on which control is transferred to the Group. They are
de-consolidated from the date the control ceases.
Intragroup transactions, balance s and unrealised profits are elimi nated. Unrealised losses are also
eliminated unless the transaction p rovides evidence of an impairment of the asset transferred. Accounting
policies of subsidiaries have been changed where nece ssary to ensure consistency with the policies adopted
by the Group.
In the Company’s statements of financial position, an investment in a subsidiary is stated at cost less
impairment losses, unless the inve stment is classified as held for sal e (or included in a disposal group that
is classified as held for sale).
(b) Merger accounting for business combination under common control
This Historical Financial Inf ormation includes the financia l statements of the entities now
comprising the Group for the Track Record Period. As explained in note 2 to the Historical Financial
Information, the acquisition of subsidiaries and business under common control has been accounted for
using merger accounting.
The merger accounting involves incorporating the financial statement items of the combining
entities or businesses in which the common control c ombination occurs as if they had been combined from
the date when the combining entities or businesses f irst came under the control of the controlling party.
The consolidated statements of profit or loss an d other comprehensive income and consolidated
statements of cash flows include the results and cash flows of the combining entities from the earliest date
presented or since the date when the combining entit ies first came under the common control, where this is
a shorter period, regardless of the date of the common control combination.
The consolidated statements of financial position have been prepared to present the assets and
liabilities of the combining entities as if the Group structure had been in existence at the end of each
reporting period. The net assets of the combining en tities are combined using the existing book values
from the controlling party’s perspective. No am ount is recognised in respect of goodwill or gain on
bargain purchase at the time of common control combi nation, to the extent of the continuation of the
controlling party’s interest.
There was no adjustment made to the net assets nor the net profit or loss of any combining entities
in order to achieve consistency of the Group’s accounting policies.
APPENDIX I ACCOUNTANTS’ REPORT
–I - 1 3–


--- page 439 ---
(c) Foreign currency translation
(i) Functional and presentation currency
Items included in the Historical Financial I nformation of each of the Group’s entities are
measured using the currency of the primary economic environment in which the entity operates (the
‘‘functional currency’’). The Historical Financial Information are presented in RMB, which is
different from the Company’s functional curre ncy, HK$. As the major revenue and assets of the
Group are derived from operations in the PRC, RMB is chosen as the presentation currency to
present the Historical Financial Information.
(ii) Transactions and balances in each entity’s financial statements
Transactions in foreign currencies are tran slated into the functional currency on initial
recognition using the exchange rates prevailing on the transaction dates. Monetary assets and
liabilities in foreign currencies are translated at the exchange rates at the end of each reporting
period. Gains and losses resulting from this tra nslation policy are recognised in profit or loss.
(iii) Translation on consolidation
The results and financial position of all the Gr oup entities that have a functional currency
different from the Company’s presentation currenc y are translated into the Company’s presentation
currency as follows:
— Assets and liabilities for each statement of f inancial position presented are translated at
the closing rate at the date of that statement of financial position;
— Income and expenses are translated at aver age exchange rate for the period (unless this
average is not a reasonable approximatio n of the cumulative effect of the rates
prevailing on the transaction dates, in whic h case income and expenses are translated at
the exchange rates on the transaction dates); and
— All resulting exchange differences are reco gnised in other comprehensive income and
accumulated in the foreign currency translation reserve.
(d) Property, plant and equipment
Property, plant and equipment, other than construc tion in progress, are stated in the consolidated
statements of financial position at cost less subs equent accumulated depreciation and subsequent
accumulated impairment losses, if any.
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as
appropriate, only when it is probable that future ec onomic benefits associated with the item will flow to
the Group and the cost of the item can be measured reliably. The carrying amount of any component
accounted for as a separate asset is derecognised when replaced. All other repairs and maintenance are
recognised in the profit or loss during the period in which they are incurred.
APPENDIX I ACCOUNTANTS’ REPORT
–I - 1 4–


--- page 440 ---
Depreciation of property, plant and equipment, other than construction in progress, is calculated at
rates sufficient to write off their costs less their residual values over the estimated useful lives on a
straight-line basis. The estimated useful lives are as follows:
Infrastructure 30 years
Buildings 10–15 years
Plant and equipment 5–10 years
Motor vehicles 5y e a r s
Office equipment and others 3–5 years
The residual values, useful lives and depreciatio n method are reviewed and adjusted, if appropriate,
at the end of each reporting period.
Construction in progress represen ts infrastructure and buildings under construction and is stated at
cost less impairment losses, if any. Depreciation begins when the relevant assets are available for use.
The gain or loss on disposal of property, plant and equipment is the difference between the net sales
proceeds and the carrying amount of the relevant asset, and is recognised in profit or loss.
(e) Investment properties
Investment properties are land and buildings held to earn rentals and/or for capital appreciation. An
investment property is measured init ially at its cost including all direct c osts attributable to the property.
After initial recognition, the inv estment property is stated at cost less accumulated depreciation and
impairment losses, if any. The depreci ation is calculated using the straigh t line basis to allocate the cost to
the residual value over its est imated useful life of 30 years.
(f) Intangible assets
Computer software are stated at cost less subseq uent accumulated amortisation and subsequent
impairment losses, if any. Amortisation is calculate d on a straight-line basis ov er their estimated useful
lives of 5 years.
(g) Leases
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 obtai n substantially all of the economic benefits from that
use.
The Group as lessee
At the lease commencement date, the Group r ecognises a right-of-use asset and a lease
liability, except for short-term leases that have a lease term of 12 months or less and leases of low-
value assets. 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.
The lease liability is initially recognised at th e present value of the lease payments payable over
the lease term, discounted using the interest rate i mplicit in the lease or, if that rate cannot be readily
determined, using a relevant incremental borrowing ra te. After initial recognition, the lease liability
is measured at amortised cost and interest expense is calculated using the effective interest method.
APPENDIX I ACCOUNTANTS’ REPORT
–I - 1 5–


--- page 441 ---
To determine the incremental borrowing rate, the Group:
‧ where possible, uses recent third-party fin ancing received by the individual lessee as a
starting point, adjusted to reflect changes i n financing conditions since third party
financing was received;
‧ uses a build-up approach that starts with a risk -free interest rate adjusted for credit risk
for leases held by the Group, which does not have recent third-party financing; and
‧ makes adjustments specific to the lease, su ch as term, country, currency and security.
If a readily observable amortising loan rate is avai lable to the individual lessee (through recent
financing or market data) which has a similar paym ent profile to the lease, then the group entities
use that rate as a starting point to determine the incremental borrowing rate.
The right-of-use asset recognised when a lease is capitalised is initially measured at cost, which
comprises the initial amount of the lease liabil ity plus any lease payments made at or before the
commencement date, and any initial direct costs inc urred. 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 i s 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, if any.
Right-of-use assets in which the Group is re asonably certain to obtain ownership of the
underlying leased assets at the end of the lease te rm are depreciated from commencement date to the
end of the useful life. Otherwise, right-of-use ass ets are depreciated on a straight-line basis over the
shorter of its estimated useful life and the lease term.
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 ther e is a change arising from the reassessment of
whether the Group will be reasonably certain to ex ercise a purchase 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 Group accounts for a lease modification as a separate lease if:
. the modification increases the scope of the lease by adding the right to use one or more
underlying assets; and
. the consideration for the leases increases by an amount commensurate with the stand-
alone price for the increase in scope and any appropriate adjustments to that stand-
alone price to reflect the circumsta nces of the particular contract.
For a lease modification that is not accounted for as a separate lease, the Group remeasures
the lease liability based on the lease term of th e modified lease by discounting the revised lease
payments using a revised discount rate at the effective date of the modification.
The Group accounts for the remeasurement of lease liabilities by making corresponding
adjustments to the relevant right-of-use asset. When the modified contract contains a lease
component and one or more additional lease or non-lease components, the Group allocates the
consideration in the modified contract to each lease component on the basis of the relative stand-
alone price of the lease component and the aggregate stand-alone price of the non-lease components.
APPENDIX I ACCOUNTANTS’ REPORT
–I - 1 6–


--- page 442 ---
The Group presents right-of-use assets, tha t do not meet the definition of investment
properties, and lease liabilities separately in the consolidated statements of financial position.
The Group as lessor
When the Group acts as a lessor, it determines at lease inception whether each lease is a
finance lease or an operating lease. A lease is classifi ed as a finance lease if it transfers substantially
all the risks and rewards incidental to the owners hip of an underlying assets to the lessee. If this is
not the case, the lease is classified as an operating lease.
(h) Biological assets
Biological assets are measured at fair value less cost to sell. Cost to sell include the incremental
selling costs directly attributable to the disposals of assets, estimate d costs of transport to the market but
excludes finance costs and income taxes. The fair value of biological assets is determined based on their
present locations and conditions and is determined b y the directors of the Company with the assistance of
an independent professional valuer.
Changes in fair value less cost to sell of biolog ical assets are recognised in profit or loss.
(i) Inventories
Inventories are stated at the lower of cost and net realisable value. Cost is determined using the
weighted average basis and comprised all costs of purchase and, where applicable, cost conversion and
other costs that have been incurred in bringing the i nventories to their present locations and conditions.
Net realisable value is the estimated selling price in the ordinary course of business, less the estimated
costs of completion and the estimat ed 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 . The amount of any write-down of inventories to net
realisable value and all losses of inventories are recognised in profit or loss in the period of write-down or
loss occurs. The amount of any reversal of write-down o f inventories is recognised as an increment in the
amount of inventories and recognised in the profit o r loss in the period in which the reversal occurs.
(j) Recognition and derecognition of financial instruments
Financial assets and financial liabilities are reco gnised in the consolidated statements of financial
position when the Group becomes a party to the contractual provisions of the instrument.
Financial assets and financial liabilities are initia lly measured at fair value. Transaction costs that
are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than
financial assets and financial liabilities at fair val ue through profit or loss (‘‘FVTPL’’)) are added to or
deducted from the fair value of the financial assets o r financial liabilities, as appropriate, on initial
recognition. Transaction costs dir ectly attributable to the acquisition of financial assets or financial
liabilities at FVTPL are recognised immediately in profit or loss.
The Group derecognises a financial asset only whe n the contractual rights to the cash flows from the
asset expire, or when it transfers the financial asset and substantially all the risks and rewards of
ownership of the asset to another entity.
The Group derecognises financial liabilities when, and only whe n, the Group’s obligations are
discharged, cancelled or have expired. The differ ence between the carrying amount of the financial
liability derecognised and the consideration paid and payable, including any non-cash assets transferred
or liabilities assumed, is recognised in profit or loss.
APPENDIX I ACCOUNTANTS’ REPORT
–I - 1 7–


--- page 443 ---
(k) Financial assets
All regular way purchases or sales of financial assets are recognised and derecognised on a trade
date basis. Regular way purchases or sales are purchases or sales of financial assets that require delivery of
assets within the time frame established by regulat ion or convention in the marketplace. All recognised
financial assets are measured subsequently in thei r entirety at either amortised cost or fair value,
depending on the classification of the financial assets. The accounting policies adopted for specific
financial assets are set out below.
(l) 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. If revenue has been reco gnised before the Group has an unconditional right to
receive consideration, the amount is presented as a contract asset.
Receivables are stated at amortised cost using the effective int erest method less allowance for ECL.
(m) Cash and cash equivalents
Cash and cash equivalents comprise cash at ba nks 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 insi gnificant risk of changes in value, having been
within three months of maturity at acquisition. Cash and cash equivalents are assessed for ECL.
(n) Financial liabilities and equity instruments
Financial liabilities and equity instruments are classified a ccording to the substance of the
contractual arrangements entered into and the definit ions of a financial liability and an equity instrument
under HKFRSs. An equity instrument is any contract that evidences a residual interest in the assets of the
Group after deducting all of its liabilities. The account ing policies adopted for specific financial liabilities
and equity instruments are set out below.
(o) Borrowings
Borrowings are recognised initially at fair value, n et of transaction costs incurred, and subsequently
measured at amortised cost using the effective interest method.
Borrowings are classified as current liabilities unless the Group has an unconditional right to defer
settlement of the liability for at least 12 m onths after the end of each reporting period.
(p) Trade and other payables
Trade and other payables are recognised initiall y at their fair value and subsequently measured at
amortised cost using the effective interest method unl ess the effect of discounting would be immaterial, in
which case they are stated at cost.
(q) Equity instruments
An equity instrument is any contract that evidence a r esidual interest in the assets of an entity after
deducting all of its liabilities. Equity instrume nts issued by the Company are recorded at the proceeds
received, net of direct issue costs.
APPENDIX I ACCOUNTANTS’ REPORT
–I - 1 8–


--- page 444 ---
(r) Revenue and other income
Revenue is recognised when control over a product o r service 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. Revenue excludes value added tax or other sales taxes and is after
deduction of any trade discounts.
Revenue from the sale of vegetable is recognised when control of the goods has been transferred,
being when the goods have been delivered to the cust omer’s specific location (delivery). Following
delivery, the customer has full discretion over the manner of distribution and price to sell the goods, has
the primary responsibility when on selling the goods and bears the risks of obsolescence and loss in
relation to the goods. A receivable is recognised by the Group when the goods are delivered to the
customer as this represents the point in time at whic h the right to consideration becomes unconditional, as
only the passage of time is required before payment is due.
Interest income is recognised as it accrues using the effective interest method.
Rental income is recognised on a straight-line basis over the lease term.
(s) Employee benefits
(i) Employee leave entitlements
Employee entitlements to annual leave are recognised when they accrue to employees. A
provision is made for the estimated liability for annual leave as a result of services rendered by
employees up to the end of each reporting period.
Employee entitlements to sick leave and maternity leave are not recognised until the time of
leave.
(ii) Pension obligations
The Group contributes to define d contribution retirement schemes which are available to all
employees. Contributions to the schemes by the Gr oup and employees are calculated as a percentage
of employees’ basic salaries. The retirement benefits scheme contributions charged to profit or loss
represents contributions payable by the Group to the funds.
(t) Borrowing costs
Borrowing costs directly attributable to the ac quisition, construction or production of qualifying
assets, which are assets that necessarily take a substantial period of time to get ready for their intended use
or sale, are capitalised as part of the cost of those ass ets, until such time as the assets are substantially
ready for their intended use or sale. Investment income earned on the temporary investment of specific
borrowings pending their expenditure on qualifying a ssets is deducted from the borrowing costs eligible
for capitalisation.
To the extent that funds are borrowed generally an d used for the purpose of obtaining a qualifying
asset, the amount of borrowing costs eligible for capital isation is determined by applying a capitalisation
rate to the expenditures on that asset. The capitali sation rate is the weighted average of the borrowing
costs applicable to the borrowings of the Group th at are outstanding during the period, other than
borrowings made specifically for the purpose of obtai ning a qualifying asset. Any specific borrowing that
remain outstanding after the related asset is ready for its intended use or sale is included in the general
borrowing pool for calculation of capit alisation rate on general borrowings.
All other borrowing costs are recognised in profit or loss in the period in which they are incurred.
APPENDIX I ACCOUNTANTS’ REPORT
–I - 1 9–


--- page 445 ---
(u) Government grants
A government grant is recognised when there is r easonable assurance that the Group will comply
with the conditions attaching to it and that the grant will be received.
Government grants relating to income are deferred and recognised in profit or loss over the period
to match them with the costs they are intended to compensate.
Government grants that become receivable as compensation for expenses or losses already incurred
or for the purpose of giving immediate financial s upport to the Group with no future related costs are
recognised in profit or loss in the period in which they become receivable.
Government grants relating to the purchase of assets are recorded as deferred income and
recognised in profit or loss on a straight-line ba sis over the useful lives of the related assets.
(v) Taxation
Income tax represents the sum of the current tax and deferred tax.
The tax currently payable is based on taxable profit for the year/period. Taxable profit differs from
profit recognised in profit or loss because of items of income or expense that are taxable or deductible in
other years and items that are never taxable or deductible. The Group’s liability for current tax is
calculated using tax rates that have been enacted o r substantively enacted by the end of each reporting
period.
Deferred tax is recognised on differences between th e carrying amounts of asset s and liabilities in the
Historical Financial Information and the corresp onding tax bases used in the computation of taxable
profit. Deferred tax liabilities are g enerally recognised for all taxable t emporary differences and deferred
tax assets are recognised to the extent that it is pr obable that taxable profit s will be available against
which deductible temporary differences, unused ta x losses or unused tax credits can be utilised. Such
assets and liabilities are not recognised if the temporar y difference arises from goodwill or from the initial
recognition (other than in a business combination) of assets and liabilities in a transaction that, at the time
of the transaction, affects neither the taxable pr ofit nor the accounting profit and does not give rise to
equal taxable and deductible temporary differences.
Deferred tax liabilities are recognised for taxabl e temporary differences arising on investments in
subsidiaries, except where the Group is able to cont rol the reversal of the temporary difference and it is
probable that the temporary difference w ill not reverse in the foreseeable future.
The carrying amount of deferred tax assets is reviewed at the end of each reporting 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 asset to be recovered.
Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability
is settled or the asset is realised, based on tax rates that have been enacted or substantively enacted by the
end of each reporting period. Deferred tax is recognis ed in profit or loss, except when it relates to items
recognised in other compr ehensive income or directly in equity, in which case the deferred tax is also
recognised in other comprehensive income or directly in equity.
The measurement of deferred tax assets and liabi lities reflects the tax consequences that would
follow from the manner in which the Group expects, at the end of each reporting period, to recover or
settle the carrying amount of its assets and liabilities.
For the purposes of measuring deferred tax for leasing transactions in which the Group recognises
t h er i g h t - o f - u s ea s s e t sa n dt h er e l a t e dl e a s el i a b ilities, the Group first determines whether the tax
deductions are attributable to the right-o f-use assets or the lease liabilities.
APPENDIX I ACCOUNTANTS’ REPORT
–I - 2 0–


--- page 446 ---
For leasing transactions in which the tax deducti ons are attributable to the lease liabilities, the
Group applies HKAS 12 requirements to recognise a de ferred tax asset (to the extent that it is probable
that taxable profit will be available against which the deductible temporary difference can be utilised) and
a deferred tax liability for all deduc tible and taxable temporary diffe rence associated with the lease
liabilities and the right-of-use assets.
Deferred tax assets and liabilities are offset when the re is a legally enforceable right to set off current
tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation
authority and the Group intends to settle its current ta x assets and liabilities on a net basis, or to realise
the asset and settle the liability simultaneously.
(w) Related parties
A related party is a person or entity that is related to the Group.
(A) A person or a close member of that person’s f amily is related to the Group if that person:
(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 of 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 subs idiary is related to the others).
(ii) One entity is an associate or a joint venture of the other entity (or an associate or a 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 p lan for the benefit of employees of either the
Group or an entity related to the Group. If the Group is itself such a plan, the
sponsoring employers are also related to the Group.
(vi) The entity is controlled or jointly c ontrolled 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 which it is a part, provides key management
personnel services to the Group or to the Group’s parent.
(x) Impairment of non-financial assets
The carrying amounts of non-financial assets are reviewed at the end of each reporting period for
indications of impairment and where an asset is impai red, it is written down as an expense through profit
or loss to its estimated recoverable amount. The recoverable amount is determined for an individual asset,
unless the asset does not generate cash inflows that a re largely independent of those from other assets or
APPENDIX I ACCOUNTANTS’ REPORT
–I - 2 1–


--- page 447 ---
groups of assets. If this is the case, recoverable amount is determined for the cash-generating unit to which
the asset belongs. Recoverable amount is the higher o f value in use and the fair value less costs of disposal
of the individual asset or the cash-generating unit.
Value in use is the present value of the estimated fut ure cash flows of the asset/cash-generating unit.
Present values are computed using pre-tax discount ra tes that reflect the time value of money and the risks
specific to the asset/cash-generating unit whose impairment is being measured.
Impairment losses for cash-generating units are allocated first against the goodwill of the unit and
then pro rata amongst the other assets of the cash-generating unit. Subsequent increases in the recoverable
amount of non-financial assets, other than goodwill, caused by changes in e stimates are credited to profit
or loss to the extent that as if no impairment had been recognised for the assets in prior years.
(y) Impairment of financial assets
The Group recognises a loss allowance for ECL on trade and other receivables. The amount of ECL
is updated at the end of each reporting period to reflect changes in credit risk since initial recognition of
the respective financial instrument.
The Group always recognises lifetime ECL for tr ade receivables. The ECL 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, general ec onomic conditions and an assessment of both the current
as well as the forecast direction of conditions at the reporting date, including time value of money where
appropriate.
For all other financial instruments, the Group recognises lifetime ECL when there has been a
significant increase in credit risk since initial reco gnition. However, if the credit risk on the financial
instrument has not increased signifi cantly since initial recognition, the Group measures the loss allowance
for that financial instrument at an amount equal to 12-month ECL.
Lifetime ECL represents the ECL t hat will result from all possible default events over the expected
life of a financial instrument. In contrast, 12-mont h ECL represents the portion of lifetime ECL that is
expected to result from default events on a financial i nstrument that are possible within 12 months after
the end of each reporting period.
Significant increase in credit risk
In assessing whether the credit risk on a financia l instrument has increased significantly since
initial recognition, the Group compares the risk of a default occurring on the financial instrument at
the end of each reporting period with the risk of a default occurring on the financial instrument at
the date of initial recognition. In making this assessment, the Group considers both quantitative and
qualitative information that is reasonable and s upportable, including historical experience and
forward-looking information that is available without undue cost or effort. Forward-looking
information considered includes the future prosp ects of the industries in which the Group’s debtors
operate, obtained from economic expert reports, fin ancial analysts, governmental bodies, relevant
think-tanks and other similar organisations, as w ell as consideration of various external sources of
actual and forecast economic information that relate to the Group’s core operations.
In particular, the following information is ta ken into account when assessing whether credit
risk has increased significantly since initial recognition:
— an actual or expected significant deteriorati on in the financial instrument’s external (if
available) or internal credit rating;
— significant deterioration in external mar ket indicators of credit risk for a particular
financial instrument;
APPENDIX I ACCOUNTANTS’ REPORT
–I - 2 2–


--- page 448 ---
— existing or forecast adverse changes in business, financial or economic conditions that
are expected to cause a significant decrease in the debtor’s ability to meet its debt
obligations;
— an actual or expected significant deteriora tion in the operating results of the debtor;
— significant increases in credit risk on other financial instruments of the same debtor; or
— an actual or expected significant adverse change in the regulatory, economic, or
technological environment of the debtor th at results in a significant decrease in the
debtor’s ability to meet its debt obligations.
Irrespective of the outcome of the above assessment, the Group presumes that the credit risk
on a financial asset has increased significantly since initial recognition when contractual payments
are more than 30 days past due, unless the Group ha s reasonable and supporta ble information that
demonstrates otherwise.
Despite the foregoing, the Group assumes that t he credit risk on a financial instrument has not
increased significantly since initial recognition if the financial instrument is determined to have low
credit risk at the end of each reporting period. A financial instrument is determined to have low
credit risk if:
(i) The financial instrument has a low risk of default;
(ii) The debtor has a strong capacity to meet its c ontractual cash flow obligations in the near
term; and
(iii) Adverse changes in economic and business conditions in the longer term may, but will
not necessarily, reduce the ability of the borrower to fulfill its contractual cash flow
obligations.
The Group considers a financial asset to have lo w credit risk when the asset has external credit
rating of ‘‘investment grade’’ in accordance wit h the globally understood definition or if an external
rating is not available, the asset has an internal rating of ‘‘performing’’. Performing means that the
counterparty has a strong financial position and there is no past due amounts.
The Group regularly monitors the effectiveness o f the criteria used to identify whether there
has been a significant increase in credit risk and revises them as appropriate to ensure that the
criteria are capable of identifying significant increase in credit risk before the amount becomes past
due.
Definition of default
The Group considers the following as constituti ng an event of default for internal credit risk
management purposes as historical experience indicates that receivables that meet either of the
following criteria are generally not recoverable.
— when there is a breach of financial covenants by the counterparty; or
— information developed internally or obtai ned from external sources indicates that the
debtor is unlikely to pay its creditors, incl uding the Group, in full (without taking into
account any collaterals held by the Group).
Irrespective of the above analysis, the Group considers that default has occurred when a
financial asset is more than 90 days past due unl ess the Group has reasonable and supportable
information to demonstrate that a more laggi ng default criterion is more appropriate.
APPENDIX I ACCOUNTANTS’ REPORT
–I - 2 3–


--- page 449 ---
Credit-impaired financial assets
A financial asset is credit-impaired when one or more events that have a detrimental impact on
the estimated future cash flows of that financial a sset have occurred. Evidence that a financial asset
is credit-impaired includes observab le data about the following events:
— significant financial difficulty of the issuer or the counterparty;
— a breach of contract, such as a default or past due event;
— the lender(s) of the counterparty, for economic or contractual reasons relating to the
counterparty’s financial diff iculty, having granted to the counterparty a concession(s)
that the lender(s) would not otherwise consider;
— it is becoming probable that the counterpart y will enter bankruptcy or other financial
reorganisation; or
— The disappearance of an active market for that financial asset because of financial
difficulties.
Write-off policy
The Group writes off a financial asset when there is information indicating that the debtor is
in severe financial difficulty and there is no realist ic prospect of recovery, including when the debtor
has been placed under liquidation or has entered in to bankruptcy proceedings, or in the case of trade
receivables, when the amounts are due over two years, whichever occurs sooner. Financial assets
written off may still be subject to enforcement a ctivities under the Group’s recovery procedures,
taking into account legal advice where appropriate . Any recoveries made are recognised in profit or
loss.
Measurement and recognition of ECL
The measurement of ECL is a function of the probability of default, loss given default (i.e. the
magnitude of the loss if there is a default) and the exposure at default. The assessment of the
probability of default and loss given default is ba sed on historical data adj usted by forward-looking
information as described above. As for the expos ure at default, for financial assets, this is
represented by the assets’ gross carrying amount at the end of each reporting period.
For financial assets, the ECL is estimated as th e difference between all contractual cash flows
that are due to the Group in accordance with the contract and all the cash flows that the Group
expects to receive, discounted at the o riginal effective interest rate.
If the Group has measured the loss allowance for a financial instrument at an amount equal to
lifetime ECL in the previous repor ting period, but determines at the current reporting date that the
conditions for lifetime ECL are no longer met, th e Group measures the loss allowance at an amount
equal to 12-month ECL at the current reporting date, except for assets for which simplified
approach was used.
The Group recognises an impairment gain or loss in profit or loss for all financial instruments
with a corresponding adjustment to their carrying amount through a loss allowance account.
APPENDIX I ACCOUNTANTS’ REPORT
–I - 2 4–


--- page 450 ---
(z) Events after the reporting period
Events after the reporting period that provide addi tional information about the Group’s position at
the end of the reporting period or those that indicate the going concern assumption is not appropriate are
adjusting events and are reflected in the Historica l Financial Information. Events after the reporting
period that are not adjusting events are disclosed in the notes to the Historical Financial Information
when material.
5. CRITICAL JUDGEMENT AND KEY ESTIMATES
Critical judgement in applying accounting policies
In the process of applying the accounting policies, the directors of the Company have made the
following judgement that has the most significant effect on the amounts recognised in the Historical
Financial Information (apart from those invol ving estimations, which are dealt with below).
(a) Lease term determination
In determining the lease term at the commencement d ate for leases that include termination options
exercisable by the Group, the Group evaluates the likelihood of exercising the termination options taking
into account all relevant facts and circumstan ces that create an economic incentive for the Group to
exercise the option, including favourable terms, le asehold improvements undertaken and the importance
of that underlying asset to the Group’s operation.
The lease term is reassessed when there is a signific ant event or significant change in circumstance
that is within the Group’s control. During the Track Record Period, no lease term has been reassessed.
Key sources of estimation uncertainty
The key assumptions concerning the future, and other key sources of estimation uncertainty at the
end of each reporting period, that have a significant risk of causing a material adjustment to the carrying
amounts of assets and liabilities within the next financial year, are discussed below.
(a) Impairment of property, plant and equipment, investment properties and right-of-use assets
Property, plant and equipment, investment propert ies and right-of-use assets are stated at costs less
accumulated depreciation and impairment losses, if a ny. In determining whether an asset is impaired, the
Group has to exercise judgement and make estimation, pa rticularly in assessing: (1) whether an event has
occurred or any indicators that may affect the asset value; (2) whether the carrying value of an asset can be
supported by the recoverable amount, in the case of va lue in use, the net present value of future cash flows
which are estimated based upon the continued use of the asset; and (3) the appropriate key assumptions to
be applied in estimating the recoverable amounts including cash flow projections and an appropriate
discount rate. When it is not possible to estimate the recoverable amount of an individual asset (including
right-of-use assets), the Group estimates the recove rable amount of the cash-generating unit to which the
assets belong. Changing the assumptions and estimat es, including the discount rates or the growth rate in
the cash flow projections, could materially affect the net present value used in the impairment test.
The carrying amounts of property, plant and e quipment were approximately RMB167,631,000,
RMB172,278,000, RMB162,756,000 and RMB159,890,000 as at 31 December 2020, 2021 and 2022 and 30
September 2023 respectively. The carrying amount s of investment properties were approximately
RMB6,725,000, RMB6,430,000, RMB6,135,000, a nd RMB17,966,000 as at 31 December 2020, 2021
and 2022 and 30 September 2023 respectively. The carrying amounts of right-of-use assets were
approximately RMB23,519,000, RMB22,768,000, RMB22,003,000 and RMB21,453,000 as at 31
December 2020, 2021 and 2022 and 30 September 2023 respectively.
APPENDIX I ACCOUNTANTS’ REPORT
–I - 2 5–


--- page 451 ---
(b) Fair value measurement of biological assets — potted vegetables
The Group’s biological assets are measured at fair value less costs to sell at the end of each reporting
period. The Group uses valuation techniques that inc lude inputs that are not based on market observable
data to estimate the fair value of biological assets. F or potted vegetables, the fair value is determined by
using the cost and market approach method with key inputs including market price and scrap rate. Any
changes in the inputs may affect the fair value of the Group’s biological assets significantly.
The carrying amounts of biological assets were approximately RMB9,395,000, RMB9,781,000,
RMB8,371,000 and RMB8,876,000 as at 31 December 2020, 2021 and 2022 and 30 September 2023
respectively.
(c) Allowance for ECL of trade receivables
The management of the Group estimates the am ount of allowance for ECL on trade receivables
based on the credit risk of trade receivables. The amount of the allowance based on ECL model is
measured as the difference between all contractual cash flows that are due to the Group in accordance
with the contracts and all the cash flows that the Gr oup expects to receive, discounted at the effective
interest rate determined at initial recognition. Wh ere the future cash flows are less than expected, or
revised downward due to changes in facts and circumstances, a material allowance may arise.
The carrying amount of trade receivables were approximately RMB31,121,000 (net of allowance for
ECL of approximately RMB1,218,000) , RMB46,590,000 (net of allowance for ECL of approximately
RMB1,000), RMB53,444,000 (net of allowance for ECL of approximately RMB161,000) and
RMB58,376,000 (net of allowance for ECL of approximately RMB100,000) as at 31 December 2020,
2021 and 2022 and 30 September 2023 respectively.
6. FINANCIAL RISK MANAGEMENT
The Group’s activities expose it to a variety of financial risks: foreign currency risk, credit risk, interest
rate risk and liquidity risk. The Group’s overall risk management programme focuses o n the unpredictability of
financial markets and seeks to minimise potential adverse effects on the Group’s financial performance.
(a) Foreign currency risk
The Group has minimal exposure to foreign currenc y risk as most of its business transactions, assets
and liabilities are principally denominated in the f unctional currencies of the Group entities. Thus, no
sensitivity analysis is presented . The Group currently does not have a foreign currency hedging policy in
respect of foreign currency transactions, assets and liabilities. The Group monitors its foreign currency
exposure closely and will consider hedging significant foreign currency exposure should the need arise.
(b) Credit risk
Credit risk is the risk that a counterparty will not meet its obligations under a financial instrument
or customer contract, leading to a financial loss. The Group is exposed to credit risk from its operating
activities (primarily trade receivables) and from its in vesting activities, includi ng deposits with banks and
financial institutions, and other financial instrum ents. The Group’s exposure t o credit risk arising from
cash and cash equivalents is limited b ecause the counterparties are banks and financial institutions with
high credit-rating assigned by international credit-rating agencies, for which the Group considers to have
low credit risk.
As at 31 December 2020, 2021, 2022 and 30 September 2023, the Group has concentration of credit
risk as 14.0%, 18.1%, 18.6% and 21.9% of the total gross trade receivables were due from the Group’s
largest customer respectively.
APPENDIX I ACCOUNTANTS’ REPORT
–I - 2 6–


--- page 452 ---
As at 31 December 2020, 2021, 2022 and 30 September 2023, the Group has concentration of credit
risk as 58.8%, 63.1%, 69.1% and 69.2% of the total gross trade receivables were due from the Group’s
five largest customers respectively.
Customer credit risk is managed by each busines s unit subject to the Group’s established policy,
procedures and control relating to customer credit r isk management. Individua l credit evaluations are
performed on all customers requiring credit ov er 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 cust omer as well as pertaining to the economic environment in which the
customer operates. The credit periods granted to the distributors and end-users customers are generally
60-120 days and 180 days respectively. Debtors with balances that are more than 60 days 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 measures loss allowances for trade receivables at an amount equal to lifetime ECL,
which is calculated using a provision matrix. As the Group’s historical credit loss experience indicate
significantly different loss patterns for different customer segments, the loss allowance based on invoice
date is distinguished between the Group’s differe nt customer bases into two major groups, namely
distributors and end-user customers. Certain d ebtors have been assessed individually as the Group
considers the balances due from these debtors have been credit-impaired.
Allowance for ECL
At 31 December
At 30
September
20232020 2021 2022
RMB’000 RMB’000 RMB’000 RMB’000
Non-credit impaired 646 1 161 100
Credit impaired 572 — — —
1,218 1 161 100
APPENDIX I ACCOUNTANTS’ REPORT
–I - 2 7–


--- page 453 ---
The following table of ageing analysis, based on invoice date, provides information about the
Group’s exposure to credit risk and ECL for trade receivables (non-credit impaired):
At 31 December 2020
0–90
days
91–180
days
181–365
days
Over
1 year Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Distributors
Expected loss rate 0% 0% 5% 90%
Gross carrying amount 30,498 354 — — 30,852
L o s s a l l o w a n c e —————
Net carrying amount 30,498 354 — — 30,852
End-user customers
Expected loss rate 8% 8% 24% 100%
Gross carrying amount 46 32 259 578 915
Loss allowance (4) (3) (61) (578) (646)
Net carrying amount 42 29 198 — 269
Total
Gross carrying amount 30,544 386 259 578 31,767
Loss allowance (4) (3) (61) (578) (646)
Net carrying amount 30,540 383 198 — 31,121
At 31 December 2021
0–90
days
91–180
days
181–365
days
Over
1 year Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Distributors
Expected loss rate 0% 0% 5% 90%
Gross carrying amount 36,608 9,981 — — 46,589
L o s s a l l o w a n c e —————
Net carrying amount 36,608 9,981 — — 46,589
End-user customers
Expected loss rate 13% 13% 34% 100%
Gross carrying amount 1 1 — — 2
Loss allowance — (1) — — (1)
Net carrying amount 1 — — — 1
Total
Gross carrying amount 36,609 9,982 — — 46,591
Loss allowance — (1) — — (1)
Net carrying amount 36,609 9,981 — — 46,590
APPENDIX I ACCOUNTANTS’ REPORT
–I - 2 8–


--- page 454 ---
At 31 December 2022
0–90
days
91–180
days
181–365
days
Over
1 year Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Distributors
Expected loss rate 0% 1% 5% 90%
Gross carrying amount 37,550 16,055 — — 53,605
Loss allowance — (161) — — (161)
Net carrying amount 37,550 15,894 — — 53,444
End-user customers
Expected loss rate 13% 13% 34% 100%
Gross carrying amount — — — — —
L o s s a l l o w a n c e —————
N e t c a r r y i n g a m o u n t —————
Total
Gross carrying amount 37,550 16,055 — — 53,605
Loss allowance — (161) — — (161)
Net carrying amount 37,550 15,894 — — 53,444
At 30 September 2023
0–90
days
91–180
days
181–365
days
Over
1 year Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Distributors
Expected loss rate 0% 1% 5% 90%
Gross carrying amount 48,558 9,918 — — 58,476
Loss allowance — (100) — — (100)
Net carrying amount 48,558 9,818 — — 58,376
End-user customers
Expected loss rate 13% 13% 34% 100%
Gross carrying amount — — — — —
L o s s a l l o w a n c e —————
N e t c a r r y i n g a m o u n t —————
Total
Gross carrying amount 48,558 9,918 — — 58,476
Loss allowance — (100) — — (100)
Net carrying amount 48,558 9,818 — — 58,376
The above expected loss rates are adjusted to refl ect differences between economic conditions during
the period over which the historical data has been co llected, current conditions and the Group’s view of
economic conditions over the expect ed lives of the receivables.
APPENDIX I ACCOUNTANTS’ REPORT
–I - 2 9–


--- page 455 ---
For the purpose of determining the expected loss rate s of distributors and end- user customers during
the Track Record Period, the historical rates of loss from sales records starting in 2016 are considered. As
there is no material change in the historical loss rates considered in determining expected loss rates of
distributors as at 31 December 2020 and 2021 and 30 Se ptember 2023, and end-user customers as at 31
December 2022 and 30 September 2023 respectively, the expected loss rate for trade receivables for
distributors as at 31 December 2020 and 2021 and 30 September 2023 and expected loss rate for trade
receivables for end-user customers as at 31 December 2021 and 2022 and 30 September 2023 remained the
same.
For trade receivables which the Group considers are credit-impaired, the Gr oup’s exposure to credit
risk and ECL is as follows:
At 31 December
At 30
September
20232020 2021 2022
RMB’000 RMB’000 RMB’000 RMB’000
Gross carrying amount 572 — — —
Loss allowance (572) — — —
Net carrying amount — — — —
Movement in the loss allowance for ECL in respect of trade receivables during the year/period is as
follows:
For the year ended 31 December
Nine months
ended 30
September
20232020 2021 2022
RMB’000 RMB’000 RMB’000 RMB’000
At the beginning of the year/
period 1,100 1,218 1 161
Allowance/(reversal of
allowance) for ECL of
trade receivables 118 140 160 (61)
Write-off — (1,357) — —
At the end of the year/period 1,218 1 161 100
During the year ended 31 December 2021, in view of prolonged outstanding, the management
considered that no reasonable expectation of r ecovering the trade receivables and an amount of
approximately RMB1,357,000 has been written off.
For other receivables, the Group recognises lifetime ECL when there has been a significant increase
in credit risk since initial recognition. However, if the credit risk on other receivables has not increased
significantly since initial recognition, the Group me asures the loss allowance for other receivables at an
amount equal to 12-month ECL. The Group has assessed that the ECL of other receivables is insignificant
at the end of each reporting period under 12-month ECL model and therefore, in the opinion of directors
of the Company, no loss allowance was recognised.
APPENDIX I ACCOUNTANTS’ REPORT
–I - 3 0–


--- page 456 ---
(c) Interest rate risk
The Group’s exposure to cash flow interest rate ris k arises from its bank deposits and certain bank
borrowings. These bank deposits and certain bank borrowings bear interests at floating rates that varied
with the then prevailing market condition.
The Group’s exposure to fair value interest rate risk arises from certain bank borrowings at fixed
interest rates.
Except as stated above, the Group has no other signif icant interest-bearing assets and liabilities
during the Track Record Period, its income and opera ting cash flows are substantially independent of
changes in market interest rates.
No sensitivity analysis is presented since the dir ectors of the Company consider that the exposure of
cash flow interest rate risk arising from bank deposits and borrowings with floating interest rates is
limited due to their short maturities o r the insignificant amounts involved.
(d) Liquidity risk
The Group’s policy is to regularly monitor current and expected liquidity requirements to ensure
that it maintains sufficient reserves of cash to meet i ts liquidity requirements in the short and longer term.
The maturity analysis based on contractual undiscounted cash flows of the Group’s and the
Company’s non-derivative financi al liabilities is as follows:
The Group
At 31 December 2020
Less than
1y e a ro ro n
demand
Between
1a n d2y e a r s
Between
2a n d5y e a r s
Over
5y e a r s
Total
contractual
undiscounted
cash flows
Carrying
amount
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Trade payables 9,149 — — — 9,149 9,149
Accruals and
other payables 3,295 — — — 3,295 3,295
Amount due to a
director 20 — — — 20 20
Bank borrowings 20,403 — — — 20,403 20,000
Lease liabilities 153 153 412 330 1,048 721
The Group
At 31 December 2021
Less than
1y e a ro ro n
demand
Between
1a n d2y e a r s
Between
2a n d5y e a r s
Over
5y e a r s
Total
contractual
undiscounted
cash flows
Carrying
amount
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Trade payables 5,323 — — — 5,323 5,323
Accruals and
other payables 1,719 — — — 1,719 1,719
Amount due to a
director 30 — — — 30 30
Bank borrowings 20,410 — — — 20,410 20,000
Lease liabilities 189 153 367 222 931 677
APPENDIX I ACCOUNTANTS’ REPORT
–I - 3 1–


--- page 457 ---
The Group
At 31 December 2022
Less than
1y e a ro ro n
demand
Between
1a n d2y e a r s
Between
2a n d5y e a r s
Over
5y e a r s
Total
contractual
undiscounted
cash flows
Carrying
amount
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Trade payables 15,552 — — — 15,552 15,552
Accruals and
other payables 1,546 — — — 1,546 1,546
Amount due to a
director 30 — — — 30 30
Bank borrowings 20,455 — — — 20,455 20,000
Lease liabilities 152 152 323 115 742 552
The Group
At 30 September 2023
Less than
1y e a ro ro n
demand
Between
1a n d2y e a r s
Between
2a n d5y e a r s
Over
5y e a r s
Total
contractual
undiscounted
cash flows
Carrying
amount
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Trade payables 12,177 — — — 12,177 12,177
Accruals and
other payables 2,628 — — — 2,628 2,628
Amount due to a
director 30 — — — 30 30
Bank borrowings 20,301 — — — 20,301 19,995
Lease liabilities 152 108 273 115 648 500
The Company
At 31 December 2021
Less than
1y e a ro ro n
demand
Between
1a n d2y e a r s
Between
2a n d5y e a r s
Over
5y e a r s
Total
contractual
undiscounted
cash flows
Carrying
amount
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Amount due to a
subsidiary 2 — — — 2 2
APPENDIX I ACCOUNTANTS’ REPORT
–I - 3 2–


--- page 458 ---
The Company
At 31 December 2022
Less than
1y e a ro ro n
demand
Between
1a n d2y e a r s
Between
2a n d5y e a r s
Over
5y e a r s
Total
contractual
undiscounted
cash flows
Carrying
amount
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Amount due to a
subsidiary 7 — — — 7 7
The Company
At 30 September 2023
Less than
1y e a ro ro n
demand
Between
1a n d2y e a r s
Between
2a n d5y e a r s
Over
5y e a r s
Total
contractual
undiscounted
cash flows
Carrying
amount
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Amount due to a
subsidiary 7 — — — 7 7
(e) Categories of financial instruments
The Group
At 31 December
At 30
September
20232020 2021 2022
RMB’000 RMB’000 RMB’000 RMB’000
Financial assets:
Financial assets at amortised cost 39,044 70,052 125,038 148,611
Financial liabilities:
Financial liabilities at amortised cost 32,464 27,072 37,128 34,830
The Company
At 31 December
At 30
September
20232020 2021 2022
RMB’000 RMB’000 RMB’000 RMB’000
Financial assets:
Financial assets at amortised cost 9 10 12 10
Financial liability:
Financial liability at amortised cost —* 2 7 7
* Represents amount less than RMB1,000.
(f) Fair values
The carrying amounts of the Group’s and the Company’s financial assets and financial liabilities at
amortised cost as reflected in the Group’s consolidat ed and Company’s statements of financial position
approximate their respective fair values.
APPENDIX I ACCOUNTANTS’ REPORT
–I - 3 3–


--- page 459 ---
7. FAIR VALUE MEASUREMENTS
Fair value is the price that would be received to sell a n asset or paid to transfer a liability in an orderly
transaction between market participants at the measu rement date. The following disclosures of fair value
measurements use a fair value hierarchy that categorises into three levels the inputs to valuation techniques used
to measure fair value:
Level 1 inputs: quoted prices (unadjus ted) in active markets for identical assets or liabilities that the
Group can access at the measurement date.
Level 2 inputs: inputs other than quoted prices include d within level 1 that are observable for the asset or
liability, either directly or indirectly.
Level 3 inputs: unobservable input s for the asset or liability.
The Group’s policy is to recognise transfers into and transfers out of any of the three levels as of the date
of the event or change in circumstances that caused the transfer.
(a) Disclosures of level in fair value hierarchy:
At 31 December 2020
Fair value measurements using:
Description Level 1 Level 2 Level 3 Total
RMB’000 RMB’000 RMB’000 RMB’000
Recurring fair value measurements
Biological assets — potted
vegetables — — 9,395 9,395
At 31 December 2021
Fair value measurements using:
Description Level 1 Level 2 Level 3 Total
RMB’000 RMB’000 RMB’000 RMB’000
Recurring fair value measurements
Biological assets — potted
vegetables — — 9,781 9,781
At 31 December 2022
Fair value measurements using:
Description Level 1 Level 2 Level 3 Total
RMB’000 RMB’000 RMB’000 RMB’000
Recurring fair value measurements
Biological assets — potted
vegetables — — 8,371 8,371
At 30 September 2023
Fair value measurements using:
Description Level 1 Level 2 Level 3 Total
RMB’000 RMB’000 RMB’000 RMB’000
Recurring fair value measurements
Biological assets — potted
vegetables — — 8,876 8,876
APPENDIX I ACCOUNTANTS’ REPORT
–I - 3 4–


--- page 460 ---
(b) Reconciliation of assets measured at fair value based on Level 3 :
For the year ended 31 December
Nine
months
ended 30
September
20232020 2021 2022
RMB’000 RMB’000 RMB’000 RMB’000
Biological assets:
At the beginning of the year/period 6,724 9,395 9,781 8,371
Increase due to plantation 67,444 86,208 74,798 66,523
Decrease due to sales, before the
biological assets fair value
adjustments (65,828) (85,999) (70,804) (66,785)
Biological assets fair value
adjustments
(#) 1,055 177 (5,404) 767
At the end of the year/period 9,395 9,781 8,371 8,876
(#) including gains arising from fair value
adjustments of biological assets held at
the end of the reporting period 3,174 3,351 2,532 3,299
In estimating the fair value of the biological assets, the highest and best use of the biological assets is
their current use.
The total gains or losses recognised in profit or loss including those for assets held at end of the
reporting period are presented as a separate item in the consolidated statements of profit or loss and other
comprehensive income.
There were no transfers in the fair value hierar chy between Level 1, Level 2 and Level 3 during the
Track Record Period.
(c) Disclosure of valuation process used by the Group and valuation techniques and inputs used in fair value
measurements
The Group’s financial controller is responsible f or the fair value measurements of assets and
liabilities required for financia l reporting purposes, including Level 3 fair value measurements. The
financial controller reports directly to the board of directors of the Company for these fair value
measurements. Discussions of valuation processes a nd results are held between the financial controller
and the board of directors of the Company.
For Level 3 fair value measurements, the Group wi ll normally engage external valuation experts
with the recognised professional qualifications and recent experience to perform the valuations.
APPENDIX I ACCOUNTANTS’ REPORT
–I - 3 5–


--- page 461 ---
The valuation techniques and the key unobservable inputs to the Level 3 fair value measurements
are set out below:
Biological assets — potted vegetables:
Valuation technique Unobservable inputs Range
Effect on
fair value for
increase of
unobservable
inputs
Cost and market
approach
Market price 31 December 2020 :
RMB15–RMB16 per pot
31 December 2021 :
RMB15–RMB16 per pot
31 December 2022 :
RMB15–RMB16 per pot
30 September 2023 :
RMB15–RMB16 per pot Increase
Scrap rate 31 December 2020 : 3.21%–4.6%
31 December 2021 : 3.11%–4.21%
31 December 2022 : 3.46%–4.45%
30 September 2023 : 3.41%–4.21% Decrease
Sensitivity analysis
The following table illustrates the sensitivity of the fair value of our biological assets that would
arise if the market price of potted vegetable produce had changed during the periods indicated, assuming
all other variables remained constant. The fair value of our biological assets increases when the market
price increases, and decreases when the market price decreases.
Change in market price –30% –15% 15% 30%
(Decrease)/increase in fair value
RMB’000 RMB’000 RMB’000 RMB’000
For the year ended
31 December 2020 (2,477) (1,239) 1,239 2,477
For the year ended
31 December 2021 (2,537) (1,268) 1,268 2,537
For the year ended
31 December 2022 (2,018) (1,009) 1,009 2,018
For the nine months ended
30 September 2023 (2,345) (1,172) 1,172 2,345
8. SEGMENT INFORMATION
The Group identifies reportable segments accordin g to the types of products and services they offer.
The directors of the Company have determined that the Group has only one operating and reportable
segment, being plantation and sales of vegetable.
Information reported to the directors of the Company, being the chief operating decision maker, for the
purposes of resource allocation and assessment of segme nt performance focuses only on revenue analysis by
nature of revenue and geographical location of customers.
APPENDIX I ACCOUNTANTS’ REPORT
–I - 3 6–


--- page 462 ---
Since this is the only one operating segment of the Gr oup, no segment information is presented other than
entity-wide disclosures.
Geographical information
Over 90% of the Group’s non-current assets and r evenue are located and generated in the PRC.
Accordingly, no further geographical information of non-current assets and revenue was disclosed.
Revenue from major customers:
Year ended 31 December
Nine months ended
30 September
2020 2021 2022 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(Unaudited)
Sales of potted vegetables:
Customer B 18,608 25,068 20,729 14,522 20,077
Customer D 14,486 19,482 16,164 11,196 16,103
Customer F 13,631 17,807 15,054 10,562 14,569
Customer G N/A* 25,288 20,914 14,658 20,234
* Less than 10% of the Group’s revenue in the respective year.
9. REVENUE
Revenue represents invoiced value of goods sold, after allowances for returns and discounts, during the
Track Record Period and is set out below:
Year ended 31 December
Nine months ended
30 September
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
HKFRS 15 :
Products transferred at
a point in time:
— Sales to distributors 121,028 154,937 126,692 88,624 121,292
— Direct sales to end-user
customers 377 9 2 2 2
121,405 154,946 126,694 88,626 121,294
There are no transaction price allocated to the perfor mance obligations that are unsatisfied and required
to be disclosed in accordance with HKFRS 15.120.
APPENDIX I ACCOUNTANTS’ REPORT
–I - 3 7–


--- page 463 ---
10. OTHER INCOME
Year ended 31 December
Nine months ended
30 September
2020 2021 2022 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(Unaudited)
Interest income 19 8 17 17 44
Rental income 640 640 640 480 480
Net foreign exchange gains — — 3 5 6
Government grants 3,627 544 227 170 170
Compensation received 304 30 — — 18
4,590 1,222 887 672 718
The government grants represent subsidies received from government (i) for agricultural development and
greening purposes; and (ii) for reimbursement of the listi ng expenses. There are no unf ulfilled conditions and
other contingencies attaching to them.
11. FINANCE COSTS
Year ended 31 December
Nine months ended
30 September
2020 2021 2022 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(Unaudited)
Interest expenses on lease
liabilities 53 73 64 49 42
Interest on bank borrowings 1,130 824 836 639 620
1,183 897 900 688 662
12. INCOME TAX EXPENSE
The Group is not subject to taxation in the Cayman Islands and the BVI.
No provision for Hong Kong Profits Tax is required since the Group has no assessable profits arose in
Hong Kong for the Track Record Period.
The Group’s subsidiaries established and operating in the PRC are subject to PRC Enterprise Income Tax
(‘‘EIT’’) at the rate of 25% for the Track Record Period. According to the Article 27 of the EIT Law and Article
86 of the Regulations of the EIT Law, enterprise inco me from agriculture, forestry, husbandry and fishery
projects may be reduced or exempted from taxation. Pu rsuant to the abovementioned provisions and with the
approval of Dianbu Branch of the State Taxation Bureau of Laixi City, Fujing Agriculture’s enterprise income
from agriculture has been exempted from the PRC EIT for the period from 1 May 2010 to 1 May 2050.
Accordingly, no PRC EIT has been provided in the Historical Financial Information for Fujing Agriculture
during the Track Record Period. No provision for the PRC EIT has been made for Xinfujing in the Historical
Financial Information as it has no assessable profits during the Track Record Period.
APPENDIX I ACCOUNTANTS’ REPORT
–I - 3 8–


--- page 464 ---
The reconciliation between the income tax expense an d the product of profit before tax multiplied by the
applicable tax rate in the tax jurisdictions of the Group is as follows:
Year ended 31 December
Nine months ended
30 September
2020 2021 2022 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(Unaudited)
Profit before tax 43,778 47,303 31,812 19,701 41,117
Tax at applicable tax rate 10,948 11,828 7,959 4,929 10,282
Tax effect of expenses that are
not deductible 11 4 12 9 6
Tax effect of tax exemption (10,959) (11,832) (7,971) (4,938) (10,288)
Income tax expense — — — — —
13. PROFIT FOR THE YEAR/PERIOD
The Group’s profit for the year/period is stated after charging/(crediting) the followings:
Year ended 31 December
Nine months ended
30 September
2020 2021 2022 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(Unaudited)
Auditors’ remuneration 52 34 41 37 14
Cost of inventories sold, before the biological
assets fair value adjustments 65,828 85,999 70,804 49,920 66,785
Depreciation of property, plant and eq uipment 7,932 9,740 10,034 7,507 7,653
Depreciation of investment properties 295 295 295 221 391
Depreciation of right-of-use assets 860 822 765 574 550
Loss on disposal of property, plant and
equipment — — 214 214 —
Biological assets fair value adjustments (1,055) (177) 5,404 4,921 (767)
Net foreign exchange losses/(gains) 2 1 (3) (5) (6)
Listing expenses 4,060 7,625 5,727 4,315 6,016
Loss on write-off of property, plant and
equipment — 33 382 382 —
Allowance/(reversal of allowance) for ECL of
trade receivables 118 140 160 10 (61)
Staff costs (including directors’ emoluments)
— Salaries, bonus, allowances, subcontracting
fees and other benefits in kind 31,646 40,095 34,750 25,106 30,729
— Retirement benefits scheme contributions 268 638 660 498 463
31,914 40,733 35,410 25,604 31,192
APPENDIX I ACCOUNTANTS’ REPORT
–I - 3 9–


--- page 465 ---
Notes:
(a) Depreciation of property, plant and equipment of approximately RMB3,686,000, RMB5,670,000,
RMB5,565,000, RMB4,277,000 and RMB4,413,000 for the years ended 31 December 2020, 2021 and
2022 and the nine months ended 30 September 2022 (unaudited) and 2023 respectively are included
in cost of sales.
(b) Depreciation of right-of-use assets of approximately RMB382,000, RMB341,000, RMB273,000,
RMB213,000 and RMB212,000 for the years ended 31 December 2020, 2021 and 2022 and the nine
months ended 30 September 2022 (unaudited) and 2023 respectively are included in cost of sales.
(c) Staff costs of approximately RMB28,286,000 , RMB37,168,000, RMB32,260,000, RMB23,183,000
and RMB28,999,000 for the years ended 31 December 2020, 2021 and 2022 and the nine months
ended 30 September 2022 (unaudited) and 2023 r espectively are included in cost of sales.
14. BENEFITS AND INTERESTS OF DIRECTORS AND EMPLOYEES
(a) The emoluments paid or payable to each of the director of the Company
The Company was incorporated in the Cayman Islands on 23 July 2019 and at the date of its
incorporation, Mr. Zhang was appointed as an exec utive director of the Company. On 27 May 2020, Mr.
Lyu Zhonghua, Mr. Cui Wei, Ms. Guo Zeqing and Mr. Pang Jinhong were appointed as executive
directors of the Company.
Dr. Li Junliang, Mr. Lam Chik Tong and Ms. Chow Wai Mee May have been appointed as the
independent non-executive directors of the Compan y on 16 November 2023 with effect from 26 February
2024. During the Track Record Period and prior to their appointment, the independent non-executive
directors did not receive any remuneration in their capacity as the Company’s directors.
Certain of the directors of the Company received remuneration from the subsidiaries now
comprising the Group during the Track Record Period for the appointment as directors or officers of
these subsidiaries. The aggregate amounts of remunera tion received or receivable by the directors of the
Company during the Track Record Period is set out below.
For the year ended 31 December 2020
Fees
Salaries and
allowances
Other
benefits
in kind
Retirement
benefits
scheme
contributions Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Executive directors
Mr. Zhang — 240 — 34 274
Mr. Lyu Zhonghua — 51 — 9 60
Mr. Cui Wei — 46 — 8 54
Ms. Guo Zeqing — 64 — 11 75
Mr. Pang Jinhong — 30 — 5 35
—4 31 — 6 74 98
APPENDIX I ACCOUNTANTS’ REPORT
–I - 4 0–


--- page 466 ---
For the year ended 31 December 2021
Fees
Salaries and
allowances
Other
benefits
in kind
Retirement
benefits
scheme
contributions Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Executive directors
Mr. Zhang — 240 — 82 322
Mr. Lyu Zhonghua — 89 — 32 121
Mr. Cui Wei — 79 — 28 107
Ms. Guo Zeqing — 136 — 39 175
Mr. Pang Jinhong — 53 — 19 72
—5 97 —2 007 97
For the year ended 31 December 2022
Fees
Salaries and
allowances
Other
benefits
in kind
Retirement
benefits
scheme
contributions Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Executive directors
Mr. Zhang — 240 — 83 323
Mr. Lyu Zhonghua — 90 — 32 122
Mr. Cui Wei — 80 — 28 108
Ms. Guo Zeqing — 144 — 39 183
Mr. Pang Jinhong — 54 — 19 73
—6 08 —2 018 09
For the nine months ended 30 September 2022 (unaudited)
Fees
Salaries and
allowances
Other
benefits
in kind
Retirement
benefits
scheme
contributions Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Executive directors
Mr. Zhang — 180 — 62 242
Mr. Lyu Zhonghua — 68 — 24 92
Mr. Cui Wei — 60 — 19 79
Ms. Guo Zeqing — 102 — 29 131
Mr. Pang Jinhong — 40 — 14 54
—4 50 —1 485 98
APPENDIX I ACCOUNTANTS’ REPORT
–I - 4 1–


--- page 467 ---
For the nine months ended 30 September 2023
Fees
Salaries and
allowances
Other
benefits
in kind
Retirement
benefits
scheme
contributions Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Executive directors
Mr. Zhang — 180 — 64 244
Mr. Lyu Zhonghua — 68 — 24 92
Mr. Cui Wei — 60 — 22 82
Ms. Guo Zeqing — 93 — 29 122
Mr. Pang Jinhong — 40 — 14 54
—4 41 —1 535 94
During the Track Record Period, no emolument was paid by the Group to any of these
directors as an inducement to join or upon joining the Group or as compensation for loss of office.
There was no arrangement under which any of these directors waived or agreed to waive any
emoluments during the Track Record Period.
The emoluments of executive directors shown above were mainly for their services in
connection with the management of affairs of the Company and the Group.
(b) Directors’ material interests in transactions, arrangements or contracts
Save as disclosed in note 40(a) to the Historical Financial Information, no significant transactions,
arrangements and contracts in rel ation to the Group’s business to which the Group was a party and in
which a director of the Company had a material intere st, whether directly or i ndirectly, subsisted at the
end of each reporting period or at any time during the Track Record Period.
(c) Five highest paid individuals
The five highest paid individuals in the Group during the years ended 31 December 2020, 2021 and
2022 and the nine months ended 30 September 2022 (unaudited) and 2023 included 3, 3, 2, 2 and 3
directors respectively whose emoluments are reflected in the analysis presented above. The emoluments of
the remaining 2, 2, 3, 3 and 2 individuals are set out below respectively:
Year ended 31 December
Nine months ended
30 September
2020 2021 2022 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(Unaudited)
Basic salaries and
allowances 234 235 332 248 178
Retirement benefits scheme
contributions 26 63 62 46 47
260 298 394 294 225
APPENDIX I ACCOUNTANTS’ REPORT
–I - 4 2–


--- page 468 ---
The emoluments fell within the following band:
Number of individuals
Year ended 31 December
Nine months ended
30 September
2020 2021 2022 2022 2023
(Unaudited)
Nil to HK$1,000,000 2 2 3 3 2
During the Track Record Period, no emolument was paid by the Group to any of these highest paid
individuals as an inducement to join or upon joining the Group or as compensation for loss of office.
There was no arrangement under which any of these highest paid individuals waived or agreed to waive
any emoluments during the Track Record Period.
15. DIVIDENDS
No dividend has been declared or paid by the companies now comprising the Group during the Track
Record Period.
16. EARNINGS PER SHARE
The calculation of basic earnings per share for the Tra ck Record Period is based on the consolidated profit
of the Group for each year/period attributable to equity holders of the Company for the Track Record Period
and based on the assumption that 400,000,000 shares of the Company are in issue and issuable, comprising
141,414 shares in issue at the date of the Prospectus and 399,858,586 shares to be issued pursuant to the
Capitalisation Issue as set out in paragraphs headed ‘‘Reorganisation’ ’ of the section headed ‘‘History,
Reorganisation and Corporate Structure’’ of this Pros pectus as if the shares were outstanding throughout the
entire Track Record Period.
As there were no dilutive potential ordinary shares during the Track Record Period, diluted earnings per
share for the Track Record Period are t he same as basic earnings per share.
17. RETIREMENT BENEFIT SCHEMES
As stipulated under the relevant rules and regulations in the PRC, the employees of the Group’s
subsidiaries established in the PRC are members of central pension scheme operated by the local municipal
government. These subsidiaries are r equired to contribute certain percenta ge of the employees’ basic salaries
and wages to the central pension scheme to fund the retir ement benefits. The local municipal government
undertakes to assume the retirement ben efits obligations of all existing and future retired employees of these
subsidiaries. The only obligation of these subsidiaries with respect to the central pension scheme is to meet the
required contributions under the scheme.
APPENDIX I ACCOUNTANTS’ REPORT
–I - 4 3–


--- page 469 ---
18. PROPERTY, PLANT AND EQUIPMENT
Infrastructure Buildings
Plant and
equipment
Motor
vehicles
Office
equipment
and others
Construction
in progress Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Cost
At 1 January 2020 99,166 28,887 3,812 2,469 8,798 4,776 147,908
Additions — 3,015 52 83 2,457 38,747 44,354
Transfer 23,617 19,586 — — — (43,203) —
At 31 December 2020 and
1 January 2021 122,783 51,488 3,864 2,552 11,255 320 192,262
Additions — — 4 — 10 14,406 14,420
Transfer 10,892 3,409 — — — (14,301) —
Write-off — (80) — — — — (80)
At 31 December 2021 and
1 January 2022 133,675 54,817 3,868 2,552 11,265 425 206,602
Additions — — 13 — 1,509 — 1,522
Disposal — (728) — — — — (728)
W r i t e - o f f ———— ( 2 , 9 9 3 ) — ( 2 , 9 9 3 )
At 31 December 2022 and
1 January 2023 133,675 54,089 3,881 2,552 9,781 425 204,403
Additions ———— 2 7 5 4 , 5 1 2 4 , 7 8 7
W r i t e - o f f ———— ( 3 , 5 1 2 ) — ( 3 , 5 1 2 )
At 30 September 2023 133,675 54,089 3,881 2,552 6,544 4,937 205,678
Accumulated depreciation
At 1 January 2020 5,682 3,111 1,947 1,399 4,560 — 16,699
Charge for the year 3,036 2,488 358 247 1,803 — 7,932
At 31 December 2020 and
1 January 2021 8,718 5,599 2,305 1,646 6,363 — 24,631
Charge for the year 3,581 3,841 278 214 1,826 — 9,740
Write-off — (47) — — — — (47)
At 31 December 2021 and
1 January 2022 12,299 9,393 2,583 1,860 8,189 — 34,324
Charge for the year 4,113 3,966 211 214 1,530 — 10,034
Disposal — (100) — — — — (100)
W r i t e - o f f ———— ( 2 , 6 1 1 ) — ( 2 , 6 1 1 )
At 31 December 2022 and
1 January 2023 16,412 13,259 2,794 2,074 7,108 — 41,647
Charge for the period 3,082 2,949 149 156 1,317 — 7,653
W r i t e - o f f ———— ( 3 , 5 1 2 ) — ( 3 , 5 1 2 )
At 30 September 2023 19,494 16,208 2,943 2,230 4,913 — 45,788
Carrying amount
At 31 December 2020 114,065 45,889 1,559 906 4,892 320 167,631
At 31 December 2021 121,376 45,424 1,285 692 3,076 425 172,278
At 31 December 2022 117,263 40,830 1,087 478 2,673 425 162,756
At 30 September 2023 114,181 37,881 938 322 1,631 4,937 159,890
APPENDIX I ACCOUNTANTS’ REPORT
–I - 4 4–


--- page 470 ---
19. INVESTMENT PROPERTIES
Properties
RMB’000
Cost
At 1 January 2020, 31 December 2020, 1 January 2021, 31 December 2021,
1 January 2022, 31 December 2022 and 1 January 2023 9,450
Additions 12,222
At 30 September 2023 21,672
Accumulated depreciation
At 1 January 2020 2,430
Charge for the year 295
At 31 December 2020 and 1 January 2021 2,725
Charge for the year 295
At 31 December 2021 and 1 January 2022 3,020
Charge for the year 295
At 31 December 2022 and 1 January 2023 3,315
Charge for the period 391
At 30 September 2023 3,706
Carrying amount
At 31 December 2020 6,725
At 31 December 2021 6,430
At 31 December 2022 6,135
At 30 September 2023 17,966
The Group let out its investment properties under ope rating leases with monthly rental under lease terms
of 2 to 5 years. The Group is not exposed to foreign currency risk as a result of the lease arrangement, as the
leases are denominated in the functional currency of the Group’s entities. The lease contracts do not contain
residual value guarantee and/or lessee’s option t o purchase the property at the end of lease term.
At 31 December 2020, 2021 and 2022 and 30 September 2023, the carrying amounts of investment
properties as security for the Group’s bank borrowings amounted to approximately RMB6,725,000,
RMB6,430,000, RMB6,135,000 and RMB17,966,000 respectively (note 31).
At 31 December 2020, 2021 and 2022 and 30 September 2023, the fair value of investment properties were
approximately RMB11,800,000, RMB12,600,000, RMB1 2,100,000 and RMB23,700,000 respectively. These fair
values are determined by the directors of the Compan y mainly with reference to the valuation, which is
performed by an independent qualified professional valuer, using depreciation replacement cost approach and
investment approach (Level 3 fair value measurements ). The valuation was determined by reference to the
unobservable inputs, recent rentals and estimated cost for replacement, in the similar locations and conditions.
There has been no change from the valuation technique us ed in the Track Record Period. In estimating the fair
value of the properties, the highest and best use of the pr operties is their current use. There were no transfers
between levels of fair value hierarchy during the Track Record Period.
APPENDIX I ACCOUNTANTS’ REPORT
–I - 4 5–


--- page 471 ---
20. RIGHT-OF-USE ASSETS
Office and cultivation facilities
For the year ended 31 December
For the nine
months ended
30 September
20232020 2021 2022
RMB’000 RMB’000 RMB’000 RMB’000
At the beginning of the year/
period 23,633 23,519 22,768 22,003
Additions 746 71 — —
Depreciation (860) (822) (765) (550)
At the end of the year/period 23,519 22,768 22,003 21,453
Year ended 31 December
Nine months ended
30 September
2020 2021 2022 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(Unaudited)
Depreciation expenses on
right-of-use assets 860 822 765 574 550
Interest expense on lease
liabilities
(included in finance costs) 53 73 64 49 42
Expenses relating to short-
term lease (included in cost
of sales and administrative
and other expenses) 59 4 — — 24
The Group leases office and cultivation facilities for its operations. Lease contracts are entered into for
fixed term of 2 to 50 years. Lease terms are negotia ted on an individual basis and contain a wide range of
different terms and conditions. In determining the lease term and assessing the length of the non-cancellable
period, the Group applies the definition of a contract and determines the period for which the contract is
enforceable.
In addition, the Group owns certain buildings where i ts office and cultivation facilities are primarily
located. The Group is the registered owner of these property interests, including the underlying leasehold lands.
Lump sum payments were made upfront to acquire these property interests. The leasehold land component of
these owned properties is presented separately onl y if the payments made can be allocated reliably.
The Group regularly entered into short-term leases for office and cultivation facilities. As at 31 December
2020, 2021 and 2022 and 30 September 2023, the portfolio of short-term leases is similar to the portfolio of
short-term leases to which the short-term lease expense is disclosed above.
Some leases include an option to terminate the lease. The Group reassesses whether it is reasonably certain
not to exercise a termination option, upon the occurrence of either a significant event or a significant change in
circumstances that is within the control of the less ee. During the Track Record Period, there is no such
triggering event. The Group does not expect to exercise such option.
As at 31 December 2020, 2021 and 2022 and 30 September 2023, all of the Group’s leases did not have
extension option.
As 31 December 2020, 2021 and 2022 and 30 September 2023, the Group’s right-of-use assets with
carrying amount of approximately RMB19,706,000, R MB19,179,000, RMB18,651,000 and RMB18,256,000 had
been pledged to secure the Group’s borrowings (note 31).
APPENDIX I ACCOUNTANTS’ REPORT
–I - 4 6–


--- page 472 ---
Details of total cash outflows for leases is set out in note 41 to the Historical Financial Information.
21. INTANGIBLE ASSETS
Computer
software
RMB’000
Cost
At 1 January 2020, 31 December 2020, 1 January 2021, 31 December 2021,
1 January 2022, 31 December 2022, 1 January 2023 and 30 September 2023 63
Accumulated amortisation
At 1 January 2020, 31 December 2020, 1 January 2021, 31 December 2021,
1 January 2022, 31 December 2022, 1 January 2023 and 30 September 2023 63
Carrying amount
At 31 December 2020, 31 December 2021, 31 December 2022 and 30 September 2023 —
22. INVESTMENTS IN SUBSIDIARIES
The Company
At 31 December
At 30
September
20232020 2021 2022
RMB’000 RMB’000 RMB’000 RMB’000
Unlisted investments, at cost —* —* —* —*
* Represents amount less than RMB1,000.
Particulars of the subsidiaries of the Company during the Track Record Period and at the date of this
report are set out below:
Name
Date of
incorporation/
establishment
Place of
incorporation/
establishment
Particulars of
issued/paid-up
capital
Percentage of ownership
interest/voting power/profit sharing
Principal activities/
place of operation
At 31 December
At 30
September
At the
date
of this
report2020 2021 2022 2023
Directly held:
Glory Team 8 August 2019 BVI US$1 100% 100% 100% 100% 100% Investment holding,
Hong Kong
Prosperity Plentiful (BVI) 16 May 2019 BVI US$1 100% 100% 100% 100% 100% Investment holding,
Hong Kong
Indirectly held:
Fujing Holdings (HK) 9 October 2019 Hong Kong HK$1 100% 100% 100% 100% 100% Investment holding,
Hong Kong
Prosperity Plentiful (HK) 6 June 2019 Hong Kong HK$1 100% 100% 100% 100% 100% Investment holding,
Hong Kong
Xinfujing 6 May 2020 The PRC — 100% 100% 100% 100% 100% Investment holding,
the PRC
Fujing Agriculture 4 December 2006 The PRC RMB70,707,080 100% 100% 100% 100% 100% Growing, processing
and selling of potted
vegetables, the PRC
Xinfujing and Fujing Agriculture are esta blished in the PRC with limited liability.
APPENDIX I ACCOUNTANTS’ REPORT
–I - 4 7–


--- page 473 ---
None of the subsidiaries of the Company had issued any debt securities at the end of each reporting
period.
Details of the restriction on conversion of RMB into foreign currencies for the subs idiaries established in
the PRC are set out in note 28 to the Historical Financial Information.
23. BIOLOGICAL ASSETS
For the year ended 31 December
Nine months
ended
30 September
20232020 2021 2022
RMB’000 RMB’000 RMB’000 RMB’000
At the beginning of the year/period 6,724 9,395 9,781 8,371
Increase due to plantation 67,444 86,208 74,798 66,523
Decrease due to sales, before the
biological assets fair value
adjustments (65,828) (85,999) (70,804) (66,785)
Biological assets fair value
adjustments (note) 1,055 177 (5,404) 767
At the end of the year/period 9,395 9,781 8,371 8,876
Biological assets were potted vegetables and were stat ed at fair value less estimated costs to sell as at the
end of each reporting period. The fair value has been assessed by an independent valuer, Savills Valuation and
Professional Services Limited, with reference to market p rices, scrap rate, species, growing conditions and cost
incurred.
Market and cost approaches are adopted to value the b iological assets as at the end of each reporting
period. For the newly planted vegetables, cost approach is adopted. The costs of direct raw materials, direct
labour, cultivation overheads have been considered in the calculation of the fair values for the newly planted
vegetables and these costs are approximately to their fair values. For the growing immature vegetables and
mature vegetables, market approach is adopted. Therefore, the fair values of the biological assets as at the end
of each reporting period are calculated to be the pr oduct of market price and estimated number of pots of
vegetables after deducting the reasonable cost related to selling.
The fair value measurement of the vegetables is cate gorised as Level 3 fair value measurement within the
three-level fair value hierarchy as defined in HKFRS 13 ‘ ‘Fair Value Measurement’’. Details of the fair value
measurement are set out in note 7 to the Historical Financial Information.
The Group had approximately 760,000, 788,000, 721,000 and 704,000 pots of vegetables as at 31
December 2020, 2021 and 2022 and 30 September 2023 resp ectively and approximately 8,022,000, 10,273,000,
8,395,000 and 8,044,000 pots of vegetable were sold during the years ended 31 December 2020, 2021 and 2022
and the nine months ended 30 September 2023 respectively. The total output of potted vegetables during the
years ended 31 December 2020, 2021 and 2022 and the nine months ended 30 September 2023 were
approximately 8,338,000, 10,692,000, 9,283,000, 8,339,000 pots respectively.
Note: Included in biological assets fair value adjustments is losses arising from unsold vegetable produce
of approximately RMB4,585,000 for the year ended 31 December 2022 as a result of temporary
suspension during the outbreak of COVID-19 epidemic from March to April 2022.
APPENDIX I ACCOUNTANTS’ REPORT
–I - 4 8–


--- page 474 ---
The Group is exposed to a number of risks related to its plantation:
(a) Regulatory and environmental risks
The Group is subject to laws and regulations in the jurisdiction in which it operates. The Group has
established environmental policies and procedures aimed at compliance with local environmental and
other laws. Management performs regular reviews to identify environmental risks and to ensure that the
systems in place are adequate to manage those risks.
(b) Climate and other risks
The Group’s vegetable plantations are exposed to th e risk of damage from climatic changes, diseases
and other natural forces. The Group has extensive pr ocesses in place aimed to minimise those risks,
including regular vegetable health inspecti ons and industry pest and disease surveys.
(c) Price risk
The Group is exposed to price risks arising fro m changes in vegetable prices. The Group does not
anticipate that vegetable prices will decline significantly in the fores eeable future. The Group reviews its
outlook for vegetable prices regularly in considering the need for active price risk management.
24. INVENTORIES
At 31 December
At 30
September
20232020 2021 2022
RMB’000 RMB’000 RMB’000 RMB’000
Pots and agricultural materials 31 199 1,557 1,331
As at 31 December 2020, 2021 and 2022 and 30 September 2023, the Group’s inventories were stated at
cost.
The Group’s inventories primarily consist of pots and agricultural materials w hich mainly include seeds,
fertilisers and biopesticides which were not utilised at the end of each reporting period.
25. TRADE RECEIVABLES
At 31 December
At 30
September
20232020 2021 2022
RMB’000 RMB’000 RMB’000 RMB’000
Trade receivables 32,339 46,591 53,605 58,476
Allowance for ECL
(note 6(b)) (1,218) (1) (161) (100)
31,121 46,590 53,444 58,376
As at 1 January 2020, trade receivables amounted to a pproximately RMB32,382,000 (net of allowance for
doubtful debts of approximately RMB1,100,000).
The Group’s trading terms with customers are mai nly on credit. The credit periods granted to the
distributors and end-user cu stomers are generally 60-120 days and 180 days respectively. The Group seeks to
maintain strict control over its outstanding receivables. Overdue balances are reviewed regularly by the directors
of the Company.
APPENDIX I ACCOUNTANTS’ REPORT
–I - 4 9–


--- page 475 ---
An ageing analysis of trade receivables at the end of each reporting period, based on the invoice date, and
net of allowance for ECL, is as follows:
At 31 December
At 30
September
20232020 2021 2022
RMB’000 RMB’000 RMB’000 RMB’000
0–90 days 30,540 36,609 37,550 48,558
91–180 days 383 9,981 15,894 9,818
181–365 days 198 — — —
31,121 46,590 53,444 58,376
The carrying amounts of the Group’s trade receivables are denominated in RMB.
Details of the credit risk of trade receivables of the Group and its impairment assessment under HKFRS 9
as at 31 December 2020, 2021 and 2022 and 30 September 2023 are set out in note 6(b) to the Historical
Financial Information.
26. PREPAYMENTS AND OTHER RECEIVABLES
At 31 December
At 30
September
20232020 2021 2022
RMB’000 RMB’000 RMB’000 RMB’000
Prepayments for renovation of
property, plant and equipment — — — 6,000
Prepaid listing expense 1,672 4,082 5,412 5,380
Other prepayments 434 4,503 334 690
Other receivables 946 490 506 631
3,052 9,075 6,252 12,701
Analysed as:
Current assets 3,052 9,075 6,252 6,701
Non-current assets — — — 6,000
3,052 9,075 6,252 12,701
Details of impairment assessment of other receivables under HKFRS 9 as at 31 December 2020, 2021 and
2022 and 30 September 2023 are set out in note 6(b ) to the Historical Financial Information.
27. AMOUNTS DUE FROM/(TO) THE ULTIMA TE HOLDING COMPANY/SHAREHOLDERS/A
DIRECTOR/A SUBSIDIARY (THE GROUP AND THE COMPANY)
The amounts due are non-trade in nature, unsecure d, interest-free and repayable on demand.
The amounts due from the ultimate holding company and shareholders and amount due to a director will
be settled prior to the Listing.
APPENDIX I ACCOUNTANTS’ REPORT
–I - 5 0–


--- page 476 ---
28. BANK AND CASH BALANCES
At the end of each reporting period, the Group’s and the Company’s bank and cash balances are
denominated in the following currencies:
The Group
At 31 December
At 30
September
20232020 2021 2022
RMB‘000 RMB’000 RMB’000 RMB’000
HK$ 16 19 6 1
RMB 6,952 22,944 71,073 89,594
Total 6,968 22,963 71,079 89,595
The Company
At 31 December
At 30
September
20232020 2021 2022
RMB‘000 RMB’000 RMB’000 RMB’000
HK$ — 1 3 1
Conversion of RMB into foreign currencies is subject to the PRC’s Foreign Exchange Control
Regulations and Administration of Settlement, Sale and Payment of Foreign Exchange Regulations.
However, the Group is permitted to exchange RMB for other currencies through authorised banks to
conduct foreign exchange business.
29. TRADE PAYABLES
At 31 December
At 30
September
20232020 2021 2022
RMB’000 RMB’000 RMB’000 RMB’000
Trade payables 9,149 5,323 15,552 12,177
An ageing analysis of the Group’s trade payables at the end of each reporting period, based on invoice
d a t e ,i sa sf o l l o w s :
At 31 December
At 30
September
20232020 2021 2022
RMB’000 RMB’000 RMB’000 RMB’000
0–90 days 8,333 5,282 13,139 11,969
91–180 days 797 — 2,372 167
181–365 days 3 22 — —
Over 1 year 16 19 41 41
9,149 5,323 15,552 12,177
The carrying amounts of the Group’s trade payables are denominated in RMB.
APPENDIX I ACCOUNTANTS’ REPORT
–I - 5 1–


--- page 477 ---
30. ACCRUALS AND OTHER PAYABLES
At 31 December
At 30
September
20232020 2021 2022
RMB’000 RMB’000 RMB’000 RMB’000
Accruals 391 412 512 492
Other payables 2,904 1,307 1,034 2,136
3,295 1,719 1,546 2,628
31. BANK BORROWINGS
At 31 December
At 30
September
20232020 2021 2022
RMB’000 RMB’000 RMB’000 RMB’000
Bank borrowings, secured 20,000 20,000 20,000 19,995
As at 31 December 2020, 2021 and 2022 and 30 September 2023, the Group’s bank borrowings were
denominated in RMB and were due within one year.
The bank borrowings of the Group are arranged at fl oating rates, thus exposing the Group to cash flow
interest rate risk. The interest rates of the Group’s bank borrowings as at 31 December 2020, 2021 and 2022 and
30 September 2023 were as follows:
At 31 December
At 30
September
20232020 2021 2022
Bank borrowings 3.85%–4.55% 3.95%–4.55% 3.75%–4.55% 3.45%–4.40%
The Group’s banking facilities are secured by:
(a) personal guarantee of RMB10,000,000, RMB10,000,000, RMB10,000,000 and RMB9,995,000
provided by directors, Mr. Zhang and Ms. Geng Juan, who is cohabiting with Mr. Zhang as his
spouse, as at 31 December 2020, 2021 and 2022 and 30 September 2023 respectively. The guarantee
will be released upon the Listing;
(b) the investment properties of the Group as at 31 December 2020, 2021 and 2022 and 30 September
2023 (note 19) ;a n d
(c) certain right-of-use assets of the Group as at 31 December 2020, 2021 and 2022 and 30 September
2023 (note 20) .
APPENDIX I ACCOUNTANTS’ REPORT
–I - 5 2–


--- page 478 ---
32. LEASE LIABILITIES
Present value of minimum lease payments
At 31 December
At 30
September
20232020 2021 2022
RMB’000 RMB’000 RMB’000 RMB’000
Within one year 80 124 98 106
In the second year 86 96 107 72
In the third to fifth years, inclusive 283 266 247 215
After five years 272 191 100 107
Present value of lease obligations 721 677 552 500
Less: Amount due for settlement within 12
months
(shown under current liabili ties) (80) (124) (98) (106)
Amount due for settlement after 12 months 641 553 454 394
Minimum lease payments
At 31 December
At 30
September
20232020 2021 2022
RMB’000 RMB’000 RMB’000 RMB’000
Within one year 153 189 152 152
In the second year 153 153 152 108
In the third to fifth years, inclusive 412 367 323 273
After five years 330 222 115 115
1,048 931 742 648
Less: Future finance charges (327) (254) (190) (148)
Present value of lease obligations 721 677 552 500
All lease liabilities are denominated in RMB.
33. DEFERRED INCOME
For the year ended 31 December
Nine months
ended
30 September
20232020 2021 2022
RMB’000 RMB’000 RMB’000 RMB’000
Government grants:
At the beginning of the year/period 3,995 3,953 3,727 3,500
Additions 3,585 318 — —
Amortisation (3,627) (544) (227) (170)
At the end of the year/period 3,953 3,727 3,500 3,330
Less: current portion (227) (227) (227) (227)
Non-current portion 3,726 3,500 3,273 3,103
APPENDIX I ACCOUNTANTS’ REPORT
–I - 5 3–


--- page 479 ---
The government grants regarding s ubsidies of agricultural development and greening purpose are deferred
a n dc r e d i t e dt op r o f i to rl o s so nas y s t e m a t i cb a s i so v er the periods in which the Group recognises the related
costs as expenses for which the grants are intended to compensate.
34. DEFERRED TAX
Pursuant to the PRC EIT Law, a 10% withholding tax is l evied on dividends declared to foreign investors
from the foreign investment enterprises established in the PRC. The requirement is effective from 1 January
2008 and applies to earnings after 31 December 2007. A l ower withholding tax rate may be applied if there is a
tax treaty between the PRC and the jurisdiction of the f oreign investors. For the Group, the applicable rate is
10% and may be reduced to 5% if certain criteria could be met under the Double Taxation Arrangement (Hong
Kong). The Group is therefore liable for withholding taxes on dividends distributed by those subsidiaries
established in the PRC in respect of earnings generated from 1 January 2008.
As at 31 December 2020, 2021 and 2022 and 30 September 2023, no deferred tax has been recognised for
withholding taxes that would be payable on the unremitted earnings that are subject to withholding taxes of the
Group’s subsidiaries established in the PRC. In the opi nion of the directors of the Company, it is not probable
that these subsidiaries will distribute such earnings in the foreseeable future. The aggregate amounts of
temporary differences associated with investments in s ubsidiaries in the PRC for which deferred tax liabilities
have not been recognised as at 31 December 2020, 2021 and 2022 and at 30 September 2023 totalled
approximately RMB125,546,000, RMB168,140 ,000, RMB196,837,000 and RMB233,873,000 respectively.
35. SHARE CAPITAL
Notes
Number of
shares Amount Equivalent to
US$’000 RMB’000
Authorised:
Ordinary shares at US$1.00 each
At 1 January 2020 50,000 50 344
Subdivision of shares (c) 4,950,000 — —
At 31 December 2020, 1 January 2021,
31 December 2021, 1 January 2022, 31
December 2022, 1 January 2023 and
30 September 2023 at US$0.01 each 5,000,000 50 344
Issued and fully paid:
Ordinary shares
At 1 January 2020 at US$1.00 each 1 —* —*
Subdivision of shares (c) 99 —* —*
Issue of shares at US$0.01 each (c) 139,900 1 10
At 31 December 2020 and
1 January 2021 at US$0.01 each 140,000 1 10
Issue of shares at US$0.01 each (d) 1,414 —* —*
At 31 December 2021, 1 January 2022
and 31 December 2022,
1 January 2023 and 30 September 2023
at US$0.01 each 141,414 1 10
* Represents amount less than RMB1,000 or US$1,000.
APPENDIX I ACCOUNTANTS’ REPORT
–I - 5 4–


--- page 480 ---
Notes:
(a) For the purpose of the Historical Financial Information, the share capital as at 1 January 2020
represented combined share capital o f the Company and Fujing Agriculture.
(b) On 23 July 2019, the Company was incorporated in Cayman Islands as an exempted company with
limited liability under the Companies Act, Chapt er 22 (Act 3 of 1961, as consolidated and revised) of
Cayman Islands with an authorised share capital of US$50,000 divided into 50,000 shares of US$1
each. At the date of the incorporation, one fully paid share of US$1 was issued at par.
(c) Pursuant to the resolutions passed on 24 March 2020, the authorised share capital of the Company
was sub-divided from US$50,000 divided into 50,000 shares of a par value of US$1 each to
US$50,000 divided into 5,000,000 shares of a nomin al value of US$0.01 each. Accordingly, the one
issued and fully paid share was sub-divided into 100 shares of a par value of US$0.01 each. On the
same day, the Company allotted and issued 139,900 shares as fully paid at par to shareholders.
(d) Pursuant to an agreement dated 8 February 2021 entered into between the Company and Mr. Xie
Xing, the Company acquired the entire issued shar e capital of Prosperity Plentiful (BVI) from Mr.
Xie Xing, in exchange of which, the Company allotted and issued 1,414 shares, representing
approximately 1% of the enlarged share capital of the Company, to Mr. Xie Xing.
The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going
concern and to maximise the return to t he shareholders through the optimisation of the debt and equity balance.
The capital structure of the Group comprises all components of shareholders’ equity.
The Group reviews the capital structure frequently by considering the cost of capital and the risks
associated with each class of capital. The Group will balance its overal l capital structure through the payment of
dividends, new share issues and share buy-backs as well as the issue of new debts, redemption of existing debts
or selling assets to reduce debts. No changes were made in the objectives, policies or processes for managing
capital during the Track Record Period.
The Group is not subject to any externa lly imposed capital requirements.
36. RESERVES
(a) The Group
The amounts of the Group’s reserves and the movements therein are presented in the consolidated
statements of profit or loss and other comprehensive income and the consolidated statements of changes
in equity.
APPENDIX I ACCOUNTANTS’ REPORT
–I - 5 5–


--- page 481 ---
(b) The Company
The Company’s reserves and movements are analysed as follows:
Foreign currency
translation
reserve
(note 36(c)(iii))
Accumulated
losses Total
RMB’000 RMB’000 RMB’000
At 1 January 2020 —* — —*
Total comprehensive loss for the year (1) — (1)
At 31 December 2020 and 1 January 2021 (1) — (1)
Total comprehensive loss for the year — (1) (1)
At 31 December 2021 and 1 January 2022 (1) (1) (2)
Total comprehensive loss for the year 1 (4) (3)
At 31 December 2022 and 1 January 2023 — (5) (5)
Total comprehensive loss for the period — (2) (2)
At 30 September 2023 — (7) (7)
* The amount is less than RMB1,000.
(c) Nature and purpose of reserves
(i) Share premium
Prior to the Group Reorganisation, share premi um represents premium arising from the issue
of shares of the subsidiaries at prices in excess of their par value per share.
(ii) Merger reserve
Merger reserve represents the difference be tween the nominal value of shares issued by the
Company and the aggregate fully paid registered ca pital and share premium of the PRC subsidiaries
being acquired pursuant to the Group Reorganisation.
(iii) Foreign currency translation reserve
The foreign currency translation reserve compr ises all foreign exchange differences arising
from the translation of the financial statements of foreign operations. The reserve is dealt with in
accordance with the accounting policies set out in no te 4(c) to the Historical Financial Information.
(iv) Statutory reserve
In accordance with the PRC Company Law and t he Group’s PRC subsidiaries’ articles of
association, the Group’s PRC subs idiaries are required to allocate 10% of its profit after tax as
determined in accordance with the relevant accounting principles and financial regulations
applicable to the PRC companie s to the statutory reserve until such reserve reaches 50% of the
registered capital. The appropriation to the res erve must be made before any distribution of
dividends to equity holders. The statutory reserve can be used to offset previous years’ losses, if any,
and part of the statutory reserve can be capitalis ed as paid-in capital provided that the amount of
such reserve remaining after the capitalisation shall not be less th an 25% of the paid-in capital of the
Group’s subsidiaries.
APPENDIX I ACCOUNTANTS’ REPORT
–I - 5 6–


--- page 482 ---
37. OPERATING LEASE COMMITMENTS
(a) The Group as lessee
The Group regularly enters into short-term leases fo r office and cultivation facilities. The portfolio
of short-term leases is similar to the portfolio of shor t-term leases to which the short-term lease expense
disclosed in note 20.
The outstanding lease commitments for the short-term lease are as follows:
At 31 December
At 30
September
20232020 2021 2022
RMB’000 RMB’000 RMB’000 RMB’000
Within one year 4 — — 12
(b) The Group as lessor
Operating leases relate to investment propertie s owned by the Group with lease terms of 2 to 5 years.
The lessee does not have options to extend the lease te rm and to purchase the property at the expiry of the
lease period.
The unguaranteed residual values do not represent a significant risk for the Group, as they relate to
property which is located in a location with a constant increase in value over the least 5 years. The Group
did not identify any indications th at this situation will change.
Minimum lease payments receivable on leases are as follows:
At 31 December
At 30
September
20232020 2021 2022
RMB’000 RMB’000 RMB’000 RMB’000
Within one year 640 507 640 487
In the second year 507 240 327 —
In the third year 240 60 — —
In the fourth year 60 — — —
1,447 807 967 487
The following table presents the amounts reported i n the consolidated stat ements of profit or loss
and other comprehensive income:
Year ended 31 December
Nine months ended
30 September
2020 2021 2022 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(Unaudited)
Rental income under
operating leases 640 640 640 480 480
APPENDIX I ACCOUNTANTS’ REPORT
–I - 5 7–


--- page 483 ---
38. CAPITAL COMMITMENTS
Capital commitments contracted for at the end of e ach reporting period but not yet incurred are as
follows:
At 31 December
At 30
September
20232020 2021 2022
RMB’000 RMB’000 RMB’000 RMB’000
Property, plant and equipment — — — 6,458
39. CONTINGENT LIABILITIES
At 31 December 2020, 2021 and 2022 and 30 September 2023, the Group did not have any contingent
liabilities.
40. RELATED PARTY TRANSACTIONS
Other than those balances with related parties di sclosed in note 27 to the Historical Financial
Information, the Group had the following material trans actions with its related parties during the Track Record
Period.
(a) Transactions with related party
Year ended 31 December
Nine months ended
30 September
2020 2021 2022 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(Unaudited)
Rental payment paid to
a related company in
respect of a property 36 36 36 27 27
As Mr. Zhang and Ms. Geng Juan are beneficial owners and directors of the related company and
the Group, the above transactions consti tute related party transactions.
In February 2019 and 2020, the Group entered into a one-year lease in respect of a leasehold
property from Mr. Zhang for its own office use. The amount of rent payable by the Group under the lease
is RMB36,000 per annum. On the date of adoption o f HKFRS 16, the Group elected not to apply the
requirements of HKFRS 16 in respect of short-term leases that have a lease term of 12 months or less.
In February 2021, the Group entered into a two-year lease in respect of the same leasehold property
mentioned above. The amount of rent payable by t he Group under the lease is RMB36,000 per annum. At
the date of lease remeasurement of the lease, the Group recognised a right-of-use asset and a lease liability
of RMB71,000 under HKFRS 16. In February 2023, the lease was renewed a year to February 2024.
(b) Guarantee
As at 31 December 2020, 2021 and 2022 and 30 September 2023, Mr. Zhang and Ms. Geng Juan had
provided personal guarantees in favour of banking faci lities granted to a subsidiary of the Group. These
guarantees will be released upon the Listing.
Details of the above guarantees are set out in note 31 to the Historical Financial Information.
APPENDIX I ACCOUNTANTS’ REPORT
–I - 5 8–


--- page 484 ---
(c) Key management compensation
Key management mainly represents the Company ’s directors. Their remunerations have been
disclosed in note 14(a) to the Historical Financial Information.
41. NOTES TO THE CONSOLIDATED STATEMENTS OF CASH FLOWS
(a) Reconciliation of liabilities arising from financing activities
The table below details changes in the Group’s liabili ties arising from financing activities, including
both cash and non-cash changes. Liabilities arising fro m financing activities are those for which cash flows
were, or future cash flows will be, classified in the Group’s consolidated statements of cash flows as cash
flows from financing activities.
Bank
borrowings
Lease
liabilities Total
RMB’000 RMB’000 RMB’000
At 1 January 2020 15,000 260 15,260
Cash flows, net 3,870 (153) 3,717
Interest expenses 1,130 53 1,183
Commencement of new leases — 561 561
At 31 December 2020 and 1 January 2021 20,000 721 20,721
Cash flows, net (824) (188) (1,012)
Interest expenses 824 73 897
Commencement of new leases — 71 71
At 31 December 2021 and 1 January 2022 20,000 677 20,677
Cash flows, net (836) (189) (1,025)
Interest expenses 836 64 900
At 31 December 2022 and 1 January 2023 20,000 552 20,552
Cash flows, net (625) (94) (719)
Interest expenses 620 42 662
At 30 September 2023 19,995 500 20,495
At 1 January 2022 20,000 677 20,677
Cash flows, net (unaudited) (639) (131) (770)
Interest expenses (unaudited) 639 49 688
At 30 September 2022 (unaudited) 20,000 595 20,595
(b) Total cash flows for bank borrowings
Net cash inflows/(outflows) included in the c onsolidated statements of cash flows for bank
borrowings comprise the followings:
Year ended 31 December
Nine months ended
30 September
2020 2021 2022 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(Unaudited)
Within financing cash
flows 3,870 (824) (836) (639) (625)
APPENDIX I ACCOUNTANTS’ REPORT
–I - 5 9–


--- page 485 ---
(c) Total cash outflows for leases
Net cash outflows included in the consolidated statements of cash flows for leases comprise the
followings:
Year ended 31 December
Nine months ended
30 September
2020 2021 2022 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(Unaudited)
Within operating cash
flows (59) (4) — — (24)
Within financing cash
flows (153) (188) (189) (131) (94)
(212) (192) (189) (131) (118)
These amounts relate to the followings:
Year ended 31 December
Nine months ended 30
September
2020 2021 2022 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(Unaudited)
Total cash outflows of
leases 212 192 189 131 118
(d) Major non-cash transactions
During the years ended 31 December 2020, 2021 and 2022 and the nine months ended 30 September
2022 (unaudited) and 2023, the Group entered into new lease agreements resulting an increase of right-of-
use assets and lease liabilities by approximately RMB 561,000, RMB71,000, Nil, Nil and Nil respectively.
42. EVENTS AFTER THE REPORTING PERIOD
(a) On 16 November 2023 and 11 March 2024, written resolutions of the shareholders of the Company
were passed to approve the matters set out in th e paragraph headed ‘‘Written Resolutions of our
Shareholders passed on 16 November 2023 and 11 March 2024’’ in Appendix VI to this Prospectus.
(b) A share scheme has been conditionally approved and adopted by the Company on 11 March 2024,
the principal terms of which are summarised in the paragraphs headed ‘‘D. Share Scheme’’ in
Appendix VI to this Prospectus.
(c) Subsequent to 30 September 2023, a personal guarantee has been provided by an independent third
party to the Group as an additional guarantee to secure the Group’s banki ng facilities. This
personal guarantee has been released and replaced by the personal guarantee provided by Ms. Geng
Qi, a sister of Ms. Geng Juan and a shareholder o f the Company, in January 2024. All personal
guarantees provided by Mr. Zhang, Ms. Geng Juan and Ms. Geng Qi, as disclosed in note 31(a), will
be released upon the Listing.
(d) As set out in note 14, each of Dr. Li Junliang, Mr. Lam Chik Tong and Ms. Chow Wai Mee May, all
being the independent non-executive directors of t he Company, has signed a letter of appointment
and a supplemental letter of appointment with th e Company on 16 November 2023 and 26 February
2024, respectively, for an initial term of three years commencing from 26 February 2024.
APPENDIX I ACCOUNTANTS’ REPORT
–I - 6 0–


--- page 486 ---
(e) The audit committee has established and come into operation with effect from 26 February 2024, in
compliance with the Corporate Governance Code.
43. 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 30 September 2023.
APPENDIX I ACCOUNTANTS’ REPORT
–I - 6 1–


--- page 487 ---
For illustrative purpose only, the unaudited pro forma financial information prepared in
accordance with paragraph 29 of Chapter 4 of the Listing Rules is set out herein to provide
the investors with further information to assess the financial performance of the Group after
taking into account the adjusted net tang ible assets of the Group to illustrate the
consolidated financial position of the Group after completion of the Share Offer and to
illustrate the financial performance of the Gr oup had the Share Offer been completed on 30
September 2023.
A. UNAUDITED PRO FORMA STATEMENT OF ADJUSTED CONSOLIDATED
NET TANGIBLE ASSETS
The unaudited pro forma financial informat ion has been prepared, on the basis of the
notes set out below, to illustrate how the Share Offer may have affected the unaudited
consolidated net tangible assets attributable to equity holders of the Company had it
occurred as of 30 September 2023. It has been prepared for illustrative purpose only and,
because of its nature, may not give a true picture of the consolidated financial position of
the Group.
Audited
consolidated net
tangible assets
attributable to
equity holders of the
Company as of
30 September 2023
Estimated net
proceeds from the
Share Offer
Unaudited pro
forma adjusted
consolidated net
tangible assets
Unaudited pro forma adjusted consolidated
net tangible assets per Share
(note 1) (note 2) (note 3) (note 4)
RMB’000 RMB’000 RMB’000 RMB HK$
B a s e do nt h el o w - e n do f
the Offer Price of
HK$1.08 per Share 331,537 72,491 404,028 0.81 0.89
Based on the high-end of
the Offer Price of
HK$1.28 per Share 331,537 89,555 421,092 0.84 0.93
Notes:
(1) The audited consolidated net tangible assets att ributable to equity holders of the Company as of 30
September 2023 is extracted from the Accountants’ Report as set out in Appendix I to this
prospectus, which is based on the audited consolid ated net assets of the Group attributable to equity
holders of the Company as at 30 September 2023 of approximately RMB331,537,000.
(2) The adjustment to the unaudited pro forma adjus ted consolidated net tangible assets reflects the
estimated proceeds from the Share Offer to be received by the Company. The estimated proceeds
from the Share Offer is based on the Offer Price of HK$1.08 and HK$1.28, respectively, being the
low-end and high-end price of the stated Offer Price range, and 100,000,000 Shares, net of
underwriting fee and other e stimated issue expenses (taking into account the effect of listing-related
expenses which have been accounted for prior to 30 September 2023) payable of approximately
RMB25.5 million for the low-end Offer Price and RMB26.6 million for the high-end Offer Price
respectively, and takes no account of any Shares which may fall to be issued upon the exercise of the
Over-allotment Option.
APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION
–I I - 1–


--- page 488 ---
(3) The unaudited pro forma adjusted consolidated ne t tangible assets per Share are arrived at after the
adjustments referred to in note 2 above and on the basis that 500,000,000 Shares are expected to be
in issue following the Share Offer (including 100,000,000 shares newly issued upon the Share Offer)
had been completed on 30 September 2023 and respective Offer Price of HK$1.08 and HK$1.28 per
Share and takes no account of (i) any Shares which may fall to be issued upon the exercise of the
Over-allotment Option; and (ii) the number of share options that may be vested and may become
exercisable upon the date of the Listing under the Pre-IPO Share Scheme.
(4) The unaudited pro forma adjusted consolidated net tangible assets per Share is converted from
RMB into HK$ at the rate of HK$1 to RMB0.90765. No representation is made that the RMB
amounts have been, could have been or could be converted to HK$, or versa, at that rate or at any
other rates or at all.
(5) No adjustment has been made to reflect any tra ding results or other transactions of the Group
entered into subsequent to 30 September 2023.
APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION
–I I - 2–


--- page 489 ---
B. INDEPENDENT REPORTING ACCOUNTANTS’ ASSURANCE REPORT ON THE
COMPILATION OF UNAUDITED PRO FORMA FINANCIAL INFORMATION
The following is the text of a report, prepared for the sole purpose of inclusion in this
prospectus, from the independent joint reporting accountants, Crowe (HK) CPA Limited and
McMillan Woods (Hong Kong) CPA Limited, Cer tified Public Accountants, Hong Kong.
長青（香港）會計師事務所有限公司
McMillan Woods (Hong Kong) CPA Limited
香港灣仔駱克道188號兆安中心24樓
2 4 / F . ,S i uO nC e n t r e ,
188 Lockhart Road, Wan Chai,
Hong Kong
To the Board of Directors of
Fujing Holdings Co., Limited
We have completed our assurance engag ement to report on the compilation of
unaudited pro forma financial informat ion of Fujing Holdings Co., Limited (the
‘‘Company’’) and its subsidiaries (hereinafter collectively referred to as the ‘‘Group’’) by
the directors of the Company for illustra tive purposes only. The unaudited pro forma
financial information consists of the unaudited pro forma adjusted consolidated net
tangible assets as at 30 September 2023 and related notes as set out on pages II-1 and II-2 of
the prospectus issued by the Company. The a pplicable criteria on the basis of which the
directors of the Company have compiled the unaudited pro forma financial information are
described in the paragraph headed ‘‘A. Unaudited pro forma statement of adjusted
consolidated net tangible assets’’ in this Appendix to this prospectus.
The unaudited pro forma financial information has been compiled by the directors of
the Company to illustrate the impact of the Sh are Offer of 100,000,000 Shares of US$0.01
each in the Company on the Group’s adjusted consolidated net tangible assets as at 30
September 2023 as if the Share Offer had been taken place at 30 September 2023. As part of
this process, information about the Group’s consolidated financial position has been
extracted by the directors of the Company from the Group’s Historical Financial
Information included in the Accountants’ Report as set out in Appendix I to this
prospectus.
Directors’ Responsibility for the Unaud ited Pro Forma Finan cial Information
The directors of the Company are respons ible for compiling the unaudited pro forma
financial information in accordance with paragraph 29 of Chapter 4 of the Rules Governing
the Listing of Securities on The Stock Exch ange of Hong Kong Limited (the ‘‘Listing
Rules’’) and with reference to Accounting Guid eline 7 ‘‘Preparation of Pro Forma Financial
Information for Inclusion in Investment Circulars’’ (‘‘AG 7’’) issued by the Hong Kong
Institute of Certified Public Accountants (the ‘‘HKICPA’’).
APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION
–I I - 3–


--- page 490 ---
Our Independence and Quality Management
We have complied with the independence and other ethical requirement 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 firms apply Hong Kong Standard on Quality Management 1 ‘‘Quality
Management for Firms that Performs Audit or Reviews of Financial Statements, or
Other Assurance or Related Services Engagem ent’’, which requires the firm to design,
implement and operate a system of quality m anagement including policies or procedures
regarding compliance with ethical requirements, professional standards and applicable legal
and regulatory requirements.
Reporting Accountants’ Responsibilities
Our responsibility is to express an opinion, as required by paragraph 29(7) of Chapter
4 of the Listing Rules, on the unaudited pro forma financial information and to report our
opinion to you. We do not accept a ny responsibility for any reports previously given by us
on any financial information used in the compilation of the unaudited 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 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 of the Company have compiled the unaudited pro
forma financial information in accordance with paragraph 29 of Chapter 4 of the Listing
Rules and with reference to AG 7 issued by the HKICPA.
For purposes of this engagement, we are not responsible for updating or reissuing any
reports or opinions on any historical financia l information used in compiling the unaudited
pro forma financial information, nor have we, in the course of this engagement, performed
an audit or review of the financial informa tion used in compiling the unaudited pro forma
financial information.
The purpose of unaudited pro forma financial information included in an investment
circular is solely to illustrate the impact of a si gnificant 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 pur poses of the illustration. Accordingly, we do
not provide any assurance that the actual outcome of the event or transaction at 30
September 2023 would have been as presented.
APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION
–I I - 4–


--- page 491 ---
A reasonable assurance engagement to report on whether the unaudited pro forma
financial information has been properly comp iled on the basis of the applicable criteria
involves performing procedures to assess wh ether the applicable criteria used by the
directors of the Company in the compilation of the unaudited pro forma financial
information provide a reasonable basis for presenting the significant effects directly
attributable to the event or transaction, and to o btain sufficient appropriate evidence about
whether:
. The related unaudited pro forma adjustments give appropriate effect to those
criteria; and
. The unaudited 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 unaudite d pro forma financial information has been
compiled, and other relevant e ngagement circumstances.
The engagement also involves evaluating the overall presentation of the unaudited pro
forma financial information.
We believe that the evidence we have obtained is sufficient and appropriate to provide
a basis for our opinion.
Opinion
In our opinion:
(a) the unaudited 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 unaudited pro forma
financial information as disclosed pursuant to paragraph 29(1) of Chapter 4 of the
Listing Rules.
Yours faithfully,
Crowe (HK) CPA Limited
Certified Public Accountants
Hong Kong, 20 March 2024
McMillan Woods (Hong Kong) CPA Limited
Certified Public Accountants
Hong Kong, 20 March 2024
APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION
–I I - 5–


--- page 492 ---
The following is the preliminary financial information of our Group as of and for the year
ended 31 December 2023 (the ‘‘ 2023 Preliminary Financial Information ’’), together with
comparative financial information as of and for the year ended 31 December 2022 and a
discussion of changes in our financial status and results of operations between the two periods.
The 2023 Preliminary Financial Information does not constitute the consolidated financial
statements of the Group for the year ended 31 December 2023 but is extracted from those
financial statements. The 2023 Preliminary Financial Information was not audited. Investors
should bear in mind that the 2023 Preliminary Financial Information in this appendix may be
subject to adjustments.
APPENDIX III UNAUDITED PRELIMINARY FINANCIAL INFORMATION
FOR THE YEAR ENDED 31 DECEMBER 2023
–I I I - 1–


--- page 493 ---
2023 PRELIMINARY FIN ANCIAL INFORMATION
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
2022 2023
Results before
biological assets fair
value adjustments
Biological assets fair
value adjustments Total
Results before
biological assets fair
value adjustments
Biological assets fair
value adjustments Total
Notes RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(Unaudited) (Unaudi ted) (Unaudited)
Revenue 6 126,694 — 126,694 157,860 — 157,860
Cost of sales (70,804) (3,351) (74,155) (86,794) (2,532) (89,326)
Gross profit 55,890 (3,351) 52,539 71,066 (2,532) 68,534
Other income 7 887 — 887 1,175 — 1,175
Changes in fair value of biological assets — (2,053) (2,053) — 3,375 3,375
Allowance for expected credit losses (‘‘ ECL’’) of
trade receivables (160) — (160) (113) — (113)
Listing expenses (5,727) — (5,727) (9,590) — (9,590)
Selling and distribution expenses (420) — (420) (311) — (311)
Administrative and other expenses (12,354) — (12,354) (12,968) — (12,968)
Profit from operations 38,116 (5,404) 32,712 49,259 843 50,102
Finance costs 8 (900) — (900) (872) — (872)
Profit before tax 37,216 (5,404) 31,812 48,387 843 49,230
I n c o m e t a x e x p e n s e 9——————
Profit for the year 10 37,216 (5,404) 31,812 48,387 843 49,230
Other comprehensive loss for the year, net of tax:
Item that may be reclassified to profit or loss:
Exchange differences on translating foreign
operations (3) — (3) (3) — (3)
Total comprehensive income for the year 37,213 (5,404) 31,809 48,384 843 49,227
Earnings per share (RMB)
Basic and diluted 12 0.08 0.12
APPENDIX III UNAUDITED PRELIMINARY FINANCIAL INFORMATION
FOR THE YEAR ENDED 31 DECEMBER 2023
–I I I - 2–


--- page 494 ---
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
2022 2023
Notes RMB’000 RMB’000
(Unaudited)
Non-current assets
Property, plant and equipment 162,756 162,330
Investment properties 6,135 17,723
Right-of-use assets 22,003 21,271
Intangible assets — —
Prepayments — 3,500
190,894 204,824
Current assets
Biological assets 13 8,371 9,645
Inventories 1,557 1,741
Trade receivables 14 53,444 61,909
Prepayments and other receivables 6,252 9,009
Amount due from the ultimate holding
company 6 6
Amounts due from shareholders 3 3
Bank and cash balances 71,079 89,429
140,712 171,742
Current liabilities
Trade payables 15 15,552 7,240
Accruals and other payables 1,546 5,921
Amount due to a director 30 30
Bank borrowings 16 20,000 19,995
Lease liabilities 98 107
Deferred income 227 227
37,453 33,520
Net current assets 103,259 138,222
Total assets less current liabilities 294,153 343,046
Non-current liabilities
Lease liabilities 454 347
Deferred income 3,273 3,046
3,727 3,393
NET ASSETS 290,426 339,653
Capital and reserves
Share capital 17 10 10
Reserves 290,416 339,643
TOTAL EQUITY 290,426 339,653
APPENDIX III UNAUDITED PRELIMINARY FINANCIAL INFORMATION
FOR THE YEAR ENDED 31 DECEMBER 2023
–I I I - 3–


--- page 495 ---
1. GENERAL INFORMATION
The 2023 Preliminary Financial Information does not constitute the consolidated financial statements of
Fujing Holdings Co., Limited (the ‘‘ Company’’) and its subsidiaries (collectively referred to as the ‘‘ Group ’’) for
the year ended 31 December 2023 but is extracted f rom those consolidated fi nancial statements.
The Company was incorporated and registered as a n exempted company in the Cayman Islands with
limited liability under the Companies Act, Cap. 22 (Ac t 3 of 1961, as consolidated and revised) of the Cayman
Islands on 23 July 2019. The address of its registered office is Cricket Square, Hutchins Drive, PO Box 2681,
Grand Cayman KY1-1111, Cayman Islands and the Company’s principal place of business in Hong Kong is
Unit 16, 28/F, One Midtown, 11 Hoi Shing Road, Tsuen Wan, Hong Kong.
Pursuant to the reorganisation of the Group (the ‘‘ Group Reorgainsation ’’) in connection with the listing of
shares of the Company on the Main Board of the Stock Exchange, the Company became the investment holding
company of the Group on 8 February 2021. Details of the Group Reorganisation were set out in the paragraph
headed ‘‘Reorganisation’’ of the section headed ‘‘Histo ry, Reorganisation and Corporate Structure’’ to this
Prospectus.
The Company is an investment holding company and ha s not carried out any business operations since the
date of its incorporation. The principal activities of the Group are growing, processing and selling of potted
vegetables in the People’s Republic of China (the ‘‘ PRC’’).
In the opinion of the directors of the Company, as at 31 December 2023, Wider International Group
Limited, a company incorporated in the British Virgin Islands (the ‘‘ BVI’’), is the immediate and ultimate parent
of the Company and Mr. Zhang Yonggang (‘‘ Mr. Zhang ’’), the director of the Company, is the ultimate
controlling party of the Company.
2. BASIS OF PREPARATION
The Group’s consolidated financial statements have been prepared in accordance with Hong Kong
Financial Reporting Standards (‘‘ HKFRSs ’’) issued by the Hong Kong Institut e of Certified Public Accountants
(the ‘‘HKICPA ’’). HKFRSs comprise Hong Kong Financial Reporting Standards; Hong Kong Accounting
Standards; and Interpretations. The Group’s consolidat ed financial statements als o comply with the applicable
disclosures required by the Rules Governing the Lis ting of Securities on The Stock Exchange of Hong Kong
Limited (the ‘‘Stock Exchange’’) and with the disclosure requirement s of the Hong Kong Companies Ordinance.
3. ADOPTION OF NEW AND AMENDMENTS TO HKFRSs
(a) Application of new and amendments to HKFRSs
All of the new and amendments to HKFRSs that a re effective on 1 January 2023 have been early
adopted by the Group prior to the annual periods beginning after 1 January 2023.
(b) Amendments to HKFRSs in issue but not yet effective
Up to the date of issue of the Group’s consolidated fi nancial statements, the HKICPA has issued the
following amendments to HKFRSs which are not yet e ffective for its accounting period beginning on or
after 1 January 2023 and which have not been adopted in the Group’s consolidated financial statements.
APPENDIX III UNAUDITED PRELIMINARY FINANCIAL INFORMATION
FOR THE YEAR ENDED 31 DECEMBER 2023
–I I I - 4–


--- page 496 ---
Amendments to HKAS 1 Classification of Liabilities as Current or Non-current 1
Amendments to HKAS 1 Non-current Liabilities with Covenants 1
Amendments to HKAS 7 and
HKFRS 7
Supplier Finance Arrangement 1
Amendments to HKFRS 16 Lease Liability in a Sale and Leaseback 1
Hong Kong Interpretation 5
(Revised)
Presentation of Financial Statements — Classification by the
Borrower of a Term Loan that contains a Repayment on
Demand Clause 1
Amendments to HKAS 21 Lack of Exchangeability 2
Amendments to HKFRS 10 and
HKAS 28
Sale or Contribution of Assets between an Investor and its
Associate or Joint Venture 3
1 Effective for annual periods beginning on or after 1 January 2024
2 Effective for annual periods beginning on or after 1 January 2025
3 Effective for annual periods beginni ng on or after a date to be determined
The directors of the Company anticipate that the application of these amendments to HKFRSs will
not have material impact on the Group’s finan cial performance and financial position.
4. MATERIAL ACCOUNTING POLICY INFORMATION
The Group’s consolidated financial statements have been prepared under the historical cost convention
unless mentioned otherwise in the material accounting information policy as described in the Group’s
consolidated financial statements (e.g. biological as sets that are measured at fair value less cost to sell).
Historical cost is generally based on the fair value of the consideration given in exchange for goods and
services.
The preparation of the Group’s consolidated financial statements in conformity with HKFRSs requires
the use of certain critical accounting estimates. It also requires management to exercise its judgement in the
process of applying the Group’s acc ounting policies. The areas involving a higher degree of judgement or
complexity, or areas where assumptions and estimates are significant to the Group’s consolidated financial
statements are disclosed in the Group’s consolidated financial statements.
The material accounting policy information appl ied in the preparation of the Group’s consolidated
financial statements are set out in the Gr oup’s consolidated financial statements.
5. SEGMENT INFORMATION
The Group identifies reportable segments a ccording to the types of products they offer.
The directors of the Company have determined that the Group has only one operating and reportable
segment, being plantation and sales of vegetable.
Information reported to the directors of the Company, being the chief operating decision maker, for the
purposes of resource allocation and assessment of segme nt performance focuses only on revenue analysis by
nature of revenue and geographical location of customers.
Since this is the only one operating segment of the Gr oup, no segment information is presented other than
entity-wide disclosures.
APPENDIX III UNAUDITED PRELIMINARY FINANCIAL INFORMATION
FOR THE YEAR ENDED 31 DECEMBER 2023
–I I I - 5–


--- page 497 ---
(a) Geographical information
Over 90% of the Group’s non-current assets and r evenue are located and generated in the PRC.
Accordingly, no further geographical information of non-current assets and revenue was disclosed.
(b) Revenue from major customers
2022 2023
RMB’000 RMB’000
(Unaudited)
Sales of potted vegetables:
Customer B 20,729 26,070
Customer D 16,164 20,908
Customer F 15,054 18,908
Customer G 20,914 26,271
6. REVENUE
Revenue represents invoiced value of goods sold, after allowances for returns and discounts, during the
year ended 31 December 2023 and is set out below:
2022 2023
RMB’000 RMB’000
(Unaudited)
Revenue from contracts with customers within the scope of HKFRS 15
Products transferred at a point in time:
—Sales to distributors 126,692 157,858
—Direct sales to end-user customers 2 2
126,694 157,860
There are no transaction price allocated to the perfor mance obligations that are unsatisfied and required
to be disclosed in accordance with HKFRS 15.120.
7. OTHER INCOME
2022 2023
RMB’000 RMB’000
(Unaudited)
Interest income 17 44
Rental income 640 640
Net foreign exchange gains 3 8
Government grants (note) 227 227
Compensation received — 256
887 1,175
APPENDIX III UNAUDITED PRELIMINARY FINANCIAL INFORMATION
FOR THE YEAR ENDED 31 DECEMBER 2023
–I I I - 6–


--- page 498 ---
Note: The government grants represent subsidie s received from government for agricultural
development and greening purposes and such government grants are recognised as income on a
systematic basis over the periods which the Group recognised related costs as expenses for which
the government grants are intended to compensate. There are no unfulfilled conditions and other
contingencies attaching to them.
8. FINANCE COSTS
2022 2023
RMB’000 RMB’000
(Unaudited)
Interest on lease liabilities 64 54
Interest on bank borrowings 836 818
900 872
9. INCOME TAX EXPENSE
The Group is not subject to taxation in the Cayman Islands and the BVI.
No provision for Hong Kong Profits Tax is required since the Group has no assessable profits arose in
Hong Kong for the years ended 31 December 2023 and 2022.
The Group’s subsidiaries established and operated i n the PRC are subject to PRC Enterprise Income Tax
(‘‘EIT’’) at the rate of 25% (2022 : 25%) for the year ended 31 December 2023. According to the Article 27 of the
EIT Law and Article 86 of the Regulations of the EIT La w, enterprise income from agriculture, forestry,
husbandry and fishery projects may be reduced or exem pted from taxation. Pursuant to the abovementioned
provisions and with the approval of Dianbu Branch of the State Taxation Bureau of Laixi City, enterprise
income generated by Qingdao Fujing Agriculture Development Company Limited* ( 青島富景農業開發有限公
司)( ‘ ‘Fujing Agriculture’’) from agriculture has been exempted from the PRC EIT for the period from 1 May
2010 to 1 May 2050. Accordingly, no PRC EIT has been provided in the Group’s consolidated financial
statements for Fujing Agriculture during the year s ended 31 December 2023 and 2022. No provision for the
PRC EIT has been made for Qingdao Xinfujing Technology Company Limited* ( 青島鑫富景科技有限公司)i n
the Group’s consolidated financial statements as it has no assessable profits durin g the years ended 31 December
2023 and 2022.
* The English name is for identification purpose only.
APPENDIX III UNAUDITED PRELIMINARY FINANCIAL INFORMATION
FOR THE YEAR ENDED 31 DECEMBER 2023
–I I I - 7–


--- page 499 ---
10. PROFIT FOR THE YEAR
The Group’s profit for the year is stated aft er charging/(crediting) the following:
2022 2023
RMB’000 RMB’000
(Unaudited)
Auditors’ remuneration 41 1,478
Cost of inventories sold, before the biological assets fair value
adjustments 70,804 86,794
Depreciation of property, plant and equipment 10,034 10,212
Depreciation of investment properties 295 634
Depreciation of right-of-use assets 765 732
Loss on disposal of property, plant and equipment 214 —
Biological assets fair valu e adjustments 5,404 (843)
Listing expenses 5,727 9,590
Loss on write-off of property, plant and equipment 382 —
Allowance for ECL of trade receivables 160 113
Staff costs (including directors’ emoluments)
—Salaries, bonus, allowances, subcontracting fees and other benefits
in kind 34,750 40,232
—Retirement benefits scheme contributions 660 611
35,410 40,843
11. DIVIDENDS
No dividend was paid or proposed during the year ended 31 December 2023, nor has any dividend been
proposed since the end of the reporting period (2022 : nil).
12. EARNINGS PER SHARE
The calculation of basic earnings per share for th e years ended 31 December 2023 and 2022 are based on
the consolidated profit of the Group attributable to equity holders of the Company for the years ended 31
December 2023 and 2022 and based on the assumption that 400,000,000 shares of the Company are in issue and
issuable, comprising 141,414 shares in issue and 399,858, 586 shares to be issued under the capitalisation issue as
set out in paragraphs headed ‘‘Reorganisation’’ of the s ection headed ‘‘History, Reorganisation and Corporate
Structure’’ of this Prospectus as if the shares were outstanding throughout the years ended 31 December 2023
and 2022.
As there were no dilutive potential ordinary shares during the years ended 31 December 2023 and 2022,
diluted earnings per share for the years ended 31 December 2023 and 2022 are the same as basic earnings per
share.
APPENDIX III UNAUDITED PRELIMINARY FINANCIAL INFORMATION
FOR THE YEAR ENDED 31 DECEMBER 2023
–I I I - 8–


--- page 500 ---
13. BIOLOGICAL ASSETS
2022 2023
RMB’000 RMB’000
(Unaudited)
At 1 January 9,781 8,371
Increase due to plantation 74,798 87,225
Decrease due to sales, before the biological assets fair value
adjustments (70,804) (86,794)
Biological assets fair value adjustments (Note) (5,404) 843
At 31 December 8,371 9,645
Note: Included in biological assets fair value adjust ments was losses arising from unsold vegetable
produce of approximately RMB4,585,000 for the year ended 31 December 2022 as a result of
temporary suspension during the outbreak of C OVID-19 epidemic from March to April 2022.
14. TRADE RECEIVABLES
2022 2023
RMB’000 RMB’000
(Unaudited)
Trade receivables 53,605 62,183
Allowance for ECL (161) (274)
53,444 61,909
An ageing analysis of trade receivables at the end of the reporting period, based on the invoice date, and
net of allowance for ECL, is as follows:
2022 2023
RMB’000 RMB’000
(Unaudited)
0–90 days 37,550 36,567
91–180 days 15,894 24,934
181–365 days — 408
53,444 61,909
15. TRADE PAYABLES
2022 2023
RMB’000 RMB’000
(Unaudited)
Trade payables 15,552 7,240
APPENDIX III UNAUDITED PRELIMINARY FINANCIAL INFORMATION
FOR THE YEAR ENDED 31 DECEMBER 2023
–I I I - 9–


--- page 501 ---
An ageing analysis of the Group’s trade payables at the end of the reporting period, based on invoice date,
is as follows:
2022 2023
RMB’000 RMB’000
(Unaudited)
0–90 days 13,139 7,049
91–180 days 2,372 150
Over 1 year 41 41
15,552 7,240
16. BANK BORROWINGS
2022 2023
RMB’000 RMB’000
(Unaudited)
Bank borrowings, secured 20,000 19,995
As at 31 December 2023 and 2022, the Group’s bank borrowings were denominated in RMB and were due
within one year.
Certain bank borrowings of the Group are arranged at floating rates, thus exposing the Group to cash
flow interest rate risk. The interest rates of the Group’s bank borrowings as at 31 December 2023 were as
follows:
2022 2023
(Unaudited)
Bank borrowings 3.75%-4.55% 3.45%-4.40%
The Group’s banking facilities as at 31 December 2023 were secured by (i) personal guarantee with
aggregate amount of RMB10,000,000 provided by the director of the Company, Mr. Zhang, and Ms. Geng
Juan, who is cohabiting with Mr. Zhang as his spouse, and an independent third party of the Company; (ii)
investment properties of the Group with carrying a mount of approximately RMB17,723,000 (unaudited); and
(iii) certain right-of-u se assets of the Group with carrying am ount of approximately RMB18,124,000
(unaudited).
The Group’s banking facilities as at 31 December 2022 were secured by (i) personal guarantee with
aggregate amount of RMB10,000,000 provided by the director of the Company, Mr. Zhang, and Ms. Geng
Juan, who is cohabiting with Mr. Zhang as his spouse; (i i) investment properties of the Group with carrying
amount of approximately RMB6,135,000; and (iii) certain right-of-use assets of the Group with carrying
amount of approximately RMB18,651,000.
The personal guarantee provided by an independent third party of the Company as at 31 December 2023
has been released subsequent to the end of the reporting period and replaced by the personal guarantee provided
by Ms. Geng Qi, sister of Ms. Geng Juan and a shareholder of the Company.
The personal guarantees provided by Mr. Zhang, Ms. Geng Juan and Ms. Geng Qi will be released
subsequent to 31 December 2023 upon the listing of the Company’s shares on the Main Board of The Stock
Exchange of Hong Kong Limited.
APPENDIX III UNAUDITED PRELIMINARY FINANCIAL INFORMATION
FOR THE YEAR ENDED 31 DECEMBER 2023
–I I I - 1 0–


--- page 502 ---
17. SHARE CAPITAL
Number of
shares Amount Equivalent to
US$’000 RMB’000
Authorised:
Ordinary shares at US$0.01 each
At 1 January 2022, 31 December 2022 and
1 January 2023 5,000,000 50 344
Increase in authorised share capital (Note) 9,995,000,000 99,950 725,172
At 31 December 2023 10,000,000,000 100,000 725,516
Issued and fully paid:
Ordinary shares at US$0.01 each
At 1 January 2022, 31 December 2022,
1 January 2023 and 31 December 2023 141,414 1 10
Note: On 16 November 2023, the Company resolved to increase its authorised share capital from
US$50,000 divided into 5,000,000 shares of US $0.01 each to US$100,000,000 divided into
10,000,000,000 shares of US$0.01 each by the creatio n of 9,995,000,000 additional shares, each
ranking pari passu with the shares then in issue in all respects.
18. CAPITAL COMMITMENTS
Capital commitments contracted for at the end of the reporting period but not yet incurred are as follows:
2022 2023
RMB’000 RMB’000
(Unaudited)
Property, plant and equipment — 3,959
19. EVENTS AFTER THE REPORTING PERIOD
(a) On 11 March 2024, a written resolution of the shareholders of the Company was passed to approve
the matters set out in the paragraph headed ‘‘Written Resolutions of our Shareholders passed on 16
November 2023 and 11 March 2024’’ in Appendix VI to this Prospectus.
(b) Subsequent to 31 December 2023 and as set out in note 16 in this appendix, the personal guarantee
provided by an independent third party to the Group has been replaced by the personal guarantee
provided by Ms. Geng Qi.
(c) Subsequent to 31 December 2023 and as set out in note 16 in this appendix, the personal guarantee
provided by Mr. Zhang, Ms. Geng Juan and Ms. Geng Qi will be released upon the listing of the
Company’s shares on the Main Board of the Stock Exchange.
(d) The audit committee has established and come into operation with effect from 26 February 2024, in
compliance with the Corporate Governance Code. E ach of the members of the audit committee has
reviewed the 2023 Preliminary Financia l Information as set out in this appendix.
APPENDIX III UNAUDITED PRELIMINARY FINANCIAL INFORMATION
FOR THE YEAR ENDED 31 DECEMBER 2023
–I I I - 1 1–


--- page 503 ---
MANAGEMENT DISCUSSION AND ANALYSIS
Business review and outlook
We are principally engaged in the cultivatio n and sales of potted vegetable produce in
the PRC, which are cultivated and sold in pots. Our potted vegetable produce was mainly
leafy vegetable species, such as crown daisy, rapeseed, Frise ´e, Indian lettuce, pak choi,
lettuce, Chinese celery and tatsoi. Our products are offered in the market primarily under
our brand ‘‘富景農業’’.
During FY2022 and FY2023, we sold our products primarily in Shandong province,
and also in Xi’an, Shaanxi province and Dalian, Liaoning province, with revenue
contribution of 91.4%, 3.7% and 4.9% in FY2023 respectively and 90.3%, 4.2% and
5.5% in FY2022 respectively. We sell our potted vegetable produce primarily through a
network of distributors in the PRC, which then on-sell our products to end-user customers,
the majority of which are hotels and restaurants in the PRC. During FY2022 and FY2023,
we had 12 distributors. Our sales to dist ributors amounted to RMB126.7 million and
RMB157.9 million, accounted for approximately 100.0% and 100.0% of our revenue for
FY2022 and FY2023 respectively. As at 31 December 2023, we had three cultivation
facilities in operation for cultivating our po tted vegetable produce, namely (i) the Laixi
Facility; (ii) the Xi’an Facility; and (iii) t he Dalian Facility. We had 140 greenhouses in
operation with a total gross floor area of 155,401 sq.m. as at 31 December 2023.
We intend to achieve sustainable growth in sales and profit and further strengthen our
leading position in the potted vegetable produce industry in the PRC by implementing the
following strategies: (i) to expand our cultivation capacity; (ii) to establish a new cultivation
facility in new geographical market; (iii) to set up a designated organic substrates
preparation facility; and (iv) to strengthen o ur operational efficiency through upgrade of
our information technology system. For de tails, please refer to the paragraph headed
‘‘Business — Our business strategies’’ in this prospectus.
Subsequent to 31 December 2023 and up to the Latest Practicable Date, there had not
been any material changes to our principal business. Our Directors confirm that, up to the
date of this prospectus, there has been no material change in our financial and trading
position since 31 December 2023.
Analysis of key items of results of operations
Revenue
Our revenue increased from approximately RMB126.7 million in FY2022 to
approximately RMB157.9 million in FY2023. Suc h increase in revenue in the said period
was primarily attributable to the increase in the sales volume of our potted vegetable
produce from approximately 8.4 million pots in FY2022 to approximately 10.5 million pots
in FY2023 as our business operation was no longer affected by COVID-19 epidemic in
FY2023. The average selling price per pot of our potted vegetable produce remained stable
at approximately RMB15.1 in FY2022 and FY2023.
APPENDIX III UNAUDITED PRELIMINARY FINANCIAL INFORMATION
FOR THE YEAR ENDED 31 DECEMBER 2023
–I I I - 1 2–


--- page 504 ---
Cost of sales
Our cost of sales primarily consists of raw materials, subcontracting labour cost and
cultivation overheads. Our raw materials primarily include (i) components of organic
substrates; (ii) seeds; and (iii) fertilisers (such as foliar fertilisers) and biopesticides (such as
matrine). Our raw materials and subcontracting labour cost accounted for approximately
48.2% and 42.2% of our cost of sales in FY202 3 respectively and 47.2% and 40.9% of our
cost of sales in FY2022 respectively. Our co st of sales increased from approximately
RMB74.2 million for FY2022 to approximately RMB89.3 million for FY2023 in line with
the revenue growth.
Gross profit and gross profit margin
Our gross profit increased by approximately RMB16.0 million (or 30.4%) from
approximately RMB52.5 million in FY2022 to approximately RMB68.5 million in FY2023.
Such increase was primarily the result of the increase in our revenue in the corresponding
period, mainly attributable to the increase in the sales volume of our potted vegetable
produce. Our gross profit margin increased from approximately 41.5% in FY2022 to
approximately 43.4% in FY2023 mainly because of the increase in revenue from the sale of
our potted vegetable produce by approximat ely RMB31.2 million (or 24.6%) from FY2022
to FY2023, which overwhelmed the increase in our cost of sales by approximately RMB15.2
million (or 20.5%) during the same period. Moreover, due to the temporary suspension of
business activities of our Laixi Facility a nd Dalian Facility durin g the lockdown period
between March and April 2022, our revenue decreased significantly during the said period,
leading to a lower gross profit margin for FY2022.
Other income
Other income consists of (i) interest income; (ii) rental income; (iii) government grants;
and (iv) compensation received. Our other in come increased slightly from approximately
RMB0.9 million for FY2022 to approximately RMB1.2 million for FY2023 mainly due to
compensation received in FY2023.
Changes in fair value of biological assets less cost to sell
Our biological assets consist of potted vegetable produce held by us and stated at fair
value less estimated cost to sell as at the end of reporting period. The fair value of our
biological assets was assessed at each reporting date. The resultant gain or loss arising from
the changes in the fair value adjustment between each reporting period are recognised in our
consolidated statements of profit or loss.
For FY2022, we recorded a loss from changes in fair value of biological assets less cost
to sell of approximately RMB2.1 million. In FY2022, our changes in fair value of biological
assets included the unsold vegetable produce of approximately RMB4.6 million as a result
of the temporary suspension of our facilitie s due to the outbreak of COVID-19 epidemic
APPENDIX III UNAUDITED PRELIMINARY FINANCIAL INFORMATION
FOR THE YEAR ENDED 31 DECEMBER 2023
–I I I - 1 3–


--- page 505 ---
from March 2022 to April 2022. The remain ing gain of approximately RMB2.5 million
represents the difference between the fair val ue of the biological assets and the original cost
of the biological assets as at 31 December 2022.
For FY2023, we recorded a gain from changes in fair value of biological assets less cost
to sell of approximately RMB3.4 million. The gain represents the difference between the fair
value of the biological assets and the original cost of the biological assets as at 31 December
2023.
Selling and distribution expenses
Selling and distribution expenses consist of salary, depreciation, office expenses,
advertising fees, motor vehicles expenses and o ther expenses. Our selling and distribution
expenses remained stable at approximately RMB0.4 million and RMB0.3 million for
FY2022 and FY2023 respectively.
Administrative and other expenses
Administrative and other expenses consist of salary, legal, professional and auditing
fees, depreciation of property, plant and equipment, depreciation of investment properties,
depreciation of right-of-use a ssets, entertainment and trave lling expenses, write-off of
property, plant and equipment and other expenses. Our administrative and other expenses
remained stable at approximately RMB12.4 million and RMB13.0 million for FY2022 and
FY2023 respectively.
Listing expenses
Listing expenses amounted to approxim ately RMB5.7 million and RMB9.6 million for
FY2022 and FY2023 respectively. The change in our Listing expenses reflects the phase of
work of the professional parties engaged for the purpose of our application for Listing in
the corresponding periods.
Income tax expense
Our income tax expense remained nil for FY2022 and FY2023.
We are not subject to taxation in the Cayman Islands and the British Virgin Islands.
No provision for Hong Kong Profits Tax is required since we have no assessable profits in
Hong Kong.
According to the Article 27 of the EIT Law and Article 86 of the Regulations of
Enterprise Income Tax Law, enterprise income from agriculture, forestry, husbandry and
fishery projects may be reduced or exempted from taxation. Pursuant to the
abovementioned provisions and with the approval of Dianbu Branch of the State
Taxation Bureau of Laixi City, Fujing Agricul ture’s enterprise income from agriculture
has been exempted from taxation for the period from 1 May 2010 to 1 May 2050.
APPENDIX III UNAUDITED PRELIMINARY FINANCIAL INFORMATION
FOR THE YEAR ENDED 31 DECEMBER 2023
–I I I - 1 4–


--- page 506 ---
Profit for the year
Our profit for the year increased by approximately RMB17.4 million from
approximately RMB31.8 million in FY202 2 to approximately RMB49.2 million in
FY2023, which mainly resulted from the increase in our revenue by approximately
RMB31.2 million from FY2022 to FY2023 mainly a ttributable to the increase in our sales
volume of our potted vegetable produce as our business operation was no longer affected by
COVID-19 epidemic in FY2023. Our revenue and sales volume for FY2022 was
significantly lower due to the temporary suspension of our Laixi Facility and Dalian
Facility as a result of the resurgence of COVID -19 cases and the lockdown measures during
March and April 2022. Meanwhile, our net profit margin increased from approximately
25.1% in FY2022 to approximately 31.2% in FY2023 as our business operation was no
longer affected by COVID-19 epidemic in FY2023.
Analysis of key items of financial position
Net current assets
Our net current assets improved from approximately RMB103.3 million as at 31
December 2022 to approximately RMB138.2 million as at 31 December 2023, with the bank
and cash balances increased from approxima tely RMB71.1 million as at 31 December 2022
to approximately RMB89.4 million as at 31 D ecember 2023. The improvement was mainly
because our revenue grew by approximately 24.6% during FY2023, leading to higher bank
balances and trade receivables balances as at 31 December 2023.
Biological assets
Our biological assets represent the potted vegetable produce stated at fair value less
estimated cost to sell as at the end of reporting period.
The fair value of our biological assets increased from approximately RMB8.4 million
as at 31 December 2022 to approximatel y RMB9.6 million as at 31 December 2023,
primarily due to the increase in the number of our potted vegetable produce in our
cultivation facilities as at 31 December 2023.
Inventories
Our inventories primarily consist of pots and agricultural materials which mainly
include seeds, fertilisers and biopesticides which were not utilised at the end of each
reporting period. Our inventories increased s lightly from approximately RMB1.6 million as
at 31 December 2022 to approximately RMB 1.7 million as at 31 December 2023 due to
purchase of raw materials.
APPENDIX III UNAUDITED PRELIMINARY FINANCIAL INFORMATION
FOR THE YEAR ENDED 31 DECEMBER 2023
–I I I - 1 5–


--- page 507 ---
Trade receivables
Our trade receivables primarily consist of receivables associated with the sales of our
potted vegetable produce to our customers. Our trade receivables increased from
approximately RMB53.4 million as at 31 Dec ember 2022 to approximately RMB61.9
million as at 31 December 2023 in line wit h the revenue growth during FY2023.
Trade payables
Our trade payables primarily relate to our subcontracting labour cost and purchase of
raw materials from our suppliers.
Our trade payables decreased from approximately RMB15.6 million as at 31 December
2022 to approximately RMB7.2 million as at 31 December 2023, primarily due to our faster
settlement of trade payables for FY2023.
Bank borrowings
Our total outstanding balance of bank loans remained stable at approximately
RMB20.0 million as at 31 December 2022 and 31 December 2023.
QUALITATIVE AND QUANTITATIVE DISCLOSURE ABOUT MARKET RISK
Please refer to the paragraph headed ‘‘Business — Risk management and internal
control’’ in this prospectus for further information.
CODE ON CORPORATE GOVERNANCE PRACTICES
Since we were not yet listed on the Stock Exchange in FY2023, the Corporate
Governance Code as set out in Appendix C1 to the Listing Rules was not applicable to us
during such period under review. After the Listing, we will comply with all the code
provisions set forth in the Corporate Governance Code. Our Directors will review our
corporate governance policies and compliance with the Corporate Governance Code for
each financial year and comply with the ‘‘comply or explain’’ principle in our corporate
governance report, which will be included in our annual reports subsequent to the Listing.
REVIEW OF OUR PRELIMINARY FINANCIAL INFORMATION
We have established an audit committee, which came into operation with effect from
26 February 2024, in compliance with the Corporate Governance Code. Each of the
members of the audit committee has reviewed the 2023 Preliminary Financial Information
as set out in this appendix.
The unaudited preliminary financial information in r espect of our consolidated
statement of financial position as at 31 D ecember 2023, consolidated statement of
comprehensive income and the related no tes thereto FY2023 as set out in our 2023
Preliminary Financial Information above has been agreed by the Reporting Accountants to
the amounts set out in the Group’s unaudited con solidated financial statements for FY2023
APPENDIX III UNAUDITED PRELIMINARY FINANCIAL INFORMATION
FOR THE YEAR ENDED 31 DECEMBER 2023
–I I I - 1 6–


--- page 508 ---
following their work under Practice Note 730 (Revised) ‘‘Guidance for Auditors Regarding
Preliminary Announcements of Annual Results’’ issued by the HKICPA. The work
performed by the Reporting Accountants in this respect did not constitute an assurance
engagement performed in accordance with Hong Kong Standards on Auditing, Hong Kong
Standards on Review Engagements or Hong Kong Standards on Assurance Engagements
issued by the HKICPA and consequently no assurance has been expressed by the Reporting
Accountants on the 2023 Prelim inary Financial Information.
PURCHASE, SALES OR REDEMPTION OF OUR SHARES
Since we were not yet listed on the Stock Exchange in FY2023, this disclosure
requirement is not applicable to us.
APPENDIX III UNAUDITED PRELIMINARY FINANCIAL INFORMATION
FOR THE YEAR ENDED 31 DECEMBER 2023
–I I I - 1 7–


--- page 509 ---
The following is the text of a letter, summary of values and valuation report, prepared for
the purpose of incorporation in this prospectus received from BMI Appraisals Limited, an
independent valuer, in connection with its valuations as at 31 December 2023 of the real
properties located in the PRC.
 20 March 2024
The Directors
Fujing Holdings Co., Limited
Huanhu North Road South
Nanbu Village South, Rizhuang Town
Laixi, Qingdao
Shandong Province
The People’s Republic of China
Dear Sirs,
INSTRUCTIONS
We refer to the instructions from Fujing Holdings Co., Limited (the ‘‘ Company ’’) for us
to value the real properties held/leased by the Company and/or its subsidiaries (together
referred to as the ‘‘ Group ’’) located in the People’s Republic of China (the ‘‘ PRC’’). We
confirm that we have conducted inspections, made relevant enquiries and obtained such
further information, as we consider necessary for the purpose of providing you with our
opinion of the market values of the real properties as at 31 December 2023 (the ‘‘ valuation
date’’).
BASIS OF VALUATION
Our valuations of the real properties have been based on the market value, which is
defined by The Hong Kong Institute of Surveyors as ‘‘the estimated amount for which an
asset or liability should exchange on the v aluation date between a willing buyer and a
willing seller in an arm’s length transaction, after proper marketing and where the parties
had each acted knowledgeably, prudently and without compulsion’’. The market value is
also understood as the value of an asset or lia bility estimated without regard to cost of sale
or purchase (or transaction) and without offset for any associated taxes or potential taxes.
APPENDIX IV PROPERTY VALUATION REPORT
–I V - 1–


--- page 510 ---
PROPERTY CATEGORISATIONS
In the course of our valuations, the portfolio of the real properties are categorised into
the following groups:
Group I — Real property held by the Group for occupation in the PRC
Group II — Real property held by the Group for owner-occupation/investment
in the PRC
Group III — Real property leased by the Group for occupation in the PRC
Group IV — Real property held by the Group for investment in the PRC
VALUATION METHODOLOGIES
In valuing the real properties in Groups I, II & IV, we have adopted the Depreciated
Replacement Cost Approach. Depreciated replacement cost is defined as ‘‘the aggregate
amount of the value of the land for the existing use or a notional replacement site in the
same locality and the new replacement cost of the buildings and other site works, from
which appropriate deductions may then be made to allow for the age, condition, economic
or functional obsolescence and environmental factors, etc.; all of these might result in the
existing real property being worth less to the undertaking in occupation than would a new
replacement’’. This basis has been used due to the lack of an established market upon which
to base comparable transactions, which genera lly furnishes the most reliable indication of
values for assets without a known used market. This opinion of value is subject to adequate
profitability of the business compared to the value of the total assets employed. Where
appropriate, we have also adopted the Investment Approach by taking into account the
current passing rent of the real property being held under existing tenancy with due
allowance for the reversionary value of the real property.
In valuing the real property in Group III leased by the Group, we are of the opinion
that it has no commercial value either because of its non-assignability i n the market or there
are prohibitions against subletting and/or assignment contained in the respective lease(s)
and/or tenancy agreement(s) or the lack of marketable and substantial profit rents.
TITLE INVESTIGATION
We have been provided with copies and/or extracts of title documents/tenancy
agreements and have been advised by the Group that no further relevant documents have
been produced. However, we have not examined the original documents to verify ownership
or to ascertain the existence of any amendment documents, which may not appear on the
copies handed to us. In the course of our valuations, we have relied upon the advice and
information given by the Group’s PRC legal advisers (the ‘‘ PRC Legal Advisers ’’) —
Hylands Law Firm ( 北京浩天（濟南）律師事務所) regarding the title of the real properties
located in the PRC. All documents have been used for reference only.
APPENDIX IV PROPERTY VALUATION REPORT
–I V - 2–


--- page 511 ---
VALUATION ASSUMPTIONS
Our valuations have been made on the assump tion that the real properties are sold in
the market in their existing states without the benefit of deferred terms contract, leaseback,
joint venture, management agreement or any other similar arrangement which would serve
to affect the values of the real properties. In addition, no account has been taken of any
option or right of pre-emption concerning or effecting the sale of the real properties and no
forced sale situation in any manner is assumed in our valuations.
In valuing the real properties, we have relied on the advice given by the Group that the
Group has valid and enforceable title to the re al properties which are freely transferable,
and has free and uninterrupted rights to use the same, for the whole of the unexpired term
granted subject to the payment of annual Government rent/land use fees and all requisite
land premium/purchase consideration payable have been fully settled.
VALUATION CONSIDERATIONS
The site inspections were conducted by Ms. Yu Feng-lin (a holder of BSc degree, Linyi
University) in April 2020. We have inspected the real properties externally and where
possible, the interior of the real properties. In the course of our inspections, we did not note
any serious defects. However, no structural surveys have been made . We are, therefore,
unable to report whether the real properties are free from rot, infestation or any other
structural defects. No tests were carried out on any of the services.
In the course of our valuations, we have relied to a considerable extent on the
information given by the Group and have accepted advice given to us on such matters as
planning approvals or statutory notices, easements, tenures, completion dates of buildings,
particulars of occupancy, site/floor areas, identifications of the real properties and other
relevant information.
We have not carried out detailed on-site measurements to verify the correctness of the
site/floor areas in respect of the real propertie s but have assumed that the site/floor areas
shown on the documents handed to us are corre ct. Dimensions, measurements and areas
included in the valuation report are based on information contained in the documents
provided to us by the Group and are therefore only approximations.
We have no reason to doubt the truth and accuracy of the information provided to us
by the Group and we have relied on your confirmation that no material facts have been
omitted from the information provided. We consider that we have been provided with
sufficient information for us to reach an informed view.
No allowance has been made in our valuations for any charges, mortgages or amounts
owing on the real properties or for any expenses or taxation, which may be incurred in
effecting a sale.
Unless otherwise stated, it is assumed that the real properties are free from
encumbrances, restrictions and outgoings of an onerous nature, which could affect their
values.
APPENDIX IV PROPERTY VALUATION REPORT
–I V - 3–


--- page 512 ---
Our valuations have been prepared in accordance with The HKIS Valuation Standards
(2020 Edition) published by The Hong Kong Institute of Surveyors, The RICS Valuation —
Global Standards published by The Royal Institution of Chartered Surveyors (‘‘ RICS ’’) and
the International Valuation Standards (IVS) published by The International Valuation
Standards Council.
Our valuations have been prepared under the generally accepted valuation procedures
and are in compliance with the requirements contained in Chapter 5 and Practice Note 12 of
the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong
Limited.
REMARKS
Unless otherwise stated, all money amounts stated herein are in Renminbi (RMB) and
no allowances have been made for any exchange transfer.
Our Summary of Values and Valuation Report are attached herewith.
Yours faithfully,
For and on behalf of
BMI APPRAISALS LIMITED
Joannau W.F. Chan
BSc., MSc., MRICS, MHKIS, RPS(GP)
Senior Director
Note: Ms. Joannau W.F. Chan is a member of the Hong Kong Institute of Surveyors (General Practice)
who has over 30 years’ experience in valuations of real properties in Hong Kong and over 24 years’
experience in valuations of real properties in the PRC.
APPENDIX IV PROPERTY VALUATION REPORT
–I V - 4–


--- page 513 ---
SUMMARY OF VALUES
No. Real property
Market Value
in existing state as at
31 December 2023
RMB
Group I — Real property held by the Group for occupation in the PRC
1. A land parcel together with
various structures located at
Nanbu Village
Rizhuang Town
Laixi, Qingdao
Shandong Province
The PRC
位於中國山東省
青島萊西市日莊鎮南埠村之
一塊土地及若干構築物
No Commercial Value
Sub-total: Nil
Group II — Real property held by the Group for owner-occupation/investment in the
PRC
2. A land parcel together with
1 building and various structures located at
Nanbu Village
Rizhuang Town
Laixi, Qingdao
Shandong Province
The PRC
位於中國山東省
青島萊西市日莊鎮南埠村之
一塊土地、一幢房屋及若干構築物
97,300,000
Sub-total: 97,300,000
APPENDIX IV PROPERTY VALUATION REPORT
–I V - 5–


--- page 514 ---
No. Real property
Market Value
in existing state as at
31 December 2023
RMB
G r o u pI I I—R e a lp r o p e r t yl e a s e db yt h eG r o u pf o ro c c u p a t i o ni nt h eP R C
3. A land parcel together with
various buildings and structures located at
Nanbu Village
Rizhuang Town
Laixi, Qingdao
Shandong Province
The PRC
位於中國山東省
青島萊西市日莊鎮南埠村之
一塊土地、若干房屋及構築物
No Commercial Value
Sub-total: Nil
Group IV — Real property held by the Group for investment in the PRC
4. A land parcel together with
8 buildings located at
Dongzhuangtou Village
Dianbu Town
Laixi, Qingdao
Shandong Province
The PRC
中國山東省
青島萊西市
店埠鎮東莊頭村之
一塊土地及八幢房屋
23,700,000
Sub-total: 23,700,000
Grand-total: 121,000,000
APPENDIX IV PROPERTY VALUATION REPORT
–I V - 6–


--- page 515 ---
VALUATION REPORT
Group I — Real property held by the Group for occupation in the PRC
No. Real property Description and tenure Particulars of occupancy
Market Value
in existing state as at
31 December 2023
RMB
1. A land parcel together
with various structures
located at
Nanbu Village
Rizhuang Town
Laixi, Qingdao
Shandong Province
The PRC
位於中國山東省
青島萊西市日莊鎮
南埠村之一塊土地及
若干構築物
The real property comprises
a land parcel with a site area
of approximately 128,334
sq.m. together with various
structures completed in
various stages between 2017
and 2018 erected thereon.
The land use rights of the
real property have been
allocated for agricultural
related, agricultural tourism
and electronic business uses.
The real property
together with Real
property Nos. 2
(excluding the leased
portion) & 3 as a whole
was occupied by the
Group for agricultural
use.
No Commercial Value
(Nil)
Notes:
1. The real property is located within Nanbu Village , Rizhuang Town, Laixi. It takes about 2 hours’ drive
from the real property to Qingdao town centre.
2. Pursuant to a Land Reservation Agreement ( 土地預約協議) entered into between the People’s
Government of Rizhuang Town of Laixi ( 萊西市日莊鎮人民政府)( ‘ ‘Rizhuang Government ’’) and
Qingdao Fujing Agriculture De velopment Company Limited ( 青島富景農業開發有限公司)( ‘ ‘Fujing
Agriculture ’’) (previously known as 青島富景農業生態開發有限公司) dated 17 June 2006, it was agreed
that Fujing Agriculture can acquire a land parcel wi thin the boundary of Rizhuang Town of Laixi having
a site area of approximately 250 mu (final area subject to measurement by Lands and Resources Bureau)
at a unit price of RMB26,000 per mu (inclusive of compensation for the ancillary structures erected
thereon, young crop compensation, land grant premium and any other fees for the land grant procedure)
for a term of 50 years for ecological and agricultural development uses and the former will be responsible
to apply for a State-owned Agricultural Land Use Rig hts Certificate for Fujin g Agriculture on or before
the end of December 2006.
3. Pursuant to a State-owned Land Use Rights Certificate ( 國有土地使用權證), Xi Guo Yong (2013) Di No.
0041 ( 西國用(2013) 第0041號 ), issued by the Municipal Government of Laixi ( 萊西市人民政府)( ‘ ‘Laixi
Government ’’) dated 22 May 2013, the land use rights of the real property with a site area of approximately
181,792 sq.m. have been allocated to Qingdao Changyang Investment and Development Co., Ltd. ( 青島昌
陽投資開發有限公司)(
‘ ‘Changyang ’’), which is a company wholly-own ed by a subordinate department of
the Laixi Government.
4. Pursuant to a Land Use Situation Explanatory Statement ( 用地情況說明) issued by the Lands and
Resources Bureau of Laixi ( 萊西市國土資源局) dated 7 August 2015, it was confirmed that Fujing
Agriculture had been using the real property for ecol ogical & agricultural development use; such land use
has not been changed and in compliance with relevant planning regulations.
APPENDIX IV PROPERTY VALUATION REPORT
–I V - 7–


--- page 516 ---
5. Pursuant to a Notice of Optimisation Measures for the Management of State-owned land at Chanzhi
Reservoir ( 關於做好產芝水庫部分國有土地管理的通知)( t h e‘ ‘Notice ’’) issued by the Office of Laixi
Government (the ‘‘ Office’’) dated 5 March 2020, the Office agreed that Rizhuang Government is
responsible for the daily management of the allocated land parcel of the real property with a site area of
approximately 192.5 mu situated in Chanzhi Reservoir held by Changyang.
6. Pursuant to a Supplemental Agreement ( 補充協議) entered into between Rizhuang Government and
Fujing Agriculture dated 23 March 2020, the former exp licitly confirmed that Fujing Agriculture has been
physically using and occupying the land parcel of the r eal property with a site area of approximately 192.5
mu in accordance with the Land Reservation Agreement dated 17 June 2006 as referred to in Note 2 and
further confirmed that there is no violation of any rele vant laws and regulations; Fujing Agriculture can
within the term (i.e. from 2006 to 2056) of the said Land Reservation Agreement continually use and
occupy the land parcel of the real property for the purpos es of vegetable plantati on, crop plantation, sale,
vegetable & crop study as well as agricultural leisure tourism, e-commerce, etc.; Fujing Agriculture can
properly use the land parcel by means like sub-leasing; and Fujing Agriculture has already settled all the
fees in accordance with the Land Leasing Agreement and therefore, Fujing Agriculture is not obliged to
pay any other fees for the land parcel.
7. Pursuant to a Confirmation Letter ( 確認函) issued by Changyang dated 11 December 2020, Changyang
reconfirmed and agreed that Fujing Agriculture is entitled to use and occupy the allocated land parcel of
the real property for the period from 22 May 2013 (i.e. the date of the State-owned Land Use Rights
Certificate as referred to in Note 3) to 5 March 2020 ( i.e. the date of the Notice as referred to in Note 5);
Changyang irrevocably agreed with the use of the land by Fujing Agriculture and the arrangement
stipulated under the Notice of Optimisation Measures for the Management of State-owned land at
Chanzhi Reservoir (i.e. the Notice) as referred to in Note 5 and the Supplemental Agreement Fujing
Agriculture entered into with the Rizhuang Government as referred to in Note 6.
8. Pursuant to a Confirmation Letter (確 認函) issued by the Natural Resources Bureau of Laixi ( 萊西市自然
資源局)( t h e‘ ‘Bureau’’) dated 22 March 2021, it is confirmed that Fujing Agriculture can use the allocated
land parcel for agricultural use for the period as st ated in the Land Reservation Agreement as referred to
in Note 2 and the Supplemental Agreement as referred t o in Note 6; Fujing Agriculture has fully settled
the relevant fees as agreed in the Land Reservation Agreement to the Government of Rizhuang Town ( 日
莊鎮政府)( ‘ ‘Rizhuang Town Government ’’) by installments from 2006 to 2018 without any breach of
contract; Fujing Agriculture is en titled to keep using the allocated land parcel without further payment
upon obtaining authorisation from the Rizhuang Town Government and receiving no objection from
Changyang. The chance for Fujing Agriculture to be stopped from using such allocated land parcel is
minima
l but if it so happens, the Bureau, Rizhuang Town Government and Changyang would reasonably
compensate on any suffered loss incurred by Fujing Agr iculture; the Bureau would strictly execute all the
arrangements regarding the allocated land parcel as st ipulated in the Notice as referred to in Note 5, and it
would not have any objection to the terms and conditions as agreed in the aforesaid Land Reservation
Agreement and Supplemental Agreement. There is no ill egal act and/or violation of any regulations for
the utilisation of the land parcel of the real property by Fujing Agriculture.
9. For the valuation of the real property, we have attr ibuted no commercial value to the land parcel together
with various structures erected thereon because of t he allocated land nature. However, for reference
purpose, we are of the opinion that the depreciated replacement cost of these structures (excluding the
land) as at the valuation date would be in the sum o f about RMB30,000,000 assuming all relevant title
certificates have been obtained a nd such structures could be freely transferred in the market.
APPENDIX IV PROPERTY VALUATION REPORT
–I V - 8–


--- page 517 ---
10. The opinion of the PRC Legal Advisers contains, inter alia , that as per the authorisation given by Laixi
Government, confirmation letters issued by the Bureau and Changyang, it is confirmed that Fujing
Agriculture is entitled to use and occupy the land par cel of the real property in accordance with the Land
Reservation Agreement and the Supplemental Agreemen t; the land parcel of the real property can be used
and occupied for agricultural purpose; the utilisa tion of the land parcel by Fujing Agriculture has not
changed the land use of such land parcel and is in compliance with relevant planning regulations; there is
no illegal act and/or violation of any regulations for the utilisation of the land parcel of the real property
by Fujing Agriculture; and if Fujing Agriculture cont inues to utilise such land parcel for agricultural
development use in accordance with the terms of the Land Reservation Agreement entered into with
Rizhuang Government, the chance of being asked by La ixi Land Administration Department to return the
relevant land is relatively low.
11. Fujing Agriculture is an indirect whol ly-owned subsidiary of the Company.
APPENDIX IV PROPERTY VALUATION REPORT
–I V - 9–


--- page 518 ---
VALUATION REPORT
Group II — Real property held by the Group for owner-occupation/investment in the PRC
No. Real property Description and tenure Particulars of occupancy
Market Value
in existing state as at
31 December 2023
RMB
2. A land parcel together
with 1 building and
various structures located
at Nanbu Village
Rizhuang Town
Laixi, Qingdao
Shandong Province
The PRC
位於中國山東省
青島萊西市日莊鎮
南埠村之一塊土地、
一幢房屋及若干構築物
The real property comprises
a land parcel (Land Plot No.
105-005-0177) with a site
area of approximately
214,804 sq.m. together with 1
building and various
structures completed in
various stages between 2012
and 2019 erected thereon.
As advised, the total gross
floor area of the ancillary
building for agricultural use
of the real property is
approximately 82 sq.m.
The land use rights of the
real property have been
granted for a term expiring
on 27 June 2058 for
agricultural use.
P o r t i o no fl a n dp a r c e lo f
the real property with a
site area of approximately
1 0 0m ui sl e a s e dt oa n
independent third party
for a term commencing
on 1 April 2019 and
expiring on 31 March
2024 at an annual rent of
RMB240,000 for seedling
planting use.
The remaining portion of
the land parcel together
with Real property Nos.
1&3a saw h o l ew a s
occupied by the Group
for agricultural use.
97,300,000
(Ninety-seven
Million and
Three Hundred
Thousand Only)
Notes:
1. The real property is located within Nanbu Village , Rizhuang Town, Laixi. It takes about 2 hours’ drive
from the real property to Qingdao town centre.
2. Pursuant to a State-owned Land Use Rights and Co llectively-owned Land L easing Rights Transfer
Contract ( 國有土地使用權及集體土地租賃權轉讓合同) dated 15 December 2010 and a Supplemental
Agreement dated 26 December 2010 entered into between an independent third party and Qingdao Fujing
Agriculture Development Company Limited ( 青島富景農業開發有限公司)( ‘ ‘Fujing Agriculture ’’), the
State-owned land parcel of the real property with plantation land of approximately 262.5 mu and fish
pond of approximately 60 mu together with the ancillar y facilities erected thereon were contracted to be
transferred to Fujing Agriculture at a t otal consideration of RMB25,044,665.
3. Pursuant to a State-owned Land Use Rights Certificate ( 國有土地使用權證), Xi Guo Yong (2015) Di No.
0122 ( 西國用(2015) 第0122號 ), issued by the Municipal Government of Laixi ( 萊西市人民政府) dated 18
June 2015, the land use rights of the real property w ith a site area of approximately 214,804 sq.m. have
been granted to Fujing Agriculture for a term ex piring on 27 June 2058 for agricultural use.
APPENDIX IV PROPERTY VALUATION REPORT
–I V - 1 0–


--- page 519 ---
4. Pursuant to a Certificate ( 證明) issued by the Natural Res ources Bureau of Laixi ( 萊西市自然資源局)( t h e
‘‘Bureau’’) dated 11 December 2023, it was confirmed tha t Fujing Agriculture had legally obtained the
State-owned Land Use Rights Certificate for the lan d parcel of the real property in accordance with the
relevant land management laws, administrative rul es & regulations and the requirements under certain
normative documents; since its incorporation, Fujin g Agriculture had been using the land parcel of the
real property in compliance with the relevant PRC l aws related to land management & town planning,
administrative rules & regulations and the require ments under certain normative documents; there is no
penalty arising from the violations from such relevant laws, rules & regulations and requirements under
normative documents; and there is no argument & dispute with the Bureau.
5. Pursuant to a Rizhuang Ji Di Land Leasing Contract ( 日莊基地土地租 賃合同)( t h e‘ ‘Leasing Contract ’’)
entered into between Fujing Agriculture and an independent third party dated 20 March 2019, portion of
the land parcel of the real property with a site area of approximately 100 mu is leased to the independent
third party for a period from 1 April 2019 to 31 Marc h 2024 at an annual rent of RMB240,000 for seedling
planting use.
6. Pursuant to a Mortgage Contract ( 抵押合同) and a Floating Capital Loan Contract ( 流動資金借款合同),
entered into between Fujing Agriculture and Qingdao Rural Commercial Bank Company Limited Laixi
Branch ( 青島農村商業銀行股份有限公司萊西支行) both dated 31 March 2021, the former has mortgaged
the land use rights of the real property to the latter as security for a loan amount of RMB10,000,000 for a
period from 31 March 2021 to 20 March 2022 and su bsequently both parties entered into a Loan
Extension Agreement ( 借款展期協議) dated 30 March 2022 to extent the mortgage of the land use rights of
the real property at a loan amount of RMB10,000,000.
Upon expiration of the above Contracts and Agreem ent, both parties entered into a Floating Loan
Contract ( 流動資金借款合同)
dated 14 February 2023 to extent the mortgage of the land use rights of the
real property at a loan amount of RMB10,000,000.
7. For the building of the real property, we have not been provided with any title certificate.
8. The opinion of the PRC Legal Advisers contains, inter alia , the followings:
a. The land use rights of the real property are legally and solely vested in Fujing Agriculture which is
entitled to occupy, use, lease, transfer, mortgage and dispose of the land use rights of the real
property within the term and land use stated in the State-owned Land Use Rights Certificate as
r e f e r r e dt oi nN o t e3 ;
b. Fujing Agriculture had erected on the real property some production faciliti es for agricultural use
and some ancillary facilities for storage, manage ment and accommodation uses which are classified
as facility agriculture (‘‘ Facility Agriculture ’’) (設施農業) and such Facility Agriculture had been
filed on record under relevant land management regulations. Such Facility Agriculture belongs to
kind of agricultural internal structure adaptation which is not non-agricultural construction and its
nature conforms to the agriculture land use of the real property, and therefore it is not necessary to
Fujing Agriculture to apply for any title certifica tes. Fujing Agriculture is entitled to occupy, use,
lease, transfer, mortgage and dispose of such Facil ity Agriculture legally in accordance with the
relevant PRC laws and regulations;
APPENDIX IV PROPERTY VALUATION REPORT
–I V - 1 1–


--- page 520 ---
c. The Leasing Contract as referred to in Note 5 is le gally valid and binding on the contracting parties.
According to the requirements under relevant regul ations, the Leasing Contract should be registered
under relevant government department. However, the registration had not been done. But such non-
registration will not affect the validity of the Le asing Contract. This is because the Leasing Contract
had been in effect in 2019 which was before the signing of the Mortgage Contract in 2020. As a
result, the mortgage will not affect the validity of the Leasing Contract. Fujing Agriculture cannot
further lease out the portion of the real propert y under the Leasing Contract. The Leasing Contract
is in compliance with relevant laws, regulations an d commercial practice. There is no signs of breach
of contract nor any possibility to a breach o f contract or to rescind the contract; and
d. Apart from the mortgage with the relevant restr ictions and the leasing situation detailed above,
there is no other material encumbrance or third party interest on the land use rights of the real
property and there is also no title defect or any mat erial legal dispute over the land use rights of the
real property.
9. Fujing Agriculture is an indirect whol ly-owned subsidiary of the Company.
APPENDIX IV PROPERTY VALUATION REPORT
–I V - 1 2–


--- page 521 ---
VALUATION REPORT
Group III — Real property leased by the Group for occupation in the PRC
No. Real property Description and tenure Particulars of occupancy
Market Value
in existing state as at
31 December 2023
RMB
3. A land parcel together
with various buildings
and structures located
at Nanbu Village
Rizhuang Town
Laixi, Qingdao
Shandong Province
The PRC
位於中國山東省
青島萊西市日莊鎮
南埠村之一塊土地、
若干房屋及構築物
The real property comprises
a land parcel with a site area
of approximately 34,467
sq.m. together with 5
buildings and various
structures completed in
various stages between 2012
and 2018 erected thereon.
As advised, the total gross
floor area of the ancillary
buildings for agricultural use
of the real property is
approximately 1,171 sq.m.
The real property is
collectively-owned land
leased for agricultural use.
The real property
together with Real
property Nos. 1 & 2
(excluding the leased
portion) as a whole was
occupied by the Group
for agricultural use.
No Commercial Value
(Nil)
Notes:
1. The real property is located within Nanbu Village , Rizhuang Town, Laixi. It takes about 2 hours’ drive
from the real property to Qingdao town centre.
2. Pursuant to a State-owned Land Use Rights and Co llectively-owned Land L easing Rights Transfer
Contract ( 國有土地使用權及集體土地租賃權轉讓合同) entered into between an independent third party
and Qingdao Fujing Agriculture Development Company Limited ( 青島富景農業開發有限公司)( ‘ ‘Fujing
Agriculture ’’) dated 15 December 2010, the collectively-ow ned land parcel of the real property with a site
area of approximately 51.7 mu were contracted to be leased to Fujing Agriculture for a term of 50 years at
a total rent of RMB2,000,000.
3. Pursuant to a Land Leasing Contract ( 土地租賃合同) entered into between the People’s Government of
Rizhuang Town (日 莊鎮人民政府)( ‘ ‘Rizhuang Government ’’) and Fujing Agriculture dated 27 December
2010, the former leased the real property with a site area of approximately 51.7 mu to the latter for
vegetable plantation use.
4. Pursuant to a Certificate regardin g the confirmation for the circulation of land contract and operation ( 關
於確認承包經營土地流轉的證明) issued by Village Committee of Nanbu Village (the ‘‘ Committee ’’) dated
18 August 2015, it was confirmed that the Committee agreed the leasing of the land parcel of the real
property by Rizhuang Government to Fujing Agriculture.
5. For the buildings erected thereon the real property, we have not been provided with any title certificates.
APPENDIX IV PROPERTY VALUATION REPORT
–I V - 1 3–


--- page 522 ---
6. For the valuation of the real property, we have attributed no commercial value to it together with the
buildings and structures erected thereon because of its non-assignability in the market or there are
prohibitions against subletting and/or assignment c ontained in the respective leasing contract and/or
tenancy agreement or the lack of substantial and marketable profit rents. However, for reference purpose,
we are of the opinion that the depreciated replacement cost of these buildings and structures (excluding
the land) as at the valuation date would be in the sum of about RMB12,700,000 assuming all relevant title
certificates have been obtained and such buildings and s tructures could be freely transferred in the market.
7. The opinion of the PRC Legal Advisers contains, inter alia , the followings:
a. The Land Leasing Contract as referred to in Not e 3 is legally valid and binding on the contracting
parties and Fujing Agriculture has settled the t otal rent under such contract; the town planning
allows the land parcel of the real property for agri cultural use; Fujing Agriculture has not changed
the agricultural land use of the real property for ot her non-agricultural development; the use of such
leased real property by Fujing Agriculture has b een in compliance with the relevant rules and
regulations; and there is no legal risks; and
b. Under the Civil Code of the People’s Republic of Ch ina, it is stipulated that the length of leasing
period cannot exceed 20 years and the period exceeding such 20-year period will become invalid.
However, Fujing Agriculture can legally and valid ly lease and use the real property within the 20-
year period and has the priority right to renew the lease upon the expiration of such 20-year period
for continued use of the real property. As a result, there is no adverse impact to the normal
operation and production of Fujing Agriculture. The Land Leasing Contract is in compliance with
relevant laws, regulations and commercial pract ice. There is no sign of breach of contract nor any
possibility to a breach of contra ct or to rescind the contract.
8. Fujing Agriculture is an indirect whol ly-owned subsidiary of the Company.
APPENDIX IV PROPERTY VALUATION REPORT
–I V - 1 4–


--- page 523 ---
VALUATION REPORT
Group IV — Real property held by the Group for investment in the PRC
No. Real property Description and tenure Particulars of occupancy
Market Value
in existing state as at
31 December 2023
RMB
4. A land parcel together
with 8 buildings located
at Dongzhuangtou
Village, Dianbu Town
Laixi, Qingdao
Shandong Province
The PRC
中國山東省青島萊西市店
埠鎮東莊頭村之一塊土地
及八幢房屋
The real property comprises
a land parcel (Land Plot No.
108–003–0050) with a site
area of approximately 25,679
sq.m. together with 8
buildings completed in about
2011 erected thereon.
The total gross floor area
(‘‘GFA’’) of the buildings of
the real property is
approximately 12,283.67
sq.m.
The land use rights of the
real property have been
granted for a term expiring
on 14 October 2045 for
industrial and cold storage
uses.
The real property is
leased to an independent
third party for a term
commencing on 1
September 2022 and
expiring on 31 August
2024 for cold storage and
related uses.
23,700,000
(Twenty-three
Million and Seven
Hundred Thousand
Only)
Notes:
1. The real property is located within Dongzhuangto u Village, Dianbu Town, Laixi. It takes about 1.5 hours’
drive from the real property to Qingdao town centre.
2. Pursuant to an Immovable Property Title Certificate ( 不動產權證), Lu (2022) Lai Xi Shi Bu Dong Chan
Quan Di No. 0006589, issued by the Lands and Resources Bureau of Laixi ( 萊西市國土資源局)d a t e d9
September 2022, the land use rights of the real propert y with a site area of approximately 25,679 sq.m. and
the building ownership rights of 8 buildings of the real property with a total GFA of approximately
12,283.67 sq.m. are legally vested in Qingdao Fuj ing Agriculture Development Company Limited ( 青島富
景農業開發股份有限公司)( ‘ ‘Fujing Agriculture ’’) for a term expiring on 14 October 2045 for industrial and
cold storage uses.
3. Pursuant to a Fujing Agriculture Dianbu Cold Storage Leasing Agreement ( 青島富景農業開發有限公司店
埠冷庫租賃使用協議)( ‘ ‘Leasing Agreement ’’) entered into between Fujing Agriculture and an independent
third party dated 20 August 2014, the real property was leased to the independent third party for a period
from 1 September 2014 to 31 August 2015 at an annual rent of RMB200,000 for cold storage and related
uses. A Supplementary Agreement was signed by both p arties dated 26 August 2015 to extend the leasing
period up to 31 August 2017. A further Supplementary Agreement was signed by both parties dated 21
August 2017 to extend the leasing period up to 31 August 2020 at a revised annual rent of RMB400,000.
On 16 August 2020, the Laixi Housing and Urban & Rural Construction Bureau ( 萊西市住房和城鄉建設
局) issued a Laixi Building Leasing Registration Certificate ( 萊西市房屋租賃登記備案證明), Xi Fang Zu
Zi Di No. 2020004 ( 西房租字第20200
 04號).
APPENDIX IV PROPERTY VALUATION REPORT
–I V - 1 5–


--- page 524 ---
Upon expiration of the above leasing period, both par ties entered into a new Leasing Agreement dated 1
September 2020 for a period from 1 September 2020 to 31 December 2023 at an annual rent of
RMB400,000. On 2 November 2020, the Laixi Housing and Urban & Rural Construction Bureau issued a
Laixi Building Leasing Registration Certificate, Xi Fang Zu Zi Di No. 2020239 ( 西房租字第2020239號 ).
Upon expiration of the above leasing period, both par ties entered into a new Leasing Agreement (the
‘‘New Leasing Agreement ’’) dated 1 September 2022 for a period from 1 September 2022 to 31 August 2024
at an annual rent of RMB400,000.
4. Pursuant to a Maximum Mortgage Contract ( 最高額抵押合同)( t h e‘ ‘Mortgage Contract ’’) entered into
between Fujing Agriculture and Bank of China Company Limited Laixi Branch ( 中國銀行股份有限公司萊
西支行)( ‘ ‘BOC Branch ’’) dated 17 September 2019, Fujing Agriculture has mortgaged the land use rights
and building ownership rights of the real property to BOC Branch as guarantee for the loan, trade finance,
bank acceptance bill, letter of guarantee, capital bus iness and any other credit business contract as well as
their related amendments and supplements between Fu jing Agriculture and BOC Branch for the period
from 17 September 2019 to 16 September 2022 at a maximum amount of secured debt of RMB10,000,000.
Within the aforementioned mortgage period, the mortgagor (i.e. Fujing Agriculture), without obtaining
the consent from the mortgagee (i.e. BOC Branch) , cannot wholly or partly transfer, lease, lend,
investment in kind, alter, construct or any other mea ns to dispose of the mortgaged real property wholly
or partly.
Before expiration of the above Mortgage Contract, b o t hp a r t i e se n t e r e di n t oaW o r k i n gC a p i t a lL o a n
Contract ( 流動資金借款合同) and a new Maximum Mortgage Contract (the ‘‘New Mortgage Contract’’)
dated 14 September 2022 to extent the mortgage period from 13 September 2022 to 13 September 2025 at a
maximum amount of secured debt of RMB10,000,000.
Both parties further entered into a Credit Limit Agreement ( 授信額度協議) and a Supplementary Credit
Limit Agreement ( 授信額度補充協議) dated 12 December 2023 and 31 January 2024 respectively, upon
expiration of the above Working Capital Loan Cont ract, the loan period was extended to 6 June 2024,
with the same guarantee terms and c onditions. Simultaneously, Geng Qi ( 耿琦) was added as a guarantor,
providing the highest mortgage guarantee for the loan.
5. Pursuant to a Certificate ( 證明) issued by the Natural Resources Bureau of Laixi (the ‘‘Bureau ’’) dated 11
December 2023, it was confirmed that Fujing Agricul ture
 had legally obtained the Immovable Property
Title Certificate of the real property in accord ance with the relevant land management laws,
administrative rules & regulations and the require ments under certain normative documents; since its
incorporation, Fujing Agriculture had been using t he real property in compliance with the relevant PRC
laws related to land management & town planning , administrative rules & regulations and the
requirements under certain normative documents; the re is no penalty arising from the violations from
such relevant laws, rules & regulations and requirements under normative documents; and there is no
argument & dispute with the Bureau.
6. Pursuant to copies of various contracts provided by the Group, various decoration and improvement
works comprising mainly insulation system, tap water supply system & scaffolding works for the cold
storage buildings as well as waterproofing works for t he ancillary office buildings have been undertaken at
a total contract sum of RMB12,221,389.74 which had b een settled on or before the date of valuation. Our
valuation has considered such costs incurred up to the date of valuation.
7. The opinion of the PRC Legal Advisers contains, inter alia , the following:
a. The land use rights and building ownership rights of the real property are legally and solely vested in
Fujing Agriculture which is entitled to occupy, u se, transfer, lease, mortgage or other means to
dispose of the real property within the term as stat ed in the Immovable Property Title Certificate as
r e f e r r e dt oi nN o t e2 ;
APPENDIX IV PROPERTY VALUATION REPORT
–I V - 1 6–


--- page 525 ---
b. All of the leasing contract/agreement and suppl ementary agreements as referred to in Note 3 are
legally valid and binding on the contracting parti es and they have been registered under relevant
government department. The aforementioned leasing relationship had been in effect from 2014,
which was well before the signing of the Mortgage Contract in 2019, as a result, the mortgage will
not affect the validity of the New Leasing Agreement. Fujing Agriculture cannot further lease out
the real property subject to the New Leasing Agreement. The New Leasing Agreement is in
compliance with relevant laws, regulations and c ommercial practice. There is no sign of breach of
contract nor any possibility to a breach of contract or to rescind the contract; and
c. Apart from the mortgage with the relevant restr ictions and the leasing situation detailed above,
there is also no other material encumbrance or t hird party interest on the land use rights and
building ownership rights of the real property and there is also no title defect or any material legal
dispute over the land use rights and buildin g ownership rights of the real property.
8. Fujing Agriculture is an indirect whol ly-owned subsidiary of the Company.
APPENDIX IV PROPERTY VALUATION REPORT
–I V - 1 7–


--- page 526 ---
Set out below is a summary of certain provisions of the Memorandum and Articles of
Association of the Company and of certain aspects of Cayman company law.
The Company was incorporated in the Cayman Islands as an exempted company with
limited liability on 23 July 2019 under the Co mpanies Act (As Revised) of the Cayman
Islands (the ‘‘ Companies Act ’’). The Company’s constitutional documents consist of its
Amended and Restated Memorandum of Association (the ‘‘ Memorandum ’’) and its
Amended and Restated Articles of Association (the ‘‘ Articles ’’).
1. MEMORANDUM OF ASSOCIATION
(a) The Memorandum states, inter alia , that the liability of members of the Company
is limited to the amount, if any, for the time being unpaid on the shares
respectively held by them and that the objects for which the Company is
established are unrestricted (including acting as an investment company), and that
the Company shall have and be capable of exercising all the functions of a natural
person of full capacity irrespective of any question of corporate benefit, as
provided in section 27(2) of the Companies Act and in view of the fact that the
Company is an exempted company that the Company will not trade in the
Cayman Islands with any person, firm or corporation except in furtherance of the
business of the Company carried on outside the Cayman Islands.
(b) The Company may by special resolution alter its Memorandum with respect to
any objects, powers or other matters specified therein.
2. ARTICLES OF ASSOCIATION
The Articles were conditionally adopted on 11 March 2024 with effect from the Listing
Date. The following is a summary of certain provisions of the Articles:
(a) Shares
(i) Classes of shares
The share capital of the Compan y consists of ordinary shares.
(ii) Variation of rights of existing shares or classes of shares
Subject to the Companies Act, if at any time the share capital of the
Company is divided into different classes of shares, all or any of the special rights
a t t a c h e dt ot h es h a r e so ra n yc l a s so fs h a r e sm a y( u n l e s so t h e r w i s ep r o v i d e df o rb y
the terms of issue of that class) be varied, modified or abrogated either with the
consent in writing of the holders of not less than three-fourths in nominal value of
the issued shares of that class or with the sanction of a special resolution passed at
a separate general meeting of the holders of the shares of that class. To every such
separate general meeting the provision s of the Articles relating to general
meetings will mutatis mutandis apply, but so that the necessary quorum (including
at an adjourned meeting) shall be two persons holding or representing by proxy
APPENDIX V SUMMARY OF THE CO NSTITUTION OF THE COMPANY
AND CAYMAN ISLANDS COMPANY LAW
–V - 1–


--- page 527 ---
not less than one-third in nominal value of the issued shares of that class. Every
holder of shares of the class shall be entitled to one vote for every such share held
by him.
Any special rights conferred upon the holders of any shares or class of shares
shall not, unless otherwise expressly provided in the rights attaching to the terms
of issue of such shares, be deemed to be varied by the creation or issue of further
shares ranking pari passu therewith.
(iii) Alteration of capital
The Company may by ordinary resolution of its members:
(i) increase its share capital by the creation of new shares;
(ii) consolidate all or any of its capital into shares of larger amount than its
existing shares;
(iii) divide its shares into several c lasses and attach to such shares any
preferential, deferred, qualified or special rights, privileges, conditions
or restrictions as the Company in general meeting or as the directors
may determine;
(iv) subdivide its shares or any of them into shares of smaller amount than is
fixed by the Memorandum; or
(v) cancel any shares which, at the date of passing of the resolution, have
not been taken and diminish the amount of its capital by the amount of
the shares so cancelled.
The Company may reduce its share capital or any capital redemption reserve
or other undistributable reserve in any way by special resolution.
(iv) Transfer of shares
All transfers of shares may be effected by an instrument of transfer in the
usual or common form or in a form prescribed by The Stock Exchange of Hong
Kong Limited (the ‘‘ Stock Exchange ’’) or in such other form as the board may
approve and which may be under hand or, if the transferor or transferee is a
clearing house or its nominee(s), by hand or by machine imprinted signature or by
such other manner of execution as the board may approve from time to time.
APPENDIX V SUMMARY OF THE CO NSTITUTION OF THE COMPANY
AND CAYMAN ISLANDS COMPANY LAW
–V - 2–


--- page 528 ---
Notwithstanding the foregoing, for s o long as any shares are listed on the
Stock Exchange, titles to such listed shares may be evidenced and transferred in
accordance with the laws applicable to an d the rules and regulations of the Stock
Exchange that are or shall be applicable to such listed shares. The register of
members in respect of its listed shares (whether the principal register or a branch
register) may be kept by recording the particulars required by Section 40 of the
Companies Act in a form otherwise than legible if such recording otherwise
complies with the laws applicable to an d the rules and regulations of the Stock
Exchange that are or shall be applicable to such listed shares.
The instrument of transfer shall be exec uted by or on behalf of the transferor
and the transferee provided that the board may dispense with the execution of the
instrument of transfer by the transferee. The transferor shall be deemed to remain
the holder of the share until the name of the transferee is entered in the register of
members in respect of that share.
The board may, in its absolute discretion, at any time transfer any share
upon the principal register to any branch register or any share on any branch
register to the principal register or any other branch register.
The board may decline to recognise any instrument of transfer unless a fee
(not exceeding the maximum sum as the Stock Exchange may determine to be
payable) determined by the Directors is paid to the Company, the instrument of
transfer is properly stamped (if applicable), it is in respect of only one class of
share and is lodged at the relevant registration office or registered office or such
other place at which the principal register is kept accompanied by the relevant
share certificate(s) and such other evidence as the board may reasonably require
to show the right of the transferor to mak e the transfer (and if the instrument of
transfer is executed by some other person on his behalf, the authority of that
person so to do).
The registration of transfers may be s uspended and the register closed on
giving notice by advertisement in any newspaper or by any other means in
accordance with the requirements of the Stock Exchange, at such times and for
such periods as the board may determine. The register of members must not be
closed for periods exceeding in the whole thirty (30) days in any year. The period
of thirty (30) days may be extended for a further period or periods not exceeding
thirty (30) days in respect of any year if approved by members by ordinary
resolution.
Subject to the above, fully paid shares are free from any restriction on
transfer and free of all liens in favour of the Company.
APPENDIX V SUMMARY OF THE CO NSTITUTION OF THE COMPANY
AND CAYMAN ISLANDS COMPANY LAW
–V - 3–


--- page 529 ---
(v) Power of the Company to purchase its own shares
The Company is empowered by the Companies Act and the Articles to
purchase its own shares subject to certain restrictions and the board may only
exercise this power on behalf of the Company subject to any applicable
requirements imposed from time to time by the Stock Exchange.
The board may accept the surrender for no consideration of any fully paid
share.
(vi) Power of any subsidiary of the Company to own shares in the Company
There are no provisions in the Articles r elating to ownership of shares in the
Company by a subsidiary.
(vii) Calls on shares and forfeiture of shares
T h eb o a r dm a yf r o mt i m et ot i m em a k e such calls upon the members in
respect of any monies unpaid on the shares held by them respectively (whether on
account of the nominal value of the shares or by way of premium). A call may be
made payable either in one lump sum or b y installments. If the sum payable in
respect of any call or installment is not paid on or before the day appointed for
payment thereof, the person or persons from whom the sum is due shall pay
interest on the same at such rate not exceeding twenty per cent. (20%) per annum
as the board may agree to accept from the day appointed for the payment thereof
to the time of actual payment, but the board may waive payment of such interest
wholly or in part. The board may, if it thi nks fit, receive from any member willing
to advance the same, either in money or money’s worth, all or any part of the
monies uncalled and unpaid or installments payable upon any shares held by him,
and upon all or any of the monies so advanced the Company may pay interest at
such rate (if any) as the board may decide.
If a member fails to pay any call on the day appointed for payment thereof,
the board may serve not less than fourteen (14) clear days’ notice on him requiring
p a y m e n to fs om u c ho ft h ec a l la si su n p a i d, together with any interest which may
have accrued and which may still accrue up to the date of actual payment and
stating that, in the event of non-payment at or before the time appointed, the
shares in respect of which the call was made will be liable to be forfeited.
If the requirements of any such notice are not complied with, any share in
respect of which the notice has been given may at any time thereafter, before the
payment required by the notice has been made, be forfeited by a resolution of the
board to that effect. Such forfeiture will include all dividends and bonuses
declared in respect of the forfeited share and not actually paid before the
forfeiture.
APPENDIX V SUMMARY OF THE CO NSTITUTION OF THE COMPANY
AND CAYMAN ISLANDS COMPANY LAW
–V - 4–


--- page 530 ---
A person whose shares have been forfeited shall cease to be a member in
respect of the forfeited shares but shall, notwithstanding, remain liable to pay to
the Company all monies which, at the date of forfeiture, were payable by him to
the Company in respect of the shares, to gether with (if the board shall in its
discretion so require) interest thereon from the date of forfeiture until the date of
actual payment at such rate not exceeding twenty per cent. (20%) per annum as
the board determines.
(b) Directors
(i) Appointment, retirement and removal
At each annual general meeting, one third of the Directors for the time being
(or if their number is not a multiple of three, then the number nearest to but not
less than one third) shall retire from office by rotation provided that every
Director shall be subject to retirement at an annual general meeting at least once
every three years. The Directors to retire by rotation shall include any Director
who wishes to retire and not offer himself for re-election. Any further Directors so
to retire shall be those who have been longest in office since their last re-election
or appointment but as between persons who became or were last re-elected
Directors on the same day those to retire will (unless they otherwise agree among
themselves) be determined by lot.
Neither a Director nor an alternate Director is required to hold any shares in
the Company by way of qualification. Further, there are no provisions in the
Articles relating to retirement of Directors upon reaching any age limit.
The Directors have the power to appoint any person as a Director either to
fill a casual vacancy on the board or as an addition to the existing board. Any
Director so appointed shall hold office only until the first annual general meeting
of the Company after his appointment and shall then be eligible for re-election.
A Director (including a managing or o ther executive Director) may be
removed by an ordinary resolution of the Company before the expiration of his
term of office (but without prejudice to any claim which such Director may have
for damages for any breach of any contract between him and the Company) and
members of the Company may by ordinary resolution appoint another in his
place. Unless otherwise determined by the Company in general meeting, the
number of Directors shall not be less than two. There is no maximum number of
Directors.
T h eo f f i c eo fd i r e c t o rs h a l lb ev a c a t e di f :
(aa) he resigns by notice in writing delivered to the Company;
(bb) he becomes of unsound mind or dies;
APPENDIX V SUMMARY OF THE CO NSTITUTION OF THE COMPANY
AND CAYMAN ISLANDS COMPANY LAW
–V - 5–


--- page 531 ---
(cc) without special leave, he is absen t from meetings of the board for six (6)
consecutive months, and the board resolves that his office is vacated;
(dd) he becomes bankrupt or has a receiving order made against him or
suspends payment or compounds with his creditors;
(ee) he is prohibited from being a director by law; or
(ff) he ceases to be a director by virtue of any provision of law or is removed
from office pursuant to the Articles.
The board may appoint one or more of its body to be managing director,
joint managing director, or deputy managing director or to hold any other
employment or executive office with the Company for such period and upon such
terms as the board may determine and the board may revoke or terminate any of
such appointments. The board may delegate any of its powers, authorities and
discretions to committees consisting of such Director or Directors and other
persons as the board thinks fit, and it may from time to time revoke such
delegation or revoke the appointment of and discharge any such committees either
wholly or in part, and either as to persons or purposes, but every committee so
formed must, in the exercise of the pow ers, authorities and discretions so
delegated, conform to any regulations that may from time to time be imposed
upon it by the board.
(ii) Power to allot and issue shares and warrants
Subject to the provisions of the Companies Act and the Memorandum and
Articles and to any special rights conferred on the holders of any shares or class of
shares, any share may be issued (a) with or have attached thereto such rights, or
such restrictions, whether with regard to dividend, voting, return of capital, or
otherwise, as the Directors may determine, or (b) on terms that, at the option of
the Company or the holder thereof, it is liable to be redeemed.
The board may issue warrants or convertible securities or securities of similar
nature conferring the right upon the holders thereof to subscribe for any class of
shares or securities in the capital of the Company on such terms as it may
determine.
Subject to the provisions of the Companies Act and the Articles and, where
applicable, the rules of the Stock Exchange and without prejudice to any special
rights or restrictions for the time being attached to any shares or any class of
shares, all unissued shares in the Company are at the disposal of the board, which
may offer, allot, grant options over or otherwise dispose of them to such persons,
at such times, for such consideration and on such terms and conditions as it in its
absolute discretion thinks fit, but so that no shares shall be issued at a discount to
their nominal value.
APPENDIX V SUMMARY OF THE CO NSTITUTION OF THE COMPANY
AND CAYMAN ISLANDS COMPANY LAW
–V - 6–


--- page 532 ---
Neither the Company nor the board is obliged, when making or granting any
allotment of, offer of, option over or disposal of shares, to make, or make
available, any such allotment, offer, option or shares to members or others with
registered addresses in any particular territory or territories being a territory or
territories where, in the absence of a registration statement or other special
formalities, this would or might, in the opinion of the board, be unlawful or
impracticable. Members affected as a result of the foregoing sentence shall not be,
or be deemed to be, a separate class of members for any purpose whatsoever.
(iii) Power to dispose of the assets of the Company or any of its subsidiaries
There are no specific provisions in the Articles relating to the disposal of the
assets of the Company or any of its subsidiaries. The Directors may, however,
exercise all powers and do all acts and things which may be exercised or done or
approved by the Company and which are not required by the Articles or the
Companies Act to be exercised or done by the Company in general meeting.
(iv) Borrowing powers
T h eb o a r dm a ye x e r c i s ea l lt h ep o w e r so ft h eC o m p a n yt or a i s eo rb o r r o w
money, to mortgage or charge all or any part of the undertaking, property and
assets and uncalled capital of the Company and, subject to the Companies Act, to
issue debentures, bonds and other securities of the Company, whether outright or
as collateral security for any debt, liability or obligation of the Company or of any
third party.
(v) Remuneration
The ordinary remuneration of the Directors is to be determined by the
Company in general meeting, such sum (unless otherwise directed by the
resolution by which it is voted) to be divided amongst the Directors in such
proportions and in such manner as the board may agree or, failing agreement,
equally, except that any Director holding office for part only of the period in
respect of which the remuneration is payab le shall only rank in such division in
proportion to the time during such period for which he held office. The Directors
are also entitled to be prepaid or repaid all travelling, hotel and incidental
expenses reasonably expected to be incurred or incurred by them in attending any
board meetings, committee meetings or general meetings or separate meetings of
any class of shares or of debentures of the Company or otherwise in connection
with the discharge of their duties as Directors.
Any Director who, by request, goes or resides abroad for any purpose of the
Company or who performs services which in the opinion of the board go beyond
the ordinary duties of a Director may be paid such extra re muneration as the
board may determine and such extra remuneration shall be in addition to or in
substitution for any ordinary remuneration as a Director. An executive Director
appointed to be a managing director, joint managing director, deputy managing
APPENDIX V SUMMARY OF THE CO NSTITUTION OF THE COMPANY
AND CAYMAN ISLANDS COMPANY LAW
–V - 7–


--- page 533 ---
director or other executive officer shall receive such remuneration and such other
benefits and allowances as the board may from time to time decide. Such
remuneration may be either in addition to or in lieu of his remuneration as a
Director.
The board may establish or concur or join with other companies (being
subsidiary companies of the Company or companies with which it is associated in
business) in establishing and making contributions out of the Company’s monies
to any schemes or funds for providing pensions, sickness or compassionate
allowances, life assurance or other benefits for employees (which expression as
used in this and the following paragraph shall include any Director or past
Director who may hold or have held any executive office or any office of profit
with the Company or any of its subsidiaries) and ex-employees of the Company
and their dependents or any class or classes of such persons.
The board may pay, enter into agreemen ts to pay or make grants of revocable
or irrevocable, and either subject or not subject to any terms or conditions,
pensions or other benefits to employees and ex-employees and their dependents,
or to any of such persons, including pensions or benefits additional to those, if
any, to which such employees or ex-emp loyees or their dependents are or may
become entitled under any such scheme or fund as is mentioned in the previous
paragraph. Any such pension or benefit may, as the board considers desirable, be
granted to an employee either before and in anticipation of, or upon or at any
time after, his actual retirement.
The board may resolve to capitalise all or any part of any amount for the
time being standing to the credit of any reserve or fund (including a share
premium account and the profit and loss account) whether or not the same is
available for distribution by applying such sum in paying up unissued shares to be
allotted to (i) employees (including directors) of the Company and/or its affiliates
(meaning any individual, corporation, partnership, association, joint-stock
company, trust, unincorporated associ ation or other entity (other than the
Company) that directly, or indirectly through one or more intermediaries,
controls, is controlled by or is under common control with, the Company) upon
exercise or vesting of any options or awards granted under any share incentive
scheme or employee benefit scheme or other arrangement which relates to such
persons that has been adopted or approved by the members in general meeting, or
(ii) any trustee of any trust to whom shares are to be allotted and issued by the
Company in connection with the operation of any share incentive scheme or
employee benefit scheme or other arrang ement which relates to such persons that
has been adopted or approved by the members in general meeting.
APPENDIX V SUMMARY OF THE CO NSTITUTION OF THE COMPANY
AND CAYMAN ISLANDS COMPANY LAW
–V - 8–


--- page 534 ---
(vi) Compensation or payments for loss of office
Pursuant to the Articles, payments to any Director or past Director of any
sum by way of compensation for loss of office or as consideration for or in
connection with his retirement from office (not being a payment to which the
Director is contractually entitled) must be approved by the Company in general
meeting.
(vii)Loans and provision of security for loans to Directors
The Company must not make any loan, directly or indirectly, to a Director or
his close associate(s) if and to the extent it would be prohibited by the Companies
Ordinance (Chapter 622 of the laws of Hong Kong) as if the Company were a
company incorporated in Hong Kong.
(viii) Disclosure of interests in contracts with the Company or any of its subsidiaries
A Director may hold any other office or place of profit with the Company
(except that of the auditor of the Company) in conjunction with his office of
Director for such period and upon such terms as the board may determine, and
may be paid such extra remuneration therefor in addition to any remuneration
provided for by or pursuant to the Articles. A Director may be or become a
director or other officer of, or otherwise interested in, any company promoted by
the Company or any other company in which the Company may be interested, and
shall not be liable to account to the Company or the members for any
remuneration, profits or other benefits received by him as a director, officer or
member of, or from his interest in, such o ther company. The board may also cause
the voting power conferred by the shares in any other company held or owned by
the Company to be exercised in such manner in all respects as it thinks fit,
including the exercise thereof in favour of any resolution appointing the Directors
or any of them to be directors or officers of such other company, or voting or
providing for the payment of remuneration to the directors or officers of such
other company.
No Director or proposed or intended Director shall be disqualified by his
office from contracting with the Company, either with regard to his tenure of any
office or place of profit or as vendor, purchaser or in any other manner
whatsoever, nor shall any such contract or any other contract or arrangement in
which any Director is in any way interested be liable to be avoided, nor shall any
Director so contracting or being so interested be liable to account to the Company
or the members for any remuneration, profit or other benefits realised by any such
contract or arrangement by reason of such Director holding that office or the
fiduciary relationship thereby established. A Director who to his knowledge is in
any way, whether directly or indirectly, interested in a contract or arrangement or
proposed contract or arrangement with the Company must declare the nature of
his interest at the meeting of the board at which the question of entering into the
APPENDIX V SUMMARY OF THE CO NSTITUTION OF THE COMPANY
AND CAYMAN ISLANDS COMPANY LAW
–V - 9–


--- page 535 ---
contract or arrangement is first taken into consideration, if he knows his interest
then exists, or in any other case, at the first meeting of the board after he knows
that he is or has become so interested.
A Director shall not vote (nor be counted in the quorum) on any resolution
of the board approving any contract or arrangement or other proposal in which he
or any of his close associates is materially interested, but this prohibition does not
apply to any of the following matters, namely:
(aa) the giving of any secu rity or indemnity either:
(aaa) to the Director or his close associate(s) in respect of money lent or
obligations incurred or undertaken by him or any of them at the
request of or for the benefit of the Company or any of its
subsidiaries; or
(bbb) the giving of any securities or indemnity to a third party in respect
of a debt or obligation of the Company or any of its subsidiaries for
which the Director or his close associate(s) has himself/themselves
assumed responsibility in whole or in part and whether alone or
jointly under a guarantee or indemnity or by the giving of security;
(bb) any proposal concerning an offe ro fs h a r e so rd e b e n t u r e so ro t h e r
securities of or by the Company or any other company which the
Company may promote or be interested in for subscription or purchase
where the Director or his close associate(s) is/are or is/are to be
interested as a participant in the underwriting or sub-underwriting of
the offer;
(cc) any proposal or arrangement concerning the benefit of employees of the
Company or its subsidiaries including:
(aaa) the adoption, modification or operation of any employees’ share
scheme or any share incentive or share option scheme under which
the Director or his close associate(s) may benefit; or
(bbb) the adoption, modification or operation of a pension fund or
retirement, death or disability benefits scheme which relates to the
Directors, his close associate(s) and employee(s) of the Company or
any of its subsidiaries and does not provide in respect of any
Director, or his close associate(s), as such any privilege or
advantage not generally accorded to the class of persons to which
such scheme or fund relates;
APPENDIX V SUMMARY OF THE CO NSTITUTION OF THE COMPANY
AND CAYMAN ISLANDS COMPANY LAW
–V - 1 0–


--- page 536 ---
(dd) any contract or arrangement in which the Director or his close
associate(s) is/are interested in the same manner as other holders of
shares or debentures or other securities of the Company by virtue only
of his/their interest in shares or debentures or other securities of the
Company.
(c) Proceedings of the Board
The board may meet for the despatch of business, adjourn and otherwise regulate
its meetings as it considers appropriate. Questions arising at any meeting shall be
determined by a majority of votes. In the case of an equality of votes, the chairman of
the meeting shall have an additional or casting vote.
(d) Alterations to constitutional documents and the Company’s name
The Articles may be rescinded, altered or amended by the Company in general
meeting by special resolution. The Articl es state that a special resolution shall be
required to alter the provisions of the Memorandum, to amend the Articles or to
change the name of the Company.
(e) Meetings of members
(i) Special and ordinary resolutions
A special resolution of the Company must be passed by a majority of not less
than three-fourths of the votes cast by such members as, being entitled so to do,
vote in person or, in the case of such members as are corporations, by their duly
authorised representatives or, where proxies are allowed, by proxy at a general
meeting of which notice has been duly given in accordance with the Articles.
Under the Companies Act, a copy of any special resolution must be
forwarded to the Registrar of Companies in the Cayman Islands within fifteen
(15) days of being passed.
An ordinary resolution is defined in the Articles to mean a resolution passed
by a simple majority of the votes of such members of the Company as, being
entitled to do so, vote in person or, in the case of corporations, by their duly
authorised representatives or, where proxies are allowed, by proxy at a general
meeting of which notice has been duly given in accordance with the Articles.
(ii) Voting rights and right to demand a poll
Subject to any special rights or restrictions as to voting for the time being
attached to any shares, at any general meeting on a poll every member present in
person or by proxy or, in the case of a member being a corporation, by its duly
authorised representative shall have one vote for every fully paid share of which
h ei st h eh o l d e rb u ts ot h a tn oa m o u n tp a i du po rc r e d i t e da sp a i du po nas h a r ei n
APPENDIX V SUMMARY OF THE CO NSTITUTION OF THE COMPANY
AND CAYMAN ISLANDS COMPANY LAW
–V - 1 1–


--- page 537 ---
advance of calls or installments is treated for the foregoing purposes as paid up on
the share. A member entitled to more than one vote need not use all his votes or
cast all the votes he uses in the same way.
At any general meeting a resolution put to the vote of the meeting is to be
decided by way of a poll save that the chairman of the meeting may in good faith,
allow a resolution which relates purely to a procedural or administrative matter to
b ev o t e do nb yas h o wo fh a n d si nw h i c hc a s ee v e r ym e m b e rp r e s e n ti np e r s o n( o r
being a corporation, is present by a duly authorised representative), or by
proxy(ies) shall have one vote provided that where more than one proxy is
appointed by a member which is a clearin g house (or its nominee(s)), each such
proxy shall have one vote on a show of hands. Votes (whether on a show of hands
or by way of poll) may be cast by such means, electronic or otherwise, as the
Directors or the chairman of the meeting may determine.
Any corporation which is a member may by resolution of its directors or
other governing body authorise such person as it thinks fit to act as its
representative at any general meeting of the Company or at any meeting of any
class of members.
The person so authorised shall be entitled to exercise the same powers on
behalf of such corporation as the corporation could exercise if it were an
individual member and such corporation shall for the purposes of the Articles be
deemed to be present in person at any such meeting if a person so authorised is
present thereat.
If a recognised clearing house (or its nominee(s)) is a member of the
Company it may authorise such person o r persons as it thinks fit to act as its
representative(s) at any meeting of the Company or at any meeting of any class of
members of the Company provided that, if more than one person is so authorised,
the authorisation shall specify the number and class of shares in respect of which
each such person is so authorised. A person authorised pursuant to this provision
shall be deemed to have been duly authorised without further evidence of the facts
a n db ee n t i t l e dt oe x e r c i s et h es a m ep o w ers on behalf of the recognised clearing
house (or its nominee(s)) as if such person was the registered holder of the shares
of the Company held by that clearing house (or its nominee(s)) including, the right
to speak and to vote, and where a show of hands is allowed, the right to vote
individually on a show of hands.
All members have the right to speak and vote at a general meeting except
where a member is required, by the rules of the Stock Exchange, to abstain from
voting to approve the matter under consideration.
APPENDIX V SUMMARY OF THE CO NSTITUTION OF THE COMPANY
AND CAYMAN ISLANDS COMPANY LAW
–V - 1 2–


--- page 538 ---
Where the Company has any knowledge that any member is, under the rules
of the Stock Exchange, required to abs tain from voting on any particular
resolution of the Company or restricted to voting only for or only against any
particular resolution of the Company, any votes cast by or on behalf of such
member in contravention of such requirement or restriction shall not be counted.
(iii) Annual general meetings and e xtraordinary general meetings
The Company must hold an annual general meeting of the Company for each
financial year and such general meeting must be held within six (6) months after
the end of the Company’s financial year, unless a longer period would not infringe
the rules of the Stock Exchange.
Extraordinary general meetings may b e convened on the requisition of one or
more members holding, at the date of deposit of the requisition, not less than one-
tenth of the paid up capital of the Company having the right of voting at general
meetings, on a one vote per share basis. Such requisition shall be made in writing
to the board or the secretary for the purpos e of requiring an extraordinary general
meeting to be called by the board for the transaction of any business or resolution
specified in such requisition. Such meeting shall be held within 2 months after the
deposit of such requisition. If within 21 days of such deposit, the board fails to
proceed to convene such meeting, the requisitionist(s) himself/herself (themselves)
may do so in the same manner, and all reasonable expenses incurred by the
requisitionist(s) as a result of the failure of the board shall be reimbursed to the
requisitionist(s) by the Company.
Notwithstanding any provisions in th e Articles, any general meeting or any
class meeting may be held by means of such telephone, electronic or other
communication facilities as to permit all persons participating in the meeting to
communicate with each other, and particip ation in such a meeting shall constitute
presence at such meeting.
(iv) Notices of meetings and business to be conducted
An annual general meeting must be called by notice of not less than twenty-
one (21) clear days. All other general meetings must be called by notice of at least
fourteen (14) clear days. The notice is exclusive of the day on which it is served or
deemed to be served and of the day for whic h it is given, and must specify the time
and place of the meeting and particulars of resolutions to be considered at the
meeting and, in the case of special business, the general nature of that business.
In addition, notice of every general meeting must be given to all members of
the Company other than to such members as, under the provisions of the Articles
or the terms of issue of the shares they hold, are not entitled to receive such
notices from the Company, and also to, among others, the auditors for the time
being of the Company.
APPENDIX V SUMMARY OF THE CO NSTITUTION OF THE COMPANY
AND CAYMAN ISLANDS COMPANY LAW
–V - 1 3–


--- page 539 ---
Any notice to be given to or by any person pursuant to the Articles may be
served on or delivered to any member of the Company personally, by post to such
member’s registered address or by advertisement in newspapers in accordance
with the requirements of the Stock Exchange. Subject to compliance with Cayman
Islands law and the rules of the Stock Exchange, notice may also be served or
delivered by the Company to any member by electronic means.
All business that is transacted at an extraordinary general meeting and at an
annual general meeting is deemed speci al, save that in the case of an annual
general meeting, each of the following business is deemed an ordinary business:
(aa) the declaration and sanctioning of dividends;
(bb) the consideration and adoption of the accounts and balance sheet and
the reports of the directors and the auditors;
(cc) the election of directors in place of those retiring;
(dd) the appointment of auditors and other officers; and
(ee) the fixing of the remuneration of the directors and of the auditors.
(v) Quorum for meetings and separate class meetings
No business shall be transacted at any general meeting unless a quorum is
present when the meeting proceeds to business, but the absence of a quorum shall
not preclude the appointment of a chairman.
The quorum for a general meeting shall be two members present in person
(or, in the case of a member being a corporation, by its duly authorised
representative) or by proxy or, for quorum purposes only, two persons appointed
by the clearing house as authorized representative or proxy, and entitled to vote.
In respect of a separate class meeting (including an adjourned meeting) convened
to sanction the modification of class rights the necessary quorum shall be two
persons holding or representing by proxy not less than one-third in nominal value
of the issued shares of that class.
(vi) Proxies
Any member of the Company entitled to attend and vote at a meeting of the
Company is entitled to appoint another person as his proxy to attend and vote
instead of him. A member who is the holder of two or more shares may appoint
more than one proxy to represent him and vote on his behalf at a general meeting
of the Company or at a class meeting. A proxy need not be a member of the
Company and is entitled to exercise the same powers on behalf of a member who
is an individual and for whom he acts as proxy as such member could exercise. In
addition, a proxy is entitled to exercise the same powers on behalf of a member
which is a corporation and for which he acts as proxy as such member could
APPENDIX V SUMMARY OF THE CO NSTITUTION OF THE COMPANY
AND CAYMAN ISLANDS COMPANY LAW
–V - 1 4–


--- page 540 ---
exercise as if it were an individual member. Votes may be given either personally
(or, in the case of a member being a corporation, by its duly authorised
representative) or by proxy.
(f) Accounts and audit
The board shall cause true accounts to be kept of the sums of money received and
expended by the Company, and the matters in respect of which such receipt and
expenditure take place, and of the propert y, assets, credits and liabilities of the
Company and of all other matters required by the Companies Act or necessary to give
a true and fair view of the Company’s affairs and to explain its transactions.
The accounting records must be kept at the registered office or at such other place
or places as the board decides and shall always be open to inspection by any Director.
No member (other than a Director) shall h ave any right to inspect any accounting
record or book or document of the Company except as conferred by law or authorised
by the board or the Company in general meeting. However, an exempted company
must make available at its registered office in electronic form or any other medium,
copies of its books of account or parts thereof as may be required of it upon service of
an order or notice by the Tax Information Authority pursuant to the Tax Information
Authority Act of the Cayman Islands.
A copy of every balance sheet and profit and loss account (including every
document required by law to be annexed thereto) which is to be laid before the
Company at its general meeting, together with a printed copy of the Directors’ report
and a copy of the auditors’ report, shall not less than twenty-one (21) days before the
date of the meeting and at the same time as the notice of annual general meeting be sent
to every person entitled to receive notices of general meetings of the Company under
the provisions of the Articles; however, subject to compliance with all applicable laws,
including the rules of the Stock Exchange, the Company may send to such persons
summarised financial statements derived from the Company’s annual accounts and the
directors’ report instead provided that any such person may by notice in writing served
on the Company, demand that the Company sends to him, in addition to summarised
financial statements, a complete printed copy of the Company’s annual financial
statement and the directors’ report thereon.
At the annual general meeting or at a subsequent extraordinary general meeting in
each year, the members shall by ordinary resolution appoint an auditor to audit the
accounts of the Company and such auditor shall hold office until the next annual
general meeting. Moreover, the members may, at any general meeting, by ordinary
resolution remove the auditor at any time before the expiration of his terms of office
and shall by ordinary resolution at that meeting appoint another auditor for the
remainder of his term. The remuneration of the auditors shall be fixed and approved by
the Company by an ordinary resolution passed at a general meeting or in such manner
a st h em e m b e r sm a yb yo r d i n a r yr e s o l u t i o nd e t e r m i n e .
APPENDIX V SUMMARY OF THE CO NSTITUTION OF THE COMPANY
AND CAYMAN ISLANDS COMPANY LAW
–V - 1 5–


--- page 541 ---
The financial statements of the Company shall be audited by the auditor in
accordance with generally accepted auditing standards which may be those of a
country or jurisdiction other than the Cayman Islands. The auditor shall make a
written report thereon in accordance with generally accepted auditing standards and
the report of the auditor must be submitted to the members in general meeting.
(g) Dividends and other methods of distribution
The Company in general meeting may declare dividends in any currency to be paid
to the members but no dividend shall be declared in excess of the amount
recommended by the board.
The Articles provide dividends may be declared and paid out of the profits of the
Company, realised or unrealised, or from a ny reserve set aside from profits which the
directors determine is no longer needed. With the sanction of an ordinary resolution
dividends may also be declared and paid out of share premium account or any other
fund or account which can be authorised for this purpose in accordance with the
Companies Act.
Except in so far as the rights attaching to, or the terms of issue of, any share may
otherwise provide, (i) all dividends shall be declared and paid according to the amounts
paid up on the shares in respect whereof the dividend is paid but no amount paid up on
a share in advance of calls shall for this purpose be treated as paid up on the share and
(ii) all dividends shall be apportioned and paid pro rata according to the amount paid
up on the shares during any portion or portions of the period in respect of which the
dividend is paid. The Directors may deduct from any dividend or other monies payable
to any member or in respect of any shares all sums of money (if any) presently payable
by him to the Company on account of calls or otherwise.
Whenever the board or the Company in general meeting has resolved that a
dividend be paid or declared on the share capital of the Company, the board may
further resolve either (a) that such dividen d be satisfied wholly or in part in the form of
an allotment of shares credited as fully paid up, provided that the members entitled
thereto will be entitled to elect to receive suc h dividend (or part thereof) in cash in lieu
of such allotment, or (b) that members entitl ed to such dividend will be entitled to elect
to receive an allotment of shares credited as fully paid up in lieu of the whole or such
part of the dividend as the board may think fit.
The Company may also upon the recommendation of the board by an ordinary
resolution resolve in respect of any one particular dividend of the Company that it may
be satisfied wholly in the form of an allotment of shares credited as fully paid up
without offering any right to members to elect to receive such dividend in cash in lieu
of such allotment.
Any dividend, interest or other sum payable in cash to the holder of shares may be
paid by cheque or warrant sent through the post addressed to the holder at his
registered address, or in the case of joint holders, addressed to the holder whose name
APPENDIX V SUMMARY OF THE CO NSTITUTION OF THE COMPANY
AND CAYMAN ISLANDS COMPANY LAW
–V - 1 6–


--- page 542 ---
stands first in the register of the Company in respect of the shares at his address as
appearing in the register or addressed to such person and at such addresses as the
holder or joint holders may in writing direct. Every such cheque or warrant shall,
unless the holder or joint holders otherwise direct, be made payable to the order of the
holder or, in the case of joint holders, to the order of the holder whose name stands
first on the register in respect of such shar es, and shall be sent at his or their risk and
payment of the cheque or warrant by the bank on which it is drawn shall constitute a
good discharge to the Company. Any one of two or more joint holders may give
effectual receipts for any dividends or other moneys payable or property distributable
in respect of the shares held by such joint holders.
Whenever the board or the Company in general meeting has resolved that a
dividend be paid or declared the board ma y further resolve that such dividend be
satisfied wholly or in part by the distribution of specific assets of any kind.
All dividends or bonuses unclaimed for one year after having been declared may
be invested or otherwise made use of by the board for the benefit of the Company until
claimed and the Company shall not be constituted a trustee in respect thereof. All
dividends or bonuses unclaimed for six years after having been declared may be
forfeited by the board and shall revert to the Company.
No dividend or other monies payable by the Company on or in respect of any
share shall bear intere st against the Company.
(h) Inspection of corporate records
Pursuant to the Articles, the register and branch register of members maintained
in Hong Kong shall be open to inspection for at least two (2) hours during business
hours by members without charge, or by any other person upon a maximum payment
of HK$2.50 or such lesser sum specified by the board, at the registered office or such
other place at which the register is kept in accordance with the Companies Act or,
upon a maximum payment of HK$1.00 or such lesser sum specified by the board, at the
office where the branch register of members is kept, unless the register is closed in
accordance with the Articles.
(i) Rights of minorities in relation to fraud or oppression
There are no provisions in the Articles rel ating to rights of minority shareholders
in relation to fraud or oppression. Howeve r, certain remedies are available to members
of the Company under Cayman Islands law, as summarised in the paragraph headed
‘‘3. Cayman Islands company law — (f) Protection of minorities and shareholders’
suits’’ in this Appendix.
(j) Procedures on liquidation
Unless otherwise provided by the Companies Act, a resolution that the Company
be wound up by the court or be wound up voluntarily shall be a special resolution.
APPENDIX V SUMMARY OF THE CO NSTITUTION OF THE COMPANY
AND CAYMAN ISLANDS COMPANY LAW
–V - 1 7–


--- page 543 ---
Subject to any special rights, privileges or restrictions as to the distribution of
available surplus assets on liquidation for the time being attached to any class or
classes of shares:
(i) if the Company is wound up and the assets available for distribution amongst
the members of the Company shall be more than sufficient to repay the whole
of the capital paid up at the commencement of the winding up, the excess
shall be distributed pari passu amongst such members in proportion to the
amount paid up on the shares held by them respectively; and
(ii) if the Company is wound up and the assets available for distribution amongst
the members as such shall be insufficient to repay the whole of the paid-up
capital, such assets shall be distributed so that, as nearly as may be, the losses
shall be borne by the members in proportion to the capital paid up, or which
ought to have been paid up, at the commencement of the winding up on the
shares held by them respectively.
If the Company is wound up (whether the liquidation is voluntary or by the court)
the liquidator may, with the authority of a special resolution and any other sanction
required by the Companies Act divide among the members in specie or kind the whole
or any part of the assets of the Company whether the assets shall consist of property of
one kind or shall consist of properties of d ifferent kinds and the liquidator may, for
such purpose, set such value as he deems fair upon any one or more class or classes of
property to be divided as aforesaid and may determine how such division shall be
carried out as between the members or different classes of members. The liquidator
may, with the like authority, vest any part of the assets in trustees upon such trusts for
the benefit of members as the liquidator, with the like authority, shall think fit, but so
that no contributory shall be compelled to accept any shares or other property in
respect of which there is a liability.
(k) Subscription rights reserve
The Articles provide that to the extent that it is not prohibited by and is in
compliance with the Companies Act, if warrants to subscribe for shares have been
issued by the Company and the Company does any act or engages in any transaction
which would result in the subscription pri ce of such warrants being reduced below the
par value of a share, a subscription rights reserve shall be established and applied in
paying up the difference between the subscription price and the par value of a share on
any exercise of the warrants.
3. CAYMAN ISLANDS COMPANY LAW
The Company is incorporated in the Cayman Islands subject to the Companies Act
and, therefore, operates subject to Cayman Islands law. Set out below is a summary of
certain provisions of Cayman company law, a lthough this does not purport to contain all
APPENDIX V SUMMARY OF THE CO NSTITUTION OF THE COMPANY
AND CAYMAN ISLANDS COMPANY LAW
–V - 1 8–


--- page 544 ---
applicable qualifications and exceptions or to be a complete review of all matters of
Cayman company law and taxation, which may differ from equivalent provisions in
jurisdictions with which intere sted parties may be more familiar:
(a) Company operations
As an exempted company, the Company’s operations must be conducted mainly
outside the Cayman Islands. The Company is required to file an annual return each
year with the Registrar of Companies of t he Cayman Islands and pay a fee which is
based on the amount of its authorised share capital.
(b) Share capital
The Companies Act provides that where a company issues shares at a premium,
whether for cash or otherwise, a sum equal to the aggregate amount of the value of the
premiums on those shares shall be transferred to an account, to be called the ‘‘share
premium account’’. At the option of a company, these provisions may not apply to
premiums on shares of that company allo tted pursuant to any arrangement in
consideration of the acquisition or cancellation of shares in any other company and
issued at a premium.
The Companies Act provides that the share premium account may be applied by
the company subject to the provisions, if any, of its memorandum and articles of
association in (a) paying distributions or dividends to members; (b) paying up unissued
shares of the company to be issued to members as fully paid bonus shares; (c) the
redemption and repurchase of shares (subject to the provisions of section 37 of the
Companies Act); (d) writing-off the pre liminary expenses of the company; and (e)
writing-off the expenses of, or the commission paid or discount allowed on, any issue
of shares or debentures of the company.
No distribution or dividend may be paid to members out of the share premium
account unless immediately following the dat e on which the distribution or dividend is
proposed to be paid, the company will be able to pay its debts as they fall due in the
ordinary course of business.
The Companies Act provides that, subject to confirmation by the Grand Court of
the Cayman Islands (the ‘‘Court ’’), a company limited by shares or a company limited
by guarantee and having a share capital may, if so authorised by its articles of
association, by special resolution reduce its share capital in any way.
(c) Financial assistance to purchase shares of a company or its holding company
There is no statutory restriction in the Cayman Islands on the provision of
financial assistance by a company to another person for the purchase of, or
subscription for, its own or its holding company’s shares. Accordingly, a company
may provide financial assistance if the directors of the company consider, in
APPENDIX V SUMMARY OF THE CO NSTITUTION OF THE COMPANY
AND CAYMAN ISLANDS COMPANY LAW
–V - 1 9–


--- page 545 ---
discharging their duties of care and acting in good faith, for a proper purpose and in
the interests of the company, that such assistance can properly be given. Such
assistance should be on an arm’s-length basis.
(d) Purchase of shares and warrants by a company and its subsidiaries
A company limited by shares or a company limited by guarantee and having a
share capital may, if so authorised by its articles of association, issue shares which are
to be redeemed or are liable to be redeemed at the option of the company or a
shareholder and the Companies Act expressly provides that it shall be lawful for the
rights attaching to any shares to be varied , subject to the provisions of the company’s
articles of association, so as to provide that such shares are to be or are liable to be so
redeemed. In addition, such a company may, if authorised to do so by its articles of
association, purchase its own shares, inclu ding any redeemable shares. However, if the
articles of association do not authorise the manner and terms of purchase, a company
cannot purchase any of its own shares unless the manner and terms of purchase have
first been authorised by an ordinary resolution of the company. At no time may a
company redeem or purchase its shares unless they are fully paid. A company may not
redeem or purchase any of its shares if, as a result of the redemption or purchase, there
would no longer be any issued shares of the company other than shares held as treasury
shares. A payment out of capital by a company for the redemption or purchase of its
own shares is not lawful unless immediately following the date on which the payment is
proposed to be made, the company shall be able to pay its debts as they fall due in the
ordinary course of business.
Shares purchased by a company is to be treated as cancelled unless, subject to the
memorandum and articles of association of the company, the directors of the company
resolve to hold such shares in the name of the company as treasury shares prior to the
purchase. Where shares of a company are held as treasury shares, the company shall be
entered in the register of members as holdi ng those shares, however, notwithstanding
the foregoing, the company is not to be tr eated as a member for any purpose and must
not exercise any right in respect of the treas ury shares, and any purported exercise of
such a right shall be void, and a treasury share must not be voted, directly or indirectly,
at any meeting of the company and must not be counted in determining the total
number of issued shares at any given time, w hether for the purposes of the company’s
articles of association or the Companies Act.
A company is not prohibited from purchasing and may purchase its own warrants
subject to and in accordance with the terms and conditions of the relevant warrant
instrument or certificate. There is no requirement under Cayman Islands law that a
company’s memorandum or articles of association contain a specific provision
enabling such purchases and the directors of a company may rely upon the general
power contained in its memorandum of association to buy and sell and deal in personal
property of all kinds.
APPENDIX V SUMMARY OF THE CO NSTITUTION OF THE COMPANY
AND CAYMAN ISLANDS COMPANY LAW
–V - 2 0–


--- page 546 ---
Under Cayman Islands law, a subsidiary may hold shares in its holding company
and, in certain circumstances, may acquire such shares.
(e) Dividends and distributions
The Companies Act permits, subject to a solvency test and the provisions, if any,
of the company’s memorandum and articles of association, the payment of dividends
and distributions out of the share premium account. With the exception of the
foregoing, there are no statutory provisions relating to the payment of dividends.
Based upon English case law, which is regarded as persuasive in the Cayman Islands,
dividends may be paid only out of profits.
No dividend may be declared or paid, and no other distribution (whether in cash
or otherwise) of the company’s assets (including any distribution of assets to members
on a winding up) may be made to the company, in respect of a treasury share.
(f) Protection of minorities and shareholders’ suits
The Courts ordinarily would be expected to follow English case law precedents
which permit a minority shareholder to commence a representative action against or
derivative actions in the name of the company to challenge (a) an act which is ultra
vires the company or illegal, (b) an act whic h constitutes a fraud against the minority
and the wrongdoers are themselves in control of the company, and (c) an irregularity in
the passing of a resolution which requires a qualified (or special) majority.
In the case of a company (not being a bank) having a share capital divided into
shares, the Court may, on the application of members holding not less than one fifth of
the shares of the company in issue, appoint an inspector to examine into the affairs of
the company and to report thereon in such manner as the Court shall direct.
Any shareholder of a company may petition the Court which may make a winding
up order if the Court is of the opinion that it is just and equitable that the company
should be wound up or, as an alternative to a winding up order, (a) an order regulating
the conduct of the company’s affairs in the future, (b) an order requiring the company
to refrain from doing or continuing an act complained of by the shareholder petitioner
or to do an act which the shareholder petitioner has complained it has omitted to do,
(c) an order authorising civil proceedings to be brought in the name and on behalf of
the company by the shareholder petitioner on such terms as the Court may direct, or
(d) an order providing for the purchase of the shares of any shareholders of the
company by other shareholders or by the company itself and, in the case of a purchase
by the company itself, a reduction of the company’s capital accordingly.
Generally claims against a company by its shareholders must be based on the
general laws of contract or tort applicable in the Cayman Islands or their individual
rights as shareholders as established by the company’s memorandum and articles of
association.
APPENDIX V SUMMARY OF THE CO NSTITUTION OF THE COMPANY
AND CAYMAN ISLANDS COMPANY LAW
–V - 2 1–


--- page 547 ---
(g) Disposal of assets
The Companies Act contains no specific restrictions on the power of directors to
dispose of assets of a company. However, as a matter of general law, every officer of a
company, which includes a director, managing director and secretary, in exercising his
powers and discharging his duties must do so honestly and in good faith with a view to
the best interests of the company and exe rcise the care, diligence and skill that a
reasonably prudent person would exercise in comparable circumstances.
(h) Accounting and auditing requirements
A company must cause proper books of account to be kept with respect to (i) all
sums of money received and expended by the company and the matters in respect of
which the receipt and expenditure takes place; (ii) all sales and purchases of goods by
the company; and (iii) the asset s and liabilities of the company.
Proper books of account shall not be deemed to be kept if there are not kept such
books as are necessary to give a true and fair view of the state of the company’s affairs
and to explain its transactions.
An exempted company must make available at its registered office in electronic
form or any other medium, copies of its books of account or parts thereof as may be
required of it upon service of an order or notice by the Tax Information Authority
pursuant to the Tax Information Authority Act of the Cayman Islands.
(i) Exchange control
There are no exchange control regulations or currency restrictions in the Cayman
Islands.
(j) Taxation
Pursuant to the Tax Concessions Act of the Cayman Islands, the Company has
obtained an undertaking:
(1) that no law which is enacted in the Cayman Islands imposing any tax to be
levied on profits, income, gains or appreciation shall apply to the Company
or its operations; and
(2) that the aforesaid tax or any tax in the nature of estate duty or inheritance
tax shall not be payable on or in respec to ft h es h a r e s ,d e b e n t u r e so ro t h e r
obligations of the Company.
The undertaking for the Company is for a period of twenty years from 29 January
2021.
APPENDIX V SUMMARY OF THE CO NSTITUTION OF THE COMPANY
AND CAYMAN ISLANDS COMPANY LAW
–V - 2 2–


--- page 548 ---
The Cayman Islands currently levy no taxes on individuals or corporations based
upon profits, income, gains or appreciations and there is no taxation in the nature of
inheritance tax or estate duty. There are no other taxes likely to be material to the
Company levied by the Government of the Cayman Islands save for certain stamp
duties which may be applicab le, from time to time, on certain instruments executed in
or brought within the jurisdiction of the Cayman Islands. The Cayman Islands are a
party to a double tax treaty entered into with the United Kingdom in 2010 but
otherwise is not party to any double tax treaties.
(k) Stamp duty on transfers
No stamp duty is payable in the Cayman Islands on transfers of shares of Cayman
Islands companies except those which hol d interests in land in the Cayman Islands.
(l) Loans to directors
There is no express provision in the Co mpanies Act prohibiting the making of
loans by a company to any of its directors.
(m) Inspection of corporate records
The notice of registered office is a matte r of public record. A list of the names of
the current directors and alternate directors (if applicable) is made available by the
Registrar of Companies for inspection by any person on payment of a fee. The register
of mortgages is open to inspection by creditors and members.
Members of the Company have no general right under the Companies Act to
inspect or obtain copies of the register of members or corporate records of the
Company. They will, however, have such rights as may be set out in the Company’s
Articles.
(n) Register of members
An exempted company may maintain its principal register of members and any
branch registers at such locations, whether within or without the Cayman Islands, as
the directors may, from time to time, think fit. The register of members shall contain
such particulars as required by Section 40 of the Companies Act. A branch register
must be kept in the same manner in which a principal register is by the Companies Act
required or permitted to be kept. The company shall cause to be kept at the place
where the company’s principal register is kept a duplicate of any branch register duly
e n t e r e du pf r o mt i m et ot i m e .
There is no requirement under the Companies Act for an exempted company to
make any returns of members to the Registrar of Companies of the Cayman Islands.
The names and addresses of the members are, accordingly, not a matter of public
record and are not available for public in spection. However, an exempted company
shall make available at its registered office, in electronic form or any other medium,
APPENDIX V SUMMARY OF THE CO NSTITUTION OF THE COMPANY
AND CAYMAN ISLANDS COMPANY LAW
–V - 2 3–


--- page 549 ---
such register of members, including any branch register of members, as may be
required of it upon service of an order or notice by the Tax Information Authority
pursuant to the Tax Information Authority Act of the Cayman Islands.
(o) Register of Directors and Officers
The Company is required to maintain at its r egistered office a register of directors
and officers which is not available for inspection by the public. A copy of such register
must be filed with the Registrar of Companies in the Cayman Islands and any change
must be notified to the Registrar within thirty (30) days of any change in such directors
or officers.
(p) Beneficial Ownership Register
An exempted company is required to maintain a beneficial ownership register at
its registered office that records details of the persons who ultimately own or control,
directly or indirectly, 25% or more of the equity interests or voting rights of the
company or have rights to appoint or remove a majority of the directors of the
company. The beneficial ownership register is not a public document and is only
accessible by a designated competent authority of the Cayman Islands. Such
requirement does not, however, apply to an exempted company with its shares listed
on an approved stock exchange, which includes the Stock Exchange. Accordingly, for
so long as the shares of the Company are listed on the Stock Exchange, the Company is
not required to maintain a beneficial ownership register.
(q) Winding up
A company may be wound up (a) compulsorily by order of the Court, (b)
voluntarily, or (c) under the supervision of the Court.
The Court has authority to order winding up in a number of specified
circumstances including where the members of the company have passed a special
resolution requiring the company to be wound up by the Court, or where the company
is unable to pay its debts, or where it is, in the opinion of the Court, just and equitable
to do so. Where a petition is presented by members of the company as contributories
on the ground that it is just and equitable that the company should be wound up, the
Court has the jurisdiction to make certain other orders as an alternative to a winding-
up order, such as making an order regulating the conduct of the company’s affairs in
the future, making an order authorising civil proceedings to be brought in the name
and on behalf of the company by the petitioner on such terms as the Court may direct,
or making an order providing for the purchase of the shares of any of the members of
the company by other members or by the company itself.
A company (save with respect to a limited duration company) may be wound up
voluntarily when the company so resolves by special resolution or when the company
in general meeting resolves by ordinary resolution that it be wound up voluntarily
because it is unable to pay its debts. In the case of a voluntary winding up, such
APPENDIX V SUMMARY OF THE CO NSTITUTION OF THE COMPANY
AND CAYMAN ISLANDS COMPANY LAW
–V - 2 4–


--- page 550 ---
company is obliged to cease to carry on its business (except so far as it may be
beneficial for its winding up) from the time of passing the resolution for voluntary
winding up or upon the expiry of the period or the occurrence of the event referred to
above.
For the purpose of conducting the proceedings in winding up a company and
assisting the Court therein, there may be a ppointed an official liquidator or official
liquidators; and the court may appoint to such office such person, either provisionally
or otherwise, as it thinks fit, and if more persons than one are appointed to such office,
the Court must declare whether any act required or authorised to be done by the
official liquidator is to be done by all or any one or more of such persons. The Court
may also determine whether any and what security is to be given by an official
liquidator on his appointment; if no official liquidator is appointed, or during any
vacancy in such office, all the property of the company shall be in the custody of the
Court.
As soon as the affairs of the company are fully wound up, the liquidator must
make a report and an account of the winding up, showing how the winding up has been
conducted and how the property of the company has been disposed of, and thereupon
call a general meeting of the company for the purposes of laying before it the account
and giving an explanation thereof. This fina l general meeting must be called by at least
21 days’ notice to each contributory in any manner authorised by the company’s
articles of association and published in the Gazette.
(r) Reconstructions
There are statutory provisions which facilitate reconstructions and
amalgamations approved by (i) a majority i n number representing seventy-five per
cent. (75%) in value of creditors, or (ii) seventy-five per cent. (75%) in value of
shareholders or class of shareholders, as the case may be, as are present at a meeting
called for such purpose and thereafter sanctioned by the Court. Whilst a dissenting
shareholder would have the right to express to the Court his view that the transaction
for which approval is sought would not provide the shareholders with a fair value for
their shares, the Court is unlikely to disapprove the transaction on that ground alone
in the absence of evidence of fraud o r bad faith on behalf of management.
The Companies Act also contains statu tory provisions which provide that a
company may present a petition to the Court for the appointment of a restructuring
officer on the grounds that the company (a) is or is likely to become unable to pay its
debts within the meaning of section 93 of the Companies Act; and (b) intends to
present a compromise or arrangement to its creditors (or classes thereof) either,
pursuant to the Companies Act, the law of a foreign country or by way of a consensual
restructuring. The petition may be presented by a company acting by its directors,
without a resolution of its shareholder s or an express power in its articles of
APPENDIX V SUMMARY OF THE CO NSTITUTION OF THE COMPANY
AND CAYMAN ISLANDS COMPANY LAW
–V - 2 5–


--- page 551 ---
association. On hearing such a petition, the Court may, among other things, make an
order appointing a restructuring officer or make any other order as the Court thinks
fit.
(s) Take-overs
Where an offer is made by a company for the shares of another company and,
within four (4) months of the offer, the holders of not less than ninety per cent. (90%)
of the shares which are the subject of the offer accept, the offeror may at any time
within two (2) months after the expiration of the said four (4) months, by notice in the
prescribed manner require the dissenting shareholders to transfer their shares on the
terms of the offer. A dissenting shareholder may apply to the Court within one (1)
month of the notice objecting to the transfer. The burden is on the dissenting
shareholder to show that the Court should exercise its discretion, which it will be
unlikely to do unless there is evidence of fraud or bad faith or collusion as between the
offeror and the holders of the shares who have accepted the offer as a means of unfairly
forcing out minority shareholders.
(t) Indemnification
Cayman Islands law does not limit the extent to which a company’s articles of
association may provide for indemnification of officers and directors, except to the
extent any such provision may be held by the Court to be contrary to public policy (e.g.
for purporting to provide indemnificatio n against the consequences of committing a
crime).
(u) Economic Substance Requirements
Pursuant to the International Tax Cooperation (Economic Substance) Act of the
Cayman Islands (‘‘ES Act ’’) that came into force on 1 January 2019, a ‘‘relevant entity’’
is required to satisfy the economic substance test set out in the ES Act. A ‘‘relevant
entity’’ includes an exempted company incorporated in the Cayman Islands as is the
Company; however, it does not include an entity that is tax resident outside the
Cayman Islands. Accordingly, for so long as t h eC o m p a n yi sat a xr e s i d e n to u t s i d et h e
Cayman Islands, including in Hong Kong, it is not required to satisfy the economic
substance test set out in the ES Act.
4. GENERAL
Conyers Dill & Pearman, the Company’s special legal counsel on Cayman Islands law,
have sent to the Company a letter of advice summarising certain aspects of Cayman Islands
company law. This letter, together with a copy of the Companies Act, is available for on
display as referred to in the paragraph headed ‘‘B. Documents available on display’’ in
Appendix VII to this prospectus. Any person wishing to have a detailed summary of
Cayman Islands company law or advice on the differences between it and the laws of any
jurisdiction with which he is more familiar is recommended to seek independent legal
advice.
APPENDIX V SUMMARY OF THE CO NSTITUTION OF THE COMPANY
AND CAYMAN ISLANDS COMPANY LAW
–V - 2 6–


--- page 552 ---
A. FURTHER INFORMATION ABOUT OUR COMPANY AND OUR SUBSIDIARIES
1. Incorporation of our Company
Our Company was incorporated in the Cayman Islands under the Companies Act
as an exempted company with limited liability on 23 July 2019 and its registered office
is located at Cricket Square, Hutchins Drive, PO Box 2681, Grand Cayman KY1-1111,
Cayman Islands. Our Company has established its principal place of business in 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 3 March 2020.
Mr. Au Yeung Ming Yin Gordon has been appointed as the authorised representative
of our Company for the acceptance of service of process and notices on behalf of our
C o m p a n yi nH o n gK o n g .
As our Company was incorporated in the Cayman Islands, its operations are
subject to the Companies Act and our constitutional documents comprising the
Memorandum and Articles. A summary of certain parts of our constitutional
documents and relevant aspects of the Companies Act is set out in Appendix V to
this prospectus.
2. Changes in share capital of our Company
The authorised share capital of our Company as at the date of incorporation was
US$50,000 divided into 50,000 shares of par value of US$1.00 each.
The following changes in the share capital of our Company have taken place since
the date of incorporation of our Company up to the date of this prospectus:
(a) On 23 July 2019, one share of a par value of US$1.00 was allotted and issued
a sf u l l yp a i dt oa nI n d e p e n d e n tT h i r dParty, which was then transferred to
Wider International on the same date for cash at par.
(b) The authorised capital of our Company was sub-divided from US$50,000.00
divided into 50,000 shares of a nominal value of US$1.00 each to
US$50,000.00 divided into 5,000,000 Shares of a nominal value of US$0.01
each on 24 March 2020.
(c) On 24 March 2020, 96,640 Shares of a par value of US$0.01 was allotted and
issued as fully paid to Wider International; 26,472 Shares of a par value of
US$0.01 was allotted and issued as fully paid to Beauty Sources; 6,300 Shares
of a par value of US$0.01 was allotted a nd issued as fully paid to Vortex
Festive; 3,500 Shares of a par value of US$0.01 was allotted and issued as
fully paid to Caring Plentiful; 3,315 Shares of a par value of US$0.01 was
allotted and issued as fully paid to Great Winner; 2,728 Shares of a par value
of US$0.01 was allotted and issued as fully paid to Yuen Sang Tai; and 945
Shares of a par value of US$0.01 was allotted and issued as fully paid to Well
Resourced.
APPENDIX VI STATUTORY AND GENERAL INFORMATION
–V I - 1–


--- page 553 ---
(d) Pursuant to the sale and purchase agreement dated 8 February 2021 entered
into between our Company and Mr. Xie Xing, our Company allotted and
issued 1,414 Shares to Mr. Xie.
(e) On 16 November 2023, the authorised share capital of our Company was
increased from USS50,000 divided into 5,000,000 Shares of par value of
US$0.01 each to USl00,000,000 divided into 10,000,000 Shares of US$0.01
each by the creation of an additional 9,995,000,000 Shares of par value of
US$0.01 each.
(f) Immediately following the completion of the Capitalisation Issue and the
Share Offer (assuming that the Over-allotment Option is not exercised and
without taking into account any Share which may be issued pursuant to any
option and/or award which may be granted under the Share Scheme), the
total issued share capital of our Comp any immediately after the completion
of the Capitalisation Issue and the S hare Offer will be US$5,000,000,000
divided into 500,000,000 Shares of par value of US$0.01 each, fully-paid or
credited as fully paid.
Other than pursuant to the general ma ndate to issue Shares referred to in the
paragraph headed ‘‘A. Further information about our Company and our subsidiaries
— 4. Written resolutions of our Shareholders passed on 16 November 2023 and 11
March 2024’’ in this Appendix to this prospectus below and the exercise of any options
and/or awards which may be granted under the Share Scheme, our Directors do not
have any present intention to issue any of th e authorised but unissued share capital of
our Company and, without the prior approval of our Shareholders at general meeting,
no issue of Shares will be made which would effectively alter the control of our
Company.
Save as disclosed above and in the paragraph headed ‘‘History, Reorganisation
and Corporate Structure — Reorganisation’’ in this prospectus, there has been no
alteration in the share capital of our Company since its incorporation.
3. Changes in share capital of our subsidiaries
The subsidiaries of our Company are listed in the Accountants’ Report as set out
in Appendix I to this prospectus. Save as disclosed in the section headed ‘‘History,
Reorganisation and Corporate Structure’’ in this prospectus, there has been no
alteration in the share capital of any of the subsidiaries of our Company within the two
years immediately preceding the date of this prospectus.
4. Written Resolutions of our Shareholders passed on 16 November 2023 and 11 March
2024
Pursuant to the written resolutions of th e Shareholders of our Company passed on
16 November 2023 and 11 March 2024, the following resolutions were passed by our
Shareholders, pursuant to which, among others:
APPENDIX VI STATUTORY AND GENERAL INFORMATION
–V I - 2–


--- page 554 ---
(a) the authorised share capital of our Company was increased from US$50,000
divided into 5,000,000 Shares with par value of US$0.01 each to
US$100,000,000 divided into 10,000,000,000 Shares of US$0.01 each;
(b) our Company approved the conditional adoption of the Memorandum and
the conditional adoption of the Articles which will become effective on the
Listing Date;
(c) conditional upon fulfillment of the conditions as stated in the paragraph
headed ‘‘Structure and Conditions of the Share Offer — Conditions of the
Share Offer’’ in this prospectus:
(i) the Share Offer was approved and our Directors were authorised to allot
and issue the Offer Shares pursuant to the Share Offer to rank pari passu
with the then existing Shares in all respects subject to the terms and
conditions stated in this prospectus;
(ii) conditional further on the share premium account of our Company
being credited as a result of the Share Offer, our Directors were
authorised to capitalise an amount of US$3,998,585.86 standing to the
credit of the share premium account of our Company and to apply such
amount as to capital to pay up in full at par 399,858,586 Shares for
allotment and issue to the persons whose names appear on the register of
members of our Company at the close of business on the date of these
resolutions (or as they may direct) in proportion (as nearly as possible
without involving fractions) to their then existing shareholdings in our
Company, each ranking pari passu in all respects with the then existing
issued Shares, and our Directors were authorised to give effect to such
capitalisation and distributions and do such things and sign on such
documents in relation thereto as they consider appropriate, and the
Capitalisation Issue was approved; and
(iii) the rules of the Share Scheme (a summary of which is set out in the
paragraph headed ‘‘D. Share Scheme’’ in this Appendix to this
prospectus) was approved and adopted and our Directors were
authorised, at their absolute discretion, to grant options to subscribe
for Shares and/or awards to obtain Shares under the Share Scheme and
to allot, issue and deal with Shares pursuant thereto and to take all such
steps as they consider necessary or desirable to implement the Share
Scheme;
(d) a general unconditional mandate was given to our Directors to exercise all
powers of our Company to allot, issue and deal with, otherwise than by way
of rights issue, an issue of Shares pursuant to the exercise of the Over-
allotment Option and options and/or awards which may be granted under the
Share Scheme, or pursuant to any scrip dividend schemes or similar
arrangements providing for the allotment and issuance of our Shares in
lieu of the whole or part of any dividend in accordance with the
APPENDIX VI STATUTORY AND GENERAL INFORMATION
–V I - 3–


--- page 555 ---
Memorandum and the Articles of Association, or upon the exercise of any
subscription or conversion rights attached to any warrants or convertibles of
our Company, or under the Capitalisat ion Issue or the Share Offer, Shares
with a number not exceeding (1) 20% of the total number of Shares of our
Company in issue immediately following completion of the Capitalisation
Issue and the Share Offer but excluding any Shares to be issued upon exercise
of the Over-allotment Option and any options and/or awards which may be
granted under the Share Scheme; and (2) the total number of Shares
repurchased by our Company under the Repurchase Mandate as defined in
paragraph (e) below. Such mandate shall remain in effect until the earliest of:
(i) the conclusion of the next annual general meeting of our Company;
(ii) the expiration of the period within which the next annual general
meeting of our Company is required by the Memorandum or Articles or
the Companies Act or any other applicable laws of the Cayman Islands
to be held; or
(iii) the time when such mandate is revoked or varied by an ordinary
resolution of our Shareholders in general meeting;
(e) a general unconditional mandate (the ‘‘ Repurchase Mandate ’’) was given to
our Directors authorising them to exercise all powers of our Company to
repurchase on the Stock Exchange or on any other stock exchange on which
the securities of our Company may be listed and which is recognised by the
SFC and the Stock Exchange for this purpose, such number of Shares as will
represent up to 10% of the total number of Shares of our Company in issue
immediately following completion of the Capitalisation Issue and the Share
Offer, but excluding any Shares to be issued upon exercise of the Over-
allotment Option and any options and/or awards which may be granted
under the Share Scheme. Such mandate shall remain in effect until the
earliest of:
(i) the conclusion of the next annual general meeting of our Company;
(ii) the expiration of the period within which the next annual general
meeting of our Company is required by the Memorandum or Articles or
the Companies Act or any other applicable laws of the Cayman Islands
to be held; or
(iii) the time when such mandate is revoked or varied by an ordinary
resolution of our Shareholders in general meeting; and
(f) the general unconditional mandate mentioned in sub-paragraph (d) above
was extended by the addition to the number of Shares repurchased by our
Company pursuant to the Repurchase Mandate referred to in sub-paragraph
APPENDIX VI STATUTORY AND GENERAL INFORMATION
–V I - 4–


--- page 556 ---
(e) above, provided that such extended amount shall not exceed 10% of the
total number of Shares of our Company in issue immediately following
completion of the Capitalisation Issue and the Share Offer.
5. Reorganisation
The companies comprising our Group underwent the Reorganisation in
preparation for the Listing. For information relating to the Reorganisation, please
r e f e rt ot h ep a r a g r a p hh e a d e d‘ ‘ H i s t o r y ,Reorganisation and Corporate Structure —
Reorganisation’’ in this prospectus.
6. Repurchase of Shares by our Company
This section contains information required by the Stock Exchange to be included
in this prospectus concerning the repurchase of Shares by our Company.
(a) Provisions of the Listing Rules
The Listing Rules permit companies whose primary listing is on the Stock
Exchange to repurchase their securities on the Stock Exchange subject to certain
restrictions, the most important of which are summarised below:
(i) Shareholders’ approval
The Listing Rules provide that all proposed repurchases of shares,
which must be fully paid up in the case of shares, by a company with a
primary listing on the Stock Exchange must be approved in advance by an
ordinary resolution of the shareholders, either by way of general mandate or
by specific approval of a particular transaction.
Pursuant to the written resolutions passed by our then Shareholders on
11 March 2024, the Repurchase Man date was given to our Directors
authorising them to exercise all powers of our Company to repurchase our
Shares as described in the paragraph headed ‘‘A. Further information about
our company and our subsidiaries — 4. Written resolutions of our
shareholders passed on 16 November 2023 and 11 March 2024’’ in this
Appendix to this prospectus.
(ii) Source of funds
Any repurchase by our Company must be financed out of funds legally
available for the purpose in accordance with the Memorandum and Articles,
the applicable laws of the Cayman Islands and the Listing Rules. A listed
company shall not repurchase its own securities on the Stock Exchange for a
consideration other than cash or for settlement otherwise than in accordance
with the trading rules of the Stock Exchange from time to time.
APPENDIX VI STATUTORY AND GENERAL INFORMATION
–V I - 5–


--- page 557 ---
Subject to the foregoing, any repurchases by our Company may be made
out of profits of our Company, out of the share premium account of our
Company, or for the capital portion of the Shares to be repurchased, out of
the proceeds of a fresh issue of Shares made for the purpose of the
repurchase. Subject to the Companies Act, a repurchase of Shares may also
be made out of the share capital of our Company.
(iii) Core connected parties
The Listing Rules prohibit our Company from knowingly repurchasing
our Shares on the Stock Exchange from a core connected person (as defined
in the Listing Rules), and a core connected person shall not knowingly sell
Shares to our Company on the Stock Exchange.
(iv) Trading restrictions
The total number of shares which a listed company is authorised to
repurchase on the Stock Exchange or on any other stock exchange recognised
by the SFC and the Stock Exchange may not exceed 10% of the number of
issued shares of that company, and the total number of warrants to subscribe
for or purchase shares authorised to be so repurchased may not exceed 10%
of the warrants of that company, in each case as at the date of the resolution
granting the general mandate for such repurchase.
A listed company is prohibited from repurchasing its own shares on the
Stock Exchange if the purchase price is higher by 5% or more than the
average closing market price for the 5 preceding trading days on which its
shares were traded on the Stock Exchange.
A listed company is also prohibited from repurchasing its own shares on
the Stock Exchange if that repurchase would result in the number of listed
securities of that company which are in the hands of the public falling below
the relevant prescribed minimum percentage for that company as determined
by the Stock Exchange.
A listed company shall not repurchase its own shares on the Stock
Exchange at any time after inside information has come to its knowledge
until (and including) the trading day after the information is made publicly
available. In particular, during the period of one month immediately
preceding the earlier of: (1) the date of our board meeting (as such date is
first notified to the Stock Exchange under the Listing Rules) for the approval
of that company’s results for any year, half-year, quarterly or any other
interim period (whether or not required under the Listing Rules); and (2) the
deadline for that company to announce its results for any year or half-year
under the Listing Rules, or quarterly or any other interim period (whether or
not required under the Listing Rules), and ending on the date of the results
announcement, that company may not repurchase its shares on the Stock
Exchange.
APPENDIX VI STATUTORY AND GENERAL INFORMATION
–V I - 6–


--- page 558 ---
(v) Status of repurchased securities
The listing of all repurchased securities (whether on the Stock Exchange
or otherwise) shall be automatically cancelled upon repurchase and the
certificates of the relevant securities must be cancelled and destroyed. Under
Cayman Islands law, shares repurcha sed by a Cayman Islands company may
be treated as cancelled and, if so cancelled, the amount of that company’s
issued share capital shall be reduced by the aggregate nominal value of the
repurchased shares accordingly although the authorised share capital of the
company will not be taken as reduced.
(vi) Reporting requirements
A listed company must report repurchases of securities on the Stock
Exchange or otherwise to the Stock Exchange no later than 30 minutes before
the earlier of the commencement of the morning trading session or any pre-
opening session on the business day following any day on which such
repurchases are made, reporting total number of Shares purchased the
previous day, the purchase price per share or the highest and lowest prices
paid for such purchases, where relevant.
In addition, a listed company’s annual report and accounts are required
to include a monthly breakdown of purchases of shares made during the
financial year under review, showing the number of shares repurchased each
month (whether on the Stock Exchange or otherwise), the purchase price per
share or the highest and lowest prices paid for all such repurchases and the
aggregate prices paid for such repurchases. The directors’ report of that
c o m p a n yi sa l s or e q u i r e dt oc o n t a i nr e f e r e n c et ot h ep u r c h a s e sm a d ed u r i n g
the year and the directors’ reaso ns for making such purchases.
(b) Exercise of the Repurchase Mandate
On the basis of 500,000,000 Shares in issue immediately after completion of
the Capitalisation Issue and the Share O ffer and taking no account of any Share
to be issued upon exercise of the Over-allotment Option or any options and/or
awards which may be granted under the Share Scheme, our Directors would be
authorised under the Repurchase Mandate to repurchase up to 50,000,000 Shares
during the period in which the Repurchase Mandate remains in force.
(c) Reasons for repurchases
Our Directors believe that it is in the best interests of our Company and our
Shareholders for our Directors to have a general authority from our Shareholders
to enable our Company to repurchase Shares in the market. Such repurchases
may, depending on market conditions and funding arrangements at the time, lead
to an enhancement of our Company’s net asset value and/or earnings per Share
and will only be made when our Directors believe that such repurchases will
benefit our Company and our Shareholders as a whole.
APPENDIX VI STATUTORY AND GENERAL INFORMATION
–V I - 7–


--- page 559 ---
(d) Funding of repurchases
In repurchasing our Shares, our Company may only apply funds legally
available for such purpose in accordance with the Companies Act, the Listing
Rules and the applicable laws and reg ulations of the Cayman Islands.
On the basis of the current financial position of our Group as disclosed in
this prospectus and taking into account the current working capital position of
our Group, our Directors consider that, if the Repurchase Mandate were to be
exercised in full, it might have a material adverse effect on the working capital
and/or the gearing position of our Group as compared with the position disclosed
in this prospectus. However, our Directors do not propose to exercise the
Repurchase Mandate to such extent as would, in the circumstances, have a
material adverse effect on the working capital requirements of our Company or
the gearing levels which in the opinion of our Directors are from time to time
appropriate for our Company.
(e) General
None of our Directors nor, to the best of their knowledge having made all
reasonable enquiries, any of their close associates (as defined in the Listing Rules),
has any present intention to sell any Shares to our Company if the Repurchase
Mandate is exercised.
Our Directors have undertaken to the Stock Exchange that, so far as the
same may be applicable, they will exercise the Repurchase Mandate in accordance
with the Listing Rules, the Memorandum a nd Articles and the applicable law and
regulations from time to time in force in the Cayman Islands.
If as a result of a repurchase of Shares pursuant to the Repurchase Mandate,
a Shareholder’s proportionate intere st in the voting rights of our Company
increases, such increase will be treated as an acquisition for the purpose of the
Takeovers Code. In certain circumst ances, a Shareholder or a group of
Shareholders acting in concert (as defined in the Takeovers Code) depending on
the level of increase of our Shareholders’ interest, could obtain or consolidate
control of our Company and may become obliged to make a mandatory offer in
accordance with Rule 26 of the Takeovers Code as a result of any such increase.
Save as disclosed above, our Directors are not aware of any consequences which
may arise under the Takeovers Code as a consequence of any repurchase of Shares
if made immediately after the Listing pursuant to the Repurchase Mandate.
Our Directors will not exercise the Repurchase Mandate if the repurchase
would result in the number of Shares wh ich are in the hands of the public falling
below 25% of the total number of Shares in issue (or such other percentage as may
be prescribed as the minimum public shareholding under the Listing Rules).
APPENDIX VI STATUTORY AND GENERAL INFORMATION
–V I - 8–


--- page 560 ---
No core connected person has notifi ed our Company that he has a present
intention to sell Shares to our Company, or has undertaken not to do so, if the
Repurchase Mandate is exercised.
B. FURTHER INFORMATION ABOUT BUSINESS OF OUR GROUP
1. Summary of material contracts
The following contracts (not being contracts entered into in the ordinary course of
business) have been entered into by members of our Group within the two years
preceding the date of this prospectus and are or may be material:
(a) Deed of Indemnity;
(b) Deed of Non-competition; and
(c) Public Offer Underwriting Agreement.
2. Intellectual property rights of our Group
(a) Trademarks
As at the Latest Practicable Date, our Group registered the following
trademarks which, in the opinion of our Directors, are material to the business of
our Group:
Trademark Registered Owner
Place of
Registration
Registration
Number
Class
(Note) Expiry Date
Fujing Agriculture PRC 35346062 35 20 December 2029
Fujing Agriculture PRC 35848985 31 6 October 2029
Fujing Agriculture PRC 35988766 35 27 September 2029
Fujing Agriculture PRC 20023215 31 6 July 2027
Fujing Agriculture PRC 44781768 5 13 November 2030
APPENDIX VI STATUTORY AND GENERAL INFORMATION
–V I - 9–


--- page 561 ---
Trademark Registered Owner
Place of
Registration
Registration
Number
Class
(Note) Expiry Date
Fujing Agriculture PRC 44753270 44 13 November 2030
Fujing Agriculture PRC 54028070 35 6 September 2032
Fujing Agriculture PRC 44782880 5 13 February 2031
Fujing Agriculture PRC 44783059 44 6 May 2031
Our Company Hong Kong 305074119 31 1 October 2029
Our Company Hong Kong 305243445 31 8 April 2030
As at the Latest Practicable Date, our Group has applied for registration of
the following trademarks in the PRC, for which approvals have not been granted
yet:
Trademark
Intened Registered
Owner
Place of
Intened
Registration
Class
(Note) Application Date
Fujing Agriculture PRC 31 13 November 2023
Fujing Agriculture PRC 31 13 November 2023
Note:
Class 5 : Pharmaceuticals, medical and veterinary preparations; sanitary preparations for
medical purposes; dietetic food and subst ances adapted for medical or veterinary
use, food for babies; dietary supplements for human beings and animals; plasters,
materials for dressings; material for stopping teeth, dental wax; disinfectants;
preparations for destroying ver min; fungicides, herbicides.
Class 31 : Raw and unprocessed agricultural, aquacultural, horticultural and forestry
products; raw and unprocessed grains and seeds; fresh fruits and vegetables,
fresh herbs; natural plants and flowers; bul bs, seedlings and seeds for planting; live
animals; foodstuffs and beverages for animals; malt.
Class 35 : Advertising; business management; business administration; office functions.
Class 44 : Medical services; veterinary services; hygienic and beauty care for human beings
or animals; agriculture, aquaculture, horticulture and forestry services.
APPENDIX VI STATUTORY AND GENERAL INFORMATION
–V I - 1 0–


--- page 562 ---
(b) Domain names
As at the Latest Practicable Date, our Group has registered the following
domain names:
Domain Name Registrant Registration Date Expiry Date
fujingnongye.cn Fujing Agriculture 29 May 2016 29 May 2024
fujingnongye.com Fujing Agriculture 9 December 2015 9 December 2024
Information contained in the above website does not form part of this
prospectus.
(c) Patents
As of the Latest Practicable Date, we have registered the following patents:
No. Name of invention Type of Invention Owner
Place of
Registration
Patent registration
number Expiry Date
1. Vegetable greenhouse environment
monitoring system* ( 一種蔬菜
大棚環境監測系統)
Invention patent
(發明專利)
Fujing Agriculture PRC ZL-2017–1–0000236.9 1 January 2037
2. Automatic sowing machine*
(自動播種機)
Utility model patent
(實用新型專利)
Fujing Agriculture PRC ZL-2019–2–0254448.4 27 February 2029
3. Automatic sowing machine*
(自動播種機)
Invention patent
(發明專利)
Fujing Agriculture PRC 201910150941.6 27 February 2039
4. Sun blocking curtain device*
(遮陽網捲簾裝置)
Utility model patent
(實用新型專利)
Fujing Agriculture PRC ZL-2019–2–0224132.0 21 February 2029
5. New type of watering device*
(一種新型灌溉裝置)
Utility model patent
(實用新型專利)
Fu
jing Agriculture PRC ZL-2018–2–2230577.8 26 December 2028
6. Greenhouse vent opening
and closing device*
(大棚通風口開閉裝 置)
Utility model patent
(實用新型專利)
Fujing Agriculture PRC ZL-2019–2–0751035.7 22 May 2029
7. New type of planting device*
(一種新型種植裝置)
Utility model patent
(實用新型專利)
Fujing Agriculture PRC ZL-2021-2-0420068.0 25 February 2031
8. Automatic blending and
feeding machine*
(一種自動攪拌上料機)
Utility model patent
(實用新型專利)
Fujing Agriculture PRC ZL-2021-2-0420175.3 25 February 2031
9. New type of sowing machine*
(一種新型播種機)
Utility model patent
(實用新型專利)
Fujing Agriculture PRC ZL-2021-2-0420070.8 25 February 2031
10. New type of planting tray*
(一種新型種植盤)
Utility model patent
(實用新型專利)
Fu
jing Agriculture PRC ZL-2021-2-0420165.X 25 February 2031
* English translation of its Chinese counterpart is for reference only.
APPENDIX VI STATUTORY AND GENERAL INFORMATION
–V I - 1 1–


--- page 563 ---
Save as disclosed above, there are no other trade or service marks, patents,
copyrights or other intellectual rights which are material to the business of our
Group.
C. FURTHER INFORMATION ABOUT OUR DIRECTORS, MANAGEMENT AND
SUBSTANTIAL SHAREHOLDERS
1. Disclosure of interests
(a) Interests of our Directors and chief executive
Immediately following the completion of the Capitalisation Issue and the
Share Offer, without taking into consideration our Shares which may be issued
pursuant to the exercise of the Over-allotment Option and any option and/or
award which may be granted under the Share Scheme, the interests or short
positions of our Directors and chief executive of our Company in our Shares,
underlying shares or debentures or any of its associated corporations (within the
meaning of Part XV of the SFO) which, once our Shares are listed on the Stock
Exchange, will have to be notified to our Company and the Stock Exchange
pursuant to Divisions 7 and 8 of Part XV of the SFO (including any interests and
short positions which they are taken or deemed to have under such provisions of
the SFO), or which will be required, pur s u a n tt os e c t i o n3 5 2o ft h eS F O ,t ob e
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
contained in the Listing Rules (the ‘‘ Model Code ’’) as set out in Appendix C3 to
the Listing Rules, to be notified to our Company and the Stock Exchange, will be
as follows:
(i) Long position in our Shares
Name of
Director(s) Capacity
Number of
Shares held
Percentage of
shareholding in
our Company
Mr. Zhang
(Note 1)
Interest in a controlled
corporation
273,636,275 54.73%
Mr. Cui Wei
(Note 2)
Interest in a controlled
corporation
9,900,010 1.92%
Notes:
1. Mr. Zhang is the sole shareholder of Wider International, thus Mr. Zhang is
deemed to be interested in the same number of Shares held by Wider International
under the SFO.
2. Mr. Cui Wei is the sole shareholder of Caring Plentiful, thus Mr. Cui Wei is
deemed to be interested in the same number of Shares held by Caring Plentiful
under the SFO.
APPENDIX VI STATUTORY AND GENERAL INFORMATION
–V I - 1 2–


--- page 564 ---
(ii) Long position in the ordinary shares of associated corporation
Name of
Director(s)
Name of associated
corporation(s) Capacity
Number of
share(s)
held
Percentage of
shareholding in
the associated
corporation(s)
Mr. Zhang Wider
International
Beneficial
owner
11 0 0 %
(b) Interests of substantial Shareholders
Immediately following the completion of the Capitalisation Issue and the
Share Offer, without taking into consideration our Shares which may be issued
pursuant to the exercise of the Over-allotment Option and any option and/or
award which may be granted under the Share Scheme, the following persons (not
being a Director or chief executive of our Company) will have interests or short
positions in our Shares, underlying shares or debentures of our Company 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, who is entitled to
exercise, or control the exercise of, 10% or more of the voting power at any
general meeting of our Company:
Name Capacity
Number of
Shares held
Percentage of
shareholding in
our Company
Wider International Beneficial owner 273,636,275 54.73%
Beauty Sources Beneficial owner 74,878,018 14.98%
Ms. Geng Qi Interest in a controlled
corporation
74,878,018 14.98%
2. Particulars of service contracts and letters of appointment
E a c ho fM r .Z h a n g ,M r .C u iW e i ,M s .G u oZ e q i n g ,M r .L y uZ h o n g h u aa n dM r .
Pang Jinhong, being all our executive Dire ctors, has entered into a service contract
with our Company on 16 November 2023 for an initial term of three years commencing
from the Listing Date and continuing thereafter until terminated by either party by
giving not less than three months’ notice in writing to the other. Each of our executive
Directors is entitled to an annual remuneration set out below, such remuneration to be
reviewed annually by our Board.
In addition, each of our executive Directors may be entitled to, if so recommended
by the remuneration committee of our Company and approved by our Board at its
absolute discretion, a discretionary bonus, the amount of which shall be determined by
our Board, with reference to the operating results of our Group, provided that the
APPENDIX VI STATUTORY AND GENERAL INFORMATION
–V I - 1 3–


--- page 565 ---
relevant executive Director shall abstain from voting and not be counted in the quorum
in respect of any resolution of our Board approving the amount of annual
remuneration, discretionary bonus and other benefits payable to him or her.
The basic annual remuneration (subject to annual review and excluding any
discretionary bonus) payable to our executive Directors will be as follows:
Name Amount
(RMB)
Mr. Zhang 432,000
Mr. Cui Wei 216,000
Ms. Guo Zeqing 240,000
Mr. Lyu Zhonghua 120,000
Mr. Pang Jinhong 84,000
Each of Dr. Li Junliang, Mr. Lam Chik Tong and Ms. Chow Wai Mee May, all
being our independent non-executive Directors, has signed a letter of appointment and
a supplemental letter of appointment with our Company on 16 November 2023 and 26
February 2024, respectively, for an initi al term of three years commencing from 26
February 2024 and continuing thereafter subject to a maximum of three years until
terminated by either party by giving not less than one months’ notice in writing to the
other. The basic annual remuneration payable to each of our independent non-
executive Directors will be as follows:
Name Amount
(RMB)
Dr. Li Junliang 60,000
Mr. Lam Chik Tong 179,000
Ms. Chow Wai Mee May 179,000
Each of our Directors is entitled to reimbu rsement of all necessary and reasonable
out-of-pocket expenses properly incurred in relation to all business and affairs carried
out by our Group from time to time or in discharge of his duties to our Group under
the service contract.
Save as aforesaid, none of our Directors has or is proposed to have a service
contract with our Company or any of its subsidiaries (other than contracts expiring or
determinable by our Group within one year without payment of compensation (other
than statutory compensation)).
3. Directors’ remuneration
During each of FY2020, FY2021, FY2022 and 9M2023, the aggregate
remuneration paid and benefits in kind granted by our Group to our Directors was
approximately RMB498,000, RMB797,000, RMB809,000 and RMB594,000
APPENDIX VI STATUTORY AND GENERAL INFORMATION
–V I - 1 4–


--- page 566 ---
respectively. Under the arrangement pre sently in force, the aggregate amount of
remunerations and benefits in kind granted by our Group to our Directors for the year
ending 31 December 2023 is estimated to be approximately RMB930,000.
None of our Directors or any past directors of any member of our Group has been
paid any sum of money for each of FY2020, F Y2021, FY2022 and 9M2023, for (a) the
loss of office as director of any member of our Group or of any other office in
connection with the management affairs of any member of our Group and (b) as an
inducement to join or upon joining any member of our Group.
There has been no arrangement under which a Director has waived or agreed to
waive any emoluments for each of FY2020, FY2021, FY2022 and 9M2023.
4. Related party transactions
During the Track Record Period, our Gr o u ph a se n t e r e di n t ot h er e l a t e dp a r t y
transactions as mentioned in note 40 to the Accountants’ Report as set out in
Appendix I to this prospectus.
5. Disclaimers
Save as disclosed in this prospectus:
(a) taking no account of any Shares to be issued upon exercise of the Over-
allotment Option or any options and/or awards which may be granted under
the Share Scheme, our Directors are not aware of any person (not being a
Director or chief executive of our Company) who will, immediately following
completion of the Capitalisation Issue and the Share Offer, have an interest
or short position in our Shares, underlying Shares or debentures of our
Company or any of its associated corporation (within the meaning of the
SFO) 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, who is entitled to exercise, or control the exercise of, 10% or more of the
voting power at any general meeting of our Company;
(b) taking no account of any Shares to be issued upon exercise of the Over-
allotment Option or any options and/or awards which may be granted under
the Share Scheme, none of our Directors or chief executive of our Company
has any interest or short position in Shares, underlying shares or debentures
of our Company or any of its associated corporations (within the meaning of
t h eS F O )w h i c hw o u l dh a v et ob en o t i f i e dt oo u rC o m p a n ya n dt h eS t o c k
Exchange under Divisions 7 and 8 of Part XV of the SFO (including any
interests and short positions which they are taken or deemed to have under
such provisions of the SFO) or would be required, pursuant to section 352 of
the SFO, to be entered in the register referred to therein, or would be
required, pursuant to the Model Code, to be notified to our Company and
the Stock Exchange, in each case once our Shares are listed on the Stock
Exchange;
APPENDIX VI STATUTORY AND GENERAL INFORMATION
–V I - 1 5–


--- page 567 ---
(c) none of our Directors or the experts named in the paragraph headed ‘‘E.
Other information — 9. Qualifications of experts’’ in this Appendix to this
prospectus is interested in the promo tion of, or in any assets which have
been, within the two years immediately preceding the issue of this prospectus,
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;
(d) none of our Directors or the experts named in the paragraph headed ‘‘E.
Other information — 9. Qualifications of experts’’ in this Appendix to this
prospectus 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 taken as a whole;
(e) none of the experts named in the para graph headed ‘‘E. Other information —
9. Qualifications of experts’’ in this Appendix to this prospectus has any
shareholding in any member of our Group or the right (whether legally
enforceable or not) to subscribe for or to nominate persons to subscribe for
securities in any member of our Group; and
(f) so far as is known to our Directors, none of our Directors, their respective
close associates (as defined under the Listing Rules) or Shareholders who are
interested in more than 5% of the issued share capital of our Company has
any interests in the five largest customers in each year/period or the five
largest suppliers in each year/perio d of our Group during the Track Record
Period.
D. SHARE SCHEME
The following is a summary of the principal terms of the Share Scheme conditionally
adopted by the written resolutions of the Shareholders of our Company passed on 11 March
2024. Our Board has been authorised to determine the grant of an option (an ‘‘ Option ’’) to
subscribe for Shares and/or award (an ‘‘ Award’’) which may vest in the form of Share(s) or
the actual selling price of the awarded shar es in cash under, and pursuant to the terms of,
the Share Scheme and to determine the grantees, number of Options and/or Awards to be
granted to each grantee and the terms and conditions of such grants pursuant to the terms
of the Share Scheme. The terms of the Share Scheme comply with the provisions of Chapter
17 of the Listing Rules effective on 1 January 2023.
(a) Purposes of the Share Scheme
The purpose of the Share Scheme is to recognise and acknowledge the
contributions by the Proposed Grantee (as defined in sub-paragraph (b) below) to
our Group. By providing them with the opportunity to acquire equity interests in our
Company, the Share Scheme aims to achieve the following objectives:
APPENDIX VI STATUTORY AND GENERAL INFORMATION
–V I - 1 6–


--- page 568 ---
(i) attract skilled and experienced perso nnel, to incentivise them to remain with
our Group, and to motivate them to strive for the future development and
expansion of our Group; and
(ii) attract and retain or otherwise maintain ongoing business relationships with
suppliers whose contributions are or will be beneficial to the long-term
growth of our Company.
With (1) the provision of the minimum Vesting Period (as defined in sub-
paragraph (i) below), (2) the requirements o n performance targets to be attained by the
Proposed Grantees which directly affect ou r Group’s business and (3) the clawback
mechanism pursuant to sub-paragraph (j) bel ow which aims to avoid offering incentive
to Proposed Grantees with Options and/or Awards granted despite his/her misconduct
or failure to meet the performance standard after the grant, our Board and the
Remuneration Committee be lieve that these arrangements are appropriate and will
align with the purpose of the Share Scheme.
(b) Who may join
Our Board may, at its absolute discretion, offer to grant an option to subscribe for
such number of Shares, and/or an award which gives a conditional right to obtain the
awarded shares when they vest as our Board may determine to the following persons
(collectively, the ‘‘ Proposed Grantee(s) ’’):
(i) Directors (including any executive Director, non-executive Director and
independent non-executive Director) and employees (whether full-time or
part-time employee) of our Group, including persons who are granted
Options or Awards under the Share Scheme as an inducement to enter into
employment contracts with our Group (‘‘ Employee Participant(s) ’’);
(ii) directors and employees of the holding companies, fellow subsidiaries or
associated companies of our Company (‘‘ Related Entity Participant(s) ’’); and
(iii) persons who provide services to our Group on a continuing or recurring basis
in its ordinary and usual course of bus iness which are in the interests of the
long term growth of our Group (‘‘ Service Provider(s)’’), provided that such
Service Providers are not placing agents or financial advisers providing
advisory services for fundraising, mergers or acquisitions of the Group and
are not professional service provi ders such as auditors or valuers who
provide assurance, or are required to perform their services with impartiality
and objectivity,
provided that no prospectus is required to be issued in connection with such grant
under the Companies Ordinance or Compa nies (Winding up and Miscellaneous
Provisions) Ordinance or any other ap plicable laws. Our Board may in its
absolute discretion specify such conditions (if any) as it thinks fit when making
such offer to the Proposed Grantees, including, without limitation and
APPENDIX VI STATUTORY AND GENERAL INFORMATION
–V I - 1 7–


--- page 569 ---
notwithstanding sub-paragraph (j) below, as to performance target to be satisfied
by the Proposed Grantees and/or our Company before an Option and/or Award
can be exercised.
(c) Maximum number of Shares in respect of which options and awards may be granted
The total number of Shares which may be issued upon exercise of all Options and
Awards that may be granted under the Share Scheme and any other schemes shall not
in aggregate exceed 10% of the relevant class of Shares in issue as at the date of the
listing of our Shares on the Stock Exchange, being 50,000,000 Shares (the ‘‘ Scheme
Mandate Limit’’), excluding for this purpose Options and Awards lapsed and/or claw
backed in accordance with the terms of the Share Scheme. Besides the Scheme Mandate
Limit, there is a sub-limit for the total number of Shares which may be issued upon
exercise of all Options and Awards and that may be granted to Service Providers under
the Share Scheme (and together with any other schemes), which shall not in aggregate
exceed 3%, being 15,000,000 Shares of the relevant class of Shares in issue on the date
our Shares commence trading on the Stock Exchange (the ‘‘ Service Provider Sublimit ’’).
Our Company may refresh the Scheme Mandate Limit and/or the Service Provider
Sublimit once every three years from the date of Shareholders’ approval for the last
refreshment (or the Effective Date (as defi ned in sub-paragraph (h) below), where
applicable) subject to prior Shareholders’ approval in the general meeting provided
that (1) the Controlling Shareholders and their associates (or if there is no controlling
shareholder, Directors (excluding indepen dent non-executive Directors) and the chief
executive of our Company and their respective associates) must abstain from voting in
favour of the relevant resolution at the general meeting; and (2) our Company must
comply with the requirements under Rules 13.39(6), 13.39(7), 13.40, 13.41 and 13.42 of
the Listing Rules. Any Scheme Mandate Limit as refreshed shall not exceed 10% of our
Shares in issue as at the date of the aforesa id Shareholders’ approval. A circular must
be sent to our Shareholders containing the number of Options and Awards that were
already granted under the existing Scheme Mandate Limit and the Service Provider
Sublimit, and the reason for the refreshment.
Our Company may also seek separate Shareholders’ approval in general meeting
for granting Options and/or Awards beyond the Scheme Mandate Limit to all
Proposed Grantees specifically identi fied by our Company before the aforesaid
Shareholders’ meeting where such approval is sought. A circular must be sent to our
Shareholders containing (among other requirements as specified under the Listing
Rules) the name of the identified Proposed Grantees, the number and terms of the
Options and/or Awards to be granted, the purpose of granting Options and/or Awards
to the identified Proposed Grantees, and how those Options and/or Awards serve such
purpose.
(d) Maximum entitlement of each Proposed Grantee
The total number of Shares issued/transferred and to be issued/transferred upon
exercise of the Options and/or Awards granted to each Proposed Grantee (excluding
any options and awards lapsed in accordance with the terms of the Share Scheme) in
APPENDIX VI STATUTORY AND GENERAL INFORMATION
–V I - 1 8–


--- page 570 ---
any 12-month period shall not exceed 1% of our Shares in issue (the ‘‘ 1% Individual
Limit ’’). Any further grant of Options and/or Awards to Proposed Grantee which
would result in the Shares issued and to be issued upon exercise of all Options and
Awards granted and to be granted to such Proposed Grantee in the 12-month period
up to and including the Grant Date (as defined in sub-paragraph (f) below) of such
further options and/or awards exceeding the 1% Individual Limit shall be subject to:
(i) the issue of circular to our Shareholders, containing (among other
requirements under the Listing Rules) the identity of the Proposed
Grantee, the number and terms (including the exercise price) of the
Options and/or Awards to be granted (and those previously granted to
such Proposed Grantee in the 12-month period), the purpose of granting
Options and/or Awards to the Proposed Grantee and an explanation as to
how those Options and/or Awards serve such purpose; and
(ii) separate Shareholders’ approval in advance with such Proposed Grantee and
his/her close associates (or his/her associates if such Proposed Grantee is a
connected person) abstaining from voting.
(e) Grant of options and/or awards to connected persons
The independent non-executive Dir ectors of our Company (excluding any
independent non-executive Director of our Company who is a Proposed Grantee)
will be required to approve each grant of Options and/or Awards to a Director, chief
executive or Substantial Shareholder or any of their respective associates.
Grant of Options and/or Awards must be approved by our Shareholders in
general meeting where the Proposed Grantee, his/her associate and all core connected
persons of our Company must be abstain from voting in favour and our Company
must send a circular which must contain (1) details of number and terms of the Options
and/or Awards to be granted to each Proposed Grantee, (2) the views of the
independent non-executive Directors (excluding any independent non-executive
Directors who is the Proposed Grantee of the Options and/or Awards) as to whether
the terms of the grant are fair and reasonable and whether such grant is in the interest
of our Company and our Shareholders as a whole, and their recommendation to the
independent Shareholders as to voting, (3) the information required under Rule
17.02(2)(c) of the Listing Rules, and (4) the information required under Rule 2.17 of
the Listing Rules to our Shareholders:
(i) where any grant of Awards (excluding grant of Options) to a Director (other
than an independent non-executive Director) or chief executive of our
Company, or any of his/her associates would result in the shares issued and
to be issued in respect of all Awards granted (excluding any Awards lapsed in
accordance with the terms of the Share Scheme) to such person in the 12-
month period up to and including the Grant Date, representing in aggregate
over 0.1% of the relevant class of Shares in issue; or
APPENDIX VI STATUTORY AND GENERAL INFORMATION
–V I - 1 9–


--- page 571 ---
(ii) where any grant of Options and/or Awards to an independent non-executive
Director or a Substantial Shareholder, or any of his/her respective associates,
would result in the Shares issued and to be issued in respect of all Options
and Awards granted (excluding any Options and Awards lapsed in
accordance with the terms of the Share Scheme) to such person in the 12-
month period up to and including the Grant Date representing in aggregate
over 0.1% of the relevant class of Shares in issue.
The Company will comply with Chapter 14A of, and other applicable rules under
the Listing Rules, for Shares to be issued to connected persons under the Share Scheme
after Listing.
(f) Acceptance of an offer of options and/or awards
An offer of grant of an Option and/or Award will be made to any Proposed
Grantee in writing (each, an ‘‘ Offer ’’) in such form as our Board may from time to time
determine, specifying (i) the date of grant (the ‘‘ Grant Date ’’, which must be a business
day), (ii) the name of the Proposed Grantee, (iii) the number of Shares comprised in the
Option and/or Award, (iv) the exercise price if the Offer is an offer of grant of Option
and/or the purchase price (if any) of the Award if our Board so decided at our Board’s
absolute discretion, (v) the market price of the Share on the Grant Date, (vi) the period
during which the Option and/or Award may be exercised and in any event ends not
later than 10 years from the Grant Date (the ‘‘ Exercise Period ’’), (vii) the Vesting
Period, and if the Vesting Period is shorter than that as required by Rule 17.03F of the
Listing Rules, the relevant circumstances that is permitted in sub-paragraph (i) below,
and if the Proposed Grantee is a Director and/or senior manager (which has the
meaning ascribed thereto under the Listing Rules), the fact that the relevant Vesting
Period is determined by the Remuneration Committee and the Remuneration
Committee’s view on why the relevant Vesti ng Period is appropriate, (viii) the date
by which the Option and/or Award must be accepted being a date not more than 30
days after the date of the Offer, (ix) the perfo rmance targets (which may be qualitative)
(if any) to be satisfied by the Proposed Grantee and/or our Company before an Option
and/or Award can be exercised and the clawback mechanism (if any) for our Company
to claw back any Option and/or Award granted, and if the Proposed Grantee is a
Director and/or senior manager and where no performance targets and/or clawback
mechanism is/are stipulated in the Offer, the views of the Remuneration Committee on
why performance targets and/or a clawba ck mechanism is/are not necessary and how
the Offer aligns with the purpose of the Share Scheme, (x) where the Proposed Grantee
is a Service Provider or a Related Entity Participant, the reasons of the Offer and the
views of our Board how the Offer aligns with the purpose of the Share Scheme, (xi)
arrangement, if any, for our Company or any of its subsidiaries to provide financial
assistance to the Proposed Grantee to fac ilitate the purchases of Shares under the
Share Scheme, (xii) such other terms and co nditions of the Offer as may be imposed by
our Board as are not inconsistent with this Share Scheme, and (xiii) requiring the
Proposed Grantee, by signing and return ing a duplicate of the Offer, to accept the
APPENDIX VI STATUTORY AND GENERAL INFORMATION
–V I - 2 0–


--- page 572 ---
Offer and to undertake to hold the Option and/or Award on the terms on which it is to
be granted and to be bound by the provisions of the Share Scheme. The Offer will be
personal to the Proposed Grantee concerned and will not be transferable.
An Option and/or Award will be deemed to have been granted and accepted by
the Proposed Grantee (the ‘‘ Grantee(s) ’’) and to have taken effect when the duplicate of
the offer document duly signed by the Grantee together with a payment to our
Company, as the case may be, of HK$1.00 (or its equivalent in the local currency of
any jurisdiction where our Company and/or its subsidiaries, as the case may be,
operate) by way of consideration for the grant thereof is received by our Company
within the time period specified in the Offe r. Such payment will in no circumstances be
refundable and will not be deemed to be a part payment of the exercise price and/or
purchase price (if any).
Any Offer may be accepted or deemed to have been accepted in part provided that
it is accepted in respect of a board lot or an integral multiple thereof and is clearly
stated in the duplicate of the offer document comprising the acceptance of the Offer
duly signed by the Grantee. To the extent th at the Offer is not accepted within 30 days
from the date upon which it is made in the manner indicated in the aforesaid, it will be
deemed to have been irrevocably declined.
Upon an Offer being accepted by a Grantee in whole or in part in accordance with
the sub-paragraphs aforesaid, an Option and/or Award in respect of the number of
Shares in respect of which the Offer was so accepted will be deemed to have been
granted by our Company to such Grantee on the Grant Date.
For the grant of Award to a Proposed Grantee, in the event that our Directors
decide to, at their absolute discretion, to appoint an award trustee, our Company shall,
as soon as reasonably practicable and in any event no later than 30 business days from
the date of acceptance of the Offer, elect to as our Directors deem appropriate as per
their absolute discretion, (i) issue and allot Shares to the award trustee and/or (ii)
transfer to the award trustee the necessary funds and instruct the award trustee to
acquire Shares through on-market transactions at the prevailing market price, so as to
satisfy the Award.
(g) Exercise price
The exercise price in respect of any Option will be such price as determined by our
Board and notified to any Grantee (subject to any adjustment made pursuant to the
sub-paragraph (s)) and must be at least the higher of:
(i) the closing price of our Shares as stated in the Stock Exchange’s daily
quotations sheet for a board lot on the Option Grant Date;
(ii) the average closing price of our Shares as stated in the Stock Exchange’s
daily quotations sheets for a board lot f or the five business days immediately
preceding the Grant Date; and
APPENDIX VI STATUTORY AND GENERAL INFORMATION
–V I - 2 1–


--- page 573 ---
(iii) the nominal value of the Share on the Grant Date.
For avoidance of doubt, an Award may be granted with or without a purchase
price, and such purchase price of the Award (if any) is not restricted by the aforesaid
sub-paragraph.
(h) Duration of the Share Scheme
Subject to sub-paragraph (u) below, the Share Scheme will be valid and effective
for a period of 10 years commencing on the date on which the conditions set out in sub-
paragraph (w) below becomes unconditional (the ‘‘ Effective Date ’’), which is expected
to be the Listing Date, after which no further Options and/or Awards will be granted
under the Share Scheme, but the provisions of the Share Scheme will remain in full
force and effect to the extent necessary to give effect to the exercise of any Options
and/or Awards granted prior thereto or otherwise as may be required in accordance
with the provisions of the Share Scheme.
(i) Time of vesting of Options and/or Awards
All Options and/or Awards granted under the Share Scheme will be subject to a
v e s t i n gp e r i o do fn ol e s st h a n1 2m o n t h sf r o mt h eG r a n tD a t e( t h e‘ ‘Vesting Period ’’)
except for the specific circumstances set out in the Share Scheme.
(j) Performance targets and clawback mechanism
The granting and/or vesting of Options and/or Awards shall also be subject to the
performance targets to be satisfied by the Grantee as determined by our Board from
time to time. The performance target may comprise a mixture of attaining a
satisfactory key performance indicators components (such as the business
performance and financial performance of our Group/department including but not
limited to annual sales targets attained by th eE m p l o y e eP a r t i c i p a n t sa n d / o rR e l a t e d
Entity Participants) which may vary among the Grantees.
Upon the occurrence of any of the following in relation to a Grantee, our
Company shall propose that no further Options and/or Awards shall be granted to
such Grantee and shall claw back the Options and/or Awards granted to such Grantee
and such Options and/or Awards shall lapse automatically:
(i) the Grantee has failed to perform duties effectively or is involved in serious
misconduct or malfeasance;
(ii) the Grantee has contravened the r elevant laws and regulations of the
applicable jurisdictions and/or the provisions of the Memorandum and
Articles;
APPENDIX VI STATUTORY AND GENERAL INFORMATION
–V I - 2 2–


--- page 574 ---
(iii) the Grantee has, during his/her tenure of office, been involved in acceptance
or solicitation of bribery, corruption, theft, leakage of trade and technical
secrets, conducted connected transactions and other unlawful acts and
misconducts, which prejudiced the interest and reputation of and caused
significant negative impact to the image of our Company; or
(iv) the Grantee has failed to discharge, o r failed to discharge properly, his/her
duties and thereby resulting in serious loss in assets to our Company and
other serious and adverse consequence.
(k) Exercise of Options and/or Awards
For the case of Option, a Grantee may exercise his/her Option in whole or in part
(but, if in part, only in respect of a board lot or any integral multiple thereof) by giving
notice in writing to our Company stating that the Option is thereby exercised and
specifying the number of Shares to be subscribed. Each such notice must be
accompanied by a remittance for the full amount of the aggregate exercise price for
our Shares in respect of which the notice is given. Within 30 days after receipt of the
notice and the remittance and, where appropriate, receipt of the certificate from the
Auditors (or the independent financial adviser appointed by our Board) pursuant to
sub-paragraph (s), our Company will allot and issue the relevant Shares to the Grantee
credited as fully paid and issue to the Grantee a share certificate in respect of the
Shares so allotted.
For the case of Award, a Grantee may exercise his/her Award in whole or in part
(but, if in part, only in respect of a board lot or any integral multiple thereof) by giving
notice in writing to our Company stating that the Award is thereby exercise and
specifying the number of Shares to be obtained. Each such notice must be accompanied
by a remittance for the full amount of the aggregate purchase price (where applicable)
for the Shares in respect of which the notice is given. Within 30 days after receipt of the
notice and, where appropriate, receipt of the certificate from the Auditors (or the
independent financial adviser appointed b y our Board) pursuant to sub-paragraph (s),
our Company shall allot and issue the relevant Shares and/or instruct the award trustee
(where applicable as our Directors elect to appoint in accordance with sub-paragraph
(f) above) the extent to which the awarded shares held in the trust shall be transferred
and released from the trust to the Grantee the share certificate in respect of the Shares
so allotted, issued and/or transferred. In case of the award trustee, the award trustee
shall transfer and release the relevant Award in manner as determined by our Board. If
it is not practicable for the Grantee to rece ive the Award in Shares, solely due to legal
or regulatory restrictions with respect to the Grantee’s ability to receive the Award in
Shares or the award trustee’s ability to giv e effect to any such transfer to the Grantee,
our Board shall, in its absolute discretion, sell, or direct and procure the award trustee
to sell, on-market at the prevailing market price, the number of awarded shares so
obtained in respect of the Grantee and pay the Grantee the proceeds arising from such
sale based on the actual selling price of such awarded shares in cash.
APPENDIX VI STATUTORY AND GENERAL INFORMATION
–V I - 2 3–


--- page 575 ---
(l) Restriction on the time of grant of options and/or awards
Our Board will not offer to grant any Option and/or Award to any Proposed
Grantee:
(i) after inside information has come to the knowledge of our Company or a
price sensitive event has occurred or a price sensitive matter has been the
subject of a decision, until such pr ice sensitive information has been
published;
(ii) during the period commencing one mo nth immediately preceding the earlier
of: (1) the date of our Board meeting (as such date is first notified to the
Stock Exchange in accordance with the Listing Rules) for the approval of our
Company’s results for any year, half-year, quarterly or any other interim
period whether or not required under the Listing Rules; and (2) the deadline
for our Company to publish an announcement of its results for any year,
half-year, quarterly or any other interim period whether or not required
under the Listing Rules, and ending on the date of the relevant results
announcement; or
(iii) during any period of delay in the publication of a results announcement.
Furthermore, if the exercise price of th e Option is fixed at the Grant Date, our
Board shall not offer to grant any Option to any Director in the following period:
(i) during the period of 60 days immediately preceding the publication date of
the annual results or, if shorter, the period from the end of the relevant
financial year up to the publication date of the results, unless the
circumstances are exceptional, for example, where a pressing financial
commitment has to be met, in accordance with the Listing Rules; and
(ii) during the period of 30 days immediately preceding the publication date of
the quarterly results (if any) and the half-year results or, if shorter, the period
from the end of the relevant quarterly or half-year period up to the
publication date of the results, unless the circumstances are exceptional, for
example, where a pressing financial commitment has to be met, in accordance
with the Listing Rules.
(m) Ranking of our Shares
For the case of Option and/or Award that is awarded by direct allotment of
Shares to a Grantee, our Shares to be allotted upon the exercise of an Option and/or
Award will not carry voting rights until the name of the Grantee has been duly entered
into the register of members of our Company as the holder thereof. Subject to the
aforesaid and the Memorandum and Articles, Shares allotted and issued on the
exercise of Options and/or Awards will rank pari passu in all respects and will have the
same voting, dividend, transfer and other ri ghts (including those arising on winding-
up) as are attached to the other fully-paid S hares in issue on the date of exercise, save
APPENDIX VI STATUTORY AND GENERAL INFORMATION
–V I - 2 4–


--- page 576 ---
that they will not rank for any dividend or other distribution declared or recommended
or resolved to be paid or made by reference to a record date falling on or before the
date of exercise.
For the case of Award that is to be awarded to a Grantee through the transfer and
release of Shares (i.e. the concerned awarded shares) held by an award trustee (which is
at our Board’s absolute discretion to appo int in accordance with sub-paragraph (f)
above) to the Grantee, the awarded share that to be transferred and released to a
Grantee will be subject to all the provisions of the Memorandum and Articles and will
rank pari passu with the fully paid Shares in issue on the date of the transfer and
release of the awarded shares from the trust to the Grantee and subject to the
registration of the name of the Grantee on the register of members of our Company,
the Grantee shall accordingly be entitled to participate in all dividends and other
distributions paid or made on or after the date of the name of Grantee is registered on
the register of members of our Company. However, before the transfer and release of
the awarded share from the award trustee to the Grantee, the Grantee only has a
contingent underlying interest in the awarded share unless and until such awarded
shares are actually transferred to the Grantee, nor does he or she have any rights to
any related income until the awarded shares vest. Unless otherwise required by law to
vote in accordance with the beneficial owner ’s direction and such a direction is given,
neither the Grantee nor the award trustee may exercise any voting rights in respect of
any awarded shares that have not yet vested. For the period between the date the
awarded share being vested and the date the awarded share being transferred and
released to the Grantee, the award trustee shall not exercise any voting rights in respect
of the awarded share unless otherwise required by law but shall retained any income
and dividend the awarded share so entitled during such period and shall remit the same
(interest free unless otherwise specified by our Board at our Board’s absolute
discretion as previously agreed between our Board and the award trustee) to the
Grantee on or reasonable time after the date when the awarded share is transferred and
released to the Grantee.
(n) Rights are personal to the Grantees
An Option and/or Award will be personal to the Grantee and not be assignable.
Except for the transmission of an Option on the death of a Grantee to his/her legal
personal representatives and nomination of an entity wholly-owned by a Grantee to
hold his/her Option and/or Award on his/her behalf, a Grantee may not sell, transfer,
charge, mortgage, encumber or create any interest in favour of any third party over or
in relation to any Option and/or Award or enter into any agreement to do any of the
foregoing. Any breach of the foregoing b y the Grantee will entitle our Company to
cancel any Option and/or Award granted to such Grantee (to the extent not already
exercised). In the event any Grantee wishes to transfer the Options and/or Awards to a
vehicle, including but not limited to a trust or a private company, for the benefit of the
Grantee and any family members of such Grantee, provided that such transfer would
continue to meet the purpose of the Share Scheme and comply with the Listing Rules,
our Board may in its absolute discretion decide to apply to the Stock Exchange for a
APPENDIX VI STATUTORY AND GENERAL INFORMATION
–V I - 2 5–


--- page 577 ---
waiver. Where such waiver is granted, our Company shall disclose the beneficiaries of
the trust or the ultimate beneficial owners of the transferee vehicle as required by the
Stock Exchange.
(o) Rights on a general offer
I fag e n e r a lo f f e ri sm a d et oa l lo u rS h a r e h o l d e r s( o ra l ls u c hS h a r e h o l d e r so t h e r
than the offeror and/or any person controlled by the offeror and/or any person acting
in association or in concert with the offero r (as defined in the Takeovers Code)), our
Company will use its best endeavours to procure that such offer is extended to all the
Grantees.
If such offer, having been approved or conducted in accordance with applicable
laws and regulatory requirements becomes effective, or becomes or is declared
unconditional, the Grantee will be entitled to exercise his/her Options and/or Awards
up to his/her entitlement (to the extent not already exercised) in full or any part thereof
at any time thereafter and up to the close of such offer (or relevant revised offer) or the
record date for entitlement under the scheme of arrangement, as the case may be.
Subject to the above, the Option and/or Award will lapse automatically on the date
which such offer (or the relevant revised offer) closed or the relevant record date for
entitlements under the scheme of arrangement, as the case may be.
(p) Rights on compromise or arrangement
If a compromise or arrangement between our Company and its Shareholders or
creditors is proposed for the purposes of a scheme for the reconstruction of our
Company or its amalgamation with any other companies, our Company will give
notice to all the Grantees on the same day as it gives notice of the meeting to its
Shareholders or creditors summoning the meeting to consider such a scheme or
arrangement and any Grantee will be entitled to exercise all or any of his/her Options
and/or Awards (to the extent not already exercised) at any time no later than two
business days prior to the date of the proposed meeting. Our Company will as soon as
possible and, in any event, no later than the business day immediately prior to the date
of the proposed meeting, allot or transfer the relevant Shares to the Grantee credited as
fully paid.
With effect from the date of such meeting , the rights of all Grantees to exercise
their respective Options and/or Awards will forthwith be suspended. Upon such
compromise or arrangement becoming effective, all Options and/or Awards will, to the
extent that they have not been exercised, lapse and terminate. If for any reason such
compromise or arrangement is not approved by the court, the rights of the Grantees to
exercise their respective Options and/or Awards will with effect from the date of the
making of the order by the court be restored in full and will become exercisable (but
subject to the other terms of the Share Scheme) as if such compromise or arrangement
had not been proposed by our Company.
APPENDIX VI STATUTORY AND GENERAL INFORMATION
–V I - 2 6–


--- page 578 ---
(q) Rights on winding up
In the event a notice is given by our Company to our Shareholders to convene a
general meeting for the purpose of considering and, if thought fit, approving the
voluntary winding up of our Company, our Company will on the same date as or soon
after it dispatches such notice to its Shareholders give notice thereof to all Grantees
and each Grantee will be entitled to exercise all or any of his/her Options and/or
Awards (to the extent not already exercis ed) at any time no later than two business
days prior to the proposed general meeting of our Company. Our Company will as
soon as possible and, in any event, no later than the business day immediately prior to
the date of the proposed general meeting, allot the relevant Shares to the Grantee
credited as fully paid. Where applicable, u pon receiving the notice of exercising
Awards, our Company shall as soon as possible and, in any event, no later than the
business day immediately prior to the date of the proposed general meeting referred to
above, instruct the award trustee to transfer and release the relevant awarded shares
from the trust to the Grantee. Subject to the above, all Options and/or Awards then
outstanding shall lapse and determine on the commencement of the winding-up.
(r) Lapse of Option and/or Award
An Option and/or Award will lapse automatically and not be exercisable (to the
extent not already exercised) on the earliest of:
(i) the expiry of the Exercise Period;
(ii) the expiry of any of the periods referred to in sub-paragraphs (o) to (q)
above;
(iii) subject to sub-paragraph (q) above, the date of the commencement of the
winding up of our Company;
(iv) the date on which the Grantee who is an Employee Participant or Related
Entity Participant ceases to be an Emp loyee Participant or Related Entity
Participant by reason of the summary te rmination of his/her employment on
any one or more of the grounds that he/she has been guilty of misconduct, or
has been convicted of any criminal offence involving his/her integrity or
honesty or (if so determined by our Board) on any other ground on which an
employer would be entitled to summar ily terminate his/her employment at
common law or pursuant to any app licable laws or under the Grantee’s
service contract with our Company, its relevant subsidiary or the holding
companies, fellow subsidiaries or associated companies of our Company;
(v) where the Grantee is a Service Provider which is under any contract with our
Company or its relevant subsidiary, the date on which such contract is
terminated by reason of breach of contract on the part of the Service
Provider;
APPENDIX VI STATUTORY AND GENERAL INFORMATION
–V I - 2 7–


--- page 579 ---
( v i ) w h e r et h eG r a n t e ei saS e r v i c eP r o v i d e r ,t h ed a t eo nw h i c ht h eG r a n t e e
appears either to be unable to pay or have no reasonable prospect to be able
to pay debts, or has become insolvent, or has made any arrangement
(including a voluntary arrangement) or composition with his/her creditors
generally, or ceases or threatens to cease to carry on his/her business, or is
bankrupted, or has been convicted of any criminal offence involving integrity
or honesty, or could no longer make any contribution to the growth and
development of our Group by reason of its cessation of its relations with our
Group or by any other reason whatsoever;
provided that whether any one or more of the events specified in (iv) to (vi)
above occur in relation to a Grantee will, in its reasonable opinion, be solely
and conclusively determined by our Board;
(vii) the date on which the Grantee commits a breach of sub-paragraph (n) above;
(viii) 12 months from the date of the death of the Grantee (being an individual and
if not exercised by his/her legal personal representative);
(ix) in cases where the Option and/or Award is held by a nominee of the Grantee,
the date such nominee ceases to be wholly-owned by the relevant Grantee;
(x) the date on which the Grantee commits any breach of any terms or
conditions attached to the grant of the Option and/or Award, unless
otherwise resolved to the contrary by our Board; or
(xi) the date on which our Company claws back the Options and/or Awards
granted pursuant to sub-paragraph (j) above.
(s) Effect of alteration to capital
In the event of any alteration in the capital structure of our Company whilst any
Option remains exercisable and/or awarded share remains outstanding, whether by
way of capitalisation of profits or reserves , rights issue, open offer, consolidation,
subdivision or reduction of the share capital of our Company (other than an issue of
Shares as consideration in respect of a transaction to which any member of our Group
is a party) such corresponding adjustments (if any) will be made to the number of
Shares to which the Option relates (insofar as it is unexercised) and/or awarded share
that remains outstanding; and/or the exerci se price of the Options granted (insofar as
they are unexercised), as the auditors (or an independent financial adviser appointed
by our Board) will certify in writing to our Board either generally or, if applicable, as
regards any particular Grantee, to be in their opinion fair and reasonable, provided
that (i) any such alteration shall give a Gr antee the same proportion of the equity
capital (rounded to the nearest whole Share) to which he/she was entitled prior to such
alteration; (ii) any such adjustment shall be made on the basis that the aggregate
exercise price payable by a Grantee on the full exercise of any Option shall remain as
APPENDIX VI STATUTORY AND GENERAL INFORMATION
–V I - 2 8–


--- page 580 ---
nearly as possible the same as it was before such event; and (iii) no adjustment shall be
made the effect of which would be to enab le a Share to be issued at less than its
nominal price (if any).
If there has been any alternation in the capital structure of our Company as
referred to in the aforesaid, our Company will, upon receipt of a notice from the
Grantee, inform him/her of such alternation and will either inform him/her of the
adjustment to be made pursuant to the certificate of the auditors (or an independent
financial adviser appointed by our Board) obtained by our Company for such purpose,
or if no such certificate has yet been obtained, inform him/her of such fact and instruct
the auditors (or an independent financial adviser appointed by our Board) to issue a
certificate in that regard in accordance with the aforesaid.
(t) Cancellation of options and/or awards
Our Board shall have the absolute discretion to cancel any Options and/or
Awards granted but not exercised or lapsed at any time if the Grantee so agreed. Any
Grantee whose Options and/or Awards are cancelled pursuant to the aforesaid may be
issued new Options and/or Awards in accordance with the provisions of the Share
Scheme, provided that unissued Options and/or Awards are available under the Share
Scheme within the limits specified in sub-paragraph (c) above.
(u) Termination of the Share Scheme
The Share Scheme will expire automatically on the day immediately preceding the
tenth anniversary of the date on which the conditions set out in sub-paragraph (w)
becomes unconditional, which is expected to be the Listing Date. Our Company may
by resolution in general meeting or our Board may at any time terminate the operation
of the Share Scheme and, in such event, no further Options and/or Awards will be
offered but the provisions of the Share Scheme will remain in full force in all other
respects. All Options and/or Awards comp lying with the provisions of the Listing
Rules which are granted during the life of the Share Scheme and remain unexpired
immediately prior to such termination w ill continue to be valid and exercisable in
accordance with the terms of the Share Scheme.
(v) Alteration of the Share Scheme
The Share Scheme may be altered in any respect by resolution of our Board except
that:
(i) any alteration to the terms and conditions of the Share Scheme which are of a
material nature or any alteration to provisions of the Share Scheme relating
to the matters set out in rule 17.03 of the Listing Rules can not be altered to
the advantage of Grantees or Proposed Grantees except with the prior
sanction of a resolution of our Shareholders in general meeting; and
APPENDIX VI STATUTORY AND GENERAL INFORMATION
–V I - 2 9–


--- page 581 ---
(ii) any change to the authority of our Board or administrators of the Share
Scheme in relation to any alteration to the terms of the Share Scheme will not
be made, except with the prior sanction of a resolution of our Shareholders of
our Company in general meeting.
Any change to the terms of the Options and/or Awards granted to a Grantee shall
be subject to the approval of our Board, Remuneration Committee, independence non-
executive Directors and/or our Shareholder s (as the case may be) if the initial grant of
Options and/or Awards was approved by such person(s) (as the case may be), save
where the alterations take effect automati cally under the existing terms of the Share
Scheme.
The amended terms of the Share Scheme and/or the options and/or awards must
continue to comply with the relevant provisions of the Listing Rules and
supplementary guidance on the interpre tation of the Listing Rules issued by the
Stock Exchange from time to time.
(w) Conditions of the Share Scheme
The Share Scheme will take effect subject to the passing of the necessary
resolution to adopt the Share Scheme by our Shareholders and our Board and is
conditional upon:
(i) the Listing Committee granting approval of the Listing of, and permission to
deal in, any Shares to be issued pursuant to the exercise of Options and/or
Awards granted under the Share Scheme on the Stock Exchange; and
(ii) the commencement of dealings in our Shares on the Stock Exchange.
If any of the above conditions are not satisfied within 12 calendar months from
the date of approval of the Share Scheme by the Shareholders, the Share Scheme will
terminate and no person will be entitled to any rights or benefits or be under any
obligations under or in respect of the Share Scheme.
(x) Administration of our Board
The Share Scheme will be subject to the administration of our Board whose
decision and interpretation (save as otherwise provided in the Share Scheme) will be
final and binding on all parties who may be affected thereby.
Our Company will disclose details of the Share Scheme in its annual and interim
reports including the number of options and/or awards, date of grant, exercise price,
Exercise Period and Vesting Period during the financial year/period in the annual/interim
reports in accordance with the Listing Rules in force from time to time.
As at the Latest Practicable Date, no Option and/or Award had been granted or agreed
to be granted under the Share Scheme.
APPENDIX VI STATUTORY AND GENERAL INFORMATION
–V I - 3 0–


--- page 582 ---
Application has been made to the Stock Exchange for the listing of, and permission to
deal in, our Shares which may fall to be issued pursuant to the exercise of the Options and
Awards being 50,000,000 Shares in total.
E. OTHER INFORMATION
1. Estate duty
Our Directors have been advised that no material liability for estate duty is likely
to fall on our Company or any of its subsidiaries in the Cayman Islands or the BVI or
Hong Kong, being jurisdictions in which one or more of the companies comprising our
Group were incorporated.
2. Tax and other indemnities
Dealings in our Shares will be subject to Hong Kong stamp duty. The current
ad valorem rate of Hong Kong stamp duty is 0.1% on the higher of the consideration
for or the market value of our Shares, and it is charged on the purchaser on every
purchase and on the seller on every sale of our Shares. A total stamp duty of 0.2% is
currently payable on a typical sale and purchase transaction involving our Shares.
Each of our Controlling Shareholders as indemnifier (each an ‘‘ Indemnifier ’’, and
collectively the ‘‘ Indemnifiers ’’) has entered into a deed of indemnity (the ‘‘ Deed of
Indemnity ’’) with and in favour of our Company (for ourselves and as trustee for each
of our subsidiaries) pursuant to which the Indemnifiers shall jointly and severally
indemnify and keep indemnified each of our Company and our subsidiaries against,
among other things, the following:
(a) any liability which is or becomes payable by any member of our Group by
virtue of the provisions of section 35, 42 and 43 of the Estate Duty Ordinance
(Chapter 111 of the Laws of Hong Kong) arising from the death of an
individual and by reason of any transfer of any property on such individual’s
death to any member of our Group on or before the date on which the Share
Offer becomes unconditional;
(b) taxation falling on any of our Company and our subsidiaries resulting from
or by reference to any income, profits or gains earned, accrued or received (or
deemed to be so earned, accrued or received) on or before the date on which
the Share Offer becomes unconditional;
(c) any actions, claims, losses, damages, costs, charges or expenses suffered or
incurred by our Company and/or any of our subsidiaries, directly or
indirectly, as a result of or in connection with any litigation, arbitration,
claim and/or legal proceedings accrued or arising on or before the date on
which the Share Offer becomes unconditional; and
APPENDIX VI STATUTORY AND GENERAL INFORMATION
–V I - 3 1–


--- page 583 ---
(d) any claims, proceedings, judgments, losses, liabilities, fines, penalties,
payments, damages and any associated costs suffered or incurred by our
Company and/or any of our subsidiaries, directly or indirectly, arising from
any non-compliance or alleged non-co mpliance with any applicable laws,
rules or regulations by our Company and/or any of our subsidiaries on or
before the date on which the Share Offer becomes unconditional.
The Indemnifiers will, however, not be liable under the Deed of Indemnity for
taxation to the extent that, among others:
(a) provision has been made for such taxation in the audited accounts of our
Company and our subsidiaries for each of FY2020, FY2021, FY2022 and
9M2023;
(b) where any provisions made for taxation in the audited accounts of our
Company and our subsidiaries for each of FY2020, FY2021, FY2022 and
9M2023 which is finally establishe d to be an over-provision, then our
Controlling Shareholders’ liability (if any) in respect of such taxation,
taxation claim or liability shall be re duced by an amount not exceeding such
over-provision;
(c) the taxation falling on our Company and our subsidiaries on or after 1
October 2023 unless liability for such taxation would not have arisen but for
any act or omission of our Company or any member of our Group (whether
alone or in conjunction with some other act or omission) otherwise than in
the ordinary course of business of our Group on or before the Listing Date;
or
(d) the taxation arises or is incurred as a consequence of any retrospective
change in law or the interpretation thereof or practice by the relevant tax
authority having retrospective effe ct coming into force after the date on
which the Share Offer becomes unconditional or any retrospective increase in
tax rates coming into force after the date on which the Share Offer becomes
unconditional.
3. Litigation
S a v ea sd i s c l o s e di nt h ep a r a g r a p hh e a d e d‘‘Business — Legal proceedings’’ in this
prospectus, as at the Latest Practicable Date, no member of our Group is engaged in
any litigation or arbitration of material importance and no litigation or claim of
material importance is known to our Directors to be pending or threatened against any
member of our Group that would have a material adverse effect on our business,
results of operations or financial condition.
APPENDIX VI STATUTORY AND GENERAL INFORMATION
–V I - 3 2–


--- page 584 ---
4. Sponsor
The Sole Sponsor has made an application on behalf of our Company to the Stock
Exchange for listing of, and permission to deal in, our Shares in issue and our Shares to
be issued as described in this prospectus and any Shares which may be issued upon the
exercise of the Over-allotment Option and any options and/or awards which may be
granted under the Share Scheme on the Stock Exchange.
The Sole Sponsor satisfies the independence criteria applicable to sponsor as set
out in Rule 3A.07 of the Listing Rules.
The Sole Sponsor’s fee in relation to the Listing is approximately RMB7.8 million
(equivalent to approximately HK$8.6 million), w hich relates solely to services provided
by the Sole Sponsor in the capacity of a sponsor.
5. Promoter
Our Company has no promoter for the purposes of the Listing Rules.
6. Preliminary expenses
The preliminary expenses in relation to incorporation of our Company payable by
our Company are approximately USD2,975.
7. Compliance adviser
Our Company has appointed Grande Capital Limited as the compliance adviser
upon Listing in compliance with Rule 3A.19 of the Listing Rules.
8. Taxation of holders of Shares
(a) Hong Kong
Dealings in Shares registered on our Company’s Hong Kong branch register
of members will be subject to Hong Kong stamp duty. The sale, purchase and
transfer of Shares are subject to Hong Kong stamp duty, the current rate of which
is 0.13% of the consideration or, if higher, the value of our Shares being sold or
transferred. Dividends paid on Shares will not be subject to tax in Hong Kong and
no tax is imposed in Hong Kong in respect of capital gains.
Profits from dealings in our Shares arising in or derived from Hong Kong
may also be subject to Hong Kong profits tax.
(b) The Cayman Islands
There is no stamp duty payable in the Cayman Islands on transfers of shares
of Cayman Islands companies save for those which hold interests in land in the
Cayman Islands.
APPENDIX VI STATUTORY AND GENERAL INFORMATION
–V I - 3 3–


--- page 585 ---
(c) Consultation with professional advisers
Intending holders of Shares are recommended to consult their professional
advisers if they are in any doubt as to the taxation implications of subscribing for,
purchasing, holding or disposing of or dealing in Shares or exercising any rights
attaching to them. It is emphasised that none of our Company, our Directors or
the other parties involved in the Share Offer can accept responsibility for any tax
effect on, or liabilities of, holders of Share s resulting from their subscription for,
purchase, holding or disposal of or dealing in Shares or exercising any rights
attaching to them.
9. Qualifications of experts
The following are the respective qualif ications of the experts who have given
opinion or advice which are included in this prospectus:
Name Qualification
Grande Capital Limited A licensed corporation to carry out Type 1
(dealing in securities) and Type 6 (advising on
corporate finance) regula ted activities under the
SFO
Conyers Dill & Pearman Cayman Islands legal advisers
Crowe (HK) CPA Limited Certified Public Accountants
McMillan Woods (Hong
Kong) CPA Limited
Certified Public Accountants
Hylands Law Firm (Jinan) Legal advisers to our Company as to the laws of
the PRC
Frost & Sullivan (Beijing) Inc.,
Shanghai Branch Co.
Industry consultant
BMI Appraisals Limited Property valuer
Savills Valuation and
Professional Services (China)
Limited
Biological assets valuer
Professor Cui Dejie ( 崔德杰)A g r i c u l t u r a l a d v i s e r
APPENDIX VI STATUTORY AND GENERAL INFORMATION
–V I - 3 4–


--- page 586 ---
10. Consents of experts
E a c ho ft h ee x p e r t sn a m e di nt h ep a r a g r a p hh e a d e d‘ ‘ E .O t h e ri n f o r m a t i o n—9 .
Qualifications of experts’’ in this Appendix to this prospectus has given and has not
withdrawn its written consent to the issue of this prospectus with the inclusion of its
reports, letters, certificates, opinions and/ or references to its name (as the case may be)
i n c l u d e di nt h ef o r ma n dc o n t e x ti nw h i c ht h ey respectively appear in this prospectus.
11. Binding effect
This prospectus shall have the effect, if an application is made in pursuance of it,
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.
12. Bilingual prospectus
The English language and Chinese language versions of this prospectus are being
p u b l i s h e ds e p a r a t e l yi nr e l i a n c eu p o nt h ee x e m p t i o np r o v i d e di ns e c t i o n4o ft h e
Companies (Exemption of Companies and Prospectuses from Compliance with
Provisions) Notice (Chapter 32L of the Laws of Hong Kong). In case of any
discrepancies between the English language version and the Chinese language version,
the English language version shall prevail.
13. 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 an d trading position since 30 September 2023
and there is no event since 30 September 2023 which would materially affect the
information shown in the Accountants’ Report as set out in Appendix I to this
prospectus.
14. Miscellaneous
(a) Save as disclosed in this prospectus, within the two years immediately
preceding the date of this prospectus:
(i) no share or loan capital of our Company or any of its subsidiaries has
been issued or agreed to be issued fully or partly paid either for cash or
for a consideration other than cash;
(ii) no commissions, discounts, brokerages or other special terms have been
g r a n t e do ra g r e e dt ob eg r a n t e di nc o n n e c t i o nw i t ht h ei s s u eo rs a l eo f
any capital of our Company or any of our subsidiaries; and
APPENDIX VI STATUTORY AND GENERAL INFORMATION
–V I - 3 5–


--- page 587 ---
(iii) no commission has been paid or is payable (except commissions to sub-
underwriters) for subscribing or agreeing to subscribe, or procuring or
agreeing to procure the subscriptions, for any Shares or debentures in
our Company or any of the subsidiaries.
(b) No founders, management or deferred shares of our Company or any of its
subsidiaries have been issued or agreed to be issued.
(c) No share or loan capital of our Company or any of its subsidiaries is under
option or is agreed conditionally or unconditionally to be put under option.
(d) There has been no interruptions 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.
(e) None of the persons whose names are listed in the paragraph headed ‘‘E.
Other information — 9. Qualifications of experts’’ in this Appendix to this
prospectus:
(i) is interested beneficially or non-beneficially in any shares in any member
of our Group; or
(ii) has any right or option (whether legally enforceable or not) to subscribe
for or to nominate persons to subscribe for any securities in any member
of our Group.
(f) No company within our Group is presently listed on any stock exchange or
traded on any trading system.
(g) There are no arrangements in existence under which future dividends are to
be or agreed to be waived.
(h) All necessary arrangements have been made to enable our Shares to be
admitted into CCASS for clearing and settlement.
(i) Our Group had not issued any debentures nor did it have any outstanding
debentures or any convertible debt securities as at the Latest Practicable
Date.
APPENDIX VI STATUTORY AND GENERAL INFORMATION
–V I - 3 6–


--- page 588 ---
A. DOCUMENTS DELIVERED TO THE REGISTRAR OF COMPANIES IN HONG
KONG
The documents attached to a copy of this pro spectus and delivered to the Registrar of
Companies in Hong Kong for registration wer e (i) written consents referred to in the
paragraph headed ‘‘E. Other information — 10. Consents of experts’’ in Appendix VI to this
prospectus; (ii) a copy of each of the material contracts referred to in the paragraph headed
‘‘B. Further information about business of our Group — 1. Summary of material contracts’’
in Appendix VI to this prospectus.
B. DOCUMENTS AVAILABLE ON DISPLAY
Copies of the following documents will be published on the website of the Stock
Exchange at www.hkexnews.hk and our Compan y at http://fujingnongye.com for 14 days
from the date of this prospectus (both dates inclusive):
1. the Memorandum and the Articles;
2. the material contracts referred to in the paragraph headed ‘‘B. Further
information about business of our Group — 1. Summary of material contracts’’
in Appendix VI to this prospectus;
3 . t h ew r i t t e nc o n s e n t sr e f e r r e dt oi nt h ep a r a g r a p hh e a d e d‘ ‘ E .O t h e ri n f o r m a t i o n—
10. Consents of experts’’ in Appendix VI to this prospectus;
4. the Accountants’ Report prepared by Crowe (HK) CPA Limited and McMillan
Woods (Hong Kong) CPA Limited for FY2020, FY2021, FY2022 and 9M2023,
the text of which is set out in Appendix I to this prospectus;
5. the report on the unaudited pro forma financial information of our Group
prepared by Crowe (HK) CPA Limited and McMillan Woods (Hong Kong) CPA
Limited, the text of which is set out in Appendix II to this prospectus;
6. the audited consolidated financial statements of our Group for FY2020, FY2021,
FY2022 and 9M2023;
7. the letter of advice prepared by Conyers Dill & Pearman, the le gal advisers of our
Company as to the laws of Cayman Islands, summarising certain aspects of the
company law of the Cayman Islands referred to in Appendix V to this prospectus;
8. the Companies Act;
9. the legal opinion prepared by Hylands Law Firm (Jinan), the legal advisers to our
Company as to the laws of the PRC, on certain aspect of the subsidiaries of our
Company in the PRC and the business operations of our Group;
1 0 . t h eF & SR e p o r t ,as u m m a r yo fw h i c hi ss e tf o r t hi nt h es e c t i o nh e a d e d‘ ‘ I n d u s t r y
Overview’’ in this prospectus;
APPENDIX VII DOCUMENTS DELIVERED TO THE REGISTRAR OF COMPANIES
IN HONG KONG AND AVAILABLE ON DISPLAY
–V I I - 1–


--- page 589 ---
11. the valuation report and fair rent letters issued by BMI Appraisals in relation to
the property interests of our Group;
12. the valuation reports on the fair value of biological assets belonging to our Group
as at 31 December 2020, 31 December 2021, 31 December 2022 and 30 September
2023 prepared by Savills Valuation and Prof essional Services (China) Limited;
13. the report issued by Professor Cui Dejie ( 崔德杰) in respect of the implication of
continuous cropping and in-pot cultivation method;
14. the service contracts, letters of appointment and supplemental letters of
appointment referred to in the paragr aph headed ‘‘C. Further information
about our Directors, management and sub stantial shareholders — 2. Particulars
of service contracts and letters of appointment’’ in Appendix VI to this
prospectus; and
15. the rules of the Share Scheme.
APPENDIX VII DOCUMENTS DELIVERED TO THE REGISTRAR OF COMPANIES
IN HONG KONG AND AVAILABLE ON DISPLAY
–V I I - 2–


--- page 590 ---
SHARE OFFER
Fujing Holdings Co., Limited
(Incorporated in the Cayman Islands with limited liability)
Stock Code: 2497
ʮ̡
Joint Overall Coordinators, Joint Global Coordinators,
Joint Bookrunners and Joint Lead Managers
Sole Sponsor
Joint Global Coordinators, Joint Bookrunners and Joint Lead Managers
1SPKFDU0SHBOJD@*10@$PWFS@&/(@.BS@@'BDUPSZ5FTUQEG
