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Jiangsu Horizon Chain Supermarket
Company Limited
ʮ̡
GlobalOﬀering
(A joint stock company in corporated in the People’s Republic of China with limited liability)
Stock Code : 2625
Sole Sponsor
Joint Bookrunners and Joint Lead Managers
Joint Global Coordinator, Joint Bookrunner and Joint Lead Manager
Joint Overall Coordinators, Joint Global Coordinators,
Joint Bookrunners and Joint Lead Managers


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IMPORTANT : If you are in any doubt about any of the contents of this prospectus, you should obtain professional independent advice.
JIANGSU HORIZON CHAIN SUPERMARKET COMPANY LIMITED
ʮ̡
(A joint stock company incorporated in the People’ s Republic of China with limited liability)
Global Offering
Number of Offer Shares under
the Global Offering
: 53,562,000 H Shares (subject to the
Over-allotment Option)
Number of Hong Kong Offer Shares : 5,357,000 H Shares (subject to reallocation)
Number of International Offer Shares : 48,205,000 H Shares (subject to reallocation and
the Over-allotment Option)
Maximum Offer Price : HK$3.00 per H Share, plus brokerage of 1.0%,
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 : RMB1.00 per H Share
Stock code : 2625
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
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 paragraph headed “Documents Delivered to the Registrar of Companie s” in Appendix VII to this prospectus, has
been registered with the Registrar of Companies in Hong Kong as required by section 342C of the Companies (Winding Up and Miscellaneous Provisions) Or dinance (Chapter 32 of the Laws of
Hong Kong). The Securities and Futures Commission and the Registrar of Companies in Hong Kong take no responsibility as to the contents of this prospec tus or any other documents referred to
above.
The Offer Price is expected to be determined by agreement between the Joint Overall Coordinators (for themselves and on behalf of the Underwriters) an d us on the Price Determination Date. The
Price Determination Date is expected to be on or before Thursday, 27 March 2025 (Hong Kong time) and, in any event, not later than 12:00 noon on Thursday, 27 March 2025 (Hong Kong time).
The Offer Price will not be more than HK$3.00 per Offer Share and is currently expected to be not less than HK$2.50 per Offer Share. If, for any reason, the Offer Price is not agreed by 12:00
noon on Thursday, 27 March 2025 (Hong Kong time) between the Joint Overall Coordinators (for themselves and on behalf of the Underwriters) and us, the G lobal Offering will not proceed and
will lapse.
The Joint Overall Coordinators, on behalf of the Underwriters, may, where considered appropriate and with our consent, reduce the number of Hong Kong Offer Shares and/or the
indicative Offer Price range below that is stated in this prospectus (which is HK$2.50 to HK$3.00) at any time prior to the morning of the last day for lod ging applications under the
Hong Kong Public Offering. In such case, notices of the reduction in the number of Hong Kong Offer Shares and/or the indicative Offer Price range will be published on the website of
our Company at www.hxsupermarket.cn and on the website of the Stock Exchange at www.hkexnews.hk as soon as practicable following the decision to make such reduction, and in any
event not later than the morning of the last day for lodging applications under the Hong Kong Public Offering. Further details are set forth in the secti ons headed “Structure of the
Global Offering” and “How to Apply for Hong Kong Offer Shares” in this prospectus.
Prior to making an investment decision, prospective investors should carefully consider all of the information set out in this prospectus, in partic ular, the risk factors set out in the section headed
“Risk Factors” in this prospectus.
The obligations of the Hong Kong Underwriters under the Hong Kong Underwriting Agreement are subject to termination by the Joint Overall Coordinator s (for themselves and on
behalf of the Underwriters) if certain events occur prior to 8:00 a.m. on the Listing Date. For details, please refer to the section headed “Underwriti ng” in this prospectus.
The Offer Shares have not been and will not be registered under the U.S. Securities Act or any state securities law in the United States and may be offered and sold outside the United States in
offshore transactions in reliance on Regulation S under the U.S. Securities Act.
ATTENTION
We have adopted a fully electronic application process for the Hong Kong Public Offering. We will not provide printed copies of this prospectus to the p ublic in relation to the
Hong Kong Public Offering.
This prospectus is available at the websites of the Stock Exchange (www.hkexnews.hk) and our Company (www.hxsupermarket.cn). If you require a print ed copy of this prospectus,
you may download and print from the website addresses above.
IMPORTANT
21 March 2025


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IMPORTANT NOTICE TO INVESTORS OF HONG KONG PUBLIC OFFERING:
FULLY ELECTRONIC APPLICATION PROCESS
We have adopted a fully electronic application process for the Hong Kong Public Offering.
We will not provide printed copies of this prospectus to the public in relation to the Hong
Kong Public Offering.
This prospectus is available at the website of the Stock Exchange at www.hkexnews.hk
under the “ HKEXnews > New Listings > New Listing Information ” section, and our website
at www.hxsupermarket.cn. If you require a printed copy of this prospectus, you may
download and print from the website addresses above.
To apply for the Hong Kong Offer Shares, you may use one of the following application
channels:
(1) apply online via the White Form eIPO service at www.eipo.com.hk ;o r
(2) apply electronically through the HKSCC EIPO channel and cause HKSCC Nominees to
apply on your behalf 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
Hong Kong Offer Shares on your behalf.
We will not provide any physical channels to accept any application for the Hong Kong Offer
Shares by the public. The contents of the electronic version of this prospectus are identical to
the printed prospectus as registered with the Registrar of Companies in Hong Kong pursuant to
Section 342C of the Companies (Winding up and Miscellaneous Provisions) Ordinance.
If you are an intermediary , broker or agent , please remind your customers, clients or
principals, as applicable, that this prospectus is available online at the website addresses above.
Please refer to the section headed “How to Apply for Hong Kong Offer Shares” in this
prospectus for further details of the procedures through which you can apply for the Hong Kong
Offer Shares electronically.
Y our application through the White Form eIPO service or the HKSCC EIPO service must be
for a minimum of 1,000 Hong Kong Offer Shares and in multiples of the number of the Hong
Kong Offer Shares set out in the table below.
If you are applying through the White Form eIPO service, you may refer to the table below for
the amount payable for the number of Shares you have selected. Y ou must pay the respective
amount payable on application in full upon application for Hong Kong Offer Shares.
If you are applying through the HKSCC EIPO channel, you are required to 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.
IMPORTANT


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JIANGSU HORIZON CHAIN SUPERMARKET COMPANY LIMITED
(HK$3.00 per Hong Kong Offer Share)
NUMBER OF HONG KONG OFFER SHARES
THAT MAY BE APPLIED FOR AND PAYMENTS
No. of
Hong Kong
Offer Shares
applied for
Amount
payable (2)
on
application
No. of
Hong Kong
Offer Shares
applied for
Amount
payable (2)
on
application
No. of
Hong Kong
Offer Shares
applied for
Amount
payable (2)
on
application
No. of
Hong Kong
Offer Shares
applied for
Amount
payable (2)
on
application
HK$ HK$ HK$ HK$
1,000 3,030.25 20,000 60,605.10 100,000 303,025.50 800,000 2,424,204.00
2,000 6,060.51 25,000 75,756.38 150,000 454,538.26 900,000 2,727,229.50
3,000 9,090.76 30,000 90,907.66 200,000 606,051.00 1,000,000 3,030,255.00
4,000 12,121.02 35,000 106,058.93 250,000 757,563.76 1,250,000 3,787,818.76
5,000 15,151.28 40,000 121,210.20 300,000 909,076.50 1,500,000 4,545,382.50
6,000 18,181.54 45,000 136,361.48 350,000 1,060,589.26 1,750,000 5,302,946.26
7,000 21,211.79 50,000 151,512.76 400,000 1,212,102.00 2,000,000 6,060,510.00
8,000 24,242.05 60,000 181,815.30 450,000 1,363,614.76 2,250,000 6,818,073.76
9,000 27,272.30 70,000 212,117.86 500,000 1,515,127.50 2,678,000
(1) 8,115,022.89
10,000 30,302.56 80,000 242,420.40 600,000 1,818,153.00
15,000 45,453.83 90,000 272,722.96 700,000 2,121,178.50
Notes:
(1) This is the maximum number of Hong Kong Offer Share you may apply for, representing approximately 50% of
the Hong Kong 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 successful, brokerage will be paid to the Exchange Participants (as defined
in the Listing Rules) and the SFC transaction levy, the Stock Exchange trading fee and AFRC transaction levy
are paid to the Stock Exchange (in the case of the SFC transaction levy, collected by the Stock Exchange on
behalf of the SFC; and in the case of the AFRC transaction levy, collected by the Stock Exchange on behalf of
the AFRC).
No application for any other number of the Hong Kong Offer Shares will be considered and any
such application is liable to be rejected.
IMPORTANT


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If there is any change in the following expected timetable of the Hong Kong Public
Offering, we will issue an announcement in Hong Kong to be published on the website of our
Company at www.hxsupermarket.cn and the website of the Stock Exchange at
www.hkexnews.hk .
Hong Kong Public Offering commences .................................. 9:00 a.m. on
Friday, 21 March 2025
Latest time to complete electronic applications under
the White Form eIPO service through the designated
website at www.eipo.com.hk ........................................1 1:30 a.m. on
Wednesday, 26 March 2025
Application lists of the Hong Kong Public Offering open
(3) ..................1 1:45 a.m. on
Wednesday, 26 March 2025
Latest time to give electronic application instructions to
HKSCC (4) ...................................................... 12:00 noon on
Wednesday, 26 March 2025
Latest time to complete payment of White Form eIPO
applications by effecting internet banking
transfer(s) or PPS payment transfer(s) ................................ 12:00 noon on
Wednesday, 26 March 2025
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 Hong Kong
Offer Shares on your behalf, you are advised to contact your broker or custodian for the latest
time for giving such instructions which may be different from the latest time as stated above.
Application lists of the Hong Kong Public Offering close
(3) ................. 12:00 noon on
Wednesday, 26 March 2025
EXPECTED TIMETABLE (1)
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Expected Price Determination Date no later than (5) ........................ 12:00 noon on
Thursday, 27 March 2025
(1) Announcement of:
 the final Offer Price;
 the level of applications in the Hong Kong Public Offering;
 the level of indications of interest in the International Offering; and
 the basis of allocation of the Hong Kong Offer Shares
to be published on the website of our Company at
www.hxsupermarket.cn
(6) and the website of the
Stock Exchange at www.hkexnews.hk
no later than ..................................................1 1:00 p.m. on
Friday, 28 March 2025
(2) Results of allocations in the Hong Kong Public
Offering (with successful applicants’ identification
document numbers, where appropriate) to be made
available through a variety of channels as
described in the section headed “How to Apply for Hong
Kong Offer
Shares – B. Publication of Results” in this
prospectus from ......................................... Friday, 28 March 2025
(3) A full announcement of the Hong Kong Public
Offering containing (1) and (2) above to be
published on the website of the Stock Exchange at
www.hkexnews.hk and the website of our Company at
www.hxsupermarket.cn
(6) from ............................ Friday, 28 March 2025
Results of allocations in the Hong Kong Public Offering
to be available at www.iporesults.com.hk (alternatively:
www.eipo.com.hk/eIPOAllotment ) with a “search by ID”
function from ....................................................1 1:00 p.m. on
Friday, 28 March 2025
to 12:00 midnight on
Thursday, 3 April 2025
EXPECTED TIMETABLE (1)
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Telephone enquiry for the results of allocations in
the Hong Kong Public Offering by calling +852 2862 8555
between 9:00 a.m. and 6:00 p.m. from ........................ Monday, 31 March 2025
to Thursday, 3 April 2025
H Share certificates in respect of wholly or partially
successful applications to be despatched or deposited
into CCASS on or before
(7) (10) ............................... Friday, 28 March 2025
White Form e-Refund payment
instructions/refund cheques in respect of wholly or
partially unsuccessful applications pursuant to the
Hong Kong Public Offering to be despatched on or
before
(8) (9) (10) .......................................... Monday, 31 March 2025
Dealings in H Shares on the Stock
Exchange expected to commence at (10) ................................. 9:00 a.m. on
Monday, 31 March 2025
Notes:
(1) All dates and times refer to Hong Kong local dates and times, except as otherwise stated.
(2) Y ou will not be permitted to submit your application through the designated website at www.eipo.com.hk after
11:30 a.m. on the last day for submitting applications. If you have already submitted your application
through the designated website at www.eipo.com.hk and obtained an application reference number from
the designated website before 11:30 a.m., you will be permitted to continue the application process (by
completing payment of application monies) until 12:00 noon on the last day for submitting applications,
when the application lists close.
(3) If there is/are a tropical cyclone warning signal number 8 or above, a “black” rainstorm warning signal and/or
Extreme Conditions (collectively, “ Severe Weather Signals ”) in force in Hong Kong at any time between 9:00
a.m. and 12:00 noon on Wednesday, 26 March 2025, the application lists will not open or close on that day. For
details, please refer to the paragraph headed “How to Apply for Hong Kong Offer Shares – E. Severe Weather
Arrangements” in this prospectus.
(4) Applicants who apply for the Hong Kong Offer Shares instructing your broker or custodian to give electronic
application instructions to HKSCC to apply on your behalf through HKSCC’s FINI system should refer to the
paragraph headed “How to apply for the Hong Kong Offer Shares – A. Application for Hong Kong Offer Shares
– 2. Application Channels” in this prospectus for further details.
(5) The Price Determination Date is expected to be on or before 12:00 noon on Thursday, 27 March 2025. If, for
any reason, the Offer Price is not agreed between the Joint Overall Coordinators (for themselves and on behalf
of the Underwriters) and us by 12:00 noon on Thursday, 27 March 2025, the Global Offering will lapse.
(6) None of the websites of our Company or any of the information contained on the websites of our Company
forms part of this prospectus.
EXPECTED TIMETABLE (1)
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(7) No temporary documents of title will be issued in respect of the Offer Shares. H Share certificates for the Hong
Kong Offer Shares will only become valid evidence of title provided that (i) the Global Offering has become
unconditional in all respects; and (ii) neither of the Underwriting Agreements has been terminated in accordance
with their terms prior to 9:00 a.m. on the Listing Date. Investors who trade H Shares on the basis of publicly
available allocation details prior to the receipt of H Share certificates or prior to the H Share certificates
becoming valid do so at their own risk.
(8) White Form e-Refund payment instruction/refund cheques will be issued in respect of wholly or partially
unsuccessful applications pursuant to the Hong Kong Public Offering and also in respect of wholly or partially
successful applications in the event that the final Offer Price is less than the price payable per Offer Share on
application.
(9) Applicants being individuals who are eligible for personal collection may not authorise any other person to
collect on their behalf. If you are a corporate applicant which is eligible for personal collection, your authorised
representative must bear a letter of authorisation from your corporation stamped with your corporation’s chop.
Both individuals and authorised representatives must produce, at the time of collection, evidence of identity
acceptable to our H Share Registrar. Applicants who have applied for Hong Kong Offer Shares through the
HKSCC EIPO channel should refer to the paragraph headed “How to Apply for Hong Kong Offer Shares – D.
Despatch/Collection of H Share Certificates and Refund of Application Monies” in this prospectus for details.
Applicants who have applied through the White Form eIPO service and paid their application monies through
single bank account may have refund monies (if any) despatched to the bank account, in the form of White Form
e-Refund payment instructions. Applicants who have applied through the White Form eIPO service and paid
their application monies through multiple bank accounts may have refund monies (if any) despatched to the
address as specified in their application instructions, in the form of refund cheques in favour of the applicant (or,
in the case of joint applications, the first-named applicant), by ordinary post at their own risk.
Any uncollected H Share certificates and/or refund cheques will be despatched by ordinary post, at the
applicants’ risk, to the addresses specified in the relevant applications.
Further information is set out in the paragraph headed “How to Apply for Hong Kong Offer Shares – D.
Despatch/Collection of H Share Certificates and Refund of Application Monies” in this prospectus.
(10) In case a Severe Weather Signal in force is hoisted on Friday, 28 March 2025, the H Share Registrar will make
appropriate arrangements for the delivery of the H Share certificates to the CCASS Depository’s service counter
so that they would be available for trading on Monday, 31 March 2025.
The H Share certificates will only become valid evidence of title provided that the Global
Offering has become unconditional in all respects and neither the Hong Kong Underwriting
Agreement nor the International Underwriting Agreement is terminated in accordance with their
respective terms prior to 8:00 a.m. on the Listing Date. The Listing Date is expected to be on or
about Monday, 31 March 2025. Investors who trade the H Shares on the basis of publicly
available allocation details prior to the receipt of H Share certificates or prior to the H Share
certificates becoming valid evidence of title do so entirely at their own risk.
The above expected timetable is a summary only. Please refer to the sections headed
“Structure of the Global Offering” and “How to Apply for Hong Kong Offer Shares” in this
prospectus for details of the structure of the Global Offering, including the conditions of the
Global Offering, the procedures for application for the Hong Kong Offer Shares and the
expected timetable, including conditions, effect of severe weather and the despatch of refund
cheques and H Share certificates.
EXPECTED TIMETABLE (1)
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This prospectus is issued by us solely in connection with the Hong Kong Public Offering
and the Hong Kong Offer Shares and does not constitute an offer to sell or a solicitation of
an offer to buy any security other than the Hong Kong Offer Shares offered by this prospectus
pursuant to the Hong Kong Public Offering. This prospectus may not be used for the purpose
of making, and does not constitute, an offer or a solicitation of an offer to subscribe for or
buy, any security in any other jurisdiction or in any other circumstances. No action has been
taken to permit a public offering of the Hong Kong Offer Shares in any jurisdiction other
than Hong Kong. The distribution of this prospectus for purposes of a public offering and the
offering and sale of the Hong Kong Offer Shares in other jurisdictions are subject to
restrictions and may not be made except as permitted under the applicable securities laws of
such jurisdictions pursuant to registration with or authorisation by the relevant securities
regulatory authorities or an exemption therefrom.
You should rely only on the information contained in this prospectus to make your
investment decision. We have not authorised anyone to provide you with information that is
different from what is contained in this prospectus. Any information or representation not
contained nor made in this prospectus must not be relied on by you 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, any of the
Underwriters, any of our or their respective directors, officers, employees, agents, or
representatives of any of them or any other parties involved in the Global Offering.
Information contained in our website, www.hxsupermarket.cn , does not form part of this
prospectus.
Page
Expected Timetable .................................................... i
Contents ............................................................. v
Summary ............................................................. 1
Definitions ............................................................ 2 6
Glossary of Technical Terms ............................................. 4 4
Forward-looking Statements ............................................. 4 6
Risk Factors .......................................................... 4 8
Waivers from Strict Compliance with the Listing Rules and Exemption
from Strict Compliance with the Companies (Winding Up and Miscellaneous
Provisions) Ordinance ................................................. 7 5
Information about this Prospectus and the Global Offering ................... 8 4
Directors, Supervisors and Parties Involved in the Global Offering ............. 9 0
CONTENTS
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Page
Corporate Information ................................................. 1 0 2
Industry Overview ..................................................... 1 0 5
Regulatory Overview ................................................... 1 3 5
History and Development ................................................ 1 6 0
Business .............................................................. 2 0 8
Directors, Supervisors and Senior Management .............................. 3 4 2
Relationship with Controlling Shareholders ................................. 3 7 5
Share Capital ......................................................... 3 8 3
Substantial Shareholders ................................................ 3 8 8
Financial Information ................................................... 3 9 3
Future Plans and Use of Proceeds ......................................... 4 7 7
Cornerstone Investor ................................................... 4 8 5
Underwriting .......................................................... 4 9 2
Structure of the Global Offering .......................................... 5 0 5
How to Apply for Hong Kong Offer Shares ................................. 5 1 7
Appendix I — Accountants’ Report ................................. I - 1
Appendix IIA — Unaudited Pro Forma Financial Information ............. IIA-1
Appendix IIB — Unaudited Preliminary Financial Information
for the year ended 31 December 2024 ................ IIB-1
Appendix III — Taxation and Foreign Exchange ........................ III-1
Appendix IV — Summary of Principal Legal and Regulatory Provisions .... I V - 1
Appendix V — Summary of the Articles of Association ................. V - 1
Appendix VI — Statutory and General Information ..................... VI-1
Appendix VII — Documents Delivered to the Registrar of Companies in
Hong Kong and Available on Display ................. VII-1
CONTENTS
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This summary aims to give you an overview of the information contained in this
prospectus. As this is a summary, it does not contain all the information that may be
important to you and is qualified in its entirety by, and should be read in conjunction with,
the full text of this prospectus. You should read the entire prospectus before you decide to
invest in the Offer Shares.
There are risks associated with any investment. Some of the particular risks associated
with an investment in the Offer Shares are set out in the section headed “Risk Factors” in
this prospectus. You should read that section carefully before you decide to invest in the Offer
Shares. V arious expressions used in this section are defined in the sections headed
“Definitions” and “Glossary of Technical Terms” in this prospectus.
OVERVIEW
We are a wholesaler of grains and oil headquartered in Y angzhou, with retail operations of
supermarket and convenience stores focusing on the central region of Jiangsu Province under our
brand “Ꮂ ” (Hongxinlong*). According to the Industry Report, we ranked second among
supermarket operators in Y angzhou in terms of sales in 2023 with a market share of
approximately 9.1%, the fifth among supermarket operators in the central region of Jiangsu
Province in terms of sales in 2023 with a market share of approximately 2.3%, and around the
twentieth among supermarket operators in Jiangsu province in terms of sales in 2023 with a
market share of approximately 0.4%. As at the Latest Practicable Date, we operated 51
supermarkets and 109 convenience stores in Jiangsu Province, out of which 49 supermarkets and
108 convenience stores are located in Y angzhou, and two supermarkets and one convenience
store are located in Taizhou. Apart from supermarkets and convenience stores, we also operate
two Malls located in Y angzhou, namely Jiangdu Mall* (۬and Hongxinlong Mall* (ڦ
ʕː ). Jiangdu Mall* (۬was opened in 1995 and covers an area of
approximately 6,000 square meters, and Hongxinlong Mall* (ʕː ) was opened in
2020 and it covers an area of approximately 3,000 square meters. For FY2021, FY2022, FY2023
and 9M2024, the revenue generated from our wholesale operations amounted to approximately
RMB525.3 million, RMB512.3 million, RMB686.5 million and RMB572.4 million, representing
approximately 36.7%, 38.6%, 49.0% and 56.9%, respectively. For the same years/period, the
revenue generated from our retail operations amounted to approximately RMB888.5 million,
RMB787.9 million, RMB688.6 million and RMB417.8 million, representing approximately
62.0%, 59.3%, 49.1% and 41.5% of our total revenue, respectively.
In terms of revenue contribution, our retail operations was our major revenue contributor
for FY2021 and FY2022, but our wholesale operations caught up to level with our retail
operations for FY2023 and overtook our retail operations for 9M2024. Such change in revenue
mix was mainly attributable to the impact of COVID-19 pandemic and cessation of sales of
tobacco products on our retail operations and the change in food consumption behaviour of
consumer and that we gradually focused more on our wholesale operations.
SUMMARY
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According to the Industry Report, the growth of online retail sales in the PRC is creating a
downward trend of offline retail sales. For instance, the share of online retail sales in total social
retail sales in the PRC rose from 26.06% at the end of 2019 to 32.72% at the end of 2023,
indicating a continuing increase in online retail sales, while at the same time the share of offline
retail sales in total social retail sales in the PRC declined from 73.94% at the end of 2019 to
67.28% at the end of 2023, indicating a downward trend of the offline retail sales. In light of the
increasing prevalence of e-commerce in the PRC, during the Track Record Period, we had
operated two mini programmes “ᒅ ” (Longhuiyigou*) and “Ꮂ຅˚༺ ” (Hongxinlong
Same Day Delivery*) for our Retail Stores and a mini programme “۬Jiangdu Mall*)
for our Malls. We have also cooperated with three e-commerce platforms, namely Douyin and
JD.com and WeChat for online sale and delivery of our products to our customers. However, a
substantial part of our revenue from our Retail Stores and Malls during the Track Record Period
was generated from general sales at our Retail Stores and Malls, and our revenue generated from
our mini programmes and e-commerce platforms only accounted for approximately 1.0%, 0.6%,
1.6% and 2.3% of our total revenue for FY2021, FY2022, FY2023 and 9M2024, respectively.
For the associate risk, please refer to the paragraph headed “Risk Factors - We may not be able
to successfully compete with online stores” in this prospectus.
OUR BUSINESS MODEL
Our business entails the following operations:
 Wholesale operations: We sell grains and oil, food products and other products to
resellers and other retail operators including other operators of supermarkets and
convenience stores as well as catering business operators. As at the Latest Practicable
Date, we have secured our district distribution rights with 15 suppliers in respect of
products of 29 brands or series of brands, including renowned brands of dairy
products, oil and liquors, out of which six for distribution in Jiangdu District,
Y angzhou, six for distribution in Y ancheng City, one for Tinghu Town of Y ancheng
City, one for Y angzhou City and one for distribution of liquor of a renowned brand in
designated store in Jiangdu District, Y angzhou. As at the Latest Practicable Date, we
had successfully renewed the district distribution agreements with ten suppliers and
we were attending to the renewal of the district distribution agreements with five
suppliers, which continued to supply products of the authorised brands to us. Our
Directors confirm that there is no impediments to the renewal of the district
distribution agreements of these five suppliers. The distribution rights under the
agreements are not expressed to be exclusive in nature. Pursuant to the agreements,
we generally enjoy better pricing terms than other distributors without such district
distributorship rights. We also sell garment and wooden products to overseas
customers and household appliances to distributors and retailers.
In respect of our wholesales, food was our major revenue contributor during the Track
Record Period. Sales of food accounted for approximately 90.6%, 85.6%, 91.7%,
93.3% and 93.1% of our revenue from wholesales for FY2021, FY2022, FY2023,
9M2023 and 9M2024, respectively. In particular, oil was our major food product for
SUMMARY
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our wholesale operations in term of revenue contribution. For FY2021, FY2022,
FY2023, 9M2023 and 9M2024, sales of oil accounted for (i) approximately 74.6%,
73.4%, 70.0%, 72.3% and 73.2% of our revenue from sales of food under our
wholesales, respectively; and (ii) approximately 67.7%, 62.8%, 64.2%, 67.5% and
68.2% of our revenue from wholesales, respectively.
Our Group commenced wholesale business since 2002 and has accumulated years of
experience in the wholesale market in the PRC. Oil has been the one of our food
products sold under our wholesale operations. During FY2021, we secured our district
distributorship rights in Y angzhou City with Yihai Kerry Food Marketing Co., Ltd.
Nanjing Branch* (ԯʱʮ̡ )( “ Yihai Kerry ”) for the
distribution of oil in which the Yihai Kerry is the brand owner. Yihai Kerry is a PRC
subsidiary of a company listed on the Shenzhen Stock Exchange engaging in oilseeds
crushing, edible oils refining, manufacturing of specialty fats and oleochemicals,
processing of corn, wheat and soybean, as well as the sustainable multi-stage
processing of rice, raw food materials, central kitchen and R&D in grains and oil
processing technology. According to publicly available information, Yihai Kerry group
is one of the largest grains and oil production and processing groups in the PRC, and
it held a dominant position with a market share of 39.0% in 2023, ranking first in the
PRC. Our Directors are of the view that our district distribution rights with Yihai
Kerry provided a solid foundation to our Group’s purchase of oil for our wholesale
operations and contributed to the growth of our wholesale operations during the Track
Record Period. Prior to securing our district distributorship rights with Yihai Kerry,
our Group purchased oil from more dispersed suppliers. For each of FY2022, FY2023
and 9M2024, Yihai Kerry became our largest supplier, and our purchase with Yihai
Kerry amounted to approximately RMB141.9 million, RMB282.3 million and
RMB284.5 million for FY2022, FY2023 and 9M2024, representing approximately
12.5%, 25.5% and 30.5% of our total purchase, respectively. As an illustration of the
significance of our collaboration with Yihai Kerry to the growth of our wholesale
operations, our revenue from sales of oil under our wholesales increased significantly
from approximately RMB311.0 million for FY2022 to approximately RMB436.1
million for FY2023, and increased significantly from approximately RMB293.3
million for 9M2023 to approximately RMB387.6 million for 9M2024. Of which, for
FY2022, FY2023 and 9M2024, our sales of oil purchased from Yihai Kerry accounted
for approximately 52.5%, 72.3% and 84.3% of our revenue from sales of oil under our
wholesales, respectively.
To the best knowledge of our Directors, Yihai Kerry granted similar district
distributorship rights in Y angzhou City to not more than three companies including us.
Despite our district distributorship rights with Yihai Kerry is not exclusive, our
Directors are of the view that our Group was able to expand our wholesales and
benefit from our district distributorship rights with Yihai Kerry primarily attributable
to the following factors: (i) we offered favourable credit terms to our wholesale
customers for oil. For example, for FY2022, FY2023 and 9M2024, our five largest
customers were wholesale customers in each year/period during the Track Record
SUMMARY
–3–


--- page 14 ---
Period (save for Customer G for FY2022 which was a bulk sales customer) in which
the products we sold to them were mainly oil we purchased from Yihai Kerry, and
these customers were given a credit period of up to 90 days. According to the Industry
Consultant, the credit terms for wholesalers of cooking oil in Jiangsu Province are
typically up to 60 days. Nevertheless, certain wholesalers with longer history or a
more established presence in the market may adopt more competitive credit policies
by offering more favorable terms in an effort to enhance their market share and
strengthen their market position. To the best knowledge of our Directors, our Group’s
credit terms are not least competitive than our competitors; (ii) in addition to oil and
to a less extent, we also sell other day-to-day food products such as grains and milk,
which we believe are essential for meeting the needs of our wholesale customers; and
(iii) instead of being only a wholesaler, our brand was boosted by retail operations
whereby we also operate supermarkets and convenience stores. According to the
Industry Report, we ranked second among supermarket operators in Y angzhou in terms
of sales in 2023 with a market share of approximately 9.1%, the fifth among
supermarket operators in the central region of Jiangsu Province in terms of sales in
2023 with a market share of approximately 2.3%, and around the twentieth among
supermarket operators in Jiangsu province in terms of sales in 2023 with a market
share of approximately 0.4%.
Our latest distributorship agreement with Yihai Kerry will expire in end of December
2025, and pursuant to it, the agreement remains effective until a renewed
distributorship agreement is entered into or if either party terminates the agreement.
Our distributorship agreement with Yihai Kerry is renewable annually, and our Group
has successfully renewed with Yihai Kerry since the first distributorship agreement
with it.
 Retail operations: We operate our supermarkets and convenience stores under our
brand “Ꮂ ” (Hongxinlong*), as well as two Malls, with geographical focus in the
central region of Jiangsu Province. We receive sales proceeds from (i) general sales to
consumers at our Retail Stores and Malls; and (ii) bulk sales to customers including
corporate and government entities. We also receive sales amounts for concessionaire
sales at our Retail Stores and Malls and charge the concessionaires certain percentage
of gross sale amounts or the agreed sales target, whichever is the higher, as
commissions.
Our supermarkets provide a wide range of daily consumer products to cater for the
daily needs of our customers, which could be broadly categorised as raw and fresh
food, grains and oil, non-staple food and household products, while our convenience
stores open for 16 or 24 hours a day to cater for quick purchases of everyday
consumable products. We adopt the strategies of standardised branding and store
design, centralised procurement, centralised inventory control and distribution as well
as unified management for our Retail Stores for the purpose of our chain store
management. These unities allow us to benefit from economies of scale, streamline
operations, and provide a predictable shopping experience for our customers.
SUMMARY
–4–


--- page 15 ---
We sell fashion and apparel, children’s wear, cosmetics and personal care, jewellery,
accessories, footwear, household appliances, consumer electronics, liquor and
miscellaneous products at our Malls. We endeavour to provide a wide range of
merchandise to cater for the demand for trendy and fashionable products.
 Rental operations: Ancillary to our retail operations, we lease some shop floor area
or shop premises in our Retail Stores and Malls to other retail operators like
restaurant, hotels and pharmacies, etc. and receive rental income.
 Supply and sales of meals: We operate a central kitchen to produce meals and deliver
to local corporates, schools or government entities. Leveraging our ability to source
and supply quality and fresh food ingredients, we also operate a central kitchen to
produce meals and deliver to local corporates, schools or government entities. As at
the Latest Practicable Date, our central kitchen was located at Y angzhou and had the
capacity to produce 10,000 sets of meals for lunch and 10,000 sets of meals for dinner
per day.
To support our wholesale and retail operations, apart from having two warehouses, we
operate a distribution centre in Jiangdu, Y angzhou to enable daily stocking, order picking and
packing in a high flow velocity. The distribution centre is equipped with our WMS system to
monitor real time inventory information and allow us to efficiently manage our inventory
control. The WMS system is linked to the ERP system adopted by our supermarkets and
convenience stores, which enables us to distribute products to our supermarkets and convenience
stores in a timely manner. The WMS system is also linked to our B2B supply chain system,
which facilitates us to place orders with our suppliers in an efficient and effective manner.
SUMMARY
–5–


--- page 16 ---
The table below sets forth a breakdown of our total revenue by operations during the Track
Record Period:
FY2021 FY2022 FY2023 9M2023 9M2024
RMB’000 % RMB’000 % RMB’000 % RMB’000 % RMB’000 %
(unaudited)
Wholesale operations:
– Sale of goods
 Wholesales (Note 1) 515,654 36.0 495,056 37.3 679,641 48.5 434,820 44.0 568,338 56.5
– Commission income from
sales and supply of
goods 9,639 0.7 17,283 1.3 6,860 0.5 6,405 0.6 4,073 0.4
Sub-total 525,293 36.7 512,339 38.6 686,501 49.0 441,225 44.6 572,411 56.9
Retail operations:
– Sale of goods
(Note 2)
 General sales: 751,615 52.5 613,209 46.2 616,813 44.0 472,480 47.8 362,049 36.0
– Supermarkets 446,875 31.2 390,094 29.4 383,592 27.4 306,482 31.0 222,588 22.1
– Convenience stores 113,165 7.9 117,664 8.9 93,848 6.7 70,296 7.1 39,650 4.0
– Malls 191,575 13.4 105,451 7.9 139,373 9.9 95,702 9.7 99,811 9.9
 Bulk sales 104,176 7.2 143,930 10.8 38,883 2.8 30,145 3.1 34,963 3.5
– Commission income from
concessionaire sales 32,718 2.3 30,748 2.3 32,894 2.3 21,795 2.2 20,752 2.1
Sub-total 888,509 62.0 787,887 59.3 688,590 49.1 524,420 53.1 417,764 41.6
Rental income from
operating lease 10,668 0.8 10,573 0.8 11,566 0.8 9,585 1.0 10,910 1.1
Supply and sales of meals 7,723 0.5 17,886 1.3 15,315 1.1 12,603 1.3 4,725 0.4
Total revenue 1,432,193 100 1,328,685 100 1,401,972 100 987,833 100 1,005,810 100
Notes:
1. Wholesales include the sale of grains and oil, food products and other products.
2. The revenue generated from our mini programmes and e-commerce platforms for Retail Stores and Malls
amounted to approximately RMB14.6 million, RMB6.6 million, RMB22.7 million and RMB22.8 million
for FY2021, FY2022, FY2023 and 9M2024, respectively.
SUMMARY
–6–


--- page 17 ---
3. Included in our total revenue was the insignificant amount of approximately RMB7.1 million, RMB1.3
million, RMB0.3 million and nil for FY2021, FY2022, FY2023 and 9M2024, respectively, attributable to
our sales to our franchisees and franchise fee. We have terminated the franchise scheme in 2023.
The following table sets forth the gross profit and gross profit margin of our wholesales,
general sales and bulk sales business segments (for which revenue is recognised on gross basis)
for the years/periods indicated:
FY2021 FY2022 FY2023 9M2023 9M2024
Gross
profit
Gross
profit
margin
Gross
profit
Gross
profit
margin
Gross
profit
Gross
profit
margin
Gross
profit
Gross
profit
margin
Gross
profit
Gross
profit
margin
RMB’000 % RMB’000 % RMB’000 % RMB’000 % RMB’000 %
(unaudited)
Wholesales 64,407 12.5 61,774 12.5 99,752 14.7 49,401 11.4 80,403 14.1
General sales: 145,048 19.3 130,255 21.2 138,102 22.4 113,630 24.0 83,578 23.1
– Supermarkets 106,278 23.8 96,539 24.7 99,012 25.8 84,946 27.7 58,298 26.2
– Convenience stores 15,862 14.0 16,556 14.1 15,145 16.1 11,730 16.7 8,603 21.7
– Malls 22,908 12.0 17,160 16.3 23,945 17.2 16,954 17.7 16,677 16.7
Bulk sales 21,449 20.6 46,776 32.5 8,113 20.9 6,202 20.6 8,160 23.3
Total 230,904 16.8 238,805 19.1 245,967 18.4 169,233 18.1 172,141 17.8
For FY2021, FY2022, FY2023, 9M2023 and 9M2024, we generated revenue of
approximately RMB1,432.2 million, RMB1,328.7 million and RMB1,402.0 million, RMB987.8
million and RMB1,005.8 million, respectively. Owing to our business nature (i.e. wholesale and
retail), cost of inventories constituted a significant portion of our cost of sales and at the same
time we had to incur selling and distribution costs and administrative and other operating
expenses to support our operations, we had thin profit margins during the Track Record Period.
Our net profit margin was approximately 2.4%, 3.8%, 3.7% and 2.4% for FY2021, FY2022,
FY2023 and 9M2024, respectively. For the associated risk, please refer to the paragraph headed
“Risk Factors – We have thin profit margins and we may not be able to sustain our historical
profitability and working capital position” in this prospectus. With a thin profit margin, we
would record net cash used in operating activities when we have negative movement in our
working capital (including inventories, trade and bills receivables and trade and bills payables)
outweighing our operating profit. For instance, we had net cash used in operating activities of
approximately RMB45.8 million, RMB11.1 million and RMB10.6 million for FY2021, 9M2023
and 9M2024, respectively, which were mainly driven by negative working capital movement
outweighing our operating profit. For the associated risk, please refer to paragraph headed “Risk
Factors – We had net cash used in operating activities for FY2021, 9M2023 and 9M2024 and we
may have difficulty meeting our payment obligations if we continue to record net cash used in
operating activities in the future” in this prospectus.
SUMMARY
–7–


--- page 18 ---
OUR PRODUCT PORTFOLIO
Through our wholesale and retail operations, we offer a wide range of daily consumer
products for our customers.
The following table sets forth the breakdown of our revenue from sales of goods which was
recognised on gross basis for the years/periods indicated:
FY2021 FY2022 FY2023 9M2023 9M2024
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(unaudited)
Wholesale Operations
Wholesales:
Non-food products 48,257 71,379 56,377 29,029 39,064
Food 467,397 423,677 623,264 405,791 529,274
Oil 348,887 310,971 436,086 293,345 387,592
Grains 15,282 24,697 33,425 15,662 39,202
Alcoholic beverages 56,550 50,237 97,661 51,976 60,063
Milk 42,976 33,111 34,314 26,374 26,900
Others 3,702 4,661 21,778 18,434 15,517
Sub-total 515,654 495,056 679,641 434,820 568,338
Retail Operations
Retail Stores and bulk sales:
Food (Note 1) 525,228 491,901 384,236 297,524 253,733
Non-food products 75,735 64,945 81,813 58,177 46,874
Tobacco products 67,708 99,158 54,788 54,788 –
Discount and coupon deduction (4,455) (4,316) (4,514) (3,566) (3,406)
664,216 651,688 516,323 406,923 297,201
Malls:
Electronic appliances 49,463 35,422 72,928 45,516 49,579
Fashion, apparel and children’s
wear 57,602 16,904 16,104 11,146 11,430
Gold, jewellery and accessories 61,619 43,751 43,732 34,226 35,357
Others
(Note 2) 25,501 10,874 9,652 6,535 5,331
Discount and coupon deduction (2,610) (1,500) (3,043) (1,721) (1,886)
191,575 105,451 139,373 95,702 99,811
Sub-total 855,791 757,139 655,696 502,625 397,012
Aggregate revenue from
wholesales, general sales
and bulk sales 1,371,445 1,252,195 1,335,337 937,445 965,350
SUMMARY
–8–


--- page 19 ---
Notes:
1. Food under our retail operations mainly include raw and fresh food, grains, oil and non-staple food.
2. Others include cosmetics, beauty products, stationeries and other groceries.
In respect of our wholesale operations, food was the most significant type of goods in
terms of revenue contribution during the Track Record Period. Our revenue from sales of food
increased significantly from approximately RMB423.7 million for FY2022 to approximately
RMB623.3 million for FY2023 and also increased significantly from approximately RMB405.8
million for 9M2023 to approximately RMB529.3 million for 9M2024. As advised by the
Industry Consultant, the increase in wholesale of food in the PRC in 2023 and 2024, particularly
as a result of recovery from COVID-19 pandemic, was driven by a combination of economic
recovery and pent-up demand. In particular, as COVID-19 restrictions were lifted, businesses
resumed normal operations, including resellers, retail operators such as operators of
supermarkets and convenience stores as well as catering business operators. This resurgence in
economic activity led to increased demand for wholesale food supplies as food service
establishments sought to replenish stock. In addition, during the lockdowns, businesses in the
PRC tended to postpone many purchases particularly in the food sector. As restrictions eased,
there was a tendency to purchase food supplies to meet the needs of retail operators and catering
business operators, thereby driving up wholesale sales. Furthermore, our increase in revenue
from sales of food under our wholesale operations for 9M2024 as a result of a change in food
consumption behaviour which in turn led to an increase in the demand for food ingredients (such
as grains and oil) at the wholesale level. As advised by the Industry Consultant, in 2024, there
has been a notable increase in the number of individuals dining out at restaurants, which was
mainly driven by several key factors including, (1) the gradual recovery of the general economy
in Y angzhou and the PRC has resulted in increased disposable income for consumers, enabling
greater spending on dining out; (2) restaurants are proactively seeking to attract customers in
order to recover from business losses incurred during the lockdowns; and (3) many people
appreciate the social aspect of dining out, which fosters gatherings with friends and family in a
lively atmosphere. As a result of the increasing number of individuals dining out at restaurants,
consumers have reduced their spending on food purchased from supermarkets at the retail level,
while at the same time the demand for food ingredients (such as grains and oil) at the wholesale
level increased.
In respect of our retail operations, food was the most significant type of goods in terms of
revenue contribution during the Track Record Period. For FY2021, FY2022, FY2023 and
9M2024, the percentage of revenue from sales of food to revenue from Retail Stores and bulk
sales was approximately 79.1%, 75.5%, 74.4% and 85.4%, respectively. The increase in such
percentage for 9M2024 was mainly driven by the nil revenue contribution from sales of tobacco
products for 9M2024 as a result of our cessation of sales of tobacco products. On 31 December
2023, our Group ceased the sales of tobacco products. For details of such cessation, please refer
to the paragraphs headed “History and Development – Cessation of sales of tobacco products
and disposal of tobacco product inventory assets” and “Business – Our product portfolio –
Cessation of sales of tobacco products and disposal of tobacco product inventory assets” in this
prospectus.
SUMMARY
–9–


--- page 20 ---
Our revenue from sales of food under our retail operations decreased from approximately
RMB525.2 million for FY2021 to approximately RMB491.9 million for FY2022, which was
mainly driven by the negative impact brought by the epidemic measures/lockdown for
COVID-19 in Y angzhou during 2022 in which our Retail Stores were required to shorten our
operating hours. Our revenue from sales of food under our retail operations further decreased to
approximately RMB384.2 million for FY2023, which was mainly driven by the negative impact
of change in shopping habits on our bulk sales following the restrictions were lifted with
COVID-19 pandemic largely behind in the PRC. For 9M2024, our revenue from sales of food
under our retail operations decreased to approximately RMB253.7 million from approximately
RMB297.5 million for 9M2023. Such decrease was mainly driven by the abovementioned change
in food consumption behaviour of consumer.
Driven by the decrease in revenue from sales of food and our cessation of sales of tobacco
products as disclosed above, our revenue from sales of goods (which was recognised on gross
basis) under our retail operations decreased from approximately RMB502.6 million for 9M2023
to approximately RMB397.0 million for 9M2024.
Our revenue from sales of electronic appliances increased significantly from approximately
RMB35.4 million for FY2022 to approximately RMB72.9 million for FY2023. As advised by the
Industry Consultant, as the restrictions were lifted with COVID-19 pandemic largely behind in
the PRC, consumers in the PRC were eager to spend on electronic appliances, leading to a surge
in sales as people sought to upgrade or replace older devices, and in particular, with more time
spent at home during lockdowns, many consumers in the PRC tended to take on home
improvement projects.
Our revenue from sales of fashion, apparel and children’s wear and gold, jewellery and
accessories under our retail operations decreased significantly from approximately RMB57.6
million and RMB61.6 million for FY2021, respectively, to approximately RMB16.9 million and
RMB43.8 million for FY2022, respectively. As advised by the Industry Consultant, the impact of
lock-down in the PRC had led to a decline in the sales of fashion, apparel and children’s wear
and gold, jewellery and accessories in the PRC, primarily due to the priority of consumers in the
PRC to focus their spending on essentials as well as the closing down of physical retail and
department stores. In particular, (i) the need to stay at home and the unavailability of fitting
rooms had hindered the sales of fashion, apparel and children’s wear; and (ii) consumers tended
to purchase luxury goods such as gold and jewellery physically in store, and were more cautious
in buying luxury items in view of the uncertainty on the economic recovery after COVID-19
pandemic.
SUMMARY
–1 0–


--- page 21 ---
OUR CUSTOMERS
The customers of our wholesale operations mainly include resellers and other retail
operators including other operators of supermarkets and convenience stores as well as catering
business operators.
The customers of our retail operations mainly consist of general sale customers and bulk
sales customers. General sale customers are primarily individuals, usually local residents living
in the communities, who come to our Retail Stores or Malls in person to shop and purchase.
Bulk sale customers include corporate and government entities, which purchase products in large
quantities.
The customers for our meals are local corporates, schools or government entities.
For FY2021, FY2022, FY2023 and 9M2024, our revenue attributable to our largest
customer in each year/period during the Track Record Period accounted for approximately 5.7%,
12.4%, 16.2% and 11.2% of our total revenue, respectively, while our revenue attributable to our
five largest customers in each year/period during the Track Record Period in aggregate
accounted for approximately 18.8%, 26.8%, 31.8% and 28.5% of our total revenue, respectively.
For further details of our five largest customers in each year/period during the Track
Record Period, please refer to the paragraph headed “Business – Our customers” in this
prospectus.
OUR SUPPLIERS
Our suppliers include manufacturers, suppliers and distributors of food products and
merchandise.
For FY2021, FY2022, FY2023 and 9M2024, our purchase from our largest supplier in each
year/period during the Track Record Period accounted for approximately 7.5%, 12.5%, 25.5%
and 30.5% of our total purchase costs, respectively, while our purchase from our five largest
suppliers in each year/period during the Track Record Period in aggregate accounted for
approximately 28.0%, 35.9%, 42.4% and 50.0% of our total purchase costs, respectively.
For further details of our five largest suppliers in each year/period during the Track Record
Period, please refer to the paragraph headed “Business – Our suppliers” in this prospectus.
SUMMARY
–1 1–


--- page 22 ---
PRICING POLICY
For our wholesale operations, when setting the wholesale price, we also consider the type
of the merchandise, the sales volume, the profit margin under the prevailing market conditions
and indicative price list from our suppliers. For our retail operations, we have adopted a
“cost-plus” pricing policy, pursuant to which we set target prices with different profit margins
over our products taking into consideration our costs of goods sold and the associated
operational costs. We would also conduct market research from time to time and compare prices
of similar products offered by our competitors, adjust our retail prices of our products based on
the prevailing market trends, sourcing prices, seasonality and the pricing strategy as determined
by our management.
COMPETITIVE LANDSCAPE
According to the Industry Report, competitions in the PRC markets of supermarket retail,
convenience store, department store and prepared food such as ready meals, pre-cooked or
semi-cooked foods are fierce despite that the levels and extents of market concentration in the
respective markets are different. While the market concentration in the supermarket retail
industry is relatively high, there are many brands or companies in the markets of convenience
store, department store and prepared food, resulting in a relatively low market concentration.
The grains and oil wholesale industry in China has shown a trend of centralization to a certain
extent. As of June 2024, there were a total of 317,600 grains and oil wholesale enterprises in
China. Among these, Jiangsu Province accounted for approximately 5.1%, totaling 16,100
enterprises. Within Jiangsu Province, central region of Jiangsu Province accounted for the
approximately 15.3%. We ranked (i) in the supermarket retail industry, the second in Y angzhou
with a market share of approximately 9.1%, the fifth in the central region of Jiangsu Province
with a market share of approximately 2.3%, and around the twentieth among supermarket
operators in Jiangsu province in terms of sales in 2023 with a market share of approximately
0.4%; (ii) in the convenience store market, the fourth in Y angzhou with a market share of
approximately 6.1%; (iii) in the department store market, the fifth in Y angzhou with a market
share of approximately 6.2%; and (iv) in the prepared food market, the fourth in Y angzhou with
a market share of approximately 1.21%, in terms of sales in the respective markets in 2023.
Please refer to the section headed “Industry Overview” and the paragraph headed “Business –
Market and competition” in this prospectus for further details on the competitive landscape,
analysis on market barriers, market opportunities and challenges of the supermarket retail
industry, convenience store market, department store market, prepared meals and grains and oil
wholesale markets.
SUMMARY
–1 2–


--- page 23 ---
COMPETITIVE STRENGTHS
We believe that we have the following competitive strengths including: (i) our brand “ڦ
Ꮂ” (Hongxinlong*) is a recognised brand in Jiangsu Province; (ii) our retail operations and
wholesale operations bring complementary benefits and synergies to each other; (iii) we have
various procurement channels to secure stable supply of products; (iv) we have an established
supply chain management systems; (v) we have an experienced and professional management
team; and (vi) we adopt an approach that aims to maintain satisfactory customer services to our
customers. For further details, please refer to the paragraph headed “Business – Our competitive
strengths” in this prospectus.
BUSINESS STRATEGIES
The principal business objectives of our Group are to further strengthen our market
position, increase our market share and capture the growth in the PRC retail industry. In
furtherance of these objectives, we plan to adopt the following strategies: (i) expanding our
presence and number of Retail Stores; (ii) expanding our warehousing capacity by establishing a
new distribution centre; (iii) expanding our processing capacity of meals by establishing a new
central kitchen; and (iv) enhancing our ERP system and infrastructure systems to improve our
operational efficiency.
FOOD SAFETY
For FY2021, FY2022, FY2023 and 9M2024, our revenue from sales of food (including
grains and oil, food products, etc.) accounted for approximately 69.3%, 68.9%, 71.9% and
77.9% of our total revenue, respectively. As such, food safety is a critical concern for our
business. As a seller, we shall be responsible for establishing and implementing a system for
inspecting and accepting incoming goods, verifying product qualification certificates and other
labels of food products. For details of the relevant laws and regulations concerning food safety,
please refer to the paragraph headed “Regulatory Overview – Food safety” in this prospectus.
We have adopted food safety measures including (i) checking the certifications for food
safety and quality provided by the food suppliers during the selection of suppliers; (ii) checking
the product information during the procurement process; (iii) conducting quality checks on food
products upon delivery to us; (iv) monitoring logistics and warehouse conditions; and (v)
checking food expiry and disposal of expired or rotten food products. For details, please refer to
the paragraph headed “Business – Food safety” in this prospectus. In 2022, there was an incident
in which we failed to verify the authenticity of the batch number, trademark registration and
labelling information in respect of the vermicelli supplied by us to a local government authority
at Hongqiao Town, Minhang District, Shanghai, the PRC (being Customer G). As a result, in
2022, we were ordered by the authority to pay fines of RMB370,000, which were duly settled in
November 2022. For details, please refer to the paragraph headed “Business – Food safety –
Immaterial food safety incidents” in this prospectus.
SUMMARY
–1 3–


--- page 24 ---
RISK FACTORS
Potential investors are advised to carefully read the section headed “Risk Factors” in this
prospectus before making any investment decision in the Offer Shares. Some of the more
particular risk factors include the following: (i) our business might be adversely affected if we
could not identify and secure desirable locations for our Retail Stores; (ii) our success depends
on our ability to respond effectively to changes in customer preferences and needs; (iii) we may
not be able to successfully compete with online stores; (iv) we have thin profit margins and we
may not be able to sustain our historical profitability and working capital position; (v) we had
net cash used in operating activities for FY2021, 9M2023 and 9M2024, and we may have
difficulty meeting our payment obligations if we continue to record net cash used in operating
activities in the future; (vi) we rely on the performance of our Retail Stores and Malls which can
be adversely affected by factors which might be beyond our control; (vii) our wholesale
operations rely on sales of oil from Yihai Kerry with whom our district distributorship rights are
not exclusive and may be subject to revocation or termination; (viii) we may not be able to
successfully implement our business plans and our growth prospects may be restricted; (ix) if we
fail to obtain sufficient funding for our expansion plans, our business and growth prospects may
be adversely affected; and (x) our plan of expansion involving acquisition of land and
constructing a new central kitchen and a new distribution centre may require substantial capital
expenditure, and result in increase in depreciation that may adversely affect our financial results
and conditions.
IMPACT OF THE OUTBREAK OF COVID-19 ON OUR OPERATIONS
Due to the emergence of the COVID-19 pandemic in the PRC in early 2020, the PRC
government imposed various lockdown measures during the Track Record Period (FY2021 and
FY2022) to contain its spread. Such measures included but not limited to, stay-at-home orders
for residents, with only one person per household allowed to leave for essential tasks every few
days, massive testing for the whole population and contact tracing efforts to identify and isolate
close contacts of positive cases. These stringent measures imposed restrictions on residents’
mobility which in turn had adverse impacts on the number of customers visiting and shopping in
our Retail Stores and Malls and thus our revenue generated therefrom. Besides, our operations
experienced material disruptions as a result of (i) temporary closure of certain of our Retail
Stores and Malls during FY2021 and FY2022; and (ii) shortening of the opening hours of our
Retail Stores and Malls. For instance, during FY2021, over 20 of our Retail Stores and our
Malls experienced temporary closure in August and September 2021 and the temporary closure
in FY2021 for each of the relevant Retail Stores and Malls lasted for no more than 45 days. In
addition, towards the end of FY2022 when the restriction was initially lifted, the infection cases
significantly increased which adversely affected the number of customers visiting and shopping
in our Retail Stores and Malls over the high-season end of year sales, despite that only one of
our Retail Stores was temporarily closed for 7 days due to the restrictions imposed by the PRC
government during the end of FY2022. As a result of these, our revenue from general sales
decreased significantly from approximately RMB751.6 million for FY2021 to approximately
RMB613.2 million for FY2022. Apart from the above, delivery of products from and to us was
SUMMARY
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adversely affected as a result of restrictive transportation measures such as heavy restriction on
travelling from and to Y angzhou and suspension of public transportation within Y angzhou.
Despite these challenges, we managed to maintain a relatively stable gross profit from sales
of goods at approximately RMB230.9 million and RMB238.8 million for FY2021 and FY2022,
respectively, which was primarily contributed by our bulk sales, the revenue and gross profit of
which increased from approximately RMB104.2 million and RMB21.4 million for FY2021,
respectively, to approximately RMB143.9 million and RMB46.8 million for FY2022. As advised
by the Industry Consultant, during the lock-downs in the PRC, driven by uncertainty about
future availability and the desire to minimise shopping trips, consumers in the PRC exhibited a
stock piling behaviour as they tended to rush to stockpile essentials such as rice, oil, canned
foods and hygiene products, which contributed to the increase in bulk sales in the PRC market.
During the COVID-19 pandemic, we assisted in procuring and distributing essential daily
necessities when various lockdown measures were imposed by the PRC government to ensure
prevention and control of spread, and were recognised as a (i) Key Supply Unit for Prevention
and Control in Jiangdu District, Y angzhou City* (ღԶᏐఊЗ )b yt h e
Office of the Command for the Prevention and Control of the Novel Coronavirus Pneumonia
Epidemic in Jiangdu District, Y angzhou City* (౨௅
܃in 2020; and (ii) Key Enterprise for Ensuring People’s Livelihood Supply in Y angzhou
City* (ᓃΆุ ) by the Commerce Bureau of Y angzhou City* ( ౮ψ̹ਠਕ҅ )
and Key Enterprise for Ensuring People’s Livelihood Supply in Y angzhou City* (ڭ
ᓃΆุ ) by the Command for the Prevention and Control of the Novel Coronavirus
Pneumonia Epidemic in Jiangdu District, Y angzhou City* (ઋԣછʈЪ
౨௅ ) in 2021.
In April 2022, a white list was established by Shanghai Municipal Commission of
Commerce (ึ ) for enterprises providing daily necessities during the COVID-19
pandemic in Shanghai to ensure effective epidemic prevention and the guarantee of daily
necessities. Due to the normalisation of production and daily life order and resumption of
business operations in Shanghai, the white list had ceased to be updated and used since 1 June
2022 and all information contained thereon is no longer available for inspection.
SUMMARY
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SUMMARY OF KEY FINANCIAL INFORMATION
Summary of the consolidated statements of profit or loss
FY2021 FY2022 FY2023 9M2023 9M2024
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(unaudited)
Revenue 1,432,193 1,328,685 1,401,972 987,833 1,005,810
Gross profit 282,685 302,138 301,376 209,881 208,434
Profit before taxation 47,696 68,487 70,058 41,796 35,102
Profit for the year/period 35,080 51,065 51,602 30,528 24,078
Non-IFRS financial measure
To supplement our consolidated financial statements which are presented in accordance
with IFRSs, we also presented the adjusted net profit (Non-IFRS measure) and adjusted net
profit margin (Non-IFRS measure) as additional financial measures, which are not required by,
or presented in accordance with IFRSs. We believe that the presentation of non-IFRS financial
measures when shown in conjunction with the corresponding IFRS financial measures provides
useful information to potential investors and management in facilitating a comparison of our
operating performance from period to period. Such non-IFRS financial measures allow investors
to consider matrices used by our management in evaluating our performance.
The use of non-IFRS financial measures has limitations as an analytical tool, and investors
should not consider these in isolation from, or as a substitute for, or superior to, analysis of our
results of operations or financial conditions as reported in accordance with IFRSs. In addition,
the non-IFRS financial measures may be defined differently from similar terms used by other
companies.
We adjusted for certain items as our non-IFRS financial measures, in order to provide
potential investors with an overall and fair understanding of our operating results and financial
performance, especially in making period-to-period comparisons of, and assessing the profile of,
our operating and financial performance. Listing expenses are mainly expenses related to the
Listing and are added back because they were incurred only for the purposes of the Listing.
SUMMARY
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Adjusted net profit (Non-IFRS measure)
We defined adjusted net profit (Non-IFRS measure) as net profit for the year adjusted by
adding back Listing expenses. The table below sets forth the adjusted net profit (Non-IFRS
measure) and the adjusted net profit margin (Non-IFRS measure) for each respective year/period
during the Track Record Period:
FY2021 FY2022 FY2023 9M2023 9M2024
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(unaudited)
Profit for the year/period 35,080 51,065 51,602 30,528 24,078
Adjusted:
Listing expenses – 1,747 3,449 3,125 7,276
Adjusted net profit
(Non-IFRS measure) for
the year/period 35,080 52,812 55,051 33,653 31,354
Adjusted net profit margin
(Non-IFRS measure) 2.4% 4.0% 3.9% 3.4% 3.1%
The decrease in our revenue of approximately RMB103.5 million from FY2021 to FY2022
was mainly driven by the decrease in our revenue from general sales in Retail Stores and Malls
due to the epidemic measures/lockdown due to COVID-19. In particular, the sales of our key
Retail Stores and Malls during our high-season period such as Chinese New Y ear period and the
period around National Day were generally affected. Our revenue increased from approximately
RMB1,328.7 million for FY2022 to approximately RMB1,402.0 million for FY2023, and
increased from approximately RMB987.8 million for 9M2023 to approximately RMB1,005.8
million for 9M2024. The increase during FY2023 was mainly driven by the increase in revenue
contributed by our five largest customers in 2023, which are mainly our wholesale customers.
Our revenue from wholesales increased during FY2023 and 9M2024 mainly driven by the
increase in sales of food.
Our profit before taxation increased from approximately RMB47.7 million for FY2021 to
approximately RMB68.5 million for FY2022. Such increase was mainly contributed by the
increase in gross profit margin from approximately 19.7% for FY2021 to approximately 22.7%
for FY2022. Our profit before taxation decreased from approximately RMB41.8 million for
9M2023 to approximately RMB35.1 million for 9M2024, mainly due to the impact of Listing
expenses.
For details, please refer to the paragraph headed “Financial Information – Principal
components of the consolidated statements of profit or loss” in this prospectus.
SUMMARY
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Summary of the consolidated statements of financial position
As at 31 December
As at
30 September
20242021 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000
Non-current assets 412,336 397,990 377,772 374,343
Current assets 764,664 933,549 1,029,364 1,025,631
Current liabilities 683,875 796,414 819,983 745,206
Non-current liabilities 95,614 88,345 93,812 136,293
Net current assets 80,789 137,135 209,381 280,425
Net assets 397,511 446,780 493,341 518,475
Our current assets increased by approximately RMB168.8 million from approximately
RMB764.7 million as at 31 December 2021 to approximately RMB933.5 million as at 31
December 2022. Such increase was mainly driven by the increase in our prepayments, deposits
and other receivables during FY2022. Our current assets further increased to approximately
RMB1,029.4 million as at 31 December 2023, which was mainly driven by the increase in our
cash and cash equivalents due to net cash generated from operating and financing activities. Our
current assets decreased slightly to approximately RMB1,025.6 million as at 30 September 2024,
which was primarily driven by the decrease in our cash and cash equivalents due to net cash
used in operating activities.
Our current liabilities increased by approximately RMB112.5 million from approximately
RMB683.9 million as at 31 December 2021 to approximately RMB796.4 million as at 31
December 2022 mainly due to the increase in our trade and bills payables. Our current liabilities
decreased by approximately RMB74.8 million from approximately RMB820.0 million as at 31
December 2023 to approximately RMB745.2 million as at 30 September 2024 mainly due to the
decrease in our trade and bills payables and bank loans and other borrowings.
Overall, our net current assets increased throughout the Track Record Period.
Our net assets increased throughout the Track Record Period, from approximately
RMB397.5 million as at 31 December 2021 to approximately RMB446.8 million as at 31
December 2022 to approximately RMB493.3 million as at 31 December 2023 to approximately
RMB518.5 million as at 30 September 2024. Such increase was mainly driven by our net profit
generated from each year/period during the Track Record Period while we have not paid or
declared dividends during the Track Record Period.
For further details, please refer to the paragraph headed “Financial Information –
Description of certain line items in the consolidated statements of financial position” in this
prospectus.
SUMMARY
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Summary of the consolidated statements of cash flows
FY2021 FY2022 FY2023 9M2023 9M2024
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(unaudited)
Operating profit before changes in
working capital 136,890 153,365 163,623 117,466 109,855
Changes in working capital (164,601) (72,463) (75,001) (111,558) (105,735)
Cash (used in)/generated from
operations (27,711) 80,902 88,622 5,908 4,120
Income tax paid (18,116) (10,867) (19,403) (17,051) (14,745)
Net cash (used in)/generated from
operating activities (45,827) 70,035 69,219 (11,143) (10,625)
Net cash used in investing activities (24,749) (25,813) (34,536) (32,127) (26,680)
Net cash generated from/(used in)
financing activities 78,375 (65,498) 35,729 (6,375) (50,681)
Net increase/(decrease) in cash and cash
equivalents 7,799 (21,276) 70,412 (49,645) (87,986)
Effect of foreign exchange rate changes (1,565) 2,377 327 (214) (448)
Cash and cash equivalents at beginning
of year/period 178,152 184,386 165,487 165,487 236,226
Cash and cash equivalents at end of
year/period 184,386 165,487 236,226 115,628 147,792
We recorded net cash used in investing activities for all years/periods presented. During the
Track Record Period, save for FY2022, 9M2023 and 9M2024, we recorded net cash generated
from financing activities. For FY2022, 9M2023 and 9M2024, the net cash used in financing
activities was mainly due to net repayment of bank loans and other borrowings. During the
Track Record Period, save for FY2021, 9M2023 and 9M2024, we recorded net cash generated
from operating activities. For FY2021, the net cash used in operating activities for FY2021 of
approximately RMB45.8 million primarily reflected the negative movements in change in
working capital mainly driven by the increase in inventories of approximately RMB84.4 million
primarily driven by the increase of our revenue from sales of goods from the year ended 31
December 2020 to FY2021. For 9M2024, the net cash used in operating activities of
approximately RMB10.6 million primarily reflected the negative movements in change in
working capital mainly driven by the increase in trade and other receivables of approximately
RMB37.9 million, the increase in inventories of approximately RMB51.3 million and decrease in
trade and other payables of approximately RMB18.7 million. For the associated risk, please refer
SUMMARY
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to paragraph headed “Risk Factors – We had net cash used in operating activities for FY2021,
9M2023 and 9M2024 and we may have difficulty meeting our payment obligations if we
continue to record net cash used in operating activities in the future” in this prospectus.
For further details of our cash flows analysis, please refer to the paragraph headed
“Financial Information – Liquidity and capital resources – Cash flows” in this prospectus.
Key financial ratios
As at/For the years ended 31 December
As at/For the
nine months
ended
30 September
20242021 2022 2023
Gross profit margin (1) 19.7% 22.7% 21.5% 20.7%
Net profit margin (2) 2.4% 3.8% 3.7% 2.4%
Return on equity (3) 8.8% 11.4% 10.5% 6.2%
Return on assets (4) 3.0% 3.8% 3.7% 2.3%
Current ratio (5) 1.1 1.2 1.3 1.4
Quick ratio (6) 0.7 0.8 0.9 1.0
Gearing ratio (7) 78.2% 70.1% 68.8% 83.3%
Interest coverage ratio (8) 3.6 4.2 4.5 3.2
Notes:
(1) Gross profit margin represents gross profit for the year/period divided by total revenue for the respective
year/period.
(2) Net profit margin represents profit for the year/period divided by total revenue for the respective year/period.
(3) Return on equity represents profit for the year/period divided by total equity as at the end of that year/period.
For the purpose of illustration, return on equity for 9M2024 is calculated on an annualised basis, and may not
represent the ratio for the year ended 31 December 2024.
(4) Return on assets represents profit for the year/period divided by total assets as at the end of that year/period. For
the purpose of illustration, return on assets for 9M2024 is calculated on an annualised basis, and may not
represent the ratio for the year ended 31 December 2024.
(5) Current ratio represents total current assets divided by total current liabilities as at the relevant year/period end.
(6) Quick ratio represents total current assets less inventories divided by total current liabilities as at the relevant
year/period end.
(7) Gearing ratio represents total bank loans and other borrowings and lease liabilities, less cash and cash
equivalents, divided by total equity as at the relevant year/period end.
(8) Interest coverage ratio represents profit before net finance costs and taxation divided by net finance costs for the
relevant year/period.
SUMMARY
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During the Track Record Period, our current ratio was above 1.0 while our quick ratio
(except as at 30 September 2024) was below 1.0 as inventories were our material assets, which
constituted approximately 24.3%, 24.3%, 18.9% and 22.7% of our total assets as at 31 December
2021, 31 December 2022, 31 December 2023 and 30 September 2024, respectively. During the
Track Record Period, we did not have prolonged average inventory turnover days. For FY2021,
FY2022 and FY2023, our average inventory turnover days were approximately 77.5 days, 108.5
days and 97.9 days, respectively. For 9M2024, our annualised average inventory turnover days
was approximately 100.2 days.
For further details, please refer to the paragraph headed “Financial Information – Selected
financial ratios” in this prospectus.
CONTROLLING SHAREHOLDERS
Pursuant to the Acting-in-concert Confirmation, Mr. Gao, Ruichuanda Investment (which is
in turn wholly-owned by Mr. Gao), Mr. Y uan and Mr. Zhang confirm that they have been acting
in concert in the management and operation of our Group since January 2019, and they have
agreed to continue to act in concert and reach consensus on any proposal related to the daily
management and operation of our Group presented to the general meeting of the Shareholders of
our Company for voting.
As at the Latest Practicable Date, Mr. Gao is able to exercise approximately 29.68% of the
voting rights in our Company through (i) his personal capacity as to approximately 16.36%; and
(ii) Ruichuanda Investment as to approximately 13.32%. Mr. Y uan is able to exercise
approximately 6.95% voting rights in our Company through his personal capacity. Mr. Zhang is
able to exercise approximately 4.85% voting rights in our Company through his personal
capacity. As such, as at the Latest Practicable Date, the Concert Parties are able to exercise
voting rights of approximately 41.48% of the total issued shares of our Company.
Immediately following the completion of the Global Offering (assuming that the
Over-allotment Option is not exercised), the Concert Parties will be entitled to exercise voting
rights of approximately 31.11% of the total issued shares of our Company, and are considered as
our Controlling Shareholders upon Listing. Accordingly, Mr. Gao, Ruichuanda Investment, Mr.
Y uan and Mr. Zhang are a group of Controlling Shareholders acting in concert.
PRE-IPO INVESTMENTS
From June 2019 to September 2020, our Company had entered into several rounds of
Pre-IPO Investments with our Pre-IPO Investors, which include Jiangdu Fund, Jiequan Fund,
Minsheng Agricultural, Batch A Investors and Batch B Investors. For further details of the
Pre-IPO Investments and the identity and background of the Pre-IPO Investors, please refer to
the paragraph headed “History and Development – Pre-IPO Investments” in this prospectus.
SUMMARY
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OFFERING STATISTICS
Number of the Offer Shares : 53,562,000 H Shares (subject to the Over-allotment
Option)
Offer Price : Not more than HK$3.00 per Offer Share and is expected to
be not less than HK$2.50 per Offer Share, plus brokerage
of 1.0%, SFC transaction levy of 0.0027%, AFRC
transaction levy of 0.00015% and Stock Exchange trading
fee of 0.00565%
Based on an
Offer Price of
HK$2.50 Per
Offer Share
Based on an
Offer Price of
HK$3.00 Per
Offer Share
HK$ HK$
Market capitalisation
(Note 1) 535,617,275 642,740,730
Unaudited pro forma adjusted net tangible assets
attributable to the equity shareholders of the Company
per Share
(Note 2) 3.03 3.15
Notes:
1. The calculation of the market capitalisation of the Shares is based on 214,246,910 H Shares in issue and H
Shares to be issued immediately after completion of the Global Offering and taking no account of any Shares
which may be issued pursuant to the exercise of the Over-allotment Option.
2. The unaudited pro forma adjusted net tangible assets attributable to the equity shareholders of the Company per
Share is arrived at after the above adjustment and on the basis that a total of 214,246,910 Shares were in issue
immediately following the completion of the Global Offering assuming the Global Offering had been completed
on 30 September 2024 without taking into account of any Shares which may be issued upon the exercise of the
Over-allotment Option.
3. No adjustment has been made to the unaudited pro forma adjusted net tangible assets attributable to equity
shareholders of the Company to reflect our trading results or other transactions entered into subsequent to 30
September 2024.
Please refer to Appendix IIA to this prospectus for the bases and assumptions in calculating the figures.
SUMMARY
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LISTING EXPENSES
The total amount of Listing expenses in connection with the Global Offering, including
underwriting commissions, is estimated to be approximately RMB38.9 million (equivalent to
approximately HK$42.2 million) (based on the mid-point of the indicative Offer Price range),
representing approximately 28.6% of our estimated gross proceeds from the Global Offering
(based on the mid-point of the indicative Offer Price range and assuming the Over-allotment
Option is not exercised). We estimate that our Listing expenses will comprise (i)
underwriting-related expenses, including underwriting commission, of approximately RMB8.1
million; and (ii) non underwriting-related expenses of approximately RMB30.8 million,
including (a) fees paid and payable to legal advisers and reporting accountant of approximately
RMB17.6 million; and (b) other fees and expenses including sponsor fee of approximately
RMB13.2 million. The Listing expenses of: (i) approximately RMB14.8 million (equivalent to
approximately HK$16.1 million) is directly attributable to the issue of the Offer Shares and is to
be accounted for as a deduction from equity in accordance with the relevant accounting
standard; and (ii) approximately RMB24.1 million (equivalent to approximately HK$26.1
million) has been or is to be charged to the consolidated statements of profit or loss, of which
(a) nil, approximately RMB1.7 million, RMB3.4 million and RMB7.3 million have been charged
for FY2021, FY2022, FY2023 and 9M2024, respectively; and (b) nil and approximately
RMB11.7 million is expected to be charged for the three months ended 31 December 2024 and
the three months ending 31 March 2025, respectively, prior to or upon Listing. Expenses in
relation to the Listing are non-recurring in nature.
DIVIDENDS
No dividend has been paid or declared by our Company during the Track Record Period
and up to the date of this prospectus.
Currently, we do not have a formal dividend policy or a pre-determined dividend
distribution ratio. Any dividends we pay will be determined at the absolute discretion of our
Board, taking into account of factors including our actual and expected results of operations,
cash flow and financial position, general business conditions and business strategies, expected
working capital requirements and future expansion plans, legal, regulatory and other contractual
restrictions, and other factors that our Board deems to be appropriate. Our Shareholders may
approve, in a general meeting, any declaration of dividends, which must not exceed the amount
recommended by our Board.
NON-COMPLIANCE
During the Track Record Period and up to the Latest Practicable Date, our Group was not
involved in any non-compliance incidents save as (i) failure to obtain certain land use right
certificates and property ownership certificates; (ii) title defects and non-registration of our
leased properties; (iii) failure to complete Fire Safety Approvals; and (iv) non-compliance with
social insurance and housing provident fund contributions. For details, please refer to the
paragraph headed “Business – Non-compliance” in this prospectus.
SUMMARY
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FUTURE PLAN AND USE OF PROCEEDS
We estimate that the net proceeds we will receive from the Global Offering (after deducting
underwriting commissions, fees and anticipated expenses payable by us in connection with the
Global Offering) will be approximately HK$105.1 million, assuming an Offer Price of HK$2.75
per Share, being the mid-point of the Offer Price range stated in this prospectus and the
Over-allotment Option is not exercised. We intend to apply these net proceeds as follows: (i)
approximately RMB30.0 million or 30.9% will be used for the opening of new Retail Stores; (ii)
approximately RMB40.0 million or 41.2% will be used for establishing a new distribution
centre; (iii) approximately RMB26.0 million or 26.8% will be used for establishing a new
central kitchen; and (iv) approximately RMB1.1 million or 1.1% will be used for enhancing our
ERP system and infrastructure systems to improve our operational efficiency.
CSRC FILING
On 20 February 2025, the CSRC issued a notification on our Company’s completion of the
PRC filing procedures for the Listing and the Global Offering and the Conversion of Domestic
Unlisted Shares into H Shares. A copy of this notification can be found on the official website
of the CSRC. As advised by our PRC Legal Advisers, our Company has completed all necessary
filings with the CSRC in the PRC in relation to the Global Offering and the Listing, and upon
completion of overseas offering and listing, we shall report information on overseas offering and
listing pursuant to the provisions of relevant guidelines.
RECENT DEVELOPMENT AND NO MATERIAL ADVERSE CHANGE
Our business operation remained stable after the Track Record Period and up to the date of
this prospectus and there was no material adverse change to our business and its industry, market
or regulatory environment. Subsequent to the Track Record Period and up to the date of this
prospectus, wholesale and retail operations continued to be our main stream of revenue. In
addition, (i) as at the Latest Practicable Date, the number of our supermarkets remained stable at
51 and the number of our convenience stores increased two to 109, respectively; and (ii)
subsequent to the Track Record Period and up to the Latest Practicable Date, we had commenced
business relationship with not less than 30 wholesale customers and 10 suppliers.
Based on our unaudited financial information for the year ended 31 December 2024 as set
out in Appendix IIB to this prospectus, our Directors expect that there will be a decrease in our
net profit for the year ended 31 December 2024 as compared to that for FY2023, which was
primarily attributable to (i) the decrease in our revenue from our retail operations mainly driven
by the decrease in revenue from sales of food as a result of the change in food consumption
behaviour of consumer and our cessation of sales of tobacco products as disclosed above; and
(ii) the increase in Listing expenses, and was partially offset by the increase in our revenue from
our wholesale operations mainly driven by the increase in revenue from sales of food as a result
of the change in food consumption behaviour of consumer as disclosed above. For further
details, please refer to the section headed “Unaudited Preliminary Financial Information for the
year ended 31 December 2024” in Appendix IIB to this prospectus. The unaudited financial
SUMMARY
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information in respect of our consolidated statement of financial position as at 31 December
2024, our consolidated statement of profit or loss, our consolidated statement of profit or loss
and other comprehensive income and the related notes thereto for the year ended 31 December
2024 as set out in the section headed “Unaudited Preliminary Financial Information for the year
ended 31 December 2024” in Appendix IIB to this prospectus has been agreed by the Reporting
Accountants to the amounts set out in the Group’s unaudited consolidated financial statements
for the year ended 31 December 2024 following their work under Practice Note 730 “Guidance
for Auditors Regarding Preliminary Announcements of Annual Results” issued by the Hong
Kong Institute of Certified Public Accountants (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 unaudited
preliminary financial information.
Our Directors expect that there will be a decrease in our net profit for the year ending 31
December 2025 as compared to that for the year ended 31 December 2024, which is primarily
attributable to (i) the increase in Listing expenses; (ii) increase in professional service fee for
compliance following the Listing; and (iii) the increase in relocation expenses in respect of our
relocation plan in respect of Muyuan Central Kitchen (the details of which is disclosed in the
paragraph headed “Business – Non-compliance – (1) Failure to obtain certain land use right
certificates and property ownership certificates – current status and remedies” in this
prospectus).
After due and careful consideration, our Directors confirm that, save for the expenses in
connection with the Listing, up to the date of this prospectus, there has been no material adverse
change in our financial or trading position or prospects since 30 September 2024, and there is no
event since 30 September 2024 that would materially affect the information shown in the
Accountants’ Report set out in Appendix I.
SUMMARY
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In this prospectus, unless the context otherwise requires, the following expressions have the
following meanings. Certain other terms are explained in the section headed “Glossary of
Technical Terms” in this prospectus.
“Accountants’ Report” the accountants’ report set out in Appendix I to this
prospectus
“Acting-in-concert Confirmation” the acting-in-concert confirmation dated 5 September
2023 entered into between the Concert Parties
“affiliate(s)” any other person(s), directly or indirectly, controlling or
controlled by or under direct or indirect common control
with such specified person
“AFRC” the Accounting and Financial Reporting Council of Hong
Kong
“Articles of Association” or
“Articles”
the articles of association of our Company, as amended,
which shall become effective on the Listing Date, a
summary of which is set out in Appendix V to this
prospectus
“Batch A Investors” Jiaqi LLP and 23 individuals, among which 13 individuals
are directors, supervisors, senior management members of
our Group or their associates (being Mr. Zhang, Hu
Qinghua (ᅅശ ), Yin Qin ( Ιා), Zhu Zheng (݁,)
Zhan Mingyu (͗ ), Y ao Xinhua (อശ ), Guo Xia
(ெᒳ), Shen Zhigen ( ӏқЌ ), Xia Zhonglin (؍׀ࢀ,)
Wang Ying ( ӓ጑), Wu Jie ( юᆎ), Li Qian (࠺and Zhu
Aizhen (ޜand 10 individuals are Independent
Third Parties (being Lu Shouping ( ௔ྪറ ), Kan
Chuanling (ޛJiang Xianyue ( Ϫᜑ˜ ), Yin Yizuo
(ँ̸່ ), Huang Haiyan ( රऎዲ ), Xu Chunling (ޛ݆ࢱ,)
Y an Shuqin (ೞ ), Guan Jianzhong (׀ܔZhu
Hairong ( ϡऎ࿲ ) and Chen Y an ( ௓ᝣ)). All of these 23
individuals are employees or ex-employees of our Group
DEFINITIONS
–2 6–


--- page 37 ---
“Batch B Investors” Y ongqi LLP and eight individuals, among which three
individuals are directors, supervisors, senior management
members of our Group or their associates (being Hu
Qinghua (ᅅശ ), Xia Zhonglin (؍׀ࢀand Li Qian ( ҽ
࠺and five individuals are Independent Third Parties
(being Kan Chuanling (ޛJiang Xianyue ( Ϫᜑ˜ ),
Yin Yizuo ( ँ̸່ ), Huang Haiyan ( රऎዲ ) and Zhu
Hairong ( ϡऎ࿲ )). All of these eight individuals are
employees or ex-employees of our Group
“Board” or “Board of Directors” our board of Directors
“Business Day(s)” any day(s) (other than Saturday(s), Sunday(s) or public
holidays) on which banks in Hong Kong are generally
open for normal banking business
“Capital Market Intermediaries” or
“Capital Market
Intermediary(ies)” or “CMI(s)”
the capital market intermediaries participating in the
Global Offering and has the meaning ascribed thereto
under the Listing Rules
“CCASS” the Central Clearing and Settlement System established
and operated by HKSCC
“Chairman” chairman of our Board
“China” or “PRC” the People’s Republic of China which, for the purpose of
this prospectus and for geographical reference only,
excludes Hong Kong, Macau Special Administrative
Region and Taiwan
“Companies Ordinance” the Companies Ordinance of Hong Kong (Chapter 622 of
the Laws of Hong Kong), as amended, supplemented or
otherwise modified from time to time
“Companies (Winding Up and
Miscellaneous Provisions)
Ordinance”
the Companies (Winding Up and Miscellaneous
Provisions) Ordinance of Hong Kong (Chapter 32 of the
Laws of Hong Kong), as amended, supplemented or
otherwise modified from time to time
DEFINITIONS
–2 7–


--- page 38 ---
“Company”, “our Company” or
“the Company”
Jiangsu Horizon Chain Supermarket Company Limited ( Ϫ
ʮ̡ ) (formerly known as
Jiangdu Mall Hongxin Supermarket Chain Co., Ltd.* ( Ϫ
ʮ̡ )), a limited liability
company established in the PRC on 19 October 2005 and
subsequently converted into a joint stock company with
limited liability on 30 September 2007
“Concert Parties” collectively, Mr. Gao, Ruichuanda Investment, Mr. Y uan
and Mr. Zhang, and “Concert Party” means any one of
them
“Controlling Shareholder(s)” has the meaning ascribed thereto under the Listing Rules
and unless the context requires otherwise, collectively
refers to Mr. Gao, Ruichuanda Investment, Mr. Y uan and
Mr. Zhang
“Conversion of Domestic Unlisted
Shares into H Shares”
the conversion of 160,684,910 Domestic Unlisted Shares
in aggregate held by the Shareholders into H Shares on a
one-for-one basis upon the completion of Global Offering.
Such conversion of Domestic Unlisted Shares into H
Shares has been approved by the CSRC on 20 February
2025 and an application for H Shares to be listed on the
Stock Exchange has been made to the Stock Exchange.
For further details, please refer to the paragraph headed
“Share Capital – Conversion of Domestic Unlisted Shares
into H Shares” in this prospectus
“CSRC” the China Securities Regulatory Commission ( ʕ਷ᗇՎ္
ึ )
“Deed of Indemnity” the deed of indemnity dated 12 March 2025 entered into
by our Controlling Shareholders with and in favour of our
Company (for itself and as trustee for its subsidiaries) as
referred to in the section headed “Appendix VI – Statutory
and General Information – 5. Other Information – A. Tax
and other indemnity” in this prospectus
“Deed of Non-competition” the deed of non-competition dated 12 March 2025 entered
into by our Controlling Shareholders in favour of our
Company (for itself and as trustee for its subsidiaries),
details of which are set out in the section headed
“Relationship with Controlling Shareholders – Deed of
Non-competition” in this prospectus
DEFINITIONS
–2 8–


--- page 39 ---
“Director(s)” or “our Director(s)” the director(s) of our Company
“Domestic Unlisted Share(s)” the ordinary share(s) in the share capital of our Company,
with a nominal value of RMB1.00 each, which is/are
subscribed for and paid up in Renminbi and are unlisted
Shares not currently listed or traded on any stock
exchange
“EIT Law” Enterprise Income Tax Law of the People’s Republic of
China (جas amended,
supplemented or otherwise modified from time to time
“Extreme Conditions” the occurrence of “extreme conditions” as announced by
the government of Hong Kong due to serious disruption of
public transport services, extensive flooding, major
landslides, large-scale power outage or any other adverse
conditions before Typhoon Signal No. 8 or above is
replaced with Typhoon Signal No. 3 or below
“FINI” “Fast Interface for New Issuance”, an online platform
operated by HKSCC that is mandatory for admission to
trading and, where applicable, the collection and
processing of specified information on subscription in and
settlement for all new listings
“Fire Safety Approval(s)” has the meaning ascribed to it in the paragraph headed
“Business – Non-compliance – (3) Failure to complete
Fire Safety Approvals” in this prospectus
“FY2021” the financial year ended 31 December 2021
“FY2022” the financial year ended 31 December 2022
“FY2023” the financial year ended 31 December 2023
“Global Offering” the Hong Kong Public Offering and the International
Offering
“Group”, “our Group”, “the
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)
DEFINITIONS
–2 9–


--- page 40 ---
“H Share(s)” the ordinary share(s) in the share capital of our Company,
with a nominal value of RMB1.00 each, which is/are to be
subscribed for and traded in Hong Kong dollars and to be
listed and traded on the Stock Exchange
“H Share Registrar” Computershare Hong Kong Investor Services Limited
“H Shareholder(s)” holder(s) of H Share(s)
“HKSCC” Hong Kong Securities Clearing Company Limited, a
wholly-owned subsidiary of Hong Kong Exchanges and
Clearing Limited
“HKSCC EIPO ” the application for the Hong Kong Offer Shares to be
issued in the name of HKSCC Nominees and deposited
directly into CCASS to be credited to your 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 Hong Kong Offer
Shares on your behalf
“HKSCC Nominees” HKSCC Nominees Limited, 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 dollars”, “HK$” and
“cents”
Hong Kong dollar(s) and cent(s), respectively, the lawful
currency of Hong Kong
“Hong Kong Offer Shares” the H Shares initially offered by our Company (subject to
reallocation) pursuant to the Hong Kong Public Offering
DEFINITIONS
–3 0–


--- page 41 ---
“Hong Kong Public Offering” the offer of the Hong Kong Offer Shares by our Company
for subscription by the public in Hong Kong at the Offer
Price on the terms and conditions described in this
prospectus
“Hong Kong Underwriters” the underwriters of the Hong Kong Public Offering listed
in the paragraph headed “Underwriting – Hong Kong
Underwriters” in this prospectus
“Hong Kong Underwriting
Agreement”
the Hong Kong underwriting agreement dated 20 March
2025, relating to the Hong Kong Public Offering 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 Hong Kong Underwriters
“Hongxin Pharmacy” Y angzhou Hongxin Pharmacy Co., Ltd.* (ג
ʮ̡ ), a limited liability company established in the
PRC on 14 May 2014, which is a direct wholly-owned
subsidiary of our Company
“Hongxin Trading” Jiangsu Hongxin Trading Co., Ltd.* (΅Ϟ
ʮ̡ ) (formerly known as Jiangdu Mall Co., Ltd.* ( Ϫ
ʮ̡ )), a joint stock company with
limited liability established in the PRC on 26 June 1994,
which is a direct non-wholly-owned subsidiary of our
Company
“Hongxin Trading Acquisition” the acquisition of 95.68% of the equity interest in
Hongxin Trading by our Company pursuant to an
acquisition agreement dated 29 December 2018
“Hongxinlong Agricultural
Products”
Jiangsu Hongxinlong Agricultural Products Co., Ltd.* ( Ϫ
ʮ̡ ), a limited liability
company established in the PRC on 5 July 2013, which is
a direct wholly-owned subsidiary of our Company
“Hongxinlong Mall” Hongxinlong Shopping Centre (ʕː ), a
shopping mall located at Daqiao Town, Jiangdu, Y angzhou
operated by us
DEFINITIONS
–3 1–


--- page 42 ---
“IFRS” International Financial Reporting Standards, which
include standards, amendments and interpretations
promulgated by the International Accounting Standards
Board and the International Accounting Standards and
interpretation issued by the International Accounting
Standards Committee
“Independent Third Party(ies)” person(s) or company(ies) who or which, to our Directors’
best knowledge, information and belief after having made
all reasonable enquiries, is/are not a connected person(s)
of our Company
“Industry Consultant” HCR Co., Ltd., the independent industry consultant
commissioned by us to conduct research on the industry in
which we operate
“Industry Report” the industry research report commissioned by us and
prepared by the Industry Consultant on the industry in
which our Group operates
“Internal Control Consultant” SHINEWING Risk Services Limited, an independent
internal control consultant engaged by us
“International Offer Shares” 48,205,000 H Shares offered by our Company pursuant to
the International Offering (subject to reallocation as
described in “Structure of the Global Offering”) together
with any additional H Shares which may be allotted and
issued by our Company pursuant to the exercise of the
Over-allotment Option
“International Offering” the offer of the International Offer Shares by the
International Underwriters at the Offer Price outside the
United States and in offshore transactions in accordance
with Regulation S under the U.S. Securities Act, as further
described in “Structure of the Global Offering” in this
prospectus
“International Underwriters” the group of international underwriters who are expected
to enter into the International Underwriting Agreement to
underwrite the International Offering
DEFINITIONS
–3 2–


--- page 43 ---
“International Underwriting
Agreement”
the underwriting agreement relating to the International
Offering expected to be entered into by, among others, our
Company and the International Underwriters on or around
the Price Determination Date, as further described in the
paragraph headed “Underwriting – Underwriting
Arrangements and Expenses – The International Offering”
in this prospectus
“Jiangdu Fund” Y angzhou Jiangdu District Major Projects Special
Investment Fund Co., Ltd.* (ɽධͦਖ਼ධ
ʮ̡ ), a limited liability company
established in the PRC on 9 October 2017, which is
owned as to approximately 99.9% by Wuhu Xinning
Investment Partnership Enterprise (Limited Partnership)*
(ྐྵҳ༟ΥྫΆุ (Υྫ )) (“ Wuhu Xinning ”)
and 0.1% by Y angzhou Longchuan Holdings Financial
Investment Co., Ltd.* (ʮ̡ ).
Wuhu Xinning is a limited partnership established in the
PRC, which is owned as to approximately 69.75% by
China Cinda Asset Management Co., Ltd. (༺༟ପ
ʮ̡ ) (whose shares are listed on the Stock
Exchange (stock code: 1359)) (“ China Cinda ”),
approximately 15.63% by Y angzhou Longchuan Holding
Financial Investment Co., Ltd.* (ፄҳ༟
ʮ̡ )( “ Longchuan Financial ”), approximately
14.45% by Y angzhou Longchuan Holding Group Co.,
Ltd.* (ப΂ʮ̡ )( “ Longchuan
Holding ”), and approximately 0.17% by Cinda Capital
Management Co., Ltd.* (ʮ̡ )( “ Cinda
Capital ”). Each of Longchuan Financial and Longchuan
Holding is indirectly wholly-owned by Y angzhou Guolian
Holding Group Co., Ltd.* (ʮ
̡), which is a wholly-state-owned enterprise. Cinda
Capital is the general partner of Wuhu Xinning, which is
indirectly wholly-owned by China Cinda
“Jiangdu Fund Capital Increase
Agreement”
the capital increase agreement (΅Ϟ
ʮ̡ᄣ༟՘ᙄ ) entered into among Jiangdu Fund, Mr.
Gao and our Company on 20 June 2019 in relation to,
among others, the Pre-IPO Investment by Jiangdu Fund.
For further details, please refer to the paragraph headed
“History and Development – Pre-IPO Investments –
Background of the Pre-IPO Investments and Information
of the Pre-IPO Investors – Jiangdu Fund” in this
prospectus
DEFINITIONS
–3 3–


--- page 44 ---
“Jiangdu Fund Supplemental
Agreement”
the supplemental agreement (ٰ
ʮ̡ᄣ༟՘ᙄʘ໾̂՘ᙄ ) entered into among
Jiangdu Fund, Mr. Gao and our Company on 23 August
2023 in relation to the Jiangdu Fund Capital Increase
Agreement. For further details, please refer to the
paragraph headed “History and Development – Pre-IPO
Investments – Special rights granted to the Pre-IPO
Investors” in this prospectus
“Jiangdu Fund Undertaking” the undertaking (ፕՌ ) given by Jiangdu Fund on 17
May 2024 in relation to the Jiangdu Fund Capital Increase
Agreement and the Jiangdu Fund Supplemental
Agreement. For further details, please refer to the
paragraph headed “History and Development – Pre-IPO
Investments – Special rights granted to the Pre-IPO
Investors” in this prospectus
“Jiangdu Mall” Jiangdu Mall (۬a shopping mall located at
Gongnong Road, Jiangdu, Y angzhou operated by us
“Jiangdu Supply and Marketing
Trade Union Committee”
Y angzhou Jiangdu District Supply and Marketing
Cooperative System Trade Union Committee* ( ౮ψ̹Ϫ
ึ ) (formerly known as Jiangdu
Supply and Marketing Cooperative System Trade Union
Committee* (ึ ))
“Jiangsu Horizon (HK)” Jiangsu Horizon (Hong Kong) Co., Limited (ڦ( ࠰
ಥ)ʮ̡ ), a limited liability company incorporated in
Hong Kong on 31 March 2011, which is an indirect
non-wholly-owned subsidiary of our Company
DEFINITIONS
–3 4–


--- page 45 ---
“Jiaqi LLP” Y angzhou Jiaqi Management Consulting Partnership
Enterprise (Limited Partnership)* ( ౮ψԳຩ၍ଣፔ༔Υྫ
Άุ(Υྫ )), a limited partnership established in the
PRC on 22 July 2019, which is held by 32 partners, with
Xu Jun (ڲࢱan Independent Third Party, as the general
partner holding 7.53% of partnership interest, and 31
limited partners holding 92.47% of partnership interest in
aggregate, including four individuals who are directors or
supervisors of our Group holding 19.71% of partnership
interest in aggregate and 27 individuals who are
Independent Third Parties holding 72.77% of partnership
interest in aggregate. The general partners and all limited
partners of Jiaqi LLP are employees or ex-employees of
our Group. For further details, please refer to the
paragraph headed “History and Development – Corporate
Structure” in this prospectus
“Jiequan Fund” Jiangsu Jiequan Supply and Marketing Cooperative
Industrial Development Fund (Limited Partnership)* ( Ϫᘽ
ږ( Υྫ )), a limited
partnership established in the PRC on 17 April 2018. The
general partners of Jiequan Fund are Jiangsu New Supply
and Marketing Fund Management Co., Ltd.* ( ϪᘽอԶቖ
ʮ̡ )( “ NSM Fund ”), which held 0.74%
partnership interest in Jiequan Fund, and Jiangsu Houji
Private Equity Fund Management Co., Ltd.* (ጐӷ
ʮ̡ ), which held 0.26% partnership
interest in Jiequan Fund and is also the fund manager of
Jiequan Fund. NSM Fund is ultimately controlled by
All-China Federation of Supply and Marketing
Cooperatives (ٟThe limited
partners of Jiequan Fund are Nanjing New Supply and
Marketing Enterprise Management Co., Ltd.* (ԯอԶቖ
ʮ̡ ) which held 49.60% partnership
interest in Jiequan Fund, Jiangsu Government Investment
Fund (Limited Partnership)* (ږ( Υ
ྫ)) which held 29.64% partnership interest in Jiequan
Fund and Nanjing Y angzi State-owned Assets Investment
Group Co., Ltd.* (ப΂ʮ̡ )
which held 19.76% partnership interest in Jiequan Fund.
Jiequan Fund is a substantial shareholder of our Company
DEFINITIONS
–3 5–


--- page 46 ---
“Jiequan Fund First Supplemental
Agreement”
the first supplemental agreement (ԶቖΥЪପ
ږ( Υྫ )ʮ̡
΅Ⴉᒅʿᄣ༟՘ᙄʘ໾̂՘ᙄ ) entered into among
Jiequan Fund, Mr. Gao, Ruichuanda Investment and
Y angzhou Xianda Toyota Automobile Sales and Service
Co., Ltd.* (ʮ̡ )( a
limited liability company established in the PRC owned as
to 60% by Mr. Gao and 40% by an Independent Third
Party) on 20 June 2020 in relation to the Jiequan Fund
Subscription Agreement. For further details, please refer
to the paragraph headed “History and Development –
Pre-IPO Investments – Background of the Pre-IPO
Investments and Information of the Pre-IPO Investors –
Jiequan Fund” in this prospectus
“Jiequan Fund Second
Supplemental Agreement”
the second supplemental agreement (Զ
ږ( Υྫ )΅
΅Ⴉᒅʿᄣ༟՘ᙄʘ໾̂՘ᙄɚ) entered into
among Jiequan Fund, Mr. Gao, our Company, Ruichuanda
Investment and Y angzhou Xianda Toyota Automobile Sales and
Service Co., Ltd.* (ʮ̡)o n
18 September 2023 in relation to the Jiequan Fund Subscription
Agreement and the Jiequan Fund First Supplemental
Agreement. For further details, please refer to the paragraph
headed “History and Development – Pre-IPO Investments –
Special rights granted to the Pre-IPO Investors” in this
prospectus
“Jiequan Fund Subscription
Agreement”
the share subscription agreement (ԶቖΥЪପุ೯
ږ(Υྫ)΅Ⴉ
ᒅʿᄣ༟՘ᙄ) entered into among Jiequan Fund, Mr. Gao and
our Company on 20 June 2020 in relation to, among others, the
Pre-IPO Investment by Jiequan Fund. For further details, please
refer to the paragraph headed “History and Development –
Pre-IPO Investments – Background of the Pre-IPO Investments
and Information of the Pre-IPO Investors – Jiequan Fund” in
this prospectus
“Joint Bookrunners” and “Joint Lead
Managers”
Red Solar Capital Limited, CMBC Securities Company
Limited, CCB International Capital Limited, CMB International
Capital Limited, uSMART Securities Limited, Star River
Securities Limited, Eddid Securities and Futures Limited,
Innovax Securities Limited and Long Bridge HK Limited
DEFINITIONS
–3 6–


--- page 47 ---
“Joint Global Coordinators” Red Solar Capital Limited, CMBC Securities Company Limited
and CCB International Capital Limited
“Joint Overall Coordinators” Red Solar Capital Limited and CMBC Securities Company
Limited
“Latest Practicable Date” 11 March 2025, 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
“Listing Date” the date expected to be on or about Monday, 31 March 2025,
on which our H Shares are listed and from which dealings
therein are permitted to take place on the Stock Exchange
“Listing Rules” the Rules Governing the Listing of Securities on The Stock
Exchange of Hong Kong Limited, as amended, supplemented or
otherwise modified from time to time
“Main Board” the stock market (excluding options market) operated by the
Stock Exchange which is independent from and operated in
parallel with GEM of the Stock Exchange
“Malls” Jiangdu Mall and Hongxinlong Mall
“Ministry of Finance” the Ministry of Finance of the PRC (௅)
“Minsheng Agricultural” Y angzhou Jiangdu District Minsheng Agricultural Service Co.,
Ltd.* (ʮ̡), a limited
liability company established in the PRC on 9 December 2016
which is owned as to 75% by Y angzhou Y uantou Agricultural
Service Co. Ltd.* (ʮ̡), 15% by
Y angzhou Jiangdu Agricultural Services Association* ( ౮ψ̹
ਕ՘ึ) and 10% by Y angzhou Whole Journey
Worry Free Modern Agricultural Services Co., Ltd* ( ౮ψΌ೻
ʮ̡)
DEFINITIONS
–3 7–


--- page 48 ---
“Minsheng Agricultural and Batch A
Investors Capital Increase
Agreement”
the capital increase agreement entered into among Minsheng
Agricultural, Batch A Investors, Mr. Gao and other then
existing Shareholders on 28 October 2019 in relation to, among
others, the Pre-IPO Investment by Minsheng Agricultural and
Batch A Investors. For further details, please refer to the
paragraph headed “History and Development – Pre-IPO
Investments – Background of the Pre-IPO Investments and
Information of the Pre-IPO Investors – Minsheng Agricultural
and Batch A Investors” in this prospectus
“MOFCOM” the Ministry of Commerce of the PRC ( ʕശɛ͏΍ձ਷ਠਕ
௅)
“Mr. Gao” Mr. Gao Feng (΋͛), our Chairman and an executive
Director, one of the Concert Parties, and a Controlling
Shareholder
“Mr. Y uan” Mr. Y uan Y uan (΋͛), the vice chairman of our Board and
an executive Director, one of the Concert Parties, and a
Controlling Shareholder
“Mr. Zhang” Mr. Zhang Jiaan ( ੵԳτ΋͛) (with a former name as Zhang
Jiaan (τ)), an executive Director and the general manager
of our Company, one of the Concert Parties, and a Controlling
Shareholder
“Muyuan Central Kitchen” our central kitchen operated by Muyuan Supply Chain and
situated at Xiezhuang Village, Shaobo Town, Jiangdu District,
Y angzhou City, serving as the processing and distribution centre
for meals
“Muyuan Supply Chain” Y angzhou Muyuan Modern Supply Chain Co., Ltd.* ( ౮ψӕ๕
ʮ̡), a limited liability company established
in the PRC on 26 August 2019, which is a direct
non-wholly-owned subsidiary of our Company owned as to
72% by our Company, 14% by Y angzhou Whole Journey Worry
Free Modern Agricultural Services Co., Ltd* ( ౮ψΌ೻ೌᅊତ
ʮ̡) and 14% by Y angzhou Jiangdu District
Supply and Marketing Investment Co., Ltd.* ( ౮ψ̹ϪேਜԶ
ʮ̡)
“NDRC” the National Development and Reform Commission of the PRC
(ึ)
DEFINITIONS
–3 8–


--- page 49 ---
“Offer Price” the offer price per Offer Share in Hong Kong dollars (exclusive
of brokerage of 1.0%, 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$3.00 per Offer Share and is
expected to be not less than HK$2.50 per Offer Share, at which
the Offer Shares are to be subscribed for pursuant to the Global
Offering, to be determined in the manner as further described in
the section headed “Structure of the Global Offering” in this
prospectus
“Offer Share(s)” the Hong Kong Offer Shares and the International Offer Shares,
with the additional H Shares which may be allotted and issued
by our Company pursuant to the exercise of the Over-allotment
Option
“Over-allotment Option” the option granted by our Company to the International
Underwriters exercisable by the Sponsor-Overall Coordinator
(on behalf of the International Underwriters) pursuant to the
International Underwriting Agreement, pursuant to which our
Company may be required to allot and issue up to an aggregate
of 8,034,000 additional H Shares, representing up to 15% of the
Offer Shares initially being offered under the Global Offering,
at the Offer Price to, among other things, cover over-allocations
in the International Offering, if any, further details of which are
described in the section headed “Structure of the Global
Offering” in this prospectus
“Overseas Listing Trial Measures” the Trial Administrative Measures of Overseas Securities
Offering and Listing by Domestic Companies ( ྤʫΆุྤ̮
) promulgated by CSRC on 17
February 2023
“PRC Company Law” or “Company
Law”
the Company Law of the PRC,a s
enacted by the Standing Committee of the Eighth National
People’s Congress on 29 December 1993 and effective on 1
July 1994, as amended, supplemented or otherwise modified
from time to time
“PRC GAAP” PRC Accounting Standards for Business Enterprises
“PRC government”, “Central
Government” or “State”
the central government of the PRC, including all governmental
subdivisions (including provincial, municipal and other regional
or local government entities) and their instrumentalities or,
where the context requires, any of them
DEFINITIONS
–3 9–


--- page 50 ---
“PRC Legal Advisers” Beijing DHH Law Firm, the legal advisers to our Company as
to the laws of the PRC
“Pre-IPO Investments” the investments made by the Pre-IPO Investors in our
Company, details of which are set out in the paragraph headed
“History and Development – Pre-IPO Investments” in this
prospectus
“Pre-IPO Investors” Jiangdu Fund, Jiequan Fund, Minsheng Agricultural, Batch A
Investors and Batch B Investors
“Price Determination Agreement” the agreement to be entered into between our Company and the
Joint Overall 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 Thursday, 27 March 2025
or such other date as may be agreed between our Company and
the Joint Overall Coordinators (for themselves and on behalf of
the Underwriters)
“Regulation S” Regulation S under the U.S. Securities Act
“Retail Stores” our supermarkets and convenience stores and/or any one of
them operated by us
“RMB” or “Renminbi” Renminbi, the lawful currency of the PRC
“Ruichuanda Investment” Jiangsu Ruichuanda Investment Co., Ltd.* ( Ϫᘽ๿ʇ༺ҳ༟Ϟ
ʮ̡), a limited liability company established in the PRC on
23 November 2009, which is owned as to 100% by Mr. Gao,
and is one of our Controlling Shareholders
“Runbaijia Trading” Y ancheng Runbaijia Trading Co., Ltd.* (ࠢ
ʮ̡), a limited liability company established in the PRC on 12
December 2019, which is a direct wholly-owned subsidiary of
our Company
“SAFE” the State Administration of Foreign Exchange of the PRC ( ʕ਷
̮ි၍ଣ҅)
“SA T” the State Administration of Taxation of the PRC (೼ਕᐼ
҅)
“SFC” the Securities and Futures Commission
DEFINITIONS
–4 0–


--- page 51 ---
“SFO” the Securities and Futures Ordinance of Hong Kong (Chapter
571 of the Laws of Hong Kong), as amended, supplemented or
otherwise modified from time to time
“Share(s)” ordinary shares in the capital of our Company with a nominal
value of RMB1.00 each
“Shareholder(s)” holder(s) of the Share(s)
“Sole Sponsor” or “Sponsor-Overall
Coordinator”
Red Solar Capital Limited, a licensed corporation under the
SFO to engage in type 1 (dealing in securities) and type 6
(advising on corporate finance) regulated activities
“Stabilising Manager” Red Solar Capital Limited
“State Council” the State Council of the PRC ( ʕശɛ͏΍ձ਷਷ਕ৫)
“Stock Exchange” The Stock Exchange of Hong Kong Limited
“Supervisor(s)” member(s) of our Supervisory Committee
“Supervisory Committee” the supervisory committee of our Company
“Takeovers Code” The Code on Takeovers and Mergers issued by the SFC, as
amended, supplemented or otherwise modified from time to
time
“Tobacco Business Cooperation
Agreement”
the cooperation agreement (ࠢ
ΥЪ՘ᙄ) dated 6 June 2024 entered into
between our Company and Jiangsu Hongxinlong Supermarket
Chain Co., Ltd.* (ʮ̡) in relation
to, among others, the transfer of tobacco product inventory
assets relating to the business of tobacco product sales of our
Group. For further details, please refer to the paragraph headed
“History and Development – Cessation of sales of tobacco
products and disposal of tobacco product inventory assets” in
this prospectus
“Track Record Period” FY2021, FY2022, FY2023 and 9M2024
“Underwriters” the Hong Kong Underwriters and the International Underwriters
“Underwriting Agreements” the Hong Kong Underwriting Agreement and the International
Underwriting Agreement
DEFINITIONS
–4 1–


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“United States” or “U.S.” or “US” the United States of America
“US dollars” “US$” United States dollar(s), the lawful currency of the United States
“U.S. Legal Advisers” Loeb & Loeb LLP , the legal advisers to our Company as to the
laws of the United States
“U.S. Securities Act” U.S. Securities Act of 1933, as amended, supplemented or
otherwise modified from time to time, and the regulations and
rules promulgated thereunder
“V A T” value added tax
“White Form eIPO ” the application for Hong Kong Offer Shares to be issued in the
applicant’s own name, submitted online through the designated
website of the White Form eIPO Service Provider, at
www.eipo.com.hk
“White Form eIPO Service Provider” Computershare Hong Kong Investor Services Limited
“Xintongyuan Trading” Y angzhou Xintongyuan Trading Co., Ltd.* ( ౮ψอஷ๕ਠ൱Ϟ
ʮ̡), a limited liability company established in the PRC on
30 January 2007, which is a direct wholly-owned subsidiary of
our Company
“Y angzhou” Y angzhou City in Jiangsu Province of the PRC
“Y ongqi LLP” Y angzhou Y ongqi Management Consulting Partnership
Enterprise (Limited Partnership)* ( ౮ψ͑ຩ၍ଣፔ༔ΥྫΆ
ุ(Υྫ)), a limited partnership established in the PRC on
3 August 2020, which is held by 40 partners, with Zhu Shu ( ϡ
⤳), an Independent Third Party, as the general partner holding
1.87% of partnership interest, and 39 limited partners holding
98.13% of partnership interest in aggregate, including an
individual being an associate of a Director holding 1.87% of
partnership interest and 38 individuals who are Independent
Third Parties holding 96.28% of partnership interest in
aggregate. The general partner and 38 limited partners of
Y ongqi LLP are employees or ex-employees of our Group. For
further details, please refer to the paragraph headed “History
and Development – Corporate Structure” in this prospectus
“%” per cent.
“9M2023” the nine months ended 30 September 2023
DEFINITIONS
–4 2–


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“9M2024” the nine months ended 30 September 2024
Unless otherwise expressly stated or the context otherwise requires, in this prospectus,
 all references to times and dates refer to Hong Kong times and dates;
 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 under the Listing
Rules;
 all data in this prospectus is as at 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
 all relevant information in this prospectus assumes no exercise of the Over-allotment
Option.
The English names of the PRC laws, rules, regulations, nationals, entities, governmental
authorities, institutions, facilities, certificates and titles etc. mentioned in this prospectus,
including those marked with “ *”, are translations from their Chinese names and are for
identification purpose only. If there is any inconsistency between the Chinese names and their
English translations, the Chinese names shall prevail.
DEFINITIONS
–4 3–


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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.
“bulk sales” the sales of products from our Retail Stores to customers,
which mainly include corporate and government entities,
which purchase products in large quantities
“B2B supply chain system” business-to-business supply chain system which connects
us with our suppliers where we place orders, handle
product returns, conduct accounts reconciliations and
settlement with our suppliers, and is connected to our ERP
system for invoicing and data reports
“CAGR” compound annual growth rate, calculated by subtracting
one from the result of dividing the ending value by its
beginning value raised to the power of one divided by the
period length
“central kitchen” a kitchen which consolidates the processing and cooking
of meals for different entities
“central region of Jiangsu
Province”
region including Y angzhou City, Taizhou City and
Nantong City
“concessionaire sales” the sales of products of our concessionaires at our Retail
Stores and Malls, pursuant to which we will charge our
concessionaires commission
“convenience stores” small chained or independent grocery retail outlets
offering a narrower range of everyday items
“ERP system” enterprise resource planning system which integrate
internal and external management information across an
entire organisation, comprising business activities such as
finance and accounting, inventory, sales, service and
customer relationship management, and automate these
activities with an integrated software application
“GDP” gross domestic product
“general sales” the sales of products at our Retail Stores or Malls to
individuals, usually local residents living in the
communities, who come to our Retail Stores or Malls in
person to shop and purchase
GLOSSARY OF TECHNICAL TERMS
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“GFA” gross floor area
“mini programme” a light feature within the WeChat interface which connects
service providers and WeChat users
“POS system” point of sale system, which consists of hardware and
software which work together to process sales and
payment transactions in our Retail Stores and Malls
“prepared food” foods that are typically produced for immediate
consumption or simply require heating
“supermarkets” chained or independent grocery retail outlets (excluding
discounters, convenience stores and independent grocery
stores), exhibiting a broad offering of groceries including
grains and oil, fresh food, snacks and beverages, as well
as non-food products such as general merchandise,
cosmetics, skin care, electronics and appliance products,
etc.
“WMS system” warehouse management system, which monitor real time
inventory information of our distribution centre and allow
us to efficiently manage our inventory control
GLOSSARY OF TECHNICAL TERMS
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This prospectus contains forward-looking statements that relate to our current expectations
and views of future events. These forward-looking statements are contained principally in the
sections headed “Summary”, “Risk Factors”, “Future Plans and Use of Proceeds”, “Industry
Overview”, “Business” and “Financial Information” in this prospectus.
The words and expressions such as “aim”, “anticipate”, “believe”, “could”, “estimate”,
“expect”, “going forward” “intend”, “may”, “ought to”, “plan”, “potential”, “predict”, “project”,
“seek”, “shall”, “should”, “will”, “would” and the negative of these terms and other similar
expressions, as they relate to us, are intended to identify a number of these forward-looking
statements. These forward-looking statements include statements relating to:
• our business prospects, strategies, plans, objectives and goals;
• our capital expenditure plans and future capital requirements;
• the amount and nature of, and potential for, future development of our business;
• our operations and the business opportunities that we may pursue;
• the general regulatory environment of the industry of which we are operating in;
• future developments, trends and conditions in the industry and markets in which we
operate;
• the performance of global financial markets, including changes in our ability to access
the capital markets and changes in the level of interest rates;
• our ability to control costs;
• the actions and developments of our competitors; and
• changes in general political, economic, legal, market and business conditions.
These forward-looking statements are subject to certain risks, uncertainties and
assumptions, some of which are beyond our control. Further, these forward-looking statements
reflect our current views with respect to future events and are not a guarantee of future
performance. Actual results may differ materially from information contained in the
forward-looking statements as a result of a number of uncertainties and factors, including the
risk factors set out in the section headed “Risk Factors” in this prospectus. All forward-looking
statements contained in this prospectus are qualified by reference to the cautionary statements as
set out in this section.
FORW ARD-LOOKING STATEMENTS
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Subject to the requirements of applicable laws, rules and regulations, we undertake no
obligation 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, after the
date on which the statements are made or to reflect the occurrence of unanticipated events. Y ou
should read this prospectus completely with the understanding that our actual future results or
performance may be materially different from which we expect.
FORW ARD-LOOKING STATEMENTS
–4 7–


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You should carefully consider each of the risks described below and all of the other
information contained in this prospectus, including the Accountants’ Report, before deciding
whether to invest in the Offer Shares. Our business, financial condition, results of operations
or prospects could be materially and adversely affected by any of these risks. You should pay
particular attention to the fact that our subsidiary in the PRC is governed by legal and
regulatory environments that in some respects differ significantly from that of other countries.
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 all or part of
your investment.
RISKS RELATING TO OUR BUSINESS
Our business might be adversely affected if we could not identify and secure desirable
locations for our Retail Stores
As a wholesaler of grains and oil with retail operations of supermarket and convenience
stores, our performance in retail operations, to a significant extent, is affected by our ability to
identify and secure desirable locations of our Retail Stores. Besides, we aim to further
strengthen our market position in the central region of Jiangsu Province particularly in Y angzhou
and Taizhou through expansion of our retail network in the neighbouring cities of our existing
markets in Jiangsu Province. Our ability to find and secure or continue to lease stores at prime
locations is therefore critical to the success of our business as well as our business strategies.
When selecting locations for our Retail Stores, we would take into account various factors
including size of the store, proximity to our existing stores or existence of any similar
competitors nearby, consumption power of the target customers in the area, population density,
customer mix of the local population, transportation and accessibility. There is no assurance that
we will be able to identify and secure desirable locations. Besides we cannot assure you that
even if we successfully identify prime locations, we will be able to secure or renew tenancy
agreements on terms that are favourable or commercially acceptable to us for our business. If we
fail to secure or renew tenancy agreements for our Retail Stores at desirable locations, our
business, financial condition, results of operations, future prospects and our plan of expansion
and growth could be adversely affected.
As at the Latest Practicable Date, our Group operated an aggregate of 160 Retail Stores and
two Malls, and among all Retail Stores, 157 Retail Stores were located at leased properties and
168 tenancy agreements were entered into in respect of the said 157 Retail Stores. The tenancy
agreements in respect of 33, 22 and 34 Retail Stores will expire during the years ending 31
December 2025, 2026 and 2027, respectively. If we are unable to renew our tenancy agreements
on terms commercially acceptable to us, or if our tenancy agreements are terminated for any
reason prior to their expiration, we will need to close or relocate the relevant Retail Stores. Such
closure or relocations will cause disruptions to our business, including loss of revenue during
the period of closure of business, and may incur extra expenses such as renovation cost and
rents. In addition, we cannot assure you that we will be able to secure another prime location for
RISK FACTORS
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relocation or the relocated Retail Stores can generate the same or more revenue and profit
previously generated from the closed Retail Stores.
Our success depends on our ability to respond effectively to changes in customer
preferences and needs
As at the Latest Practicable Date, our products covered a wide range of products for daily
life of our customers, including raw and fresh food, grains and oil, non-staple food, household
products, fashion and apparel, children’s wear, cosmetics and personal care, jewellery,
accessories, footwear, household appliances, consumer electronics, liquor and miscellaneous
products.
We believe that our success depends, to a large extent, on our ability to offer a wide
product portfolio meeting the daily needs of our customers and changing consumer preferences.
There is no assurance that our existing product portfolio will be or continue to be able to satisfy
our customers’ existing needs, or to cope with the changes in consumer preferences and needs or
we could bring new products in a timely manner. If we fail to anticipate or respond to changes
in customer preferences or fail to bring to market in a timely manner products that satisfy
customers’ evolving preferences, we may either experience inventory shortage or, on the other
hand, end up with outdated products leading to obsolescence or impairment of inventories, our
market share and our sales and profitability could be adversely affected.
We may not be able to successfully compete with online stores
In recent years, various popular e-commerce platforms and mini programmes have launched
online stores and such online stores offer greater efficiency, convenience and accessibility
through the use of internet and a wide range of products that are commonly found in our Retail
Stores are offered at such online stores at more competitive prices due to generally lower
operational costs. Given the prevalence of e-commerce in recent years, customers might also
shift from shopping physically at malls to e-commerce platforms for all kinds of products.
According to the Industry Report, the growth of online retail sales in the PRC is creating a
downward trend of offline retail sales. For instance, the share of online retail sales in total social
retail sales in the PRC rose from 26.06% at the end of 2019 to 32.72% at the end of 2023,
indicating a continuing increase in online retail sales, while at the same time the share of offline
retail sales in total social retail sales in the PRC declined from 73.94% at the end of 2019 to
67.28% at the end of 2023, indicating a downward trend of the offline retail sales. During the
Track Record Period, we had operated two mini programmes “ᒅ ” (Longhuiyigou*) and
“Ꮂ຅˚༺ ” (Hongxinlong Same Day Delivery*) for our Retail Stores and a mini
programme “۬Jiangdu Mall*) for our Malls. We have also cooperated with three
e-commerce platforms, namely Douyin and JD.com and WeChat for online sale and delivery of
our products to our customers. However, a substantial part of our revenue from our Retail Stores
and Malls during the Track Record Period was generated from general sales at our Retail Stores
and Malls, and our revenue generated from our mini programmes and e-commerce platforms
only accounted for approximately 1.0%, 0.6%, 1.6% and 2.3% of our total revenue for FY2021,
FY2022, FY2023 and 9M2024, respectively. If we fail to develop and enhance our mini
RISK FACTORS
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programmes to grab more market shares from internet retailing or cooperate with other third
party e-commerce platforms to compete with the other e-commerce platforms to cater for the
trend of internet retailing, our sales, business and financial condition may be adversely affected.
We have thin profit margins and we may not be able to sustain our historical profitability
and working capital position
We have had thin net profit margin during the Track Record Period. Our net profit margin
was approximately 2.4%, 3.8%, 3.7% and 2.4% for FY2021, FY2022, FY2023 and 9M2024,
respectively.
In terms of working capital position, we recorded net cash used in operating activities of
approximately RMB45.8 million and RMB10.6 million for FY2021 and 9M2024, respectively,
and net cash generated from operating activities of approximately RMB70.0 million and
RMB69.2 million for FY2022 and FY2023, respectively.
Our profitability and working capital position mainly depend on a number of factors,
including our sales volume, selling prices, procurement costs of our products and these factors
may be beyond our control. The selling prices, procurement costs of our products and our sales
volume may fluctuate as a result of our relative bargaining power, market demand and supply, or
the market price trend. The selling prices for our products fluctuated and may continue to
fluctuate due to seasonality or fluctuation in costs of goods. Depending on the price fluctuations
of the products that we procured from our suppliers, we may need to adjust the selling price of
our products. However, there is no assurance that we can pass all increase in costs onto our
customers in a timely manner or at all. If there is any unfavourable change in our volume of
products sold, selling prices or costs of sales, our financial condition or working capital position
may be adversely affected, and we may not be able to sustain our historical profitability and
amount of operating cash flow.
We had net cash used in operating activities for FY2021, 9M2023 and 9M2024, and we may
have difficulty meeting our payment obligations if we continue to record net cash used in
operating activities in the future
We had net cash used in operating activities of approximately RMB45.8 million, RMB11.1
million and RMB10.6 million for FY2021, 9M2023 and 9M2024, respectively, and we may
experience cash flow mismatch in our business. Our net cash used in operating activities were
primarily due to increase in inventories and trade and other receivables and decrease in contract
liabilities. For detailed analysis of our cash flows, please refer to the paragraph headed
“Financial Information – Liquidity and capital resources – Cash flows” in this prospectus. We
may continue to experience net cash used in operating activities in the future. Our operating
cash flows may be adversely affected by a number of factors beyond our control, including but
not limited to, market condition and the macroeconomic environment. Our future liquidity, the
payment of trade payables and repayment of any debt obligations, as they become due, will
primarily depend on our ability to maintain adequate cash inflows from operating activities. If
we are unable to maintain adequate cash inflows from operating activities, we may default on
RISK FACTORS
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our payment obligations, which may materially and adversely affect our business, financial
condition, results of operations and prospects.
We rely on the performance of our Retail Stores and Malls which can be adversely affected
by factors which might be beyond our control
The revenue derived from our retail operations accounted for approximately 62.0%, 59.3%,
49.1% and 41.5% of our total revenue for FY2021, FY2022, FY2023 and 9M2024, respectively.
Our business, profitability and financial performance depend on our ability to increase sales
volume and efficiently manage costs in our Retail Stores and Malls. V arious factors, such as
increasing competition in the retail industry in the PRC, changes in consumer preferences,
customer sensitivity to changes in our product prices, our reputation and consumer perception of
our brand and our offerings in terms of variety, quality and price, consumer experiences from
shopping in our stores, which might be beyond our control could adversely affect the number of
customer visits and the average spending per transaction, and hence the sales of our Retail
Stores and Malls. On the other hand, increase in our rental expenses, procurement costs of our
products, staff costs and other costs might also affect our profitability. If any of the above
happens, our business, reputation, financial condition, results of operation and prospects will be
materially and adversely affected.
Our wholesale operations rely on sales of oil from Yihai Kerry with whom our district
distributorship rights are not exclusive and may be subject to revocation or termination
In respect of our wholesales, food was our major revenue contributor during the Track
Record Period. Sales of food accounted for approximately 90.6%, 85.6%, 91.7%, 93.3% and
93.1% of our revenue from wholesales for FY2021, FY2022, FY2023, 9M2023 and 9M2024,
respectively. In particular, oil was our major food product for our wholesale operations in term
of revenue contribution. For FY2021, FY2022, FY2023, 9M2023 and 9M2024, sales of oil
accounted for (i) approximately 74.6%, 73.4%, 70.0%, 72.3% and 73.2% of our revenue from
sales of food under our wholesales, respectively; and (ii) approximately 67.7%, 62.8%, 64.2%,
67.5% and 68.2% of our revenue from wholesales, respectively. We secured our district
distributorship rights in Y angzhou City with Yihai Kerry Food Marketing Co., Ltd. Nanjing
Branch* (ԯʱʮ̡ )( “ Yihai Kerry ”) for the distribution of oil in
which the Yihai Kerry is the brand owner. Yihai Kerry was our largest supplier for FY2022,
FY2023 and 9M2024, and our purchase with Yihai Kerry amounted to approximately RMB141.9
million, RMB282.3 million and RMB284.5 million for FY2022, FY2023 and 9M2024,
representing approximately 12.5%, 25.5% and 30.5% of our total purchase, respectively. On the
other hand, our revenue from sales of oil under our wholesales increased significantly from
approximately RMB311.0 million for FY2022 to approximately RMB436.1 million for FY2023,
and increased significantly from approximately RMB293.3 million for 9M2023 to approximately
RMB387.6 million for 9M2024. Of which, for FY2022, FY2023 and 9M2024, our sales of oil
purchased from Yihai Kerry accounted for approximately 52.5%, 72.3% and 84.3% of our
revenue from sales of oil under our wholesales, respectively.
RISK FACTORS
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Our district distributorship rights with Yihai Kerry was not exclusive. To the best
knowledge of our Directors, Yihai Kerry granted similar district distributorship rights in
Y angzhou City to not more than three companies including us. If Yihai Kerry grants district
distributorship rights to more companies, the competition for sales of Yihai Kerry’s branded oil
may increase and our business, financial conditions and results of operations may be materially
and adversely affected. In addition, we cannot assure you that Yihai Kerry will not revoke or
terminate our district distributorship rights with it. If we are unable to identify suitable
alternative suppliers or enter into agreements with them in similar or favourable terms, our
business, financial conditions and results of operations may be materially and adversely affected.
We may be subject to food safety issue, product liability claims or product recalls relating
to defective products sold by us
While we are not involved in the production of the products sold at our Retail Stores and
Malls, according to the applicable PRC laws and regulations, both the manufacturers and the
sellers of goods shall be responsible for the quality of goods sold. For details, please refer to the
paragraph headed “Regulatory Overview – Laws, Regulations and Policies relating to our
Industry – Product Liability” in this prospectus. The Product Quality Law of the PRC provides
that a set of arrangements such as supervision and on-site inspections shall be carried out to
ensure that the quality of goods sold shall achieve the national and industrial standards. If there
is any quality issues found in the products sold in our Retail Stores and Malls, we may be
ordered by the relevant government authorities to rectify the quality issues such as to replace the
products we sold or make refunds to our customers. Therefore, we are subject to product
liability claims or product recalls if the products sold in our Retail Stores and Malls are found to
be defective, unfit for consumption or causing illness, which are risks inherent in the retail
businesses. During the Track Record Period, we had received administrative penalties for
supplying certain products which failed to comply with the food safety laws and regulations. For
example, there was an incident in which we failed to verify the authenticity of the batch number,
trademark registration and labelling information in respect of the vermicelli supplied by us to
Customer G in 2022. During the Track Record Period, we have generated revenue of
approximately RMB41.7 million from Customer G and the vermicelli concerned accounted for a
negligible amount of revenue generated from Customer G. As a result, in 2022, we were ordered
by the Shanghai City Minhang District Administration for Market Regulation* ( ɪऎ̹඘Бਜ̹
ఙ္ຖ၍ଣ҅ ) to pay fines of RMB370,000. Please refer to the paragraph headed “Business –
Procurement and quality control – Selection of suppliers” and the paragraph headed “Business –
Food safety – Immaterial food safety incidents” in this prospectus for details about the incident.
We cannot assure you that our internal control measures on food safety and/or selection of
suppliers and products will be effective and/or we will not be subject to any product recall or
product liability claims due to deficiencies in product quality, product contamination or other
food safety issues in the future. In the event that the use or consumption of the products sold by
us results in any damage to our customers, we may face product liabilities claims and be held
liable to pay compensation and damages to the customers. Such claims may disrupt our business,
divert the attention of our management and consume much of the resources of our Group. In
case any of such claims materialises, our corporate image and reputation may suffer which may
RISK FACTORS
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result in our customers losing loyalty, faith and confidence to purchase from us. Our business
prospects and results of operations may be adversely affected as a result.
We have included in some of our supply agreements provisions to require our suppliers to
indemnify us against any claims by our customers for any product liabilities claims relating to
defective products manufactured and/or supplied by them. There is no assurance that we will be
able to get full indemnification from our suppliers in a timely manner, or our suppliers will
remain solvent or have adequate financial resources to indemnify us for all product liabilities
claims. If there are any claims relating to product liabilities against us and we could not get full
indemnification from our suppliers in a timely manner, our corporate image, business
performance and results of operations may be adversely affected.
We had not obtained land use right certificates for part of our self-owned land and
property ownership certificates for part of our self-owned properties in the PRC as at the
Latest Practicable Date and we may be subject to penalties
As at the Latest Practicable Date, we had not obtained land use right certificates with an
aggregate site area of approximately 68 mu (equivalent to approximately 45,300 sq.m.) in the
land owned by us. Our PRC Legal Advisers have advised us that the relevant competent
authorities may impose fines or penalties on us. Obtaining land use right certificates is also a
prerequisite for applying for subsequent construction related permits and building ownership
certificates. For details, please refer to the paragraph headed “Business – Non-compliance” in
this prospectus. We cannot assure you that our titles to or uses of the relevant land and buildings
will not be further challenged in the future or that we will be able to obtain the land use right
certificates as planned. Any of these would adversely affect our business, financial condition and
results of operations.
As at the Latest Practicable Date, we had not obtained the property ownership certificates
for properties with an aggregate gross floor area of approximately 26,000 sq.m.. As such, our
rights to these buildings may be limited or challenged by relevant competent authorities and we
may also be subject to administrative fines or other penalties, which may materially and
adversely affect our business operations, divert management attention and other resources and
incur significant costs. For details, please refer to the paragraph headed “Business –
Non-compliance” in this prospectus.
We may be subject to fines for failing to register the lease agreement of leased property
As at the Latest Practicable Date, most lease agreements of properties, whether leased by or
leased to us, had yet to be registered with the relevant government authorities. For details,
please refer to the paragraph headed “Business – Properties – Leased properties” in this
prospectus. As advised by our PRC Legal Advisers, lease agreements have to be registered with
the relevant authorities within 30 days of signing according to the Administration Measures for
Commodity House Leasing (). According to the relevant PRC
regulations, we may be ordered by the relevant government authorities to register the relevant
lease agreements within a prescribed period, failing which we may be subject to a fine ranging
RISK FACTORS
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from RMB1,000 to RMB10,000 for each unregistered lease. Furthermore, there can be no
assurance that the PRC government will not amend or revise existing property laws, rules and
regulations in respect of leasing of properties to require additional approvals, licences or
permits, or impose stricter requirements on the leased properties that we use or lease to others.
We have certain non-compliance with the PRC laws and regulations. Any enforcement
action against us may adversely affect our business and reputation
As at the Latest Practicable Date, our Group operated an aggregate of 160 Retail Stores and
two Malls, among which 17 outlets (approximately 10.5% in terms of the total number of
outlets) did not obtain the required “Fire Safety Inspection Certificate before the Use or
Business Operation of Public V enues” (ࣸ
ᗇ) or a “Fire Safety Inspection Opinion before the Use or Business Operation of Public
V enues” ( ) (collectively, the “ Fire
Safety Inspection Certificate(s) ”) pursuant to relevant PRC laws and regulations. We also
failed to make adequate social insurance and housing provident fund contributions for all our
employees in accordance with certain legal and statutory requirements in the PRC during the
Track Record Period. In respect of our failure to obtain the Fire Safety Inspection Certificates
for some of our Retail Stores and Malls, the possible legal consequences include discontinuation
of the use of properties, suspension of business and payment of fine. In respect of our failure to
make adequate social insurance and housing provident fund contributions for all our employees,
pursuant to the relevant laws and regulations, the possible legal consequences include payment
of all outstanding contributions and fines imposed by relevant government authorities and
compulsory enforcement by the PRC court. For further details of the non-compliance, please
refer to the paragraph headed “Business – Non-compliance” in this prospectus. If any of the
government authorities takes enforcement action against us in relation to the non-compliance
incidents, we may be ordered to pay fines and/or other penalties, which could adversely affect
our business and reputation.
We may not be able to successfully implement our business plans and our growth prospects
may be restricted
We plan to expand our business by opening additional Retail Stores in Jiangsu Province, in
particular in Y angzhou and Taizhou. Our ability to implement our expansion plan and grow
would be subject to numerous factors such as our ability to identify suitable sites for new Retail
Stores, our ability to attract and retain sufficient management staff for our expanded operations,
availability of resources and fund for our expansion plan, our ability to obtain necessary
governmental licences and permits in a timely manner, our ability to enhance our operational
and management systems, including our information technology systems to support an expanded
retail network, our ability to effectively control and manage our costs such as human resources,
logistics and rents for our expanded network etc. There is no assurance that we will be able to
maintain our competitive edges or leverage our experience to expand our market share. Our
inability to effectively manage our development strategies, or any delay in execution of our
business plan, may result in our incapability to capture market growth or to compete
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successfully with our competitors, which may in turn weaken our market position and adversely
affect our business and results of operations.
If our expansion plans were wholly or partially unsuccessful or we cannot properly manage
our additional Retail Stores in new markets or geographical locations which are full of
uncertainties and challenges, we may need to modify our business strategies, restructure our
business models and adjust our product portfolio and services in order to cater for the
customers’ need or in line with the market trends. However, we cannot assume you that we will
be able to analyse the challenges and difficulties accurately, take appropriate approaches and
make necessary changes. Any failure by us to leverage our retail experience to effectively
manage our business plan and growth may result in us losing the advantages or chances to grow
our business.
If we fail to obtain sufficient funding for our expansion plans, our business and growth
prospects may be adversely affected
For opening additional Retail Stores in the PRC, we would require additional funding from
time to time to cope with our growth needs such as funding our Retail Stores’ renovation and
replenishing our cash flow during the renovation period before the new Retail Stores are ready
for operation. We also plan to expand our warehousing capacity by establishing a new
distribution centre and increase our processing capacity of meals by establishing a new central
kitchen. The rental expenses, land acquisition cost and the purchase of new equipment will incur
a significant amount of fixed costs and our investment may not be paid back in a timely manner
or at all. Our working capital requirements and the cash flow provided by future operating
activities, if any, will vary greatly from period to period. We may not be able to obtain adequate
levels of additional financing, whether through equity financing, debt financing or other sources
in the event that our internal resources are insufficient to fulfil our cash needs. Incurring
indebtedness would increase our finance costs and could result in imposition of operating and
financing covenants that may, among other things, restrict our expansion plans and operations,
and/or our ability to pay dividends. Further, as our ability to obtain additional capital on
acceptable terms is subject to a variety of uncertainties that could be beyond our control, we
cannot assure you that future financing will be available to us in amounts or on terms acceptable
and/or favourable to us, or at all. If we are unable to raise additional financing, we may be
unable to implement our long-term business plan, develop or enhance our products and services,
take advantage of future opportunities or maintain our competitive advantages on a timely basis,
or at all. In addition, a lack of additional financing could force us to substantially curtail our
business plan.
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Our plan of expansion involving acquisition of land and constructing a new central kitchen
and a new distribution centre may require substantial capital expenditure, and result in
increase in depreciation that may adversely affect our financial results and conditions
As part of our business strategies, we intend to expand our processing capacity for meals
and warehousing capacity by setting up a new distribution centre with a gross floor area of
approximately 10,000 sq.m. and establishing a new central kitchen with a gross floor area of
approximately 3,000 sq.m. on the same parcel of land to be acquired. Please refer to the
paragraph headed “Business – Our business strategies” and the section headed “Future Plans and
Use of Proceeds” in this prospectus for further details of our expansion plan.
We estimate that the total capital expenditure for the expansion plan (namely, acquiring a
parcel of land with a total site area of approximately 13,000 sq.m., constructing a new central
kitchen and a new distribution centre) will be approximately RMB74.8 million. Nonetheless, we
may turn out incurring greater capital expenditures for such expansion plan since the capital
expenditure which we may incur will depend on the cost of the individual land which our Group
may acquire, the condition of the volatile property market and the costs of materials and labour
in establishing the new central kitchen and the new distribution centre. We may need to raise
additional funds through bank borrowing or issuance of debt or equity securities to finance these
capital expenditures, which will involve costs of financing such as interest expenses. Besides,
we may expose to risks and problems associated with acquisition of land and construction of the
new central kitchen and the new distribution centre, including but not limited to the risk of delay
in the construction, the requirement of different management expertise for the construction
works and the risk of volatility in property price for the acquired land. All these risks and costs
associated with acquisition of land and construction of the new central kitchen and the new
distribution centre may have a material negative impact on our business and financial position in
the long term.
Furthermore, it is expected that after implementation of the expansion plan, additional
depreciation will be charged to our profit and loss account and may therefore affect our financial
performance and operating results.
Our planned expansion will increase our costs (including depreciation expenses) but there
is no assurance that there will be a satisfactory increase in our operational and financial
performance as a result. Should we be unable to utilise the expanded processing capacity for
meals and warehouse capacity and increase our profitability after such planned investments, our
business and financial position and prospects may be adversely affected.
We rely on the reputation and brand image of our brand “Ꮂ ” (Hongxinlong *)
Our brand “Ꮂ ” (Hongxinlong*) is important to our business and we rely on our brand
to attract customers to our Retail Stores and Malls and build up trust, confidence and loyalty
from our customers. Brand value is based largely on subjective customer perception. According
to the Industry Report, we are known for offering high-quality and reasonably priced
commodities, comfortable and convenient shopping environment, attentive customer service and
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the ability to accurately grasp the consumption habits and shopping preferences of local
consumers, and the local consumers have strong recognition and loyalty to our brand. We
believe that this high degree of brand recognition is a valuable asset of our Group, which
enables us to differentiate ourselves from our competitors and attract more customers. If we are
unable to protect and enhance our brand recognition, the market perception of our brands and
our customers’ confidence on us may be eroded and our brand value could be significantly
reduced, which in turn could materially and adversely impact our business and results of
operations. Furthermore, any adverse claims, media speculation and other negative incident or
negative publicity concerning our Group, our Retail Stores, Malls and products sold in our
Retail Stores and Malls could also adversely affect our reputation and business.
We lease certain areas in our Retail Stores and Malls to tenants and arrange concessionaires
to sell their products in our Retail Stores and Malls. We have only limited influence over the
daily business and management of our tenants and concessionaires. There is no assurance that
our tenants or concessionaires will always strictly comply with our agreements, and their poor
management or business performance may have an adverse effect on our corporate image,
reputation and business operations.
Our business relies on stable and reliable supply of products, and any failure or delay in
supply of products or any significant increase in the purchase prices may significantly
impact on our business and results of operation
As a wholesaler of grains and oil with retail operations of supermarkets and convenience
stores, our business, financial performance and continued success is premised upon our ability to
offer a diverse and wide product mix to meet our customers’ need, which requires stable and
reliable supply of products from our suppliers. Nonetheless, not all of our suppliers are
contractually bound by long-term supply agreements. Even if we have entered into long-term
supply agreements with some suppliers, there is no assurance that they will not early terminate
such long-term supply agreements for any reason before their expiration or will continue to
supply their products to our Group in a timely manner and at a favourable price. If there is any
failure or delay in supply of products or any significant increase in the purchase prices of our
products, our business and results of operation may be adversely affected. Even if we are able to
secure alternative suppliers, we cannot guarantee that the contract terms entered into with the
alternative suppliers will be similar or more favourable than those entered into with our original
suppliers or such alternative suppliers could supply products of similar quality at prices and
terms acceptable to us. In such event, we may lose our existing customers if we cannot provide a
stable supply of our products and our business, financial condition and operation results may be
materially and adversely affected.
We may be subject to claims relating to counterfeit products and intellectual property
infringement for products sold in our Retail Stores and Malls
We are not involved in the production of products sold at our Retail Stores and Malls and
all our products sold at our Retail Stores and Malls are finished products procured from our
suppliers. During the Track Record Period and up to the Latest Practicable Date, save for the
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passing-off incident involving certain vermicelli products procured from a supplier, further
details of which are set out in the paragraph headed “Business – Food safety – Immaterial food
safety incidents” in this prospectus, our Group was not subject to any material claims relating to
counterfeit products or intellectual property infringement. There is no assurance that our internal
control measures could prevent our suppliers from providing any counterfeit products to us.
Counterfeit products are also usually characterised as sub-standard and poor quality, and may
even pose health and safety issues to the end consumers and users. If we fail to identify any
counterfeit products supplied to us by our suppliers, and sell such products at our Retail Stores
and Malls, our reputation and business might be adversely affected. If any of the counterfeit
products had resulted in any health and safety issues, we might also be subject to product
liability claims, which would adversely affect our reputation and business.
Products sold at our Retail Stores and Malls might bear logos and brand names of suppliers
or other third parties. We primarily rely on the intellectual property representations of our
suppliers and would not require our suppliers to provide us with the intellectual property
information of those products delivered to us by our suppliers. As a result, we may not be able
to detect or deter any intellectual property infringement of the products supplied to us. If there
is any intellectual property infringement for the products sold by us, we may be requested to
suspend the sale of the relevant products by the intellectual property right owners, or compelled
to do so by the courts. Further, we may be subject to risks and losses as a result of any actions
and litigations taken by the intellectual property right owners against us.
There is no assurance that all products sold by us will not have counterfeit issues or will be
free from intellectual property infringements, or we will be able to recover all damages or
compensation from our suppliers relating to third party claims against counterfeit products or
intellectual property infringements. If we are unable to deter and avoid the sale of products
susceptible to counterfeit problems or intellectual property infringements, or recover our loss
from our suppliers, our brand image and business may be adversely affected.
We procure finished products from our suppliers and we have limited control over our
suppliers in respect of the supply and quality of our products
We do not have our own production facilities for products sold at our Retail Stores and
Malls, and we procure our products from our suppliers. We place great emphasis on the choice
of our suppliers and have standard operating procedures for quality check of the products sold
by us. However, our control over our suppliers in respect of their production process and their
products is to some extent limited. We cannot assure you that (i) there will not be any
unexpected interruption of their supply of products to us or any increase in the production costs
for any reason beyond our control or expectation, such as introduction of new regulatory
requirements, import restrictions, loss of their certifications or licences, power interruptions,
fires or other events; or (ii) the products provided to us by them can meet our quality
requirements. Any interruption in the supply of the products could have a material adverse
impact on our business. Any quality issues of our products may affect our corporate image,
reputation and confidence of our customers to purchase from us. If we are unable to detect, deter
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and effectively manage the risks relating to products quality, this may expose us to product
liabilities claims and our business and results of operations may be adversely affected.
We may be subject to the risk of shortages or unavailability of products due to
transportation problems or disruptions to our supply chain
The business of our Retail Stores and Malls depends on our ability to maintain sufficient
inventory of our major products to meet the demands of our customers. Even if we have
established and maintained a stable relationship with our suppliers, there is no assurance that we
will not experience any disruption of product delivery due to reasons out of our control
including but not limited to travel restrictions imposed by the government, mishandling of
products, natural disasters, unfavourable weather conditions and labour strikes. Any delays,
losses or damages in delivery may result in insufficient level of inventory to meet the market
demand in a timely manner, our reputation, business operations and profitability may be
adversely affected.
Our meal business is susceptible to food-borne illness claims
Our meal business is susceptible to food-borne illness claims. Since our supply of meals
depends on the supply of food ingredients, we may be exposed to product safety or quality
issues, such as food contamination or spoilage of food ingredients and meals during storage. As
part of our quality control, we require our suppliers and staff at our central kitchen to follow our
standards and guidelines. We cannot guarantee that they fully understand and are in full
compliance with all the relevant hygiene, health and safety standards that would efficiently and
effectively spot and eliminate the risks of food infectious disease. The consumption of
contaminated or spoiled food products may result in illness, injury or, in extreme cases, death.
During the Track Record Period and up to the Latest Practicable Date, our Group was not
subject to any material claims relating to product safety or quality issues in relation to our meal
business. Food safety issues, actual or perceived, even when false or unfounded, may require our
Group and/or our suppliers to recall the affected products from all markets in which they are
distributed. Such issues or recalls could adversely affect our business and reputation. In
addition, negative publicity regarding these types of issues may tarnish the image of our brand
and discourage consumers from buying meals or even products from our Retail Stores. We may
not be able to handle the negative comments effectively and in a timely manner and additional
resources may be required to handle the issues and rebuild trust and confidence from customers
if there is any damage to our reputation. Damage to our reputation or loss of consumer
confidence in our products could lower the demand of meals or even our products at Retail
Stores and thus have a material adverse effect on our business, results of operation and financial
performance.
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We may not be able to respond promptly or adapt to future changes in laws and regulations
governing our business and industry
We are required to possess various licences to operate our business and we are also subject
to a wide range of laws and regulations governing our pricing or quality control. Any changes in
such laws and regulations such as the imposition of more stringent requirements relating to our
business and operations such as those relating to quality control or employee-related protection
may result in increased operational and compliance costs and thus lower profit margin. There is
no assurance that we will be able to adapt to any future changes in laws and regulations
applicable to us, or we will be able to effectively manage our business and operations in view of
such changes. Our business and results of operations may be adversely affected as a result.
The sale of our products as well as our business might be adversely affected if we fail to
maintain volume of sales to, continue the business relationship or renew the sales
agreements with our wholesale customers which on-sell our products to their customers
We sell grains and oil, food products, garment, wooden products, household appliances and
other products to our wholesale customers on a wholesale basis. Our wholesale customers
including resellers and other retail operators on-sell our products to their respective customers
through their sales network. For FY2021, FY2022, FY2023 and 9M2024, our revenue from sales
of goods to our wholesale customers accounted for approximately 36.0%, 37.3%, 48.5% and
56.5% of our total revenue, respectively.
During the Track Record Period, we generally entered into sales agreements with our
wholesale customers. We cannot assure you that the sales agreements we have with the existing
wholesale customers will be renewed on the same or similar terms, or at all, upon or before the
expiration of these sales agreements, nor can we assure you that existing wholesale customers
will not terminate these sales agreements before they expire. There is no assurance that we will
be able to maintain the existing business relationship with our wholesale customers or that the
existing wholesale customers will continue to place orders with us at historical levels, or at all.
If any of our major wholesale customers substantially reduces its volume of purchases from us
or ceases to do business with us at all, our sales may decrease substantially and our financial
condition and results of operation may be materially and adversely affected.
We may not be able to assess the sales and inventory levels of our wholesale customers or
correctly predict the sales trends of our products
We have a buyer/seller relationship with our wholesale customers and we recognise revenue
when control over a product or service is transferred to the wholesale customer. We have limited
control over our wholesale customers and they are under no contractual obligation to provide us
with any information regarding their inventory levels and sales data in respect of the products
sold by us in a timely manner, or at all.
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If our wholesale customers do not disclose data of their inventory and sales level of our
products to us, we may not have any effective means in assessing their sales and inventory
levels of our products, or whether their orders placed with us are indeed backed by back-to-back
orders from end customers. Even if our wholesale customers are willing to share with us such
data, we may not be able to ensure the accuracy and reliability of such data. As a result, we may
not be able to predict or rely on the data provided by our wholesale customers to correctly
predict customers’ preferences and anticipate the real market demands of our products. Any
incorrect forecast or anticipation of market trends may end up in our inability to effectively
manage our inventory and sales strategies. This may adversely affect our business performance
and financial condition.
Our business and results of operations may be affected by our lack of control over our
wholesale customers and their business strategies and performance
We do not have control over or contractual right to control our wholesale customers, their
business models, market competitiveness and financial performances since our relationship with
our wholesale customers is a buyer/seller relationship. The performance of our wholesale
customers, their sales network and their ability to expand their businesses are crucial to the
future growth of our business and directly affect our sales volume and profitability. If our
wholesale customers fail to market and sell our products efficiently to end customers, maintain a
sustainable business or even cease to carry on their business, our wholesale customers may
decrease their amount of purchases from us, ask for discounts, cease to on-sell our products or
choose to sell products supplied by our competitors. We may experience reduced orders from
them or even lose our wholesale customers and this may adversely affect our business growth
and results of operations.
Any further increase in the tariff imposed on our products exporting to the U.S. may have
a material adverse impact on us
During the Track Record Period, we engaged in export sales and we sold garment to a
customer in the United States under our wholesale operations. In relation to our export sales to
the United States, we are advised by our U.S. Legal Advisers that we will not be the party
responsible for the payment of any tariffs if we ship our products to our U.S. customer on a free
on board (FOB) basis. As such, as all of our products to the U.S. customer were shipped on FOB
basis, our U.S. customer is the importer of record and is responsible for payment of tariffs, if
any. The U.S. government announced to impose additional tariff of 10% on goods from the PRC
in February 2025 and imposed a further additional tariff of 10% in March 2025. As advised by
our U.S. Legal Advisers, the garment we mainly sold to the U.S. during the Track Record Period
would be subject to a tariff ranging from approximately 34.6% to 59.5% if those products are
shipped from or originated from the PRC and entered the U.S. on or after 4 March 2025.
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We cannot assure you that the tariff imposed by the U.S. government on garment imported
from the PRC will remain unchanged or will not further increase in the future. In the event the
tariff imposed by the U.S. government increases and our U.S. customer have difficulty to pass
on all or any such additional costs to their onward customers, our U.S. customer may reduce
their orders from us or we may have to lower our pricing, which may materially and adversely
affect our financial performance and financial conditions.
We are exposed to credit risks with respect to the settlement by our customers for bulk
sales and wholesale. Any significant delay in payment or defaults by our customers may
materially and adversely affect our financial conditions and results of operations
During the Track Record Period, the average turnover days of trade and bills receivables
were approximately 21.3 days, 44.1 days, 53.9 days and 64.2 days (annualised) for FY2021,
FY2022, FY2023 and 9M2024, respectively. The credit terms offered by us to our customers for
bulk sales and wholesale ranged from 0 to 90 days. We may adjust our credit terms for our
customers for bulk sales and wholesale based on their payment and credit history. However, in
the event that our customers for bulk sales and wholesale delay or default in their payment
obligations to us, our collection period will be lengthened causing an increase in our trade
receivables cycles. There is no assurance that our customers for bulk sales and wholesale will
meet their payment obligations to us on time or in full. Their failures will increase our trade
receivables cycles and we may need to obtain third party finance to fund our daily operations.
Our business and results of operations may be adversely affected by any such delay or default in
the payments by our customers for bulk sales and wholesale.
We rely on our information technology system for our operation
We rely on our existing information technology systems, such as our ERP system, POS
system, WMS system and B2B supply chain system for exchange of information between our
individual Retail Stores and our distribution centre in order to manage our purchases from our
suppliers and sales data, monitor and control our inventory level, logistics arrangement,
membership information and product labelling system. There is no assurance that our
information technology would not experience breakdown, interruption or malfunction in the
future. Any loss of data or break down of our information technology systems may cause
interruptions to our operations and as a result of which our business and results of operations
may be adversely affected.
Substantial part of our inventory are stored in our distribution centre and warehouses, and
any force majeure event affecting our distribution centre and warehouses and their
functionality may severely disrupt our business and bring loss and damage to our Group
Our distribution centre and warehouses are located in Jiangdu, Y angzhou. Substantial part
of our inventory are stored there before they are being delivered to our Retail Stores, Malls or
customers. During the Track Record Period and up to the Latest Practicable Date, our Group was
not subject to any material claims relating to unexpected disruptions at warehouse and/or
distribution centre. In the event there is any material unexpected disruption at or in the vicinity
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of our distribution centre and/or warehouse premises as a result of the occurrence of any force
majeure events, including fire, power and flooding beyond our control, it may directly cause
substantial damage or destruction to our distribution centre and/or warehouses and our inventory.
We cannot guarantee that any precautionary measures implemented at our distribution centre
and/or warehouses such as fire safety facilities and CCTV surveillance system could mitigate the
risk and minimise the business disruptions and potential loss and damages. There is no assurance
that we could take adequate and appropriate steps to mitigate the potential impact of such
disruptions effectively. The occurrence of any of such force majeure incidents in the future may
cause partial or total loss of our inventory, and result in material damage or destruction to our
warehousing facilities and equipment. We maintain various types of insurance policies to cover
our business operations, including property all risks insurance. However, such coverage may be
limited. For example, we may not be able to get fully compensated in case that our losses
attributed to any force majeure event exceed the maximum amount of indemnification we are
able to seek under the insurance policies. Our operation may be severely impaired or even put to
a halt, which may lead to material adverse impact on our results of operations.
We depend on key management personnel, and their departure would seriously and
adversely hinder our ability to maintain or grow our business
Our success and growth has been, and will continue to be, heavily dependent upon our
ability to identify, hire, train and retain suitable, skilled and qualified employees, including
management personnel with the requisite industry expertise. Our Directors take the view that the
experience and qualifications of our Directors and members of senior management are important
to us. For details, please refer to the section headed “Directors, Supervisors and Senior
Management” in this prospectus. Our Directors and members of senior management have been
key members of our management team and play a pivotal role in conducting our daily operations
and formulating our long-term business strategies. In particular, each of Mr. Gao, our Chairman
and executive Director, and Mr. Y uan, our executive Director, has over 40 years of experience in
the supermarket and supply chain businesses, respectively. Further, Mr. Zhang and Mr. Y ao Jun,
our executive Directors and members of our senior management, have over 30 years and 15
years of experience in the supermarket and supply chain businesses, respectively. They have
contributed significantly to our result during the Track Record Period. If we lose the services of
any member of our management team for any reason, we may not be able to locate, or may incur
great costs to recruit and train suitable or qualified replacements in a timely manner, or at all,
which could result in disruption of our business and inefficiency in execution of development
strategies.
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We may be subject to the risk of obsolescence for our inventory
Our inventory primarily comprised trade merchandise with different shelf lives. In
particular, our products such as raw and fresh food might have shorter shelf lives. As such, our
procurement team would closely monitor our inventory level on our ERP system to minimise the
risk of overstocking and obsolescence of our inventory. Our balances of inventories as at 31
December 2021, 31 December 2022, 31 December 2023 and 30 September 2024 amounted to
approximately RMB286.4 million, RMB324.0 million, RMB266.3 million and RMB317.6
million, respectively.
Our inventory inevitably faces obsolescence risks where there are unexpected material
fluctuations or abnormalities in the supply and demand of our products by suppliers and
customers, respectively, or where there are changes in end consumers’ tastes and preferences or
introduction of new products in the market which may lead to decreased demand and
overstocking of particular products, which in turn increases the risk of obsolescence. In case we
fail to manage our inventory effectively or sell our products before the expiry of the shelf lives,
we may be subject to risks of inventory obsolescence, a decline in our inventory values and
significant write-downs or write-offs. If we carry out promotional activities in order to reduce or
boost up the sale of the slow-moving inventories and our inventory level, we may have to reduce
the sale price of our products, which may lead to lower gross margins. In such circumstances,
our business, financial condition and results of operations may be materially and adversely
affected.
Our results of operations may fluctuate due to seasonality
Our business performance may fluctuate from period to period due to various factors,
including the seasonal shopping and consumption habits. For instance, we generally have higher
sales during festivals, holidays and promotional activities, in particular Chinese New Y ear and
anniversary of our Group. Furthermore, some of our products might also be seasonal in nature
and may only be available for certain seasons or offered during certain festivals. We believe that
our results of operations will continue to experience seasonal fluctuation be affected by the
seasonal consumption pattern in the future. Therefore, comparing our results of operations across
different periods of a given year to assess our business performance may not be meaningful and
should not be relied upon as indicator of our future performance. Furthermore, if our operations
are disrupted or affected by unpredictable events during these festive seasons, our business,
financial condition and results of operations would be adversely affected.
Our insurance coverage may not provide our Group with adequate protection against risks
related to our business and operations
We maintain various insurance such as property all risks insurance and public liability
insurance. We did not maintain any product liability insurance for our product liabilities. Our
insurance may not fully cover all the potential losses and claims arising from our operations.
Our Group and/or our officers (as the case may be) may be exposed to claims in respect of
matters that are not covered by the insurance policies we maintained. In addition, most of our
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insurance policies are subject to standard deductions, exclusions and limitations. We believe
these insurance policies are generally in accordance with customary industry practices, including
deductibles and limits of coverage, but we cannot be fully insured against all potential hazards
incidental to our business, including losses resulting from business interruptions, or all potential
losses, including damage to our reputation.
If we were to incur significant liabilities for which we are not fully insured, it may have an
adverse effect on our results of operations and financial conditions. As a result of market
conditions, premiums and deductibles for certain insurance policies may increase substantially
and, in some instances, certain insurance policies may become unavailable at a reasonable cost
or available only for certain risks. If we were for any reason no longer covered by our existing
insurance policies, we may not be able to obtain alternative insurance policies at acceptable
terms or at all, which may have an adverse effect on our results of operations.
With respect to losses and claims which are covered by insurance policies, the process for
us to recover such losses from insurers may be lengthy and complicated. In addition, we may not
be able to recover the full amount of such losses from the insurers. There can be no assurance
that insurance policies would be sufficient to cover all potential losses, regardless of the cause,
or that we can recover such losses from the insurers.
Our production of meals may be interrupted by production difficulties due to machinery
failures, utility shortages or stoppages, fire, acts of God or other calamities at or near our
central kitchen
Our production of meals relies on the continued and proper function of equipment and
steady and reliable supply of electricity and other utilities. Any interruption to our production
may result in delay or failure in the supply of meals in a timely matter, or at all, loss of sales,
reputational damage, workplace safety issues or other consequences that may materially and
adversely affect our business.
We rely on a number of machinery with different specifications to prepare and pack the
meals. Any mechanical failures or breakdown of our machinery could materially disrupt our
production of meals and cause us to incur additional costs to repair or replace the affected
machinery. There can be no assurance that we will not experience any problems with our
machinery or that we will be able to address any such problems or obtain replacements in a
timely manner. Problems with any machinery in our central kitchen for meals may affect our
ability to prepare and pack the meals or cause us to incur significant expense to repair or replace
the affected machinery. Any of these could have a material adverse effect on our business,
results of operations and financial condition.
Furthermore, the operation of our central kitchen for meals depends on a continuous and
adequate supply of electricity and other utilities. If there are any shortage of electricity, the PRC
authorities may require our central kitchen to be shut down periodically. Any disruption in the
supply of electricity at our central kitchen would disrupt our production of meals and could
cause delay or failure in the supply of meals in a timely matter, or at all, or deterioration or loss
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of our food ingredients. This could materially and adversely affect our ability to fulfil our orders
and consequently may have a material adverse effect on our business and operations, results of
operations, financial conditions and reputation.
In addition, our central kitchen for meals are subject to various risks. Fire, earthquakes,
natural disasters, pandemic or extreme weather, including droughts, floods, excessive cold or
heat, typhoon or other storms, causing power outages, damage to our central kitchen or
disruption of transportation channels, among other events, could significantly interfere with our
operations. Any failure to take adequate steps to mitigate the potential impact of unforeseeable
events or to effectively respond to such events could materially and adversely affect our
business, financial condition and results of operations.
We may not be able to obtain or renew all requisite licences, approvals and permits for our
business on time
Our Group as well as our Retail Stores are required to obtain and hold relevant licences,
approvals and permits for our business in accordance with the PRC laws and regulations. For
details, please refer the paragraph headed “Business – Licences and registrations” in this
prospectus. There is no assurance that we can continue to comply with the relevant regulatory
regimes or we could successfully obtain or renew the requisite licences and permits in a timely
manner. If we or any of our Retail Stores fail to obtain or renew the requisite licences and
permits in a timely manner, we may be subject to fines and sanctions and some of our Retail
Stores and/or our central kitchen may be ordered to temporarily or permanently suspend its
operations, which may disrupt our operations and materially and adversely affect our business,
results of operations and financial condition.
RISKS RELATING TO OUR INDUSTRY
We operate in a competitive industry
According to the Industry Report, the supermarket industry in the PRC is very competitive
and is moderately concentrated with over 6,000 industry players in 2023. We have to compete
with cross-province chain supermarkets and convenience stores, as well as those of local brands
in the province or city. We believe our ability to compete effectively depends on various factors,
including our Retail Store network and our established supply chain. If we fail to compete
effectively or cost-efficiently against our competitors, we may lose or be unable to maintain or
increase our market shares, which could have a material adverse effect on our business, results
of operations, financial condition and prospects.
We may be affected by any adverse change in economic and social conditions of Jiangsu
Province
Jiangsu Province has been and will continue to be the principal market of our Group’s
business. During the Track Record Period, most of our Group’s business operations were in
Y angzhou and all of them were in Jiangsu province. Besides, our distribution centre as well as
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our two warehouses where a substantial part of our products are stored are located within
Jiangsu Province. Our Directors expect that Jiangsu Province will continue to our Group’s
operation and asset base and our results of operations and business are therefore heavily
dependent on the economic and social conditions of Jiangsu Province. If there is any adverse
change in the Jiangsu Province that is out of our control such as downturn of the local economy,
outbreak of any pandemic, natural disasters or acts of god, it may adversely affect our business
and operations. We cannot assure you that there will not be any unexpected change or
unpredictable or disastrous events in Jiangsu Province and our business and results of operations
may be adversely affected as a result.
Our business may be adversely affected by the new retail model
According to the Industry Report, research and applications in artificial intelligence, big
data analytics, Internet of Things and smart hardware have achieved new breakthroughs and
progresses in recent years, resulting in the emergence of a new retail model in the PRC. The
new retail model generally involves the use of unmanned shelves, vending machines, smart
payment technologies, etc. in retail business, which reflects a shift towards more automated and
efficient retail environments. It is generally believed that by adopting the new retail model,
stores will be able to provide more personalised and intelligent shopping experiences to
customers while at the same time lowering their operational costs.
During the Track Record Period and up to the Latest Practicable Date, our Group had not
implemented the new retail model in our business. Considering the rise of the new retail model
adopted by other market players in the industry, we may be required to respond to such change
by spending extra resources in adapting new technology in order to offer more personalised and
intelligent shopping experiences to customers and stay afloat in the industry. However, we
cannot assure you that we will be able to cope with such change in a timely manner, or at all. If
we fail to respond to such change in the retail model, we may not be able to stay competitive in
the industry, which could materially and adversely affect our business, results of operations,
financial condition and prospects.
We are subject to a wide range of laws and regulations and changes in such laws and
regulations may affect our business
Our business and operations are subject to a wide range of laws and regulations such as
those relating to pricing, consumer protection, quality of goods and food safety. For details,
please refer to the section headed “Regulatory Overview” in this prospectus. There can be no
assurance that the PRC government will not impose additional or stricter laws or regulations on
pricing, consumer protection, quality of goods and food safety or provide more stringent or
comprehensive monitoring and regulation on pricing, consumer protection, quality of goods and
food safety, which may lead to an increase in our costs of complying with such regulations.
Government authorities may inspect, examine or enquire on our compliance with the relevant
statutory and regulatory requirements from time to time. These laws and regulations, as well as
any associated inquiries, examinations, investigations or any other actions from the government,
may be costly to comply with and may result in negative publicity, increase in our operating
RISK FACTORS
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costs, and/or demand for significant management time and attention, and may subject us to
remedies that may harm our business, including fines or demands or orders that requires us to
modify or cease any of our existing business practices. In addition, we may be unable to pass
these additional costs on to our customers, which may result in a material adverse effect on our
results of operations.
RISKS RELATING TO CONDUCTING BUSINESS IN CHINA
We may be subject to additional approval or other requirements of the CSRC or other PRC
governmental authorities in connection with future capital raising activities
On 20 February 2025, the CSRC issued a notification on our Company’s completion of the
PRC filing procedures for the Listing and the Global Offering and the Conversion of Domestic
Unlisted Shares into H Shares. A copy of this notification can be found on the official website
of the CSRC. As advised by our PRC Legal Advisers, our Company has completed all necessary
filings with the CSRC in the PRC in relation to the Global Offering and the Listing, and upon
completion of overseas offering and listing, we shall report information on overseas offering and
listing pursuant to the provisions of relevant guidelines.
We cannot assure you that any new rules or regulations promulgated in the future will not
impose additional requirements or restrictions on us or our future financing activities. If it is
determined in the future that additional approval from or filing with the CSRC or other
regulatory authorities or other procedures are required, there is no guarantee that we will be able
to obtain such approval, perform such filing procedures or meet such other requirements in a
timely manner or at all. We may face sanctions by the CSRC or other PRC regulatory authorities
for failure to seek CSRC approval or other government authorisation, or perform filing
procedures, for our future financing activities, and these regulatory authorities may impose fines
and penalties on us, limit our operating activities in the PRC, limit our ability to pay dividends
outside the PRC, delay or restrict the repatriation of the proceeds from our future financing
activities into the PRC or take other actions to restrict our financing activities, which could have
a material adverse effect on our business.
Changes in economic, political and social conditions in China could affect our business and
prospects
Substantially all of our operations, assets and revenue are located in or derived from our
businesses in China. Accordingly, our financial condition, results of operations and prospects
are, to a significant degree, subject to the economic, political, social and regulatory landscape in
China, including changes in international, national, regional and local economic conditions,
employment levels, consumer demand and discretionary spending. The PRC government has
implemented various measures to encourage, and to guide, the economic growth and the
allocation of resources, some of which may have an effect on our business.
RISK FACTORS
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Y ou may experience additional procedures in effecting service of process or enforcing
foreign judgments against us, our Directors, supervisors or senior management residing in
China
Our Company was incorporated under the laws of the PRC. Substantially all of our assets
are located in China and all of our Executive Directors, supervisors and senior management
reside in China. This may result in additional procedures to effecting service of process within
Hong Kong or elsewhere outside of China upon us or our Directors, supervisors or senior
management.
On 14 July 2006, China and Hong Kong signed the Arrangement on Reciprocal Recognition
and Enforcement of Judgments in Civil and Commercial Matters by the Courts of the Mainland
and of the Hong Kong Special Administrative Region Pursuant to Choice of Court Agreements
between Parties Concerned (ٙ
τર ) (the “ Arrangement ”), pursuant to which a party having obtained a final
enforceable judgment rendered by a designated People’s Court of the PRC requiring payment of
money in a civil and commercial case according to a choice of court agreement in writing may
apply for recognition and enforcement of the judgment in Hong Kong, and vice versa.
Nonetheless, the Arrangement is subject to a choice of court agreement in writing which is
defined as any agreement in writing entered into between the parties after the effective date of
the Arrangement in which a Hong Kong or PRC court is expressly designated as the court
having sole jurisdiction for the dispute. In the case where the parties in the dispute do not agree
to enter into a choice of court agreement in writing, the Arrangement would not be available for
a party who seeks to enforce a final judgment against our assets or our Directors, supervisors or
senior management in China.
We cannot guarantee that all foreign court judgments made against us or any of our
directors, supervisors or senior management in China will be effectively enforced.
The PRC regulations on foreign currency conversion may limit our foreign exchange
transactions, including dividend payments on our Shares
Currently, the RMB cannot be freely converted into any foreign currency, and the
conversion and remittance of foreign currencies are subject to PRC foreign exchange
regulations. There can be no assurance that, under a certain exchange rate, we will have
sufficient foreign currencies to meet our foreign exchange requirements such as performing
foreign currency-denominated contracts. Under the current foreign exchange regulations in the
PRC, RMB can generally be converted for foreign exchange transactions under our current
account including the payment of dividends without the need for prior approval from the SAFE.
Nonetheless, we are required to present documentary evidence of such transactions and conduct
such transactions at designated foreign exchange banks within the PRC that have the requisite
licences to carry out foreign exchange business.
RISK FACTORS
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Meanwhile, foreign exchange transactions for capital account purposes may require the
prior approval or registration with the SAFE. If we fail to obtain the SAFE’s approval to convert
RMB into foreign currencies for foreign exchange transactions or there are changes in the
foreign exchange regulations or policies, our capital expenditure plans, business operations,
results of operations, financial condition and our ability to pay dividends could be materially
and adversely affected.
We are a PRC enterprise and we are subject to PRC tax on our global income, and any
dividends paid to investors and gains on the sale of our Shares by our investors may be
subject to PRC tax
As a PRC-incorporated company, under applicable PRC tax laws, we are subject to a tax of
up to 25% on our global income. Under applicable PRC tax laws, regulations and statutory
documents, non-PRC resident individuals and enterprises are subject to different tax obligations
with respect to dividends received from us or gains realised upon the sale or other disposition of
our Shares.
Non-PRC individuals are generally subject to PRC individual income tax under the
Individual Income Tax Law of the PRC (جwith respect to PRC
source income or gains at a rate of 20%. We are required to withhold related tax from dividend
payments paid to non-PRC resident individuals, unless specifically exempted by the tax
authority of the State Council or reduced or eliminated by an applicable tax treaty. However,
pursuant to the Circular on Certain Policy Questions Concerning Individual Income Tax (݁
 ) issued by the MOF and SA T on 13
May 1994, the income gained by foreign individuals from dividends and bonuses of
foreign-invested enterprises are exempted from individual income tax for the time being.
According to the Circular Declaring that Individual Income Tax Continues to Be Exempted
over Individual Income from Transfer of Shares issued by the MOF and the SA T (࢕
 ) effective as of 30 March
1998, income from individuals’ transfer of stocks of listed companies continued to be
temporarily exempted from individual income tax. On 3 February 2013, the State Council
approved and promulgated the Notice of Suggestions to Deepen the Reform of System of Income
Distribution ( ). On
8 February 2013, the General Office of the State Council promulgated the Circular Concerning
Allocation of Key Works to Deepen the Reform of System of Income Distribution ( ਷ਕ৫፬ʮ
 ). These documents indicates that the PRC
government is planning to cease foreign individuals’ tax exemption for dividends obtained from
foreign-invested enterprises, and the MOF and the SA T should be responsible for making and
implementing details of such plan. However, relevant implementation rules or regulations have
not been promulgated by the MOF and the SA T. Considering these uncertainties, non-resident
individual holders of our Shares should be aware that they may be obligated to pay PRC income
tax on the dividends and bonus realised from the Shares.
RISK FACTORS
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Non-PRC resident enterprises that do not have establishments or premises in the PRC, or
that have establishments or premises in the PRC but their income is not related to such
establishments or premises, are subject to PRC EIT at the rate of 10% on dividends received
from PRC companies and gains realised upon disposition of equity interests in the PRC
companies pursuant to the EIT Law and other applicable PRC tax regulations and statutory
documents, which may be reduced or eliminated under special arrangements or applicable
treaties between the PRC and the jurisdiction where the non-resident enterprise resides. Pursuant
to applicable regulations, we intend to withhold tax at a rate of 10% from dividends paid to
non-PRC resident enterprise holders of our Shares (including HKSCC Nominees and payments
through CCASS). Non-PRC resident enterprises that are entitled to be taxed at a reduced rate
under an applicable income tax treaty will be required to apply to the PRC tax authorities for a
refund of any amount withheld in excess of the applicable treaty rate, and payment of any such
refund will be subject to the PRC tax authorities’ verification.
There remains uncertainty as to the interpretation and application of the relevant PRC tax
laws by the PRC tax authorities, including whether and how individual income tax or EIT Law
tax on gains derived by holders of our Shares from their disposition of our Shares may be
collected. If any such tax is collected, the value of our Shares may be materially and adversely
affected.
Payment of dividends is subject to conditions under PRC law and regulations
Under PRC law and regulations, we may only pay dividends out of distributable profits.
Distributable profits are our after-tax profits as determined under PRC GAAP or IFRS,
whichever is lower, less any recovery of accumulated losses and appropriations to statutory and
other reserves that we are required to make. As a result, we can not guarantee that we will have
sufficient or any distributable profit which enables us to make dividend distributions to our
Shareholders, including in periods for which our financial statements indicate we are profitable.
Any distributable profit not distributed in a given year is retained and available for distribution
in subsequent years.
Fluctuations in exchange rates could result in foreign currency exchange losses
Fluctuations in exchange rates between RMB and U.S. dollar and other currencies may be
affected by, among other things, changes in China’s political and economic conditions, as well
as economic and political developments around the globe. There is no assurance that the value
of RMB will remain at the current level against U.S. dollar or any other foreign currency.
Potential appreciation or depreciation of RMB against U.S. dollar or any other foreign currency
will have mixed effects on our business and there is no assurance that the overall effect will be
positive. In addition, being a PRC-based company listed in Hong Kong, any significant change
in the exchange rates of Hong Kong dollar against RMB may materially and adversely affect any
dividends payable on our Shares in Hong Kong dollars.
RISK FACTORS
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RISKS RELATING TO THE GLOBAL OFFERING
There has been no prior public market for our Shares and there can be no assurance that
an active market would develop
Prior to the Global Offering, there has been no public market for our Shares. The initial
Offer Price range for our Shares was the result of negotiations among us and the Joint Overall
Coordinators (for themselves and on behalf of the Underwriters) and the Offer Price may differ
significantly from the market price for our Shares following the Global Offering. We have
applied to list and deal in our Shares on the Stock Exchange. There is no assurance that the
Global Offering will result in the development of an active, liquid public trading market for our
Shares. Factors such as variations in our revenue, earnings and cash flows or any other
developments of us may affect the volume and price at which our Shares will be traded.
Any disposal or perceived disposal of a substantial number of the Shares by our
Controlling Shareholders or substantial shareholders in the public market could adversely
affect the market price of the Shares
There is no assurance that our Controlling Shareholders will not dispose of their
shareholdings following the expiration of their respective lock-up periods after the Listing.
Disposal of a substantial number of the Shares in the public market after the completion of the
Global Offering, or the perception that disposal may occur could materially and adversely affect
the prevailing trading price of the Shares. We cannot predict the effect, if any, of any future
sales of the Shares by any of our Controlling Shareholders or substantial shareholders may have
on the market price of the Shares.
Shareholders’ interests may be diluted and market price of the Shares may decrease if we
issue additional Shares in the future
We may need to raise additional funds in the future to finance our further business
expansion, new development and acquisitions. If additional funds are raised through the issuance
of new equity or equity-linked securities of our Company other than on a pro-rata basis to our
existing Shareholders, the percentage shareholding of such Shareholders in our Company may be
diluted, and such new securities may confer rights and privileges that take priority over those
conferred by the Offer Shares.
Our Controlling Shareholders’ interests may not be aligned with the interests of other
Shareholders
Immediately following the Global Offering, our Controlling Shareholders will control the
exercise of approximately 31.11% of the Shares in issue (without taking into account any Shares
which may be allotted and issued upon the exercise of the Over-allotment Option). Therefore,
our Controlling Shareholders will continue to be able to exercise controlling influence over our
business through the ability to direct us to take actions or omit from taking actions without the
consent or approval of other Shareholders. Accordingly, our Controlling Shareholders have
RISK FACTORS
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substantial influence over our business, including but not limited to decisions regarding mergers,
consolidations and the sale of all or substantially all of our assets, election of Directors, timing
and distribution of dividends, if any, and other significant corporate actions.
There is no assurance that our Controlling Shareholders will act in our best interests or that
of our minority Shareholders. The interests of our Controlling Shareholders may differ from the
interests of our other Shareholders. If there exists any conflict of interests between our
Controlling Shareholders and minority Shareholders, our Controlling Shareholders may have the
power to prevent us from proceeding with any proposed transactions at the general meeting
which could be beneficial to us and other Shareholders, regardless of the underlying reasons.
As the initial Offer Price per Share is higher than the net tangible book value per Share,
purchasers of our Shares in the Global Offering will experience immediate dilution
The Offer Price of our Offer Shares is higher than the net tangible book value per Share
immediately prior to the Global Offering. Therefore, purchasers of our Offer Shares in the
Global Offering will experience an immediate dilution in pro forma adjusted net tangible assets
attributable to the equity shareholders of the Company per Share of HK$3.03 and HK$3.15,
respectively, assuming an Offer Price of HK$2.50 per Offer Share and HK$3.00 per Offer Share,
respectively, and existing Shareholders will receive an increase in the pro forma adjusted and
consolidated net tangible asset value per Share of their Shares. If we issue additional Shares in
the future, purchasers of our Offer Shares may experience further dilution.
RISKS RELATING TO STATEMENTS MADE IN THIS PROSPECTUS
Certain facts, statistics and data contained in this prospectus with respect to the industry
may not be accurate and should not be unduly relied upon
Certain facts, statistics and data in this prospectus are derived from various sources
including publications and industry-related sources prepared by government officials or
independent third parties. In addition, certain information and statistics set forth in the section
headed “Industry Overview” have been extracted from the Industry Report. We believe that the
sources of information are appropriate sources for such information, and the Sole Sponsor and
our Directors have taken reasonable care to extract and reproduce the publications and
industry-related sources in this prospectus. In addition, we have no reason to believe that such
information is false or misleading or that any fact that would render such information false or
misleading has been omitted. However, neither our Group, our Directors, the Sole Sponsor, nor
any parties involved in the Global Offering including the Industry Consultant have
independently verified, or make any representation as to, the accuracy of such information and
statistics from the official government sources. It cannot be assured that statistics derived from
the official government sources are stated or prepared at the same standard or level of accuracy
as, or consistent with, those in other publications within or outside Hong Kong. Accordingly,
such information and statistics from the official government sources may not be accurate and
should not be unduly relied upon.
RISK FACTORS
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Forward-looking statements contained in this prospectus are subject to risks and
uncertainties
This prospectus includes various forward-looking statements with respect to our business
strategies, operating efficiencies, competitive positions, growth opportunities for existing
operations, plans and objectives of management, certain pro forma information and other
matters. The words “aim”, “anticipate”, “believe”, “can”, “could”, “estimate”, “expect”, “go
forward”, “intend”, “may”, “might”, “ought to”, “plan”, “project”, “seek”, “should”, “will”,
“would” and the negative of these terms and other similar words or statements identify a number
of these forward-looking statements. These forward-looking statements, including, amongst
others, those relating to our future business prospects, capital expenditure, cash flows, working
capital, liquidity and capital resources are necessarily estimates reflecting the best judgment of
our Directors and management and involve a number of risks and uncertainties that could cause
actual results to differ materially from those suggested by the forward-looking statements. As a
consequence, these forward-looking statements should be considered in light of various
important factors, including those set out in this section. Accordingly, such statements are not a
guarantee of future performance and investors should not place undue reliance on any
forward-looking statement. All forward-looking statements in this prospectus are qualified by
reference to this cautionary statement.
Investors should read the entire prospectus carefully and should not place any reliance on
any information contained in press articles, other media and/or research reports regarding
our Group or the Global Offering
There may be press and media coverage regarding our Group or the Global Offering, which
may include certain operating and financial information and projections, valuations and other
information that do not appear in this prospectus. We strongly caution our investors not to rely
on any such information. Our Group has not authorised the disclosure of any such information to
the press or media and do not accept any responsibility for 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. In making your
decision as to whether to subscribe for the Offer Shares, you should rely only on the information
contained in this prospectus.
RISK FACTORS
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In preparation for the Global Offering, we have applied for waivers from strict compliance
with the relevant provisions of the Listing Rules and exemption from strict compliance with the
relevant provisions of the Companies (Winding up and Miscellaneous Provisions) Ordinance as
set out below.
W AIVER IN RELATION TO MANAGEMENT PRESENCE IN HONG KONG
Pursuant to Rules 8.12 and 19A.15 of the Listing Rules, we must have sufficient
management presence in Hong Kong. This normally means that at least two of our executive
Directors must be ordinarily resident in Hong Kong.
However, our Company would not be able to satisfy the requirements under Rules 8.12 and
19A.15 of the Listing Rules due to the following reasons:
(a) our Group’s headquarters and principal place of business are located in the PRC, the
business operations of our Group are substantially managed and conducted in the PRC
and our Group does not have any substantial business activities or operations in Hong
Kong;
(b) our executive Directors and members of our Group’s senior management ordinarily
reside in the PRC and are expected to continue to reside in the PRC, the principal
base of our Group’s operations;
(c) substantially all of our Group’s assets are based in the PRC;
(d) for the purposes of the management and operations of our Group, the appointment of
additional executive Directors who are ordinarily resident in Hong Kong will not only
increase the administrative expenses of our Group, but will also reduce the
effectiveness and responsiveness of our Board in making decisions for our Group,
especially when business decisions are required to be made on a timely basis. In
addition, appointing 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 Rules 8.12 and 19A.15 of the Listing Rules may not be in the best
interest of our Company and our Shareholders as a whole;
(e) if additional executive Directors who are ordinary residents of Hong Kong are
appointed, they will not be able to fully understand the daily operations of the core
business of our Group or fully appreciate the circumstances surrounding or affecting
the core business operations and development of our Group from time to time, as they
will not be physically present in the operation and management base of our Group in
W AIVERS FROM STRICT COMPLIANCE WITH THE LISTING RULES AND EXEMPTION
FROM STRICT COMPLIANCE WITH THE COMPANIES (WINDING UP AND
MISCELLANEOUS PROVISIONS) ORDINANCE
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the PRC all the time. As such, such executive Directors may not be able to exercise
their discretion on a fully informed basis, or make appropriate business decisions or
judgments that are most beneficial to the operations and development of our Group;
and
(f) each of the executive Directors has a vital role in the business and operations of our
Group and it is of paramount importance for them to be based in the PRC and
physically close to our Group’s operations. To relocate any of the existing PRC-based
executive Directors to Hong Kong for the sole purpose of satisfying the requirements
of Rules 8.12 and 19A.15 of the Listing Rules will take time to process the
application for residency in Hong Kong and the application will be unnecessarily
burdensome and costly for our Company and may not be approved by the Listing
Date. Since such executive Directors, after the relocation, will not be physically
present at the operation and management base of our Group in the PRC all the time,
they may encounter management difficulties.
Therefore, our Directors consider that the appointment of additional executive Directors
who are ordinarily residents in Hong Kong or to relocate Directors who are currently based in
the PRC to Hong Kong is not beneficial to or appropriate for our Group. Accordingly, we do not
and, for the foreseeable future, will not have sufficient management presence in Hong Kong.
Accordingly, we have applied to the Stock Exchange for, and the Stock Exchange has
granted us, a waiver from strict compliance with the requirements under Rules 8.12 and 19A.15
of the Listing Rules, subject to the following conditions. In order to maintain effective
communication with the Stock Exchange, we will put in place the following measures between
us and the Stock Exchange:
1. we have appointed Mr. Gao, our executive Director, and Mr. Hui Hung Kwan ( ஢ᒿ໊
΋͛), one of our joint company secretaries as our authorised representatives (the
“Authorised Representatives ”) pursuant to Rule 3.05 of the Listing Rules. The
Authorised Representatives will act as our Company’s principal channel of
communication with the Stock Exchange. Each of the Authorised Representatives will
be readily contactable by phone, facsimile and email to promptly deal with enquiries
from the Stock Exchange, and will also be available to meet with the Stock Exchange
to discuss any matter within a reasonable period of time upon request of the Stock
Exchange;
2. when the Stock Exchange wishes to contact our Directors on any matter, each of the
Authorised Representatives will have all necessary means to contact all of our
Directors (including our independent non-executive Directors) and senior management
team promptly at all times. Our Company will also inform the Stock Exchange
promptly in respect of any changes in the Authorised Representatives. We have
W AIVERS FROM STRICT COMPLIANCE WITH THE LISTING RULES AND EXEMPTION
FROM STRICT COMPLIANCE WITH THE COMPANIES (WINDING UP AND
MISCELLANEOUS PROVISIONS) ORDINANCE
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provided the Stock Exchange with the contact details (i.e., mobile phone number,
office phone number, fax number and email address) of each of our Authorised
Representatives and Directors to facilitate communication with the Stock Exchange;
3. all Directors who do not ordinarily reside in Hong Kong possess or can apply for valid
travel documents to visit Hong Kong and can meet with the Stock Exchange within a
reasonable period of time upon request;
4. in compliance with Rules 3A.19 of the Listing Rules, we have appointed Red Solar
Capital Limited as our compliance adviser (the “ Compliance Adviser ”), which has
access at all times to our Authorised Representatives, Directors and other officers of
our Company, and will act as an additional channel of communication with the Stock
Exchange. Our Company will keep the Stock Exchange up to date in respect of any
change to such details. Our Authorised Representatives, Directors and other officers of
our Company will provide promptly such information and assistance as the
Compliance Adviser may reasonably require in connection with the performance of the
Compliance Adviser’s duties as set forth in Chapter 3A of the Listing Rules. There
will be adequate and efficient means of communication between our Company, the
authorised representatives, our Directors and other officers and the Compliance
Adviser, and to the extent reasonably practicable and legally permissible, our
Company will keep the Compliance Adviser informed of all communications and
dealings between our Company and the Stock Exchange; and
5. we shall ensure that there are adequate and efficient means of communication among
our Company, our Authorised Representatives, our Directors, other officers and the
Compliance Adviser, and will keep the Compliance Adviser fully informed of all
communications and dealings between us and the Stock Exchange.
W AIVER IN RESPECT OF APPOINTMENT OF JOINT COMPANY SECRETARIES
Pursuant to Rules 3.28 and 8.17 of the Listing Rules, we must appoint a company secretary
who, by virtue of his/her academic or professional qualifications or relevant experience, is, in
the opinion of the Stock Exchange, capable of discharging the functions of company secretary.
Note 1 to Rule 3.28 of the Listing Rules further provides that the Stock Exchange considers
that the following academic or professional qualifications to be acceptable:
(a) a member of The Hong Kong Chartered Governance Institute;
(b) a solicitor or barrister (as defined in the Legal Practitioners Ordinance (Chapter 159
of the Laws of Hong Kong)); and
W AIVERS FROM STRICT COMPLIANCE WITH THE LISTING RULES AND EXEMPTION
FROM STRICT COMPLIANCE WITH THE COMPANIES (WINDING UP AND
MISCELLANEOUS PROVISIONS) ORDINANCE
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(c) a certified public accountant as defined in the Professional Accountants Ordinance
(Chapter 50 of the Laws of Hong Kong).
Note 2 to Rule 3.28 of the Listing Rules provides that the Stock Exchange will consider the
following factors in assessing an individual’s “relevant experience”:
(i) length of employment with the issuer and other issuers and the roles he/she played;
(ii) familiarity with the Listing Rules and other relevant laws and regulations including
the SFO, the Companies Ordinance, the Companies (Winding Up and Miscellaneous
Provisions) Ordinance and the Takeovers Code;
(iii) relevant training taken and/or to be taken in addition to the minimum requirement of
taking not less than fifteen hours of relevant professional training in each financial
year under Rule 3.29 of the Listing Rules; and
(iv) professional qualifications in other jurisdictions.
Our Company has appointed Mr. Hui Hung Kwan ( ஢ᒿ໊΋͛ )( “ Mr. Hui ”) and Ms. Xu
Chunling (ɾɻ )( “ Ms. Xu ”) as the joint company secretaries of our Company. Ms. Xu, as
the manager of our Company and secretary to the Board, is mainly responsible for managing the
corporate affairs of our Group, managing the archives and qualification certificates, drafting and
preparing legal and other documents and managing their receipt and dispatch. Given Ms. Xu’s
experience and she currently serves as the secretary to our Board, our Directors are of the view
that, with Ms. Xu’s thorough understanding of corporate governance matters of our Group, she is
considered as a suitable person to act as a company secretary of our Company. In addition, as
the core business and operations of our Group are substantially based and conducted in the PRC,
our Directors believe that it is necessary to appoint Ms. Xu as a company secretary whose
presence in the headquarters of our Group enables her to attend to the day-to-day corporate
secretarial matters concerning our Group. However, given Ms. Xu does not possess a
qualification stipulated in Rule 3.28 of the Listing Rules, she is not able to solely fulfil the
requirements as a company secretary of a listed issuer stipulated under Rules 3.28 and 8.17 of
the Listing Rules. While Ms. Xu may not be able to solely fulfil the requirements of the Listing
Rules, our Company believes that it would be in the best interests of our Company and the
corporate governance of our Company to appoint Mr. Hui as one of our joint company
secretaries due to his thorough understanding of the internal administration and business
operations of our Group. In order to provide assistance to Ms. Xu and to enable Ms. Xu to
acquire the “relevant experience” under Note 2 to Rule 3.28 of the Listing Rules so as to fully
comply with the requirements set forth under Rules 3.28 and 8.17 of the Listing Rules, we have
also appointed Mr. Hui, a member of the Hong Kong Institute of Certified Public Accountants,
who fully meets the requirements stipulated under Rules 3.28 and 8.17 of the Listing Rules to
act as the other joint company secretary and to provide assistance to Ms. Xu for an initial period
of three years from the Listing Date.
W AIVERS FROM STRICT COMPLIANCE WITH THE LISTING RULES AND EXEMPTION
FROM STRICT COMPLIANCE WITH THE COMPANIES (WINDING UP AND
MISCELLANEOUS PROVISIONS) ORDINANCE
–7 8–


--- page 89 ---
Since Ms. Xu does not possess the formal qualifications required of a company secretary
under Rule 3.28 of the Listing Rules, we have applied to the Stock Exchange for, and the Stock
Exchange has granted, a waiver from strict compliance with the requirements under Rules 3.28
and 8.17 of the Listing Rules such that Ms. Xu may act as a joint company secretary of our
Company. Pursuant to paragraph 13 of Chapter 3.10 of the Guide for New Listing Applicants
published by the Stock Exchange, the waiver will be for a fixed period of time (“ Waiver
Period ”) and on the following conditions: (i) the proposed company secretary must be assisted
by a person who possesses the qualifications or experience as required under Rule 3.28 of the
Listing Rules and is appointed as a joint company secretary throughout the Waiver Period; and
(ii) the waiver for Rules 3.28 and 8.17 of the Listing Rules will be revoked immediately if there
are material breaches of the Listing Rules by the issuer. The waiver is valid for an initial period
of three years from the Listing Date, and is granted on the condition that Mr. Hui, as a joint
company secretary of our Company, will work closely with, and provide assistance to, Ms. Xu in
the discharge of her duties as a joint company secretary and in gaining the relevant company
secretary experience as required under Rule 3.28 of the Listing Rules and to become familiar
with the requirements of the Listing Rules and other applicable Hong Kong laws and
regulations, for an initial period of three years commencing on the Listing Date.
Given Mr. Hui’s professional qualifications and experience, he will be able to explain to
both Ms. Xu and our Company the relevant requirements under the Listing Rules. Mr. Hui will
also assist Ms. Xu in organising Board meetings and Shareholders’ meetings of our Company as
well as other matters of our Company which are incidental to the duties of a company secretary.
He is expected to work closely with Ms. Xu, and will maintain regular contact with Ms. Xu, our
Directors, Supervisors and the senior management of our Company. The waiver will be revoked
immediately if Mr. Hui ceases to provide assistance to Ms. Xu as a joint company secretary for
the three-year period after the Listing or where there are material breaches of the Listing Rules
by our Company.
In addition, Ms. Xu will comply with the annual professional training requirement under
Rule 3.29 of the Listing Rules and will enhance her knowledge of the Listing Rules during the
three-year period from the Listing. Ms. Xu will also be assisted by (a) the Compliance Adviser,
particularly in relation to compliance with the Listing Rules; and (b) the Hong Kong legal
advisers of our Company, on matters concerning our Company’s ongoing compliance with the
Listing Rules and the applicable laws and regulations.
Before the expiration of the initial three year period, we shall re-evaluate and demonstrate
to the Stock Exchange that Ms. Xu, having benefited from the assistance of Mr. Hui for the
preceding three years, will have acquired the skills necessary to carry out the duties of company
secretary and the relevant experience within the meaning of Note 2 to Rule 3.28 of the Listing
Rules so that a further waiver will not be necessary.
Please refer to the section headed “Directors, Supervisors and Senior Management” in this
prospectus for the biographical information of Ms. Xu and Mr. Hui.
W AIVERS FROM STRICT COMPLIANCE WITH THE LISTING RULES AND EXEMPTION
FROM STRICT COMPLIANCE WITH THE COMPANIES (WINDING UP AND
MISCELLANEOUS PROVISIONS) ORDINANCE
–7 9–


--- page 90 ---
W AIVER IN RESPECT OF STRICT COMPLIANCE WITH RULE 4.04(1) OF THE
LISTING RULES AND EXEMPTION FROM STRICT COMPLIANCE WITH
SECTION 342(1) 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
Applicable Listing Rules and legal requirements
Requirements under the Companies (Winding Up and Miscellaneous Provisions) Ordinance
Section 342(1) of the Companies (Winding Up and Miscellaneous Provisions) Ordinance
requires, subject to section 342A of the Companies (Winding Up and Miscellaneous Provisions)
Ordinance, all prospectuses to state the matters specified in Part I of the Third Schedule to the
Companies (Winding Up and Miscellaneous Provisions) Ordinance and set out the reports
specified in Part II of 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, a listing applicant is required to include in its
prospectus a statement as to the gross trading income or sales turnover (as may be appropriate)
of the listing applicant during each of the three financial years immediately preceding the issue
of its prospectus, as well as an explanation of the method used for the computation of such
income or turnover and a reasonable breakdown of 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, a listing applicant is required to include in its
prospectus a report by the auditors of the listing applicant with respect to profits and losses and
assets and liabilities in respect of each of the three financial years immediately preceding the
issue of the prospectus.
According to section 342A(1) of the Companies (Winding Up and Miscellaneous
Provisions) Ordinance, the SFC may issue, subject to such conditions (if any) as it thinks fit, a
certificate of exemption from compliance with the relevant requirements of 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 the relevant requirements would be irrelevant or unduly burdensome, or is
otherwise unnecessary or inappropriate.
W AIVERS FROM STRICT COMPLIANCE WITH THE LISTING RULES AND EXEMPTION
FROM STRICT COMPLIANCE WITH THE COMPANIES (WINDING UP AND
MISCELLANEOUS PROVISIONS) ORDINANCE
–8 0–


--- page 91 ---
Listing Rules
Rule 4.04(1) of the Listing Rules requires that the consolidated results of the listing
applicant and its subsidiaries in respect of each of the three financial years immediately
preceding the issue of the prospectus of the listing applicant, or such shorter period as may be
acceptable to the Stock Exchange, be included in the accountants’ report of the prospectus.
Rule 13.49(1) of the Listing Rules requires issuers to publish preliminary financial results
not later than three months after the end of each financial year.
Requirements under the Guide for New Listing Applicants
Pursuant to paragraph 19 of Chapter 1.1A of the Guide for New Listing Applicants
published by the Stock Exchange, in view of the shortened deadline for releasing preliminary
results announcements and to enable potential investors to have adequate and timely
information, where an applicant issues its listing document within three months after the latest
year end, the Stock Exchange has provided the conditions for granting waiver from strict
compliance with Rules 4.04(1) of the Listing Rules as follows:
(i) the listing document must include the financial information for the latest financial
year and a commentary on the results for the year. The financial information to be
included in the listing document must (a) follow the same content requirements as for
a preliminary results announcements under Rule 13.49 of the Listing Rules; and (b) be
agreed with the reporting accountants following their review under Practice Note 730
“Guidance for Auditors Regarding Preliminary Announcements of Annual Results”
issued by the Hong Kong Institute of Certified Public Accountants;
(ii) the applicant must list on the Stock Exchange within three months after the latest year
end; and
(iii) the applicant must obtain a certificate of exemption from the SFC on compliance with
the Companies (Winding Up and Miscellaneous Provisions) Ordinance requirements.
Grounds for waiver and exemption application
The financial year of our Company ends on 31 December. This prospectus contains the
consolidated results of our Group for the three years ended 31 December 2023 and the nine
months ended 30 September 2024, but does not include the consolidated results of our Group in
respect of the full year immediately preceding the proposed date of issue of this prospectus,
being the full year ended 31 December 2024, as required under Rule 4.04(1) of the Listing
Rules, paragraph 27 of Part I and paragraph 31 of Part II of the Third Schedule to the
Companies (Winding Up and Miscellaneous Provisions) Ordinance.
W AIVERS FROM STRICT COMPLIANCE WITH THE LISTING RULES AND EXEMPTION
FROM STRICT COMPLIANCE WITH THE COMPANIES (WINDING UP AND
MISCELLANEOUS PROVISIONS) ORDINANCE
–8 1–


--- page 92 ---
The waiver and exemption applied for would not prejudice the interest of the investing
public. The strict compliance with the requirements under Rule 4.04(1) of the Listing Rules,
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 be unduly burdensome for the
following reasons:
(a) there would not be sufficient time for our Company and the Reporting Accountants to
finalise the audited consolidated financial statements of our Group for the year ended
31 December 2024 for inclusion in this prospectus. It would be unduly burdensome
for our Company and the Reporting Accountants to undertake the considerable amount
of work required to prepare, update and finalise the Accountants’ Report to cover such
additional period within a short period of time. If the results for the full year ended 31
December 2024 are to be included in this prospectus, there would be a significant
delay in the listing timetable;
(b) our Company has included in this prospectus (i) the Accountants’ Report covering the
three years ended 31 December 2023 and the nine months ended 30 September 2024;
(ii) the unaudited preliminary financial information of our Group for the year ended
31 December 2024 and a commentary on the results for the year, which has been
agreed with the Reporting Accountants, following their review under Practice Note
730 “Guidance for Auditors Regarding Preliminary Announcements of Annual Results”
issued by the Hong Kong Institute of Certified Public Accountants, and such
disclosure is no less than the content requirements for a preliminary results
announcement under Rule 13.49 of the Listing Rules (the “ Preliminary Financial
Information and Commentary ”); and (iii) the information regarding the recent
development of our Group subsequent to the Track Record Period and up to the Latest
Practicable Date;
(c) our Company is of the view that the Accountants’ Report covering the three years
ended 31 December 2023 and the nine months ended 30 September 2024, as set out in
Appendix I to this prospectus, the unaudited pro forma financial information as set out
in Appendix IIA to this prospectus, unaudited preliminary financial information for the
year ended 31 December 2024 as set out in Appendix IIB to this prospectus, together
with other disclosure in this prospectus, has already provided the potential investors
with adequate and reasonably up-to-date information in the circumstances to form a
view on the track record of our Company; and our Directors confirm that all
information which is necessary for the investing public to make an informed
assessment of the business, assets and liabilities, financial position, management and
prospects has been included in this prospectus. Therefore, the waiver and the
exemption would not prejudice the interests of the investing public;
W AIVERS FROM STRICT COMPLIANCE WITH THE LISTING RULES AND EXEMPTION
FROM STRICT COMPLIANCE WITH THE COMPANIES (WINDING UP AND
MISCELLANEOUS PROVISIONS) ORDINANCE
–8 2–


--- page 93 ---
(d) our Company will not be in breach of its Articles of Association or laws and
regulations of the PRC or other regulatory requirements as a result of not publishing
its preliminary results announcement for the year ended 31 December 2024 in
accordance with Rule 13.49(1) of the Listing Rules. Pursuant to the Note to
Rule 13.49(1) of the Listing Rules, our Company will publish an announcement after
Listing and no later than 31 March 2025 stating that the relevant financial information
has been included in this prospectus; and
(e) our Company will comply with the requirements under Rule 13.46 of the Listing Rules
in respect of the publication of our annual report. Our Company currently expects to
issue our annual report for the financial year ended 31 December 2024 on or before 30
April 2025. 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 financial year ended 31 December 2024.
The waiver and exemption application
In light of the above, we have applied for, and the Stock Exchange has granted us, a waiver
from strict compliance with the requirements under Rule 4.04(1) of the Listing Rules relating to
inclusion in the Accountants’ Report of the consolidated results of our Group in respect of the
full financial year ended 31 December 2024, on the conditions that: (i) this prospectus will be
issued on or before Friday, 21 March 2025 and the Listing Date shall not be later than three
months after the latest financial year end of our Company (i.e., on or before 31 March 2025);
(ii) we have obtained from the SFC a certificate of exemption from strict compliance with the
requirements under section 342(1) in relation to paragraphs 27 and 31 of the Third Schedule to
the Companies (Winding Up and Miscellaneous Provisions) Ordinance; (iii) the Preliminary
Financial Information and Commentary shall be included in this prospectus; and (iv) our
Company is not in breach of its constitutional documents or laws and regulations of PRC or
other regulatory requirements regarding its obligation to publish preliminary results
announcements.
We have also applied for, and the SFC has granted us, a certificate of exemption under
section 342A of the Companies (Winding Up and Miscellaneous Provisions) Ordinance from
strict compliance with the requirements under paragraph 27 of Part I and paragraph 31 of Part II
of the Third Schedule to the Companies (Winding Up and Miscellaneous Provisions) Ordinance
on the conditions that: (i) the particulars of this exemption are set out in this prospectus; (ii) this
prospectus will be issued on or before Friday, 21 March 2025 and our Company’s H Shares will
be listed on or before 31 March 2025 (i.e., three months after the latest financial year-end).
W AIVERS FROM STRICT COMPLIANCE WITH THE LISTING RULES AND EXEMPTION
FROM STRICT COMPLIANCE WITH THE COMPANIES (WINDING UP AND
MISCELLANEOUS PROVISIONS) ORDINANCE
–8 3–


--- page 94 ---
DIRECTORS’ RESPONSIBILITY FOR THE CONTENTS OF THIS PROSPECTUS
This prospectus, for which our Directors (including any proposed director who is named as
such in this prospectus) collectively and individually accept full responsibility, includes
particulars given in compliance with the Companies (Winding Up and Miscellaneous Provisions)
Ordinance, the Securities and Futures (Stock Market Listing) Rules (Chapter 571V of the Laws
of Hong Kong) and the Listing Rules for the purpose of giving information to the public with
regard to our Group. Our Directors, having made all reasonable enquiries, confirm that to the
best of their knowledge and belief, the information contained in this prospectus is accurate and
complete in all material respects and not misleading or deceptive, and there are no other matters
the omission of which would make any statement herein or this prospectus misleading.
CSRC FILING
On 20 February 2025, the CSRC issued a notification on our Company’s completion of the
PRC filing procedures for the Listing and the Global Offering and the Conversion of Domestic
Unlisted Shares into H Shares. A copy of this notification can be found on the official website
of the CSRC. As advised by our PRC Legal Advisers, our Company has completed all necessary
filings with the CSRC in the PRC in relation to the Global Offering and the Listing, and upon
completion of overseas offering and listing, we shall report information on overseas offering and
listing pursuant to the provisions of relevant guidelines.
In issuing such notice, the CSRC accepts no responsibility for our financial soundness, nor
for the accuracy of any of the statements made or opinions expressed in this prospectus. No
other filing with the CSRC are required to be obtained for the listing of the H Shares on the
Stock Exchange.
INFORMATION ON THE GLOBAL OFFERING AND THIS PROSPECTUS
This prospectus is published solely in connection with the Hong Kong Public Offering. For
applications under the Hong Kong Public Offering, this prospectus contains the terms and
conditions of the Hong Kong Public Offering. The Global Offering comprises the Hong Kong
Public Offering of initially 5,357,000 H Shares and the International Offering of initially
48,205,000 H Shares (subject, in each, to reallocation on the basis as set out in the section
headed “Structure of the Global Offering” in this prospectus).
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
Global Offering or to make any representation not contained in this prospectus, and any
information or representation not contained herein must not be relied upon as having been
authorised by the Company, 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 our or their affiliates or any of their respective
directors, officers, employees, advisers, agents or representatives, or any other persons or parties
INFORMATION ABOUT THIS PROSPECTUS AND THE GLOBAL OFFERING
–8 4–


--- page 95 ---
involved in the Global Offering. Neither the delivery of this prospectus nor any subscription or
acquisition made under it shall, under any circumstances, create any implication that there has
been no change in our affairs since the date of this prospectus or that the information in this
prospectus is correct as of any subsequent time.
For details of the structure of the Global Offering, including its conditions and the
arrangements relating to the Over-allotment Option and stabilisation, please refer to the section
headed “Structure of the Global Offering” in this prospectus.
DETERMINATION OF THE OFFER PRICE
The H Shares are being offered at the Offer Price which will be determined by the Joint
Overall Coordinators (for themselves and on behalf of the Underwriters) and us on or before
Thursday, 27 March 2025 or such later date as may be agreed upon between the Joint Overall
Coordinators (for themselves and on behalf of the Underwriters) and us, and in any event no
later than 12:00 noon on Thursday, 27 March 2025. If the Joint Overall Coordinators (for
themselves and on behalf of the Underwriters) and our Company are unable to reach an
agreement on the Offer Price on such date, the Global Offering will not proceed and will lapse.
RESTRICTIONS ON OFFER AND SALE OF THE OFFER SHARES
Each person acquiring the Hong Kong Offer Shares under the Hong Kong Public Offering
will be required to, or be deemed by his acquisition of Hong Kong Offer Shares to, confirm that
he is aware of the restrictions on the offer and sale of the Hong Kong Offer Shares described in
this prospectus.
No action has been taken to permit a public offering of the Offer Shares outside Hong
Kong or the distribution of this prospectus in any jurisdiction other than Hong Kong.
Accordingly, this prospectus may not be used for the purpose 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 for subscription. The distribution of this prospectus and the offering and sale of the
Offer Shares in other jurisdictions are subject to restrictions and may not be made except as
permitted under the applicable securities laws of such jurisdictions pursuant to registration with
or authorisation by the relevant securities regulatory authorities or an exemption therefrom. In
particular, the Offer Shares have not been offered and sold, and will not be offered and sold,
directly or indirectly, in the PRC.
INFORMATION ABOUT THIS PROSPECTUS AND THE GLOBAL OFFERING
–8 5–


--- page 96 ---
UNDERWRITING
The Listing is sponsored by the Sole Sponsor and the Global Offering is managed by the
Joint Overall Coordinators and Joint Global Coordinators. The Hong Kong Public Offering is
fully underwritten by the Hong Kong Underwriters subject to the terms and conditions of the
Hong Kong Underwriting Agreement. The International Offering is expected to be fully
underwritten by the International Underwriters, subject to the agreement on the Offer Price
between the Joint Overall Coordinators (for themselves and on behalf of the Underwriters) and
us. For further details on the Underwriters and the underwriting arrangements, please refer to the
section headed “Underwriting” in this prospectus.
APPLICATION FOR LISTING OF THE H SHARES ON THE STOCK EXCHANGE
We have applied to the Stock Exchange for the granting of the listing of, and permission to
deal in, our H Shares to be issued pursuant to the Global Offering (including any additional H
Shares which may be issued pursuant to the exercise of the Over-allotment Option). Our
Domestic Unlisted Shares may be converted to H Shares after obtaining the approval of the
CSRC or the authorised approval authorities of the State Council, details of which are set out in
the paragraph headed “Share Capital – Conversion of Domestic Unlisted Shares into H Shares”
in this prospectus.
Dealings in the H Shares on the Stock Exchange are expected to commence at 9:00 a.m. on
Monday, 31 March 2025. Except for our pending application to the Stock Exchange for the
listing of, and permission to deal in, the H Shares, no part of our share or loan capital is listed
on or dealt in on any other stock exchange and no such listing or permission to list is being or
proposed to be sought in the near future.
The H Shares will be traded in board lot of 1,000 H Shares. The stock code of the H Shares
is 2625.
Under section 44B(l) of the Companies (Winding Up and Miscellaneous Provisions)
Ordinance, if the permission for the H Shares to be listed on the Stock Exchange pursuant to this
prospectus has been refused before the expiration of three weeks from the date of the closing of
the Global Offering or such longer period not exceeding six weeks as may, within the said three
weeks, be notified to us by or on behalf of the Stock Exchange, then any allotment made on an
application in pursuance of this prospectus shall, whenever made, be void.
INFORMATION ABOUT THIS PROSPECTUS AND THE GLOBAL OFFERING
–8 6–


--- page 97 ---
H SHARES WILL BE ELIGIBLE FOR ADMISSION INTO CCASS
Subject to the granting of the listing of, and permission to deal in, the H Shares on the
Stock Exchange and our compliance with the stock admission requirements of HKSCC, the H
Shares will be accepted as eligible securities by HKSCC for deposit, clearance and settlement in
CCASS with effect from the Listing Date or any other date as determined by HKSCC.
Settlement of transactions between Exchange Participants (as defined in the Listing Rules) 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 the HKSCC Operational
Procedures in effect from time to time. All necessary arrangements have been made enabling the
H Shares to be admitted into CCASS. Investors should seek the advice of their stockbrokers or
other professional advisors for details of the settlement arrangements as such arrangements may
affect their rights and interests.
PROCEDURE FOR APPLICATION FOR HONG KONG OFFER SHARES
The procedure for applying for the Hong Kong Offer Shares is set forth in the section
headed “How to Apply for Hong Kong Offer Shares” in this prospectus.
H SHARE REGISTER AND STAMP DUTY
All Offer Shares will be registered on the H Share register of our Company maintained by
our H Share Registrar, Computershare Hong Kong Investor Services Limited, in Hong Kong.
Our register of members will also be maintained by us at our legal address in the PRC.
Dealings in the H Shares registered on the H Share register of our Company in Hong Kong
will be subject to Hong Kong stamp duty. The stamp duty is charged to each of the seller and
purchaser at the ad valorem rate of 0.1% of the consideration for, or (if greater) the value of, the
H Shares transferred. In other words, a total of 0.2% is currently payable on a typical sale and
purchase transaction of the H Shares. In addition, a fixed duty of HK$5 is charged on each
instrument of transfer (if required).
DIVIDENDS PAYABLE TO HOLDERS OF H SHARES
Unless determined otherwise by our Company, dividends payable in Hong Kong dollars in
respect of our H Shares will be paid to the Shareholders listed on the H Share register of our
Company in Hong Kong, by ordinary post, at the Shareholders’ risk, to the registered address of
each Shareholder of our Company.
INFORMATION ABOUT THIS PROSPECTUS AND THE GLOBAL OFFERING
–8 7–


--- page 98 ---
REGISTRATION OF SUBSCRIPTION, PURCHASE AND TRANSFER OF H SHARES
We have instructed the H Share Registrar, and the H Share Registrar has agreed, not to
register the subscription, purchase or transfer of any H Shares in the name of any particular
holder unless the holder delivers a signed form to the H Share Registrar in respect of those H
Shares bearing statements to the effect that the holder:
(i) agrees with us and each of our Shareholders, and we agree with each Shareholder, to
observe and comply with the PRC Company Law, the Companies Ordinance, the
Companies (Winding Up and Miscellaneous Provisions) Ordinance, the Special
Regulations and our Articles of Association;
(ii) agrees with us, each of our Shareholders, Directors, Supervisors, managers and
officers, and we, acting for ourselves and for each of our Directors, Supervisors,
managers and officers agree with each Shareholder, to refer all differences and claims
arising from our Articles of Association or any rights or obligations conferred or
imposed by the PRC Company Law or other relevant laws and administrative
regulations concerning our affairs to arbitration in accordance with our Articles of
Association, and any reference to arbitration shall be deemed to authorise the
arbitration tribunal to conduct hearings in open session and to publish its award,
which shall be final and conclusive;
(iii) agrees with us and each of our Shareholders that our H Shares are freely transferable
by the holders thereof; and
(iv) authorises us to enter into a contract on his or her behalf with each of our Directors,
Supervisors, managers and officers whereby such Directors, Supervisors, managers
and officers undertake to observe and comply with their obligations to our
Shareholders as stipulated in our Articles of Association.
PROFESSIONAL TAX ADVICE RECOMMENDED
Potential investors in the Global Offering are recommended to consult their professional
advisors as to the taxation implications of subscribing for, purchasing, holding or disposing of,
and/or dealing in the H Shares or exercising rights attached to them. None of 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, officers, employees, agents or representatives or any other person or party
involved in the Global Offering accepts responsibility for any tax effects on, or liabilities of, any
person resulting from the subscription, purchase, holding, disposition of, or dealing in, or the
exercise of any rights in relation to, the H Shares.
INFORMATION ABOUT THIS PROSPECTUS AND THE GLOBAL OFFERING
–8 8–


--- page 99 ---
LANGUAGE
If there is any inconsistency between this prospectus and its Chinese translation, this
prospectus shall prevail. For ease of reference, the names of the Chinese laws and regulations,
government authorities, institutions, natural persons or other entities (including our subsidiaries)
have been included in this prospectus in both the Chinese and English languages. In the event
that there is any inconsistency between the Chinese names of such laws and regulations,
authorities, persons, entities or enterprises established in or relating to China mentioned in this
prospectus and their English translations, the Chinese names shall prevail.
ROUNDING
Certain amounts and percentage figures, such as share ownership and operating data,
included in this prospectus may 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.
EXCHANGE RATE CONVERSION
Unless otherwise specified, for the purpose of this prospectus and for the purpose of
illustration only, the translations of Renminbi into Hong Kong dollars in this prospectus are
based on the rate of HK$1.00: RMB0.92 and USD1.00: HK$7.80.
No representation is made that any amounts in HK$, RMB or US$ can be or could have
been at the relevant dates converted at the above rate or any other rates or at all.
COMMENCEMENT OF DEALING IN THE H SHARES
Dealings in the H Shares on the Stock Exchange are expected to commence at 9:00 a.m. on
Monday, 31 March 2025.
INFORMATION ABOUT THIS PROSPECTUS AND THE GLOBAL OFFERING
–8 9–


--- page 100 ---
DIRECTORS
Name Address Nationality
Executive Directors
Mr. Gao Feng
(΋͛ )
(Chairman)
Room 001, Building 48
Zhongtian Apartment
No. 103, Xindu North Road
Jiangdu District, Y angzhou City
Jiangsu Province
PRC
Chinese
Mr. Y uan Y uan
(΋͛ )
Room 001, Building 50
Zhongtian Apartment
No. 103, Xindu North Road
Jiangdu District, Y angzhou City
Jiangsu Province
PRC
Chinese
Mr. Zhang Jiaan
(ੵԳτ΋͛ )
(with a former name as
Zhang Jiaan (τ ))
Room 307, Unit 3, Building 6
Longchuan Commercial Pedestrian Street
Jiangdu District, Y angzhou City
Jiangsu Province
PRC
Chinese
Mr. Y ao Jun
(ᒺ΋͛ )
Room 208, Building 88
No. 18 Wenchang Middle Road
Guangling District, Y angzhou City
Jiangsu Province
PRC
Chinese
Ms. Shen Zhigen
(ӏқЌɾɻ )
(with a former name as
Qian Wen ( ፺ත))
Room 601, Building 19
Shengdi Runyuan, Longchuan North Road
Jiangdu District, Y angzhou City
Jiangsu Province
PRC
Chinese
Ms. Nai Jingjing
(᣼౺౺ɾɻ )
Room 1001, Building 1
Bishui Jiayuan Phase 2
No. 2 Xindu Road
Jiangdu District, Y angzhou City
Jiangsu Province
PRC
Chinese
DIRECTORS, SUPERVISORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING
–9 0–


--- page 101 ---
Name Address Nationality
Mr. Wang Fei
(΋͛ )
Room 2305, Building 17
No. 8 Tuanjie Road, Jiangpu Street
Pukou District, Nanjing City
Jiangsu Province
PRC
Chinese
Non-executive Director
Ms. Wei Y an
(ዲɾɻ )
Room 403, Unit 1, Building 3
Jinsui Garden, No. 99 Zhonghe Road
Jianye District, Nanjing City
Jiangsu Province
PRC
Chinese
Independent non-executive
Directors
Mr. Lam Ka Tak
(ྗᅃ΋͛ )
Flat A, 4th Floor
Tai Gardens
No. 285 Prince Edward Road West
Kowloon
Hong Kong
Chinese
Mr. Zheng Manjun
(΋͛ )
No. 2, 8th Floor, Unit 1, Building 3
No. 126 Tianshun Road
High-tech Zone, Chengdu City
Sichuan Province
PRC
Chinese
Mr. Zheng Y u
(ቍρ΋͛ )
Room 401
No. 3, Yingao Lane
Qinhuai District, Nanjing City
Jiangsu Province
PRC
Chinese
Mr. Zhu Bo
(΋͛ )
Room 701, Unit 1, Building 9
19 Xingyue Street
Jianye District, Nanjing City
Jiangsu Province
PRC
Chinese
DIRECTORS, SUPERVISORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING
–9 1–


--- page 102 ---
SUPERVISORS
Name Address Nationality
Ms. Zhan Mingyu
(͗ɾɻ )
(with a former name as
Zhan Mingyu (͗ ))
Room 403, Building 80
Century Garden, Xiannu Town
Jiangdu District, Y angzhou City
Jiangsu Province
PRC
Chinese
Mr. Xia Zhonglin
(΋͛ )
Room 408, 1st Floor, Jiangdu Mall
No. 2 Gongnong Road
Jiangdu District, Y angzhou City
Jiangsu Province
PRC
Chinese
Ms. Zhu Aizhen
(ɾɻ )
Room 306, Building 1
Jinse Y angguang
Jiangdu District, Y angzhou City
Jiangsu Province
PRC
Chinese
For further information on the profile and background of our Directors and Supervisors,
please refer to the section headed “Directors, Supervisors and Senior Management” in this
prospectus.
PARTIES INVOLVED IN THE GLOBAL OFFERING
Sole Sponsor Red Solar Capital Limited
(A licensed corporation under the SFO to engage
in type 1 (dealing in securities) and type 6
(advising on corporate finance) regulated
activities)
402B, 4/F China Insurance Group Building
141 Des V oeux Road Central
Central
Hong Kong
DIRECTORS, SUPERVISORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING
–9 2–


--- page 103 ---
Sponsor-Overall Coordinator Red Solar Capital Limited
(A licensed corporation under the SFO to engage
in type 1 (dealing in securities) and type 6
(advising on corporate finance) regulated
activities)
402B, 4/F China Insurance Group Building
141 Des V oeux Road Central
Central
Hong Kong
Joint Overall Coordinators Red Solar Capital Limited
(A licensed corporation under the SFO to engage
in type 1 (dealing in securities) and type 6
(advising on corporate finance) regulated
activities)
402B, 4/F China Insurance Group Building
141 Des V oeux Road Central
Central
Hong Kong
CMBC Securities Company Limited
(A licensed corporation under the SFO to engage
in type 1 (dealing in securities) and type 4
(advising on securities) regulated activities)
45/F, One Exchange Square
8 Connaught Place
Central
Hong Kong
Joint Global Coordinators Red Solar Capital Limited
(A licensed corporation under the SFO to engage
in type 1 (dealing in securities) and type 6
(advising on corporate finance) regulated
activities)
402B, 4/F China Insurance Group Building
141 Des V oeux Road Central
Central
Hong Kong
DIRECTORS, SUPERVISORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING
–9 3–


--- page 104 ---
CMBC Securities Company Limited
(A licensed corporation under the SFO to engage
in type 1 (dealing in securities) and type 4
(advising on securities) regulated activities)
45/F, One Exchange Square
8 Connaught Place
Central
Hong Kong
CCB International Capital Limited
(A licensed corporation under the SFO to engage
in type 1 (dealing in securities), type 4 (advising
on securities) and type 6 (advising on corporate
finance) regulated activities)
12/F, CCB Tower
3 Connaught Road Central
Central
Hong Kong
Joint Bookrunners and
Joint Lead Managers
Red Solar Capital Limited
(A licensed corporation under the SFO to engage
in type 1 (dealing in securities) and type 6
(advising on corporate finance) regulated
activities)
402B, 4/F China Insurance Group Building
141 Des V oeux Road Central
Central
Hong Kong
CMBC Securities Company Limited
(A licensed corporation under the SFO to engage
in type 1 (dealing in securities) and type 4
(advising on securities) regulated activities)
45/F, One Exchange Square
8 Connaught Place
Central
Hong Kong
DIRECTORS, SUPERVISORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING
–9 4–


--- page 105 ---
CCB International Capital Limited
(A licensed corporation under the SFO to engage
in type 1 (dealing in securities), type 4 (advising
on securities) and type 6 (advising on corporate
finance) regulated activities)
12/F, CCB Tower
3 Connaught Road Central
Central
Hong Kong
CMB International Capital Limited
(A licensed corporation under the SFO to engage
in type 1 (dealing in securities) and type 6
(advising on corporate finance) regulated
activities)
45th Floor, Champion Tower
3 Garden Road
Central
Hong Kong
uSMART Securities Limited
(A licensed corporation under the SFO to engage
in type 1 (dealing in securities), type 4 (advising
on securities), type 6 (advising on corporate
finance) and type 9 (asset management) regulated
activities)
Room 2406, 24/F
FWD Financial Centre
308 Des V oeux Road Central
Sheung Wan
Hong Kong
Star River Securities Limited
(A licensed corporation under the SFO to engage
in type 1 (dealing in securities), type 4 (advising
on securities) and type 9 (asset management)
regulated activities)
Room 2402, Wing On Centre
111 Connaught Road Central
Hong Kong
DIRECTORS, SUPERVISORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING
–9 5–


--- page 106 ---
Eddid Securities and Futures Limited
(A licensed corporation under the SFO to engage
in type 1 (dealing in securities), type 2 (dealing
in futures contracts), type 3 (leveraged foreign
exchange trading), type 4 (advising on securities),
type 5 (advising on futures contracts) and type 9
(asset management) regulated activities)
21/F, CITIC Tower
1 Tim Mei Avenue
Central
Hong Kong
Innovax Securities Limited
(A licensed corporation under the SFO to engage
in type 1 (dealing in securities) and type 4
(advising on securities) regulated activities)
Unit A–C, 20/F, Neich Tower
128 Gloucester Road
Wan Chai
Hong Kong
Long Bridge HK Limited
(A licensed corporation under the SFO to engage
in type 1 (dealing in securities), type 2 (dealing
in futures contracts), type 4 (advising on
securities) and type 9 (asset management)
regulated activities)
Unit No. 3302, 33/F
West Tower, Shun Tak Centre
168–200 Connaught Road Central
Hong Kong
Capital Market Intermediaries and
Hong Kong Underwriters
Red Solar Capital Limited
(A licensed corporation under the SFO to engage
in type 1 (dealing in securities) and type 6
(advising on corporate finance) regulated
activities)
402B, 4/F China Insurance Group Building
141 Des V oeux Road Central
Central
Hong Kong
DIRECTORS, SUPERVISORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING
–9 6–


--- page 107 ---
CMBC Securities Company Limited
(A licensed corporation under the SFO to engage
in type 1 (dealing in securities) and type 4
(advising on securities) regulated activities)
45/F, One Exchange Square
8 Connaught Place
Central
Hong Kong
CCB International Capital Limited
(A licensed corporation under the SFO to engage
in type 1 (dealing in securities), type 4 (advising
on securities) and type 6 (advising on corporate
finance) regulated activities)
12/F, CCB Tower
3 Connaught Road Central
Central
Hong Kong
CMB International Capital Limited
(A licensed corporation under the SFO to engage
in type 1 (dealing in securities) and type 6
(advising on corporate finance) regulated
activities)
45th Floor, Champion Tower
3 Garden Road
Central
Hong Kong
uSMART Securities Limited
(A licensed corporation under the SFO to engage
in type 1 (dealing in securities), type 4 (advising
on securities), type 6 (advising on corporate
finance) and type 9 (asset management) regulated
activities)
Room 2406, 24/F
FWD Financial Centre
308 Des V oeux Road Central
Sheung Wan
Hong Kong
DIRECTORS, SUPERVISORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING
–9 7–


--- page 108 ---
Star River Securities Limited
(A licensed corporation under the SFO to engage
in type 1 (dealing in securities), type 4 (advising
on securities) and type 9 (asset management)
regulated activities)
Room 2402, Wing On Centre
111 Connaught Road Central
Hong Kong
Eddid Securities and Futures Limited
(A licensed corporation under the SFO to engage
in type 1 (dealing in securities), type 2 (dealing
in futures contracts), type 3 (leveraged foreign
exchange trading), type 4 (advising on securities),
type 5 (advising on futures contracts) and type 9
(asset management) regulated activities)
21/F, CITIC Tower
1 Tim Mei Avenue
Central
Hong Kong
Innovax Securities Limited
(A licensed corporation under the SFO to engage
in type 1 (dealing in securities) and type 4
(advising on securities) regulated activities)
Unit A–C, 20/F, Neich Tower
128 Gloucester Road
Wan Chai
Hong Kong
Long Bridge HK Limited
(A licensed corporation under the SFO to engage
in type 1 (dealing in securities), type 2 (dealing
in futures contracts), type 4 (advising on
securities) and type 9 (asset management)
regulated activities)
Unit No. 3302, 33/F
West Tower, Shun Tak Centre
168-200 Connaught Road Central
Hong Kong
DIRECTORS, SUPERVISORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING
–9 8–


--- page 109 ---
Legal Advisers to our Company As to Hong Kong law
DeHeng Law Offices (Hong Kong) LLP
Solicitors, Hong Kong
28/F, Henley Building
5 Queen’s Road Central &
Room 3507, 35/F, Edinburgh Tower
The Landmark, 15 Queen’s Road Central
Central, Hong Kong
As to PRC law
Beijing DHH Law Firm
Registered law firm in the PRC
12/F, Tower C
Beijing Yintai Centre
No. 2 Jianguomenwai Avenue
Chaoyang District
Beijing, PRC
As to U.S. law
Loeb & Loeb LLP
Attorneys-at-law
345 Park Avenue
New Y ork, NY 10154
United States
Legal Advisers to the Sole Sponsor
and the Underwriters
As to Hong Kong law
ONC Lawyers
Solicitors, Hong Kong
19/F, Three Exchange Square
8 Connaught Place
Central
Hong Kong
As to PRC law
Beijing Dacheng Law Offices, LLP
Registered law firm in the PRC
16–21F, Tower B
ZT International Center
No. 10, Chaoyangmen Nandajie
Chaoyang District, Beijing
PRC
DIRECTORS, SUPERVISORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING
–9 9–


--- page 110 ---
Reporting Accountants and
Independent Auditor
KPMG
Certified Public Accountants
Public Interest Entity Auditor registered in
accordance with the Accounting and
Financial Reporting Council Ordinance
8th Floor, Prince’s Building
10 Chater Road, Central
Hong Kong
Industry Consultant HCR Co., Ltd.
6th Floor, Building 102, No. 10
No. 10 Jiuxianqiao North Road
Chaoyang District
Beijing 100016
PRC
Internal Control Consultant SHINEWING Risk Services Limited
17/F., Leighton Centre
77 Leighton Road
Causeway Bay
Hong Kong
Compliance Adviser Red Solar Capital Limited
(A licensed corporation under the SFO to engage
in type 1 (dealing in securities) and type 6
(advising on corporate finance) regulated
activities)
402B, 4/F China Insurance Group Building
141 Des V oeux Road Central
Central
Hong Kong
Fire Safety Consultants Jiangsu Yilun Construction Engineering Co.,
Ltd. * (ʮ̡ )
No. 16 Hongyuan Road
Shaobo Town
Jiangdu District
Y angzhou
PRC
DIRECTORS, SUPERVISORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING
– 100 –


--- page 111 ---
Shanghai Yuanning Fire Technology Co., Ltd.*
(ʮ̡ )
Room 1906, Building A
No. 1555 Kongjiang Road
Y angpu District
Shanghai
PRC
Construction Safety Consultant Shanghai Biaogu Construction Engineering
Testing Technology Co., Ltd.* (ண
ʮ̡ )
No. 155 Anzhi Road
Jiading District
Shanghai
PRC
Receiving Bank Industrial and Commercial Bank of China
(Asia) Limited
33/F, ICBC Tower
3 Garden Road, Central
Hong Kong
DIRECTORS, SUPERVISORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING
– 101 –


--- page 112 ---
Registered Office Shao Bo Town Industrial Park Logistics Park
Jiangdu District, Y angzhou City
Jiangsu Province
PRC
Headquarters and Principal Place of
Business in the PRC
Shao Bo Town Industrial Park Logistics Park
Jiangdu District, Y angzhou City
Jiangsu Province
PRC
Principal Place of Business in
Hong Kong
Room 2109
21st Floor
C C Wu Building
302–308 Hennessy Road
Wanchai
Hong Kong
Company’s Website www.hxsupermarket.cn
(information contained in this website does not
form part of this prospectus)
Joint Company Secretaries Ms. Xu Chunling (ɾɻ )
Room 506
Building 1-20
Zhongyuan Ouzhoucheng Tixiangjun
No. 333 Pujiang Road
Jiangdu District, Y angzhou City
Jiangsu Province
PRC
Mr. Hui Hung Kwan ( ஢ᒿ໊΋͛ )
(an associate of the Hong Kong Institute of
Certified Public Accountants (formerly known as
the Hong Kong Society of Accountants) and a
fellow of the Association of Chartered Certified
Accountants)
Flat B, 2/F, Block 7
Aldrich Garden
2 Oi Lai Street
Shau Kei Wan
Hong Kong
CORPORATE INFORMATION
– 102 –


--- page 113 ---
Authorised Representatives
(for the purpose of the Listing Rules)
Mr. Gao Feng (΋͛ )
Room 001, Building 48
Zhongtian Apartment
No. 103, Xindu North Road
Jiangdu District, Y angzhou City
Jiangsu Province
PRC
Mr. Hui Hung Kwan ( ஢ᒿ໊΋͛ )
Flat B, 2/F, Block 7
Aldrich Garden
2 Oi Lai Street
Shau Kei Wan
Hong Kong
Audit Committee Mr. Lam Ka Tak (ྗᅃ΋͛ ) (Chairperson)
Mr. Zheng Manjun (΋͛ )
Mr. Zheng Y u ( ቍρ΋͛ )
Mr. Zhu Bo (΋͛ )
Ms. Wei Y an (ዲɾɻ )
Nomination Committee Mr. Zheng Manjun (΋͛ ) (Chairperson)
Mr. Lam Ka Tak (ྗᅃ΋͛ )
Mr. Zheng Y u ( ቍρ΋͛ )
Mr. Zhu Bo (΋͛ )
Ms. Wei Y an (ዲɾɻ )
Remuneration Committee Mr. Zheng Y u ( ቍρ΋͛ ) (Chairperson)
Mr. Lam Ka Tak (ྗᅃ΋͛ )
Mr. Zheng Manjun (΋͛ )
Mr. Zhu Bo (΋͛ )
Ms. Wei Y an (ዲɾɻ )
H Share Registrar Computershare Hong Kong Investor Services
Limited
Shops 1712–1716
17th Floor, Hopewell Centre
183 Queen’s Road East
Wanchai
Hong Kong
CORPORATE INFORMATION
– 103 –


--- page 114 ---
Principal Banks Agricultural Bank of China Y angzhou Jiangdu
Branch
No. 1289 Wenchang East Road
Jiangdu District, Y angzhou City
Jiangsu Province
PRC
Bank of China Jiangdu Branch
No. 19 Longcheng Road
Jiangdu District, Y angzhou City
Jiangsu Province
PRC
China Construction Bank Corporation Jiangdu
Branch
No. 1 Xiancheng Road
Jiangdu District, Y angzhou City
Jiangsu Province
PRC
Agricultural Development Bank of China
Y angzhou Jiangdu Branch
No. 10 Dong Fang Hong East Road
Jiangdu District, Y angzhou City
Jiangsu Province
PRC
Jiangsu Jiangdu Rural Commercial Bank
Co., Ltd.
No. 21 Longcheng Road
Jiangdu District, Y angzhou City
Jiangsu Province
PRC
CORPORATE INFORMATION
– 104 –


--- page 115 ---
The data and statistical information set out in this chapter are sourced from the
independent industry report compiled by HCR. The industry report is based on data from its
database, publicly available sources, industry reports, data obtained from interviews, official
government and other publications, and other sources. We believe that the sources of the
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. The information from official government resources 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, any of the Underwriters, any of our and their respective directors,
supervisors, officers, affiliates, advisers, or representatives, or any other person or party
involved in the Global Offering and neither do we make no representation as to the
completeness, accuracy or fairness of such information and accordingly such information
should not be unduly relied upon.
SOURCE OF INFORMATION
We commissioned HCR, an independent market research and consulting company, to
analyse and prepare the industry report on the retail industry, grains and oil wholesale and
prepared food in the PRC. We agreed to pay HCR a fee of RMB500,000, which we believe is
reflective of the market rate for such reports. We have extracted certain information from the
industry report in this section, as well as in the sections headed “Summary”, “Risk Factors”,
“Business”, “Financial Information” and elsewhere in this prospectus to provide our potential
investors with a more comprehensive presentation of the industry in which we operate.
Founded in 2008, HCR focused on providing data analysis, industry research, and other
services to commercial clients and government agencies. The company holds the Foreign-Related
Investigation Licence issued by the National Bureau of Statistics. HCR has experience in
researching and tracking the retail industry, grains and oil wholesale and prepared food in the
PRC. During the preparation and compilation of the research, HCR utilises research parameters
and assumptions, collecting data from multiple primary and secondary sources, including
statistical data published by the National Bureau of Statistics and local statistical bureaus, data
from annual reports of listed companies, and company websites, as well as data obtained from
interviews with industry experts. During the preparation of the report, HCR assumes that: (i) the
social, economic, and political conditions in the PRC and around the world will remain stable
during the forecast period; (ii) government policies related to the chain supermarket industry in
the PRC will remain unchanged during the forecast period; (iii) all data published by relevant
statistical bureaus are accurate; and (iv) all data related to the sales scale of companies collected
from their annual reports are accurate.
INDUSTRY OVERVIEW
– 105 –


--- page 116 ---
DIRECTOR’S CONFIRMATION
Our Directors have confirmed that after taking reasonable care, there is no adverse change
in the market information since the date of the report which may qualify, contradict or have an
impact on the information in this section.
MACRO-ECONOMIC ENVIRONMENT IN CHINA
Since the initiation of economic reforms, China’s economy has consistently maintained
rapid growth. In recent years, China’s economy has faced increased risks and challenges due to
factors such as the COVID-19 pandemic, the Russia-Ukraine conflict and conflict in the Middle
East. However, the fundamental long-term prospects of China’s economy remain positive. In
2023, China’s nominal Gross Domestic Product (GDP) amounted to RMB126,058.2 billion,
representing a year-on-year growth of 5.2% and a CAGR of 7.17% from 2017 to 2023, and
solidifying its position as the world’s second-largest economy. The per capita disposable income
of the PRC residents had increased from approximately RMB26,000 in 2017 to approximately
RMB39,000 in 2023, representing a CAGR of 6.99%.
Overview of the Food and Household Products Market
In 2023, the per capita consumption expenditure of Chinese residents reached RMB26,796,
representing a year-on-year increase of 9.0%. Among which, the per capita expenditure on food,
beverages, and tobacco was RMB7,983, representing a year-on-year increase of 6.7%; per capita
clothing expenditure was RMB1,479, representing a year-on-year increase of 8.4%; and per
capita expenditure on daily necessities and services was RMB1,526, representing a year-on-year
increase of 6.6%. In 2023, the expenditure of the residents on food and household products,
including food, beverages, clothing, daily necessities and services, accounted for 41.01% of the
per capita consumption expenditure of the residents. In line with the improving living standards,
consumers are inclined to choose high-quality consumer goods, which will promote the
continuous development of the consumer goods market.
YANGZHOU AND TAIZHOU
Y angzhou is a prefecture-level city in Jiangsu Province, with a GDP of approximately
RMB781.0 billion in 2024, representing a year-on-year increase of 6.0%, and a CAGR of 6.6%
from 2020 to 2024. In 2024, the resident population of Y angzhou City was approximately 4.6
million, and the total retail sales of consumer goods in Y angzhou City reached RMB177.1
billion, representing a year-on-year increase of 6.6%. The per capita disposable income of
residents in Y angzhou City was approximately RMB50,000, with a year-on-year increase of
5.7%, which indicates a strong consumption capacity. As a historical and cultural city, Y angzhou
City’s economy is supported by tourism, manufacturing and service industries. With convenient
transportation, it is a modern city with steady economic development.
INDUSTRY OVERVIEW
– 106 –


--- page 117 ---
Taizhou City, another prefecture-level city in Jiangsu Province, had a GDP of RMB702.1
billion in 2024, representing a year-on-year growth of 4.3%, and a CAGR of 7.2% from 2020 to
2024. In 2024, the resident population of Taizhou City was approximately 4.5 million, and the
total retail sales of consumer goods reached RMB179.3 billion, representing a year-on-year
increase of 4.9%. The per capita disposable income of residents in Taizhou City was
approximately RMB62,000, representing a year-on-year increase of 4.7%. Taizhou City is
predominantly driven by manufacturing, with developed industries such as pharmaceuticals,
shipbuilding and chemicals.
RETAIL MARKETS
Overview
In line with the popularity and development of e-commerce, the omni-channel sales model
that integrates online and offline channels is transforming traditional retail formats, introducing
consumers to more diverse shopping experiences. By the end of 2023, online retail sales in the
PRC amounted to RMB15.4 trillion, representing a year-on-year increase of 11%. The share of
online retail sales in total social retail sales in the PRC rose from 26.06% at the end of 2019 to
32.72% at the end of 2023, indicating a continuing increase in online retail sales. As a result of
the accelerated integration of online and offline retail market, the share of online retail sales is
expected to increase continuously in the future. Meanwhile, by the end of 2023, the PRC’s
offline retail sales reached RMB31.8 trillion, representing a year-on-year increase of 5.5%, while
the share of offline retail sales in total social retail sales in the PRC declined from 73.94% at the
end of 2019 to 67.28% at the end of 2023, indicating a downward trend of the offline retail
sales.
1. Supermarket Chain Market in China
Chain supermarkets play a vital role as a significant commodity distribution channel in the
PRC. In 2023, the retail sales of chain supermarkets in the PRC amounted to RMB734.6 billion.
In recent years, due to factors such as slower economic growth leading to reduced consumer
demand, the live streaming e-commerce and e-commerce capturing market share in retail market,
and the rapid development of business forms such as unmanned stores and convenience stores,
the retail sales of chain supermarkets nationwide experienced an overall decline from 2017 to
2023, with a CAGR of -1.28% from 2017 to 2023. Looking ahead, as the global economy
gradually recovers from adverse factors such as the pandemic, the domestic economy also will
witness a significant boost. With consumer confidence strengthening, the consumer sentiment is
growing, which directly drives growth in the retail market. The government has introduced a
volley of policies aimed at stimulating consumption, such as tax cuts and consumption vouchers,
effectively stimulating market demand and promoting the development of the retail sector. As
urbanization continues to intensify, a significant influx of rural populations into cities will usher
in new consumer demands and purchasing power, providing reliable market space for chain
supermarkets. As the income of residents continues to increase, their purchasing power also
increasingly strengthens, driving a robust demand for quality consumer goods and services. This
undoubtedly presents more opportunities for chain supermarkets. Well-known chain supermarkets
INDUSTRY OVERVIEW
– 107 –


--- page 118 ---
have carved out a strong brand image among consumers through ongoing brand building and
marketing activities, fostering consumer loyalty that helps stabilise and expand their market
share. It is projected that the retail sales of chain supermarkets nationwide will resume growth
from 2024E to 2027E. HCR expects the supermarket chain retail market in the PRC to grow at a
CAGR of 1.43% from 2024E to 2027E.
Sales and Forecasts in the Supermarket Chain Retail Market in China (RMB100 million),
2017–2027E










7,935 8,096 8,108 7,948 8,154
6,887
7,346 7,618 7,770 7,871 7,950
0
3,000
6,000
9,000 10%
-10%
0%
-15%
-5%
-20%
2017 2018 2019 2020 2021 2022 2023 2024E 2025E 2026E 2027E
2.0% 2.6%
-15.5%
3.7%
2.0% 1.3% 1.0%
Sales (RMB100 million) YoY growth
CAGR
2017–2023
-1.28%
2024E–2027E
1.43%
0.1%
-2.0%
6.7%
5%
Source: The data for the period 2017–2023 is sourced from the National Bureau of Statistics, and the data for the
period 2024E–2027E is estimated by HCR
The National Standard of Retail Format Classification (GB/T18106–2004) defines
supermarkets with a sales area larger than 6,000 square meters as large supermarkets, while
those with a sales area below 6,000 square meters are defined as small and medium-sized
supermarkets.
The era of rapid expansion for China’s chain supermarkets has come to an end, although it
remains to deal with a massive consumer market with strong sustainable development
capabilities, boasting numerous changes and opportunities. Different market segments within the
supermarket industry in the PRC demonstrate differentiated development status. For instance,
due to reasons such as severe homogenization of goods, inefficiencies in the supply chain, lack
of convenience, and market squeeze by e-commerce channels, the market scale of traditional
large supermarket format is gradually declining. The standardised product range and pricing of
large supermarkets are weaker than e-commerce channels, and their immediacy in meeting
consumer demands is lower than convenience stores, enabling several traditional large
supermarkets to close down their stores successively. While closing down their stores, they
continue to open new ones in search of a second growth curve in performance. A number of
large supermarket enterprises start to explore the membership store model, transitioning from the
“channel-oriented retailer” to the “product-driven retailer”.
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In contrast, small and medium-sized supermarkets offer higher convenience,
personalization, and community interaction, leading to increasing market scale. In particular,
small community stores that primarily sell fresh food, are more capable of meeting daily
consumption needs. Fresh products, characterised by high gross profits, high repurchase rates,
and strong customer loyalty, have become key attractions for small and medium-sized
supermarkets. In addition, regional chain supermarkets experience relatively less development
pressure, primarily benefitting from the rooted operations of regional enterprises at the local
level, which builds strong connections and loyalty with consumers. Future adjustments, mergers
and acquisitions, and reorganizations will occur successively in the industry. Small and
medium-sized supermarkets are defined to be supermarkets with a sales area of below 6,000
square meters. As of the Latest Practicable Date, the sales area of all supermarkets of our Group
are below 6,000 square meters and hence all supermarkets of the Group fall within the category
of small and medium-sized supermarkets.
In 2023, the proportion of retail market scale of large supermarkets in the PRC amounted to
52.6%. The retail sales of large supermarket from 2024E to 2027E increases at a CAGR of
-1.9%. In 2023, the retail sales of small and medium-sized chain supermarkets were
approximately RMB348.1 billion, accounting for 47.4%. The retail sales of small and
medium-sized chain supermarkets from 2024E to 2027E increases at a CAGR of 4.9%.
After experiencing a decline in 2019, the supermarket chain retail market in Jiangsu
Province has gradually resumed its growth since 2020. In 2023, the retail sales of chain
supermarkets in Jiangsu Province amounted to RMB119.9 billion, representing a year-on-year
growth of 6.7% and a CAGR of -1.97% in Jiangsu Province from 2017 to 2023. In 2023, the
number of the chain supermarkets in Jiangsu Province decreased by more than 50%. However,
the total sales increased instead of decreasing, reflecting a rapid growth in sales per store and an
improvement in the operational efficiency of the chain supermarkets.
In Jiangsu Province, retail sales of small and medium-sized chain supermarkets amounted
to approximately RMB47.95 billion in 2023. The retail sales of small and medium-sized chain
supermarkets from 2017 to 2023 increased at a CAGR of 15.7%. It is expected that the retail
sales of small and medium-sized chain supermarkets in Jiangsu Province from 2024E to 2027E
will increase at a CAGR of 8.7%.
The central region of Jiangsu Province, including Y angzhou City, Taizhou City, and
Nantong City, is one of the economically developed areas in China. It has a relatively high per
capita income level and strong consumer purchasing power. The region also experiences a
relatively dense population and a rapid urbanisation process. Consequently, there exists
significant potential for the growth of the supermarket chain retail market. In 2023, the nominal
GDP of the central region of Jiangsu Province amounted to RMB2,596.8 billion. The per capita
disposable income of the central region of Jiangsu Province had grew from approximately
RMB31,500 in 2017 to approximately RMB50,000 in 2023, representing a CAGR of 8.01%.
Such increasing trends indicate a growing purchasing power and willingness to spend on food
and household products by retail customers in the central region of Jiangsu Province, which will
contribute to the growing retail sales of chain supermarkets and convenience stores in such
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region. According to the estimates by HCR, the retail sales of chain supermarkets in central
region of Jiangsu Province amounted to RMB20.0 billion in 2023, with a CAGR of -3.0% in
central region of Jiangsu Province from 2017 to 2023.
In the central region of Jiangsu Province, the retail sales of small and medium-sized chain
supermarkets amounted to approximately RMB7.99 billion in 2023. The retail sales of small and
medium-sized chain supermarkets from 2017 to 2023 increased at a CAGR of 14.5%. It is
expected that the retail sales of small and medium-sized chain supermarkets in the central region
of Jiangsu Province from 2024E to 2027E will increase at a CAGR of 7.7%.
In Y angzhou City, the retail sales of chain supermarkets amounted to RMB4.37 billion in
2023, with a CAGR of -2.9% in Y angzhou City from 2017 to 2023. HCR estimates that the retail
sales of chain supermarkets in Y angzhou City in 2027E will amount to RMB4.41 billion, with a
CAGR of 0.3% from 2024E to 2027E.
In Y angzhou City, the retail sales of small and medium-sized chain supermarkets amounted
to RMB1.75 billion in 2023. The retail sales of small and medium-sized chain supermarkets
from 2017 to 2023 increased at a CAGR of 14.6%. It is expected that the retail sales of small
and medium-sized chain supermarkets in Y angzhou City from 2024E to 2027E will increase at a
CAGR of 4.7%.
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2. Convenience Store Market in China
As the convenience store aligns with consumer demands for “fast-paced” and
“convenience-oriented” experiences, and accelerates its digital transformation to achieve a high
level of digitization in logistics and distribution, the sales in China’s convenience store industry
has been growing rapidly in recent years. The retail sales of nationwide convenience stores
continued to rise from 2017 to 2023. In 2023, the retail sales of convenience stores in China
amounted to RMB424.8 billion, with a CAGR of 14.30% from 2017 to 2023. With future
economic recovery, the implementation of policies to promote consumption at the national and
local levels, growth in the number of convenience stores and average sales per store, and
accelerated transformation in digitization and intellectualization of convenience stores, it is
projected that the retail sales of nationwide convenience stores will maintain continuous growth
from 2024E to 2027E, with a CAGR of 9.00%. The details are as follows:
Sales and Forecasts in the Convenience Store Retail Market in China (RMB100 million),
2017–2027E
CAGR
2017–2023
14.30%
2024E–2027E
9.00%
Sales (RMB100 million) YoY growth








1,905
2,264
2,556
2,961
3,492
4,248
5,243
5,715
6,172
0
3,000
2,000
1,000
5,000
4,000
7,000
6,000
20%
15%
10%
5%
0%
18.8%
12.9%
15.8%
17.9%
9.8% 10.8%
12.2%
10.0% 9.0% 8.0%
3,834
4,766
2017 2018 2019 2020 2021 2022 2023 2024E 2025E 2026E 2027E
Source: The data for the period 2017–2023 is sourced from the China Chain Store & Franchise Association, and the
data for the period 2024E–2027E is estimated by HCR
The regional sales scale of the convenience store retail market has also maintained a rapid
growth trend. In 2023, the retail sales of convenience stores in Jiangsu Province amounted to
RMB41.0 billion, with a CAGR of 15.4% in Jiangsu Province from 2017 to 2023. HCR expects
a CAGR of 12.1% in Jiangsu Province from 2024E to 2027E. In 2023, the retail sales of
convenience stores in central region of Jiangsu Province amounted to RMB6.83 billion, with a
CAGR of 14.2% in central region of Jiangsu Province from 2017 to 2023. Driven by strong
economic growth momentum and continuously rising income levels and expenditures, HCR
expects a CAGR of 11.0% in central region of Jiangsu Province from 2024E to 2027E. In 2023,
the retail sales of convenience stores in Y angzhou City amounted to RMB1.50 billion, with a
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CAGR of 14.3% from 2017 to 2023. HCR estimates that the retail sales of convenience stores in
Y angzhou City from 2024E to 2027E will increase at a CAGR of 8.0%.
3. Department Store Market in China
Department stores with a long history of development in China serve as a traditional
channel for selling goods. The overall retail sales of nationwide above-designated-size
(according to the industry practice, being department stores with annual operating revenue
exceeding RMB5 million and employing more than 60 staff at year-end) department stores
showed a downward trend from 2017 to 2023, with the retail sales of above-designated-size
department stores of RMB204.8 billion in China in 2023 and a CAGR of -9.70% from 2017 to
2023, which were attributable to several factors, including a decrease in demands for high-end
and luxury products as a result of a slowdown in economic growth, lack of competitiveness of
traditional department store goods due to consumer upgrading and changes in consumption
patterns, emergence of numerous shopping centres due to the rapid urbanisation process, and a
decline in sales at physical stores owning to the convenience of online shopping in recent years.
In the future, with the continuous development of convenience stores, live-streaming sales,
e-commerce, and others, it is expected that the retail sales of nationwide above-designated-size
department stores will continue to decline from 2024E to 2027E, with a CAGR of -5.02% from
2024E to 2027E as estimated by HCR.
Sales and Forecasts in the Above-Designated-Size Department Store Retail Market
in China (RMB100 million), 2017–2027E
CAGR
2017–2023
-9.70%
2024E–2027E
-5.02%
National sales (RMB100 million) National YoY growth








2017 2018 2019 2020 2021 2022 2023 2024E 2025E 2026E 2027E
3,778 3,781
3,518
3,083
3,404
2,048
1,658 1,592 1,544
0
1,500
1,000
500
2,500
2,000
4,000
3,500
3,000
15%
10%
5%
-15%
-25%
-35%
-30%
0%
0.1%
-7.0%
-12.4%
10.4%
-16.2%
-28.2%
-12.0%
-8.0%
-4.0% -3.0%
2,851
1,802 -10%
-5%
-20%Source: The data for the period 2017–2023 is sourced from the National Bureau of Statistics, and the data for the
period 2024E–2027E is estimated by HCR
Note: According to the industry practice, the above-designated-size department stores refer to those with annual
operating revenue exceeding RMB5 million and employing more than 60 staff at year-end
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The regional sales scale of the department store retail market also shows a downward trend.
In 2023, the retail sales of above-designated-size department stores in Jiangsu Province
amounted to RMB75.6 billion, representing a year-on-year decrease of 17.8% and a CAGR of
-5.4% in Jiangsu Province from 2017 to 2023. HCR expects a CAGR of -7.0% in Jiangsu
Province from 2024E to 2027E. In 2023, the retail sales of department stores in central region of
Jiangsu Province amounted to RMB12.6 billion, with a CAGR of -6.3% in central region of
Jiangsu Province from 2017 to 2023. The sales in central region of Jiangsu Province from 2024E
to 2027E will increase at a CAGR of approximately -7.9%. In 2023, the retail sales of
above-designated-size department stores in Y angzhou City amounted to RMB2.75 billion, with a
CAGR of -6.3% in Y angzhou City from 2017 to 2023. HCR estimates that the retail sales of
above-designated-size department stores in Y angzhou City from 2024E to 2027E will increase at
a CAGR of -10.5%.
Competitive Landscape
1. Supermarket Chain Market in China
The supermarket retail industry in the PRC has developed over the years, leading to fierce
competition and a relatively high market concentration. The Group has a market share of
approximately 0.4% in supermarket chains in Jiangsu Province, ranking approximately 20th in
the market. The following table sets forth the ranking of the top five chain supermarkets by
sales value in central region of Jiangsu Province and Y angzhou City:
Ranking of the Chain Supermarkets in central region of Jiangsu Province
by Sales Value in 2023
Ranking Company name Sales value Market share
(RMB100
million)
1 Company A
(1) 26.1 13.1%
2 Company B (2) 11.2 5.6%
3 Company C (3) 8.3 4.2%
4 Company D (4) 7.6 3.8%
5 The Group 4.3 2.2%
Source: Company annual reports, and HCR
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Ranking of the Chain Supermarkets in Y angzhou City, Jiangsu Province
by Sales Value in 2023
Ranking Company name Sales value Market share
(RMB100
million)
1 Company A 6.27 14.3%
2 The Group 4.01 9.2%
3 Company C 3.33 7.6%
4 Company B 2.40 5.5%
5 Company D 0.78 1.8%
Source: Company annual reports, and HCR
(1) Founded in 2000, Company A is a retail enterprise listed on the H-share market that operates large, medium, and
small supermarket businesses through multiple brands. It owns over 400 large supermarkets and more than 30
medium supermarkets (Note 1) .
(2) Founded in 2009, Company B is a specialised chain supermarket management enterprise, with a focus on
localised operation strategies and more than a hundred of stores in Jiangsu Province.
(3) Founded in 2020, Company C, the predecessor of which was founded in 1991, is a well-known comprehensive
retail enterprise. The company’s business encompasses supermarkets, convenience stores, raw and fresh food
market, with thousands of stores nationwide.
(4) Founded in 2001, Company D is a chain supermarket enterprise listed on the A-share market. Its primary
business scope includes the sale of food, fresh fruits, daily necessities, and other consumer goods, with more
than a thousand of supermarket stores.
Note 1: The National Standard of Retail Format Classification (GB/T18106-2004) defines supermarkets with a
sales area larger than 6,000 square meters as large supermarkets, while those with a sales area below 6,000
square meters are defined as small and medium-sized supermarkets.
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2. Convenience Store Market in China
There are many convenience store brands in China, leading to fierce competition and a
relatively low market concentration. The following table sets forth the ranking of the top five
convenience store brands by sales value in central region of Jiangsu Province and Y angzhou
City:
Ranking of the Convenience Store Companies in the central region of
Jiangsu Province by Sales Value in 2023
Ranking Company name Sales value Market share
(RMB100
million)
1 Company E
(5) 6.23 9.1%
2 Company F (6) 3.13 4.6%
3 Company G (7) 2.25 3.3%
4 Company H (8) 1.61 2.4%
5 Company I (9) 1.45 2.1%
Source: Company annual reports, and HCR
Note: Represent approximately 1.3% of the convenience store market share in the central region of Jiangsu Province
by convenience store sales of the Group in 2023.
Ranking of the Convenience Store Companies in the Y angzhou City,
Jiangsu Province by Sales Value in 2023
Ranking Company name Sales value Market share
(RMB100
million)
1 Company F 1.68 11.2%
2 Company G 1.28 8.6%
3 Company E 1.14 7.6%
4 The Group 0.91 6.1%
5 Company J
(10) 0.59 3.9%
Source: Company annual reports, and HCR
(5) Founded in 2012, Company E is a leading convenience chain brand in Jiangsu Province. It adopts a direct
management chain operation model for all of its stores and has opened more than 600 stores.
(6) Founded in 1996, Company F currently has hundreds of stores covering 13 prefecture-level cities in Jiangsu
Province and 14 prefecture-level cities in Anhui Province.
(7) Founded in 1973, Company G is a foreign-funded convenience store company. It tapped into the Chinese market
in 1996 and set up more than 6,000 stores in major cities in China.
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(8) Founded in 1973, Company H is a foreign-funded convenience store company. It tapped into the Chinese market
in 2004 and set up more than 7,000 stores in major cities in China.
(9) Founded in 1997, Company I currently has more than 30,000 stores covering most provinces and cities in China.
(10) Founded in 2001, Company J has nearly 4,000 stores in Zhejiang, Jiangsu, Anhui and other places.
3. Department Store Market in China
There are many department store brands in China, leading to fierce competition and a
relatively low market concentration. The following table sets forth the ranking of the top five
department store brands by sales value in central region of Jiangsu Province and the Y angzhou
City:
Ranking of the Department Store Retail Companies in the central region of
Jiangsu Province by Sales Value in 2023
Ranking Company name Sales value Market share
(RMB100
million)
1 Company K
(11) 8.69 6.9%
2 Company L (12) 4.63 3.7%
3 Company M (13) 4.39 3.5%
4 Company N (14) 3.20 2.5%
5 Company O (15) 3.00 2.4%
Source: Company annual reports, and HCR
Note: Represent approximately 1.2% of the department store retail market share in the central region of Jiangsu
Province by department store retail sales of the Group in 2023.
Ranking of the Department Store Retail Companies in the Y angzhou City,
Jiangsu Province by Sales Value in 2023
Ranking Company name Sales value Market share
(RMB100
million)
1 Company O 3.00 10.9%
2 Company K 2.90 10.5%
3 Company P
(16) 2.50 9.1%
4 Company L 2.20 8.0%
5 The Group 1.70 6.2%
Source: Company annual reports, and HCR
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(11) Founded in 1988, Company K is engaged in the businesses covering real estate development, commercial
operation, cultural tourism, financial investment and other fields. It has opened more than 400 large department
stores in China (Note 2) .
(12) Founded in 1993, Company L is engaged in the businesses covering real estate development, investment,
commercial operation management, health care services and other fields. It has opened large department stores in
142 large and medium-sized cities in China.
(13) Founded in 1983, Company M develops high-quality shopping centres integrating retail, catering, entertainment,
leisure, culture, and health care. It currently has more than 20 large-scale shopping centres in China.
(14) Founded in 1997, Company N is a well-known large-scale department store retail company. It has more than 20
large-scale shopping centres in major cities in China. It has established several enterprises in China operating in
multiple industries such as real estate, shopping centres, hotels, property, entertainment, and agriculture.
(15) Founded in 1996, Company O is committed to developing large-scale comprehensive shopping centres that
integrate commercial, living, entertainment, leisure, education and other functional supporting facilities.
(16) Founded in 1996, Company P is engaged in the businesses covering real estate development, commercial
operations, logistics and warehousing, financial investment and other fields. It has competitive strengths in the
Y angzhou City.
Note 2: According to Clause 1.0.4 of the Code for Design of Store Buildings JGJ48-2014 (஝
ᇍJGJ48-2014), the scale of the store building is divided into large, medium and small based on the total
gross floor area of the stores in a single building. The store buildings with a gross floor area of 20,000
square meters or more are classified as large, 5,000 to 20,000 square meters as medium; and less than
5,000 square meters as small.
Market Value Chain
1. Supermarket Chain Market in China
The upstream of the value chain of the chain supermarket retail industry mainly consists of
suppliers of agricultural products, aquatic products, food, tobacco and alcohol, daily necessities,
and household appliances. The midstream of the value chain mainly includes supermarket retail
enterprises, including logistics, warehousing, and distribution processes. The downstream market
mainly consists of various residents and group consumers, categorised into online platform
consumers and offline platform consumers based on their purchasing channels. The Group
operates as a participant in the midstream of the value chain, primarily involved in providing
supermarket retail services.
2. Convenience Store Market in China
The upstream of the value chain of the convenience store retail industry mainly consists of
suppliers of products such as food and beverages, tobacco and alcohol, and daily necessities.
The midstream of the value chain mainly consists of convenience store retail companies,
including headquarters operation management, procurement, logistics distribution, and
warehousing management. The downstream market mainly consists of various residents who
support the operation of convenience stores through their purchases of goods and services. The
Group operates as a participant in the midstream of the value chain, primarily engaging in
providing convenience store retail services.
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3. Department Store Market in China
The upstream of the value chain of the department store retail industry mainly consists of
suppliers of products such as clothing, household goods, and electronic products. The midstream
of the value chain mainly consists of department store retail companies, including headquarters
operation management, procurement, logistics distribution, and warehousing management. The
downstream market mainly consists of various residents who support the operation of department
stores through their purchases of goods and services. The Group operates as a participant in the
midstream of the value chain, primarily engaging in providing department store retail services.
Analysis on Market Barriers
1. Common Factors
Capital requirements: Operating chain supermarkets, convenience stores, and department
stores entails a substantial initial investment, including expenses such as store rent, decoration,
procurement of equipment and goods, inventory acquisition, and operating costs.
Licences and permits: According to laws and regulations, it is required to obtain relevant
licences and permits for operating chain supermarkets, convenience stores, and department
stores, such as business licences and food hygiene permits.
Geographical location: Finding suitable geographical locations with favourable lease terms
is crucial for achieving successful operations. Chain supermarkets, convenience stores, and
department stores need to select appropriate locations in high-traffic areas. However, this may
result in high rental and property costs, which may pose a barrier for new entrants.
Supply chain management: Establishing an efficient and stable supply chain network is
essential to ensure timely availability of products. For new entrants, it may be challenging to
establish partnerships with well-known brands and suppliers.
Competitive environment: The retail industry typically faces intense competition, and new
entrants must be prepared to tackle the challenges presented by existing competitors.
Brand influence: Enterprises with strong brand influence have established a good reputation
and image in consumers, making it easier for consumers to recognise and choose their products
or services. Brand awareness and loyalty can drive consumers to become long-term customers,
increasing their purchase frequency and value. New market entrants may find it challenging to
establish strong brand influence, as it serves as a barrier to entry into the market.
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2. Unique Factors in Markets
(i) Supermarket Chain Market
Operational and management capabilities: Robust operational and management
capabilities can ensure efficient inventory management, timely replenishment and supply
chain management, optimised store layout and display, and can improve sales and customer
experience and effectively control costs and profits.
(ii) Convenience Store Market
Open hours: Convenience stores typically require extended open hours, including
24-hour service, to meet consumers’ demands for shopping at any time. To achieve 24-hour
operation, new entrants need to undertake measures such as expanding their workforce,
maintaining ample supplies, and enhancing nighttime security, which will increase their
operating costs.
Fast service: Convenience stores prioritise a quick and convenient shopping
experience, necessitating investments in technological equipment, the establishment of a
supply chain network, employee training, process optimization, and the development of
brand awareness and reputation. These factors require new entrants to possess specific
resources and capabilities to successfully penetrate the industry.
(iii) Department Store Market
Business support requirements: Department stores typically have specific business
positioning and support requirements that align with their prescribed brand image and
scope of operations. This requires new entrants to have a certain level of funding,
resources, operational capabilities, and the ability to compete with existing brands.
Market Opportunities and Challenges
Market Opportunities
1. Common Factors
Huge consumer market: China has a large population base (China has a total population of
1.41 billion at the end of 2023) and a growing middle class, the number of which reached 99
million as of the end of 2023, accounting for 7.05% of the population. With the increasing
number of middle-class individuals, their consumption demands are continuously upgrading from
basic needs to higher-level requirements. This shift is driving the purchase of high-quality and
cost-effective products in supermarkets. Along with this consumer upgrade, the average spending
per customer in supermarkets is expected to increase. In 2023, per capita consumption
expenditure in China amounted to RMB26,800. The per capita consumption expenditure in China
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from 2019 to 2023 increased at a CAGR of 5.5%, providing support for the development of the
retail industry.
Accelerated urbanisation process: In recent years, China has witnessed a continuous
increase in urbanisation rate, with the urbanisation rate reaching 66.16% in 2023 from 60.60% in
2019. As urbanisation progresses, there is a growing demand for diverse shopping experiences,
and the retail industry can meet such demand and attract more consumers.
Technological innovation: With the constant advancement of technologies, the retail
industry can leverage technologies such as the internet, artificial intelligence, and big data
analytics to enhance operational efficiency, optimise supply chain management, and improve
customer experience.
2. Unique Factors in Markets
(i) Supermarket Chain Market
Increasing demand for fresh products: Consumers have an increasing demand for fresh
food. Per capita consumption of fresh products such as vegetables and edible mushrooms,
fresh fruits, aquatic products, and meat increased from 99.2 kg, 45.6 kg, 11.5 kg, and 26.7
kg in 2017 to 113.6 kg, 60.8 kg, 15.2 kg, and 39.8 kg in 2023, respectively, showing
varying degrees of increase. Supermarkets can attract more customers by offering a diverse
range of fresh products, which accounted for over 30% of supermarket sales in the industry.
Integration of e-commerce and offline channels: Chain supermarket enterprises can
achieve omni-channel sales and services to provide a better shopping experience and
convenience by integrating online and offline channels. The integration of online and
offline channels presents opportunities for the supermarket retail industry.
A more favourable development outlook for small and medium-sized supermarkets:
Compared to large supermarkets, small and medium-sized supermarkets are characterised
by greater convenience, personalization and community interaction. In recent years, the
development of small and medium-sized supermarkets has outpaced that of large
supermarkets. For example, from 2017 to 2023, the retail sales of small and medium-sized
chain supermarkets in Y angzhou increased at CAGR of 14.6%. The Group’s chain
supermarkets are primarily small and medium-sized supermarkets, which will have better
development prospects in the future.
In addition, in order to generate additional source of income and diversify the
business operations within the outlet, it is common for supermarket and shopping mall
operators in the PRC to lease part of the outlet areas to providers of other services.
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(ii) Convenience Store Market
Trend of small-scale operations: With the acceleration of people’s lifestyles, the
demand for convenient and efficient shopping experiences is on the rise. Convenience
stores can meet consumer demands by offering small-scale operations, decentralised
layouts, and 24-hour service.
Changing consumer habits: As urbanization accelerates, a growing number of
customers choose to purchase daily necessities and ready-to-eat food from convenience
stores. According to statistics from the China Chain Store & Franchise Association, the
number of convenience stores in the PRC grew from 91,000 in 2015 to over 300,000 in
2023, with a CAGR of 16.5% from 2015 to 2023. The number of convenience stores
operated by the Group has continued to increase in recent years, rising from 102 stores in
2021 to 107 stores by the end of September 2024. The Group plans to open an additional
30 convenience stores by the end of 2025.
New retail model: Convenience stores can provide more personalised and intelligent
shopping experiences by combining online and offline channels and embracing new retail
models, such as unmanned shelves, vending machines, and smart payment technologies. A
number of convenience stores start to adopt the O2O (Online to Offline) model, providing
services such as online ordering through mobile apps, in-store pickup, or home delivery.
For example, 7-Eleven collaborates with delivery platforms including Meituan and Ele.me
to achieve rapid growth in online orders. Lawson convenience stores launch customised
promotional activities through data analysis, effectively enhancing customer authenticity
and average transaction value.
(iii) Department Store Market
Entertainment and experiences: Department stores can incorporate elements of
entertainment, catering, and experiential retail to create diverse consumption scenarios.
This can extend the duration of customers’ visits and enhance customer satisfaction.
Following the introduction of entertainment and experiential elements, the average
time customers spend in department stores has increased by over 30%, with the overall
customer satisfaction rate exceeding 90%.
Boutique positioning: Department stores can focus on the introduction and promotion
of boutique brands. By offering unique products and services, department stores can attract
high-end consumer groups and enhance their competitiveness. The number of first-tier
international brands introduced by high-end department stores continues to rise, with an
average of over 100 international brands in each high-end department store.
Integration of e-commerce and offline channels: Department stores can combine online
and offline channels by adopting the O2O model, providing online shopping and offline
experience services through e-commerce platforms and mini-programs. For instance, Intime
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Retail in partnership with Alibaba launches the “Miaojie” app, achieving seamless
integration of online and offline operations. Department stores can achieve omni-channel
sales and services to provide a better shopping experience and convenience by integrating
online and offline channels. The integration of online and offline channels presents
opportunities for the department store retail industry.
Market Challenges
1. Common Factors
Market competition: The retail industry experiences intense competition as it is populated
with a multitude of domestic and international competitors. New entrants need to navigate
competitive pressures and offer competitive products and services.
Evolving consumer demands: Consumer demands are in a constant state of flux, with
increasing expectations for product quality, variety, price, and convenience. The retail industry
needs to exhibit adaptability and cater to the diverse needs of consumers.
Competition from E-commerce: With the booming development of e-commerce, online
retail platforms provide a convenient way to shop with diverse choices at competitive prices.
Traditional physical stores need to compete with online channels and seek for integrated online
and offline development strategies.
Performance being susceptible to short-term factors: During the COVID-19 pandemic, some
retail enterprises were designated as pandemic-specific supply enterprises by the government,
which drove the growth of their performance. However, there has been a downward trend of
performance since the end of the pandemic.
2. Unique Factors in Markets
(i) Supermarket Chain Market
Substantial capital investment: Supermarkets require significant capital investment for
inventory management and equipment upgrades, as well as the establishment of an
extensive supply chain network.
Complex product management: Supermarkets typically offer a diverse array of product
choices, which requires effective inventory management and shelf display to meet consumer
demands.
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(ii) Convenience Store Market
Space limitations: Convenience stores often face space constraints and limited shelf
capacity, necessitating the offering of a diverse product selection within a confined area. To
remain competitive, they need to employ differentiation strategies, provide value-added
services, and target specific consumer groups.
(iii) Department Store Market
High rent and operating costs: Shopping centres require significant investment for
construction and maintenance, and high rent and operating costs pose challenges for both
tenants and management.
Merchant cooperation and leasing: Department stores need to establish collaborations
with various merchants, coordinate leasing relationships, and manage tenants to ensure the
operation and attractiveness of the mall.
Analysis on Cost Factors
The main cost factors affecting the retail industry include store rent, transportation and
logistics expenses, labour costs, inventory costs, management fees, operational expenses and
other expenses. The change in the expenses such as store rent, transportation and logistics fees,
and labour costs, is strongly correlated with industry price levels. The change in the expenses
such as inventory costs, management fees, and operational expenses is related to the company’s
own management capabilities.
According to the data from China Index Academy, from 2019 to 2023, the average rent for
commercial properties on 100 key business streets in major cities nationwide was
RMB24.9/square meter/day, showing an overall downward trend. According to the statistics from
China’s road logistics price index, from 2018 to 2023, the fixed base index of China’s road
logistics price fluctuated between 96.59 and 103.99, with insignificant overall fluctuations.
According to the data from the National Bureau of Statistics, in recent years, the average annual
wages of employees in non-private and private urban units in China have presented an upward
trend, indicating a continuous increase in labour costs in the industry.
The increase or decrease in major costs of the industry and the company will affect the
costs and profits of the Group. The Group will make moderate adjustments to the selling prices
of products to ensure a moderate profit.
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GRAINS AND OIL WHOLESALE MARKET
Overview
In recent years, various factors, such as a slight increase in China’s total population,
sustained economic growth, accelerated urbanisation, and inflation, have contributed to the
continuous growth in wholesale sales of grains and oil nationwide from 2017 to 2023. Going
forward, with the economic growth and the acceleration of urbanisation, it is expected that the
wholesale sales of grains and oil in China, Jiangsu Province and central region of Jiangsu
Province will continue to increase from 2024 to 2027. In 2023, the sales of grains and oil
wholesale enterprises in the above-designated-size wholesale industry (being wholesale
enterprises with an annual revenue from main businesses of RMB20 million and above) in China
amounted to RMB1,408.6 billion, with a CAGR of 13.18% from 2017 to 2023, and HCR expects
a CAGR of 8% in China from 2024E to 2027E.
Sales and Forecasts of Grains and Oil Wholesale Enterprises Above Designated Size
in China (RMB100 million), 2017–2027E
$"(3
2017–2023
13.18%
2024E–2027E
8%
National Sales (RMB100 million) National YoY growth













6,702 7,035
8,483
9,896
0
10,000
5,000
25,000
20,000
15,000
30%
25%
20%
15%
10%
5%
0%
5.0%
20.6%
16.6%
24.2%
8%
6%
8% 8% 8% 8%
2017 2018 2019 2020 2021 2022 2023 2024E 2025E 2026E 2027E
12,287 13,274 14,086
15,213
16,430
17,745
19,164
Source: The data for the period 2017-2023 is sourced from the National Bureau of Statistics, and the data for the
period 2024E-2027E is estimated by HCR
The regional sales scale of the grains and oil wholesale market also shows a continuous
growth trend. In 2023, the sales of the grains and oil wholesale market of the
above-designated-size wholesale industry in Jiangsu Province amounted to RMB85.2 billion,
with a CAGR of 13.28% in Jiangsu Province from 2017 to 2023, and HCR expects a CAGR of
8% in Jiangsu Province from 2024E to 2027E. The sales of the grains and oil wholesale market
of the above-designated-size wholesale industry in central region of Jiangsu Province in 2017
amounted to RMB7.9 billion, while the sales of the grains and oil wholesale market of the
above-designated-size wholesale industry in central region of Jiangsu Province in 2023
amounted to RMB16.7 billion, with a CAGR of 13.32% in central region of Jiangsu Province
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from 2017 to 2023. Driven by the increasing trend of population in the PRC and the PRC’s
government policies in promoting the development of the agricultural industry, HCR expects that
the sales in the above-designated-size grains and oil wholesales market in the central region of
Jiangsu Province in 2024E and 2027E will amount to approximately RMB18.0 billion and
RMB23.3 billion, respectively, representing a CAGR of 8% in the central region of Jiangsu
Province from 2024E to 2027E. In 2023, the sales in the above-designated-size grains and oil
wholesales market in Y angzhou amounted to RMB4.4 billion, representing a CAGR of 12.81% in
Y angzhou from 2017 to 2023; HCR expects a CAGR of 8% in Y angzhou from 2024E to 2027E.
Competitive Landscape
The grains and oil wholesale industry in China has shown a trend of centralization to a
certain extent. Large state-owned enterprises and certain large private enterprises enjoy a
dominant position in the market with strong market control and pricing capabilities. Meanwhile,
there are also a large number of small and medium-sized enterprises that typically focus on
specific regions or specific types of grains and oil products. Large enterprises generally exhibit
maturity in supply chain management and possess the ability to efficiently coordinate all aspects
of the supply chain to reduce costs and improve response time.
As of June 2024, there were a total of 317,600 grains and oil wholesale enterprises in
China. Among these, Jiangsu Province accounted for approximately 5.1%, totaling 16,100
enterprises. The Group’s market share in grains and oil wholesale industry in 2023 was
approximately less than 0.1% in China and approximately 0.6% in Jiangsu Province. Within
Jiangsu Province, Northern Jiangsu accounted for the highest proportion of 44.7%, followed by
Southern Jiangsu accounting for 40.0%, and central region of Jiangsu Province accounted for the
lowest proportion of approximately 15.3%.
Market Value Chain
The upstream of the value chain of the grains and oil wholesale industry mainly consists of
agricultural production processes, including agricultural activities such as planting and breeding,
as well as the primary processing of agricultural products. The midstream of the value chain
mainly consists of the processing of grains and oil, including milling, extracting and processing
of agricultural products into grains and oil products, etc. The downstream market consists of
various components, including the wholesale, distribution (it is a common industry practice for
wholesalers in China to sell their products to wholesale distributors in order to reach a wider
customer base) and retail of grains and oil, including the wholesale sales of the processed grains
and oil products to retailers or direct sales to consumers. The Group operates as a participant in
the downstream of the value chain, primarily engaging in wholesale sales of processed grains
and oil products.
Analysis on Market Barriers
Industry guidelines and norms: There is a series of industry guidelines and norms in the
grains and oil wholesale industry, including quality standards, safety and hygiene requirements,
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etc. New entrants need to understand and comply with these guidelines, and have appropriate
management systems and operating procedures.
Inventory requirements: Grains and oil wholesale businesses require a certain scale of
warehousing capacity to ensure sufficient inventory supply. Therefore, new entrants may need to
possess qualified warehouse facilities and satisfy the corresponding inventory requirements.
Financial strength: Operating a grains and oil wholesale business entails the need for a
certain level of financial strength to support procurement, transportation, and inventory
operations. New entrants are usually required to provide relevant financial proof to demonstrate
their sound financial standing and operational capabilities.
Market Opportunities and Challenges
Market Opportunities
Supply chain optimization and technological advancement: With the advancement of
logistics and warehousing technology, the supply chain efficiency of the grains and oil wholesale
market will be significantly enhanced. A modern logistics system can reduce transportation
costs, minimise losses, and enhance the profitability of enterprises. The application of Internet
and big data technology will also bring new opportunities to the grains and oil wholesale
market. Through digital management, enterprises can better grasp market demand, optimise
inventory management, and enhance operational efficiency.
Continuous increase in import volume of grains and oil in China: To meet the needs of
variety adjustment and market supply, China imports a portion of grains from abroad every year.
According to customs statistics, China’s grains imports increased from 130.62 million tons in
2017 to 161.96 million tons in 2023. China’s edible oil imports rose from 7.291 million tons in
2017 to 10.039 million tons in 2023. This provides international opportunities for grains and oil
wholesale enterprises, allowing them to meet domestic market demand by importing high-quality
grains and oil products.
Significant efficiency improvements and market expansion opportunities brought by B2B
platform: According to the statistics from iResearch, the online market size of China’s B2B
industry in 2023 is RMB16.7 trillion, with a compound annual growth rate of 5.3% from 2018 to
2023. Grains and oil wholesale, as an important vertical sector of B2B e-commerce, benefits
from this trend. For example, B2B platforms such as Alibaba 1688 and B.JD.COM have become
important sales channels for grains and oil wholesale enterprises. These platforms not only
helped enterprises expand their sales scale but also enhanced their competitiveness through data
analysis and technical support.
Huge demand: V ast population and substantial consumption of grains in China create an
enormous potential for the grains and oil wholesale market. In the past decade, the per capita
grains consumption in the PRC has been 130 kilograms per year, and the per capita cooking oil
consumption has been 10 kilograms per year. In 2023, the sales of grains and oil wholesale
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enterprises in the above-designated-size wholesale industry (being wholesale enterprises with an
annual revenue from main businesses of RMB20 million and above) in China amounted to
RMB1,408.6 billion, with a CAGR of 13.18% from 2017 to 2023.
Agricultural supply-side reform: The government’s efforts to modernise agriculture and
improve the quality of agricultural products have created opportunities for grains and oil
wholesalers to access a wider range of high-quality and distinctive products.
National Food Security Strategy: Acknowledging the importance of food security, the
government has introduced a series of policies and initiatives to support the development of the
grains and oil industry. For example, the “National Food Security Medium- and Long-Term
Planning Outline” ( ) emphasizes strengthening the construction
of grains reserves and circulation systems.
Development of e-commerce: The widespread adoption and rapid development of internet
technologies have provided grains and oil wholesalers with online sales channels, expanding the
reach of their market influence and sales channels. For example, Alibaba’s 1688 platform and
JD.com both have dedicated wholesale sections for grains and oil, facilitating purchase processes
for business and individual customers.
Market Challenges
Supply chain management: Grains and oil wholesalers need to establish an efficient supply
chain management system to ensure the quality and delivery efficiency of the products, thereby
meeting consumer demands for safe and healthy food.
Price fluctuations: The prices of grains and oil are subject to various factors, such as
weather conditions and changes in the international market. Wholesalers need to manage the
risks associated with price fluctuations and set reasonable prices to maintain their
competitiveness.
Competition pressure: The grains and oil wholesale industry is characterised by intense
competition and a multitude of competitors. Wholesalers must maintain their competitiveness by
offering high-quality products, reducing costs, and improving service quality.
Regulations and standards: The grains and oil industry is subject to strict regulations
enforced by regulatory authorities. Wholesalers must comply with relevant regulations and
standards to ensure the quality and safety of products.
Analysis on Cost Factors
The wholesale business of grains and oil is significantly impacted by price fluctuations in
grains and oil. According to statistics from the Ministry of Agriculture and Rural Affairs, the
monthly wholesale price index for grains and oil products in China fluctuated between 106.8 and
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120.26 from June 2021 to May 2023. The wholesale prices of grains and oil products show an
upward trend in China.
Changes in grains and oil prices will affect the costs and profits of the Group. The Group
will make moderate adjustments to the selling prices of products to ensure a moderate profit.
PREPARED FOOD MARKET IN CHINA
Overview
In recent years, the urbanisation and the fast-paced modern lifestyle have led to an
increasing demand for convenient and quick food options. The pressures of work and busy
schedules have left many individuals with limited time for meal preparation. Consumers have
become increasingly conscious of maintaining a healthy diet, focusing on the safety and
nutritional value of food. The prepared food industry, offering ready meals, pre-cooked or
semi-cooked foods, has made progress in supply chain management and technological
innovation. All of these factors have contributed to the continuous growth of the prepared food
market in China. In 2023, the sales of prepared food in China amounted to RMB516.5 billion,
with a CAGR of 18.15% from 2017 to 2023. HCR expects a CAGR of 20.92% from 2024E to
2027E.
Sales and Forecasts in the Prepared Food Market in China (RMB100 million), 2017–2027E
Sales (RMB100 million) YoY growth
CAGR
2017–2023
18.15%
2024E–2027E
20.92%








1,898 2,126 2,445 2,888 3,459
5,165
10,720
12,328
0
4,000
2,000
8,000
6,000
14,000
12,000
10,000
40%
35%
30%
25%
20%
15%
10%
5%
0%
12.0%
15.0%
18.1% 19.8% 21.3%
23.1%
35.0%
30.0%
18.3%
15.0%4,196
6,972
9,061
2017 2018 2019 2020 2021 2022 2023 2024E 2025E 2026E 2027E
Source: the Hongcan Industry Research Institute (Ӻ৫ ) and HCR
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The regional sales scale of the prepared food market has also maintained a rapid growth
trend. In 2023, the sales of prepared food in Jiangsu Province amounted to RMB47.86 billion,
with a CAGR of 20.42% in Jiangsu Province from 2017 to 2023. HCR expects the sales of
prepared food to grow at a CAGR of 22.2% in Jiangsu Province from 2024E to 2027E. In 2023,
the sales of prepared food in central region of Jiangsu Province amounted to RMB7.75 billion,
with a CAGR of 21.66% in central region of Jiangsu Province from 2017 to 2023. Driven by the
increasing demand for convenient, fast and diverse food processing options among consumers,
HCR expects a CAGR of 22.96% in central region of Jiangsu Province from 2024E to 2027E. In
2023, sales of prepared food in Y angzhou reached RMB1.24 billion, with a CAGR of 25.9%
from 2017 to 2023. HCR forecasts a CAGR of 21.7% for this market in Y angzhou from 2024E to
2027E.
Competitive Landscape
There are many companies in the prepared food industry in China, leading to fierce
competition and a relatively low market concentration. The following table sets forth the ranking
of the top five prepared food companies by sales value in central region of Jiangsu Province and
the Y angzhou City:
Ranking of the Prepared Food Companies in central region of
Jiangsu Province by Sales Value in 2023
Ranking Company name Sales value Market share
(RMB100
million)
1 Company Q
(17) 6.7 8.65%
2 Company R (18) 4.8 6.19%
3 Company S (19) 0.89 1.15%
4 Company T (20) 0.52 0.67%
5 Company U (21) 0.22 0.28%
Source: Company annual reports, and HCR
Note: represent approximately 0.19% of the market share of prepared food in the central region of Jiangsu Province
by sales of prepared food of the Group in 2023
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Ranking of the Prepared Food Companies in the Y angzhou City,
Jiangsu Province by Sales Value in 2023
Ranking Company name Sales value Market share
(RMB100
million)
1 Company R 3.7 29.74%
2 Company Q 1.5 12.06%
3 Company S 0.39 3.14%
4 The Group 0.15 1.21%
5 Company U 0.14 1.13%
Source: Company annual reports, and HCR
(17) Founded in 2001, Company Q is primarily engaged in the research, production and sale of frozen food, including
frozen hotpot ingredients, frozen noodle and rice products, and frozen dishes. it has more than 300 products in
its portfolio.
(18) Founded in 2015, Company R is a food processing supply chain enterprise that specialises in the integrated
management of fresh processed products, food, and related products. It processes approximately 350,000 tons of
meat products, 100,000 tons of seafood products, and 60,000 tons of frozen food products annually.
(19) Founded in 2008, Company S currently owns a food production plant with an area of 20,000 square meters, eight
product lines and over 300 products in its portfolio. It has opened over 2,000 stores in major cities across the
country.
(20) Founded in 1999, Company T owns a specialised food production plant with an area of 20,000 square meters. Its
sales network covers over 20 cities in the Y angtze River Delta region with more than 1,000 franchise outlets.
(21) Founded in 1993, Company U has nearly 30 food production lines, producing over 100 varieties of food
products, including ambient lotus root prepared food, frozen/chilled lotus root prepared food, boiled vegetables,
frozen vegetables, lotus root powder, and lotus root juice beverages.
Market Value Chain
The upstream of the value chain of the prepared food industry mainly consists of raw
material suppliers involved in crop cultivation, livestock farming, and other related activities.
The midstream of the value chain mainly consists of food processing companies and central
kitchens that are engaged in the production and processing of prepared food. The downstream
market includes sales channels such as restaurants, supermarkets, convenience stores, as well as
schools, enterprises and public institutions, and various residents. The Group operates as a
participant in the midstream of the value chain, primarily engaging in providing production and
processing services for prepared food.
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Analysis on Market Barriers
Food safety standards and supervision: As a type of food, prepared food must comply with
relevant food safety standards and regulations. Market barriers include obtaining business
licences and food production permits, along with complying with requirements related to food
hygiene management, usage of food additives, labeling, packaging, and others. Such barriers are
put in place to ensure the quality and safety of the product.
Production equipment and site requirements: The production of prepared food necessitates
appropriate equipment and sites that adhere to hygiene standards and food production
requirements. Depending on the scale of prepared food production, specific production processes
and equipment requirements may also need to be fulfilled. Startups may face challenges in
securing adequate funding to meet these production equipment and site requirements.
Technology and recipe secrets: Certain prepared food companies may possess specific
technology and recipe secrets, which also act as market barriers. New entrants must have the
required technical capabilities or engage in technological cooperation with established
companies.
Brand and market reputation: A strong brand and positive market reputation can contribute
to a company’s competitive advantage in the highly competitive prepared food market. However,
for new entrants, establishing a brand and enhancing market reputation require dedicated
investments of time and resources.
Supply chain management and logistics capabilities: In the prepared food industry, it is
essential to establish a robust supply chain system that encompasses ingredient procurement,
storage, processing, and distribution. Efficient supply chain management and logistics
capabilities contribute to enhancing a company’s competitiveness.
Financial strength and market penetration capability: The prepared food industry is highly
competitive and demands a certain level of financial strength and market penetration capability.
New entrants might be required to make substantial investments in areas such as equipment
procurement, production operations and market promotion.
Market Opportunities and Challenges
Market Opportunities
Increased demand for convenient and fast food options: With the progress of urbanisation
and the widespread adoption of modern lifestyles, there has been a growing demand for
convenient and fast food options. As a convenient solution, the prepared food enjoys a vast
market prospect. In 2023, sales of prepared food in China amounted to RMB516.5 billion, with a
CAGR of 18.15% from 2017 to 2023.
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Increased health consciousness: Consumers are increasingly concerned about healthy eating
and place greater emphasis on food safety and nutritional value. The prepared food industry can
meet consumers’ health needs by offering fresh, high-quality ingredients and incorporating
well-balanced nutrition.
Technological innovation and supply chain optimization: With continuous technological
advancements, the prepared food industry is driving innovation in food processing, supply chain
management and logistics distribution. This improves production efficiency and product quality,
presenting more opportunities in the market. Smart equipment for prepared food can facilitate
production processes including ingredient cutting, mixing, and marinating, significantly reducing
processing time and improving production efficiency. Traditional manual approaches are
susceptible to human errors, while smart equipment can minimise such errors, ensuring product
consistency and stability.
Market Challenges
Food safety risks: The prepared food industry must address food safety concerns, which
encompass aspects such as selection of raw materials, hygiene control during processing, and
ensuring the integrity of storage and distribution processes. As consumer expectations for food
safety rise, prepared food companies need to allocate more resources to ensure the quality and
safety of their products.
Price competition and squeezed profit margin: The prepared food market is fiercely
competitive, with the price becoming one of the important factors in consumer choice. Prepared
food companies necessitate cost control and efficiency improvements while safeguarding quality,
in order to maintain competitiveness and sustainable development.
Brand building and consumer awareness: The prepared food industry is relatively new, with
many mid to low-end brands and product lines in the market. Prepared food companies are
required to enhance their brand building and marketing efforts to increase consumer awareness
and acceptance of prepared food.
Legal regulations and regulatory requirements: The prepared food industry is subject to
stringent compliance with food safety laws and regulations. Companies must adhere to the
relevant regulations and undergo audits and certifications. They need to allocate additional
resources to meet regulatory requirements and be prepared for inspections and spot checks
conducted by regulatory authorities.
Analysis on Cost Factors
The production of prepared food involves the procurement of various ingredients and raw
materials, including vegetables and meat. The cost of raw materials is one of the important
factors that influence costs. According to statistics from the Ministry of Agriculture, the monthly
wholesale price index 200 for “vegetable basket” products in China fluctuated between 110.02
and 136.61 from June 2021 to May 2023. In the short term, the wholesale price index for
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“vegetable basket” products in China has remained relatively stable, while in the long term, it
has shown a fluctuating growth trend. Changes in the cost of raw materials for prepared food
will affect the costs and profits of the Group. The Group will make moderate adjustments to the
selling prices of products to ensure a moderate profit.
COMPETITIVE STRENGTHS OF THE GROUP
The Group has established a strong presence in the local market of Y angzhou through years
of dedicated efforts, showcasing strong strengths in localised operations. The Group’s existing
stores are located in core areas and communities in Y angzhou City and Taizhou City. These
locations offer key advantages such as wide reach, a large consumer base in close proximity, and
favourable urban transportation access, creating a barrier to localised competition. As at the
Latest Practicable Date, the Group operates 51 supermarkets, 109 convenience stores, and 2
department stores, of which 49 supermarkets and 108 convenience stores are located in
Y angzhou City, Jiangsu Province and 2 supermarkets and 1 convenience store are located in
Taizhou City, Jiangsu Province. The Group’s supermarkets are mainly small and medium-sized
supermarkets, holding a leading position among chain retail enterprises in the Y angzhou City. In
the future, the Group plans to further deepen its presence in Y angzhou and Taizhou while
expanding into other areas such as Gaoyou, Y ancheng, and Tianchang.
As the Group holds a leading position in the region, we are known for offering high-quality
and reasonably priced commodities, comfortable and convenient shopping environment, premium
customer service and accurate insight into the consumption habits and shopping preferences of
local consumers, and the local consumers have strong recognition and loyalty to our brand. Due
to the substantial market value of the Group’s brand reputation and years of positive brand
experiences, customers have developed strong confidence and loyalty towards the Group’s brand.
In the supermarket chain retail sector, the Group recorded general sales from our supermarket
retail stores and bulk sales of approximately RMB425.3 million in 2023. According to estimates,
the Group holds a market share of approximately 2.3% in central region of Jiangsu Province and
a market share of approximately 9.1% in the Y angzhou City, ranking the fifth and second
respectively in the industry in such regions. In the convenience store retail sector, the Group
recorded general sales from convenience retail stores of approximately RMB91.0 million in
2023, ranking fourth in Y angzhou City. In the shopping mall retail sector, the Group recorded
general sales and commission income from concessionaire sales from shopping malls of
approximately RMB170.1 million in 2023, ranking fifth in Y angzhou City. In the catering sector,
the Group offers various types of meals, serving many schools, corporates, and government
departments. The Group recorded revenue of approximately RMB15.3 million from supply and
sales of meals in 2023, ranking fourth in Y angzhou City. In the wholesale sector, the Group has
established long-term cooperative relationships with suppliers, enabling it to procure
cost-effective grains and oil. In addition, relying on its well-developed logistics and
transportation network, the Group can provide customers with efficient home delivery services,
thereby enhancing customer satisfaction.
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Advantages of chain operations. The increase in the number of retail stores of chain
operation businesses not only boosts their revenue, but also enhances their bargaining power
with suppliers to reduce procurement costs through increased purchase volumes. These benefits
positively impact both the profitability of retail operations and the wholesale business. In
addition, the increase in the number of retail stores also attracts more affiliate customers. The
Group possesses a significant advantage in its supply chain system. As a leading local retail
chain enterprise in Y angzhou, the Group has established an extensive procurement network and
earned a good reputation within the local market in Y angzhou, and has built stable and flexible
cooperation relationships with suppliers, thereby enjoying strong bargaining power. Meanwhile,
the Group has implemented a centralised procurement strategy at its headquarters, progressively
increasing the proportion of direct procurement from manufacturers. By establishing long-term
and stable cooperative relationships, as well as efficient communication mechanisms, with
well-known manufacturers nationwide, the Group aims to reduce procurement costs by reducing
intermediate agency as much as possible. In addition, the Group possesses the largest logistics
distribution system in the Y angzhou City. The ambient temperature distribution centre covers an
area of approximately 16,000 square meters, while the fresh food distribution centre includes a
cold storage area of approximately 5,000 square meters.
The Group achieves a higher level of refined management. After more than a decade of
business development, the Group has accumulated extensive experience in retail management,
and established a management system that is tailored to its own characteristics. The Group has
put in place standardised business operation procedures that focus on corporates, stores and
employees. These procedures regulate each specific operation in its business by formulating
detailed internal process control manuals. The Group actively introduces IT information control
systems and financial information management systems, creating refined management tools that
facilitate seamless coordination of overall functions within the enterprise, making internal
systems and operational mechanisms of the Group increasingly improved. As the headquarters of
the Group, the Y angzhou City is the primary source of the Group’s operating revenue. Although
large-scale retail enterprises have expanded into the local market, the Group still maintains a
strong competitive edge in terms of store locations and regional scale due to factors such as
their relatively late entry and fewer store numbers. In future development, the Group will fully
leverage its advantages in self-owned properties, logistics distribution, local customer base, and
the Hongxin brand to further build competitive barriers and continually expand its market share.
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THE PRC LA WS, REGULATIONS AND POLICIES
This section sets out summaries of certain aspects of PRC laws, regulations and policies,
which are relevant to business operations of our Company.
LA WS, REGULATIONS AND POLICIES RELATING TO OUR INDUSTRY
Product Liability
Pursuant to the Product Quality Law of the PRC ( )
promulgated by the Standing Committee of the National People’s Congress (the “ SCNPC ”) on
22 February 1993 and recently revised on 29 December 2018, both producers and sellers should
bear corresponding product quality responsibilities. For instance, producers should be
responsible for the quality of the products they produce, while sellers shall establish and
implement a system for inspecting and accepting incoming goods, verifying product qualification
certificates and other labels. A seller shall be responsible for repair or change of the product, or
for refund of a product if it is sold under any of the following circumstances: (i) the product
sold does not possess the properties for use that it should possess, and no prior indication is
given of such a situation; (ii) the product sold does not conform to the applied product standard
as carried on the product or its packaging; or (iii) the product sold does not conform to the
quality indicated by such means as a product description or physical sample. Where the product
has caused any loss to the consumers, the seller shall compensate for such loss. After the seller
repairs, changes, refunds the product, or compensates for losses in accordance with the
preceding provisions, if it is the responsibility of the producer or other sellers who provide
products to the seller, the seller has the right to claim compensation from them.
According to the Civil Code of the PRC (Պ), which was
promulgated by the National People’s Congress of the PRC (the “ NPC ”) on 28 May 2020 and
took effect on 1 January 2021, if defects are found after the product is put into circulation,
producers and sellers shall promptly take remedial measures such as stopping sales, issuing
warnings and recalling the product. If the party fails to take remedial measures in time or fails
to take effective remedial measures and results in increased damage thereof, it shall also bear
tortious liability for the increased damage. When recall measures are taken in accordance with
the above-mentioned stipulations, the producers or sellers shall bear the necessary expenses
incurred to the infringed. When a product is manufactured or sold with full knowledge of its
defects, or the person in charge fails to take effective remedial measures in accordance with the
above-mentioned stipulations, which cause death or serious damage to the health of others, the
infringed party shall have the right to claim appropriate punitive damages.
Consumer Protection
The PRC Consumer Protection Law ( ) (the
“Consumer Protection Law ”) promulgated by the SCNPC, which was latest amended on 25
October 2013 and came into effect on 15 March 2014, sets out the obligations of business
operators and the rights and interests of the consumers in China. Pursuant to the Consumer
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Protection Law, business operators must guarantee that the commodities they sell satisfy the
requirements for personal or property safety, provide consumers with authentic information
about the commodities, and guarantee the quality, function, usage and term of validity of the
commodities. Failure to comply with the PRC Consumer Protection Law may subject business
operators to civil liabilities such as refunding purchase prices, replacement of commodities,
repairing, ceasing damages, compensation, and restoring reputation, and even subject the
business operators to criminal penalties. Where the operators of the online trading platforms are
unable to provide the real names, addresses and valid contact details of the sellers or service
providers, the consumers may also claim damages to the providers of the online trading
platforms. Operators of online trading platforms that clearly know or should have known that
sellers or service providers use their platforms to infringe upon the legitimate rights and
interests of consumers but fail to take necessary measures should bear joint and several
liabilities with the sellers or service providers. Moreover, if business operators deceive
consumers, they should not only compensate consumers for their losses, but also pay additional
damages equal to three times the price of the goods or services on the demand of consumers. If
business operators knowingly provide substandard or defective products or services, causing
death or serious damage to the health of consumers or other victims, the victims shall have the
right to require compensation for their losses and to claim punitive compensation of not more
than two times the amount of losses incurred.
Advertising
The PRC Advertising Law (), which was promulgated by the
SCNPC on 27 October 1994 and latest amended on 29 April 2021, requires that advertisers,
advertising operators and advertisement publishers shall ensure that contents of advertisements
produced or spread by them are true and totally comply with applicable laws and regulations,
and contents of advertisements shall not include, inter alia, information which (i) damages the
national dignity or interest, or involves state secrets, (ii) contains such words as “national”,
“highest level” and “the best”, or (iii) involves ethnic, racial, religious and gender
discrimination. Advertisements posted or published through the Internet shall not affect normal
usage of network by users. Advertisements published in the form of pop-up window on the
Internet shall display the close button clearly to make sure that the viewers can close the
advertisement by one-click.
Food Safety
In accordance with the PRC Food Safety Law ( ),
promulgated by the SCNPC on 28 February 2009 and latest amended on 29 April 2021 and came
into effect on the same day, and the Implementation Rules of PRC Food Safety Law (ʕശɛ͏
ૢԷ ), promulgated by the State Council on 20 July 2009 and latest
amended on 11 October 2019 and came into effect on 1 December 2019, with the purpose of
guaranteeing food safety and safe guarding the health and life safety of the public, the PRC sets
up a system of the supervision, monitoring and appraisal on the food safety risks, compulsory
adoption of food safety standards. To engage in food production, sale or catering services, the
business operators shall obtain a licence in accordance with the laws and regulations. Violations
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of these law and measures may result in civil liabilities and administrative penalties, such as
compensation for damages, fines, suspension or shutdown of business, as well as confiscation of
tools, equipment, food ingredients and other articles used in the illegal food production or
trading, or even criminal penalties. However, according to article 136 of the PRC Food Safety
Law, if the business operators implement the inspection of incoming food and other obligations
stipulated in the PRC Food Safety Law, having sufficient evidence to prove that they do not
know the incoming food failed to meet the food safety standards, and are able to explain the
source of the incoming food, the business operators could be exempt from penalties, but the food
that does not meet the food safety standards should be confiscated and if it causes personal,
property or other damage, the business operators shall bear compensation liabilities in
accordance with the laws.
The Administrative Measures for Food Operation Licencing ()
promulgated by the State Food and Drug Administration of the PRC (the “ SFDA ”, which has
now been merged into the State Administration for Market Regulation of the PRC, or the
“SAMR ”) on 31 August 2015 and amended on 17 November 2017 and came into effect on the
same day, regulates the food operation licencing activities, strengthens supervision and
management of food operation, and ensures food safety. Food operation operators shall obtain
the food operation licence, or the Food Operation Permit, for each business venue where they
engage in food operation activities. The food operation licence is valid for five years. Food
operation operators shall properly keep their food operation licences, and shall not forge, alter,
resell, rent, lend, or transfer any food operation licences. Those who fail to obtain a food
operation licence and engage in food operation activities shall be punished by the local food and
drug administrative authorities at or above the county level according to these measures and the
PRC Food Safety Law.
According to the Measures for the Administration of Food Operation Licencing and Filing
( ), which was issued by the SAMR on 15 June 2023 and came
into effect on 1 December 2023 and replaced the Administrative Measures for Food Operation
Licencing (), in the following situations, food operation operators do
not require obtaining the food operation licence: (i) selling edible agricultural products, (ii)
selling pre-packaged food only, (iii) medical institutions and drug retail enterprises that sell
specific full nutrient formula foods in special medical purpose formula foods, (iv) food
producers with a food production licence that sell their produced food at their production and
processing sites or through the internet, or (v) other situations stipulated by laws and regulations
that do not require obtaining a food operation licence. Further, operators who only sell
pre-packaged food (including health food, formula food for special medical purposes, infant
formula milk powder and other special foods for infants and young children) should reported to
the local market supervision and management department at or above the county level for filing.
In addition, food operation operators who are engaged in online business, external warehouses
(including self-owned and leased), or group meal delivery providing meals to schools or
childcare institutions, shall report to the local market supervision and management department at
or above the county level within ten working days from the date of carrying out relevant
business activities, which shall be recorded and reported on the food operation licence and filing
management information platform.
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Public Assembly Venue Hygiene
The Regulation for the Administration of Sanitation of the Public Assembly V enue (ʮ΍ఙ
ሊ͛၍ଣૢԷ) promulgated by the State Council, which was promulgated and entered into
effect on 1 April 1987 and as amended on 6 February 2016 and 23 April 2019, and the
Implementation Rules for the Regulation for the Administration of Sanitation of the Public
Assembly V enue ( promulgated by the National Health and
Family Planning Commission (later known as National Health Commission of the PRC), which
was promulgated on 10 March 2011 and entered into effect on 1 May 2011 and as amended on
19 January 2016 and 26 December 2017. According to such regulations, a public assembly venue
is required to obtain a public assembly venue hygiene licence from the local health authority
after it applies for a business licence but before the opening for its business.
Publications Operation
The State Council promulgated the Administrative Regulations on Publishing (2020
Revision) (၍ଣૢԷ (2020ࠈࡌ)) on 25 December 2001, which was last amended on 29
November 2020. Pursuant to the Administrative Regulations on Publishing , institutions
conducting the wholesale business of publications shall obtain the Publications Operation
Licence from the publication administration authorities at provincial level, while institutions
carrying on the retail business of publications shall obtain the Publications Operation Licence
from the publication administration authorities at county level. The Provisions on the
Administration of the Publication Market (2016) (֛2016) ), jointly
promulgated on 31 May 2016 by the State Administration of Press, Publication, Radio, Film and
Television (later known as National Radio and Television Administration) and the Ministry of
Commerce of the PRC (the “ MOFCOM ”), applies to the wholesale, retail, lease and exhibition
of publications and also contains licencing requirements for the wholesale and retail of
publications.
Medical Devices Operation
The Measures on the Supervision and Administration of the Business Operations of Medical
Devices ( ) (the “ Measures on Medical Devices ”), which was
promulgated by SAMR on 10 March 2022 and took effect on 1 May 2022, applies to any
business activities of medical devices as well as the supervision and administration thereof
conducted within the territory of the PRC. Pursuant to the Measures on Medical Devices, NMPA
shall be responsible for the supervision and administration of nationwide business operations
concerning medical devices. Medical devices are divided into three classes depending on the
degree of risks of medical devices. Entities engaged in distribution of Class III medical devices
shall obtain a medical device operating licence and entities engaged in distribution of Class II
medical devices shall complete filings with the competent local MPA, while entities engaged in
distribution of medical devices of Class I are not required to conduct any filing or obtain any
licence. In addition, in accordance with the Regulations on Supervision and Administration of
Medical Devices (ᔼᐕኜ૛္ຖ၍ଣૢԷ), promulgated by the State Council on 9 February
2021 and effective as of 1 June 2021, Class II and Class III medical devices shall be registered
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with the NMPA or its local branches, while Class I medical devices shall be filed with the
competent local Medical Products Administration (the “ MPA”). In the event that the business
operator in distribution of Class III medical devices without a medical device operating licence
or the business operator in distribution of Class II or Class III medical devices that are not
registered with the NMPA or its local branches, the business operator may be imposed fine or be
shut down by the authorities.
Pharmaceutical Operation
In September 1984, the SCNPC promulgated the Drug Administration Law of the PRC (ʕ
) (the “ Drug Administration Law ”), which was amended in 2001,
2013, 2015 and 2019 respectively to regulate all entities or individuals engaging in research,
manufacture, operation, use, supervision and management of drugs within the PRC. According to
the Drug Administration Law, no pharmaceutical operation, including pharmaceutical wholesale
and pharmaceutical retail business, is permitted without obtaining the Pharmaceutical Operation
Licence. If the trading of drugs is conducted without a Pharmaceutical Operation Licence, the
illegal incomes by selling drugs shall be confiscated and the local Food and Drug Administration
(the “ FDA ”, which is now known as the MPA), shall impose the fine ranging from 15 to 30
times of the value of the illegally sold drugs (including sold or unsold drugs). The
Implementation Rules for the Drug Administration Law of the PRC (၍ଣ
ૢԷ), was promulgated by the State Council in August 2002 and amended in 2016 and
2019, which emphasised the detailed implementation rules of drugs administration. The SFDA
promulgated the Measures for the Administration of Pharmaceutical Operation Licence (ۜ
) in February 2004 as amended in 2017, which stipulates the procedures
for applying the Pharmaceutical Operation Licence and the requirements and qualifications for
pharmaceutical wholesalers or pharmaceutical retailers with respect to their management system,
personnel, facilities and etc.. On 27 September 2023, the SAMR promulgated the Measures for
the Supervision and Management of Drug Distribution and Use Quality (຾ᐄձԴ͜ሯඎ
), which came into effect in 1 January 2024 and replaced the Measures for the
Administration of Pharmaceutical Operation Licence, to further clarify the procedure, renewal,
supervision and inspection of the drug operation licenses. The valid term of the Pharmaceutical
Operation License is five years and shall be renewed during the period ranging from six months
to two months prior to its expiry.
Tobacco Monopoly Commodities
Pursuant to the Tobacco Monopoly Law of the PRC ( )
promulgated by the SCNPC on 29 June 1991, and as latest amended on 24 April 2015, and the
Implementation Rules for the Tobacco Monopoly Law of the PRC (ج
ૢԷ (2023ࠈࡌ)) promulgated by the State Council on 3 July 1997 and latest amended on
20 July 2023, the PRC shall according to law exercise monopoly administration over the
production, sale, import and export of tobacco monopoly commodities, and practise a tobacco
monopoly licence system. Any enterprise that engages in retail business of tobacco monopoly
commodities are required to obtain a Tobacco Monopoly Licence for Retail Trade.
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Pursuant to the Administrative Measures for Tobacco Monopoly Licences (2016) (๧ণਖ਼
ج2016ࠈࡌ)) promulgated by the Ministry of Industry and Information
Technology of the PRC (the “ MIIT ”) on 26 May 2016 and came into force on 20 July 2016, and
the Implementation Rules of the Administrative Measures for Tobacco Monopoly Licences (๧
 ) promulgated by the State Tobacco Monopoly Administration
on 31 December 2020 and came into force on 31 March 2021, detailed procedures and
requirements for applying the Tobacco Monopoly Licences, as well as the issuance and
management of Tobacco Monopoly Licences by the Tobacco Monopoly Bureau, are listed. In
addition, foreign-invested enterprises or individual businesses are not allowed to engage in the
wholesale or retail business of tobacco monopoly commodities, and are not allowed to engage in
business of tobacco monopoly commodities in disguised forms such as commercial franchising,
reinvestments or otherwise.
Value-Added Telecommunications Services
The Telecommunications Regulations of the PRC (ૢԷ ),
promulgated on 25 September 2000 by the State Council and last amended in February 2016,
provides the regulatory framework for telecommunications service providers in China. The
Telecommunications Regulations categorise the telecommunication services in the PRC as either
basic telecommunications services or value-added telecommunications services, and value-added
telecommunications services are defined as telecommunications and information services
provided through public network infrastructures. The Administrative Measures for
Telecommunications Business Operating Licence ( ), promulgated
by the MIIT in July 2017, set forth more specific provisions regarding the types of licences
required to operate value-added telecommunications services (the “ V AT Licence ”), the
qualifications and procedures for obtaining the licence, and the administration and supervision of
these licences. A commercial operator of value-added telecommunication services must first
obtain a V A T Licence. There are two varieties of V A T Licence, one for services within a single
province and one for services across multiple provinces. Furthermore, any telecommunication
services operator may only conduct a telecommunication business of the type and within the
scope of business as specified in its V A T Licence.
Pursuant to a catalogue that was issued as an appendix to the Telecommunications
Regulations (ุਕʱᗳͦ፽), as last amended by the MIIT in June 2019, the first
category of value-added telecommunications services is divided into four subcategories: the
Internet Data Centre Services, the Content Delivery Network Services, the Domestic Internet
Protocol Virtual Private Network Services and the Internet Access Services. The second category
of value-added telecommunications services includes, among others, the online data processing
and transaction processing services and internet information services. Telecommunication
services operators engaged in different categories of value-added telecommunications services
must obtain the corresponding V A T Licence.
In addition, the Administrative Measures on Internet Information Services (؂ࢹڦ
), which were promulgated by the State Council in September 2000 and amended in
January 2011, classify internet information services into commercial internet information
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services, which refers to the provision, with charge of payment, of information or website
production or other service activities to online users via the internet, and non-commercial
internet information services, which refers to the provision, free of charge, of information that is
in the public domain and openly accessible to online users via the internet. The measures require
that a provider of commercial internet information services shall obtain a V A T Licence for
internet information services, often referred to as an ICP Licence, and a provider of
non-commercial internet information services shall carry out record-filing procedures with the
provincial level counterparts of the MIIT.
According to the Special Administrative Measures (Negative List) for the Access of Foreign
Investment (2021 Edition) (݄( ૶ఊ ) (2021و)), which was
promulgated by the National Development and Reform Commission of the PRC (the “ NDRC ”)
and MOFCOM on 27 December 2021 and effective from 1 January 2022, and was replaced by
the Special Administrative Measures (Negative List) for the Access of Foreign Investment (2024
Edition) (݄( ૶ఊ ) (2024و)) on 1 November 2024, as for the
value-added telecommunications business types which fall within the commitment of PRC to the
World Trade Organisation (the “ WTO ”), the ultimate capital contribution percentage by foreign
investor(s) in a foreign-invested value-added telecommunications enterprise shall not exceed
50%, excluding e-commerce, domestic multi-party communication, storage and forwarding, and
call centre.
During the Track Record Period, we operated our Weixin mini programmes and cooperated
with third-party e-commerce platforms in the ordinary course of business. As advised by our
PRC Legal Advisers, based on the consultation with the Jiangsu Provincial Administration of
Communications, registering and operating third-party mini programmes or account on
third-party e-commerce platforms does not require the value-added telecommunications business
operating licence.
Online Trading
In August 2018, the SCNPC promulgated the E-Commerce Law of the PRC (ʕശɛ͏΍ձ
), (the “ E-Commerce Law ”) effective on 1 January 2019, which aims to regulate
the e-commerce activities conducted within the territory of the PRC. According to the
E-Commerce Law, e-commerce operators refer to individuals, enterprises, and other
organisations engaged in the business activities of selling goods or providing services through
the Internet or any other information network, including e-commerce platform operators,
in-platform operators, and e-commerce operators that sell commodities or provide services
through a self-built website or any other network services. E-commerce operators shall make
market participant registration according to the law unless no registration is required by laws or
administrative regulations. E-commerce operators shall obtain relevant administrative licence in
business operation if it is required by laws.
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Alcohol Circulation
The Guidance of the MOFCOM on Promoting Healthy Development of Alcohol Circulation
for the “13th Five-Year” Period (ኬจ
Ԉ), which was promulgated by MOFCOM on 13 February 2017, are formulated for the
purpose of regulating the order of alcohol circulation, eliminating the regional alcohol
circulation ban, and promoting the orderly development of the alcohol market.
LA WS AND REGULATIONS RELATING TO PREPAID CARDS
Pursuant to the Administrative Measures for the Payment Services Provided by
Non-financial Institutions ( ) promulgated by the People’s Bank
Of China (the “ PBOC ”) on 14 June 2010 and latest amended with immediate effect on 29 April
2020, the Regulations on Supervision and Administration of Non-bank Payment Institutions (ڢ
ვБ˕˹ዚ࿴္ຖ၍ଣૢԷ ) issued by the State Council on 9 December 2023, which became
effective on 1 May 2024 and replaced the Administrative Measures for the Payment Services
Provided by Non-financial Institutions, and the Administrative Measures for Single-purpose
Commercial Prepaid Cards (Trial Implementation) (ج( ༊Б))
promulgated by the MOFCOM on 21 September 2012 and latest amended with immediate effect
on 18 August 2016, the issuance and acceptance of prepaid card is a payment service provided
by non-financial institutions, and the term “payment service provided by non-financial
institutions” refers to that the non-financial institutions provide transfer service of monetary
capital as an intermediary between payees and payers. The non-financial institutions, as the
card-issuers, shall complete filing formalities within 30 days from the date it conducts
single-purpose commercial prepaid card businesses.
LA WS AND REGULATIONS RELATING TO FIRE PREVENTION
Pursuant to the Fire Prevention Law of the PRC () (the “ Fire
Prevention Law ”) promulgated by the NPC on 29 April 1998 and latest amended with
immediate effect on 29 April 2021, and the Interim Provisions on Design Inspection and
Acceptance of Fire Protection of Construction Projects (᜕ϗ၍ଣᅲБ
֛2023ࠈࡌ)) promulgated by the Ministry of Housing and Urban-Rural Development of the
PRC on 1 April 2020 and latest amended on 21 August 2023, for the hotels, restaurants,
shopping malls, and markets with more than 10,000 square meters, the construction entity shall
apply for fire protection design approval. For other hotels, restaurants, shopping malls, or
markets, when the construction entity applies for construction permit or for approval of
commencement report, it shall provide the fire protection design drawings and technical
materials satisfying the requirement of the construction and such construction project shall be
subject to the filing and random inspection system.
Pursuant to the Fire Prevention Law, upon completion of the construction project, which is
required to apply for fire safety inspection and acceptance as stipulated by the housing and
urban-rural development authority, the construction entity shall apply to the housing and
urban-rural development authority for fire safety inspection and acceptance. For other
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construction projects, the construction entity shall complete filing formalities with the housing
and urban-rural development authority following the inspection and acceptance, and the housing
and urban-rural development authority shall conduct spot check. Pursuant to the Fire Prevention
Law, the construction project that fails to complete as-built acceptance check on fire prevention
shall be ordered by the competent government authorities to close and shall be fined not less
than RMB30,000 but not more than RMB300,000. Construction projects that fail to complete fire
safety filing shall be ordered to rectify and be subject to a fine of up to RMB5,000.
Pursuant to the Fire Prevention Law, the fire safety inspection of public gathering places
shall be subject to the management of notification and commitment before they are put into use
and open for business. Before the use or commencement of the business operations of a public
place, the construction entities or the entities using such places shall file an application for fire
safety inspection with the fire prevention and rescue department of the local governments of
such places at or above the county level, and make a commitment that the place complies with
the fire control technical standards and management regulations, and submit the requisite
materials and be responsible for the authenticity of their commitments and the submitted
materials. An approval shall be granted to those complying with the fire control safety
requirements through inspection. If the public gathering places are put into use or open for
business without approval of fire prevention and rescue department, or the use or business
conditions of such places are found to be inconsistent with the use or business conditions
promised upon the verification of fire prevention and rescue department, such places shall be
ordered to discontinue the use, production or operation and the construction entities or the using
entities shall be fined not less than RMB30,000 but not more than RMB300,000.
LA WS AND REGULATIONS RELATING TO ENVIRONMENTAL PROTECTION
According to the Environmental Protection Law of the PRC (ᚐ
), which came into effect on 26 December 1989 with latest amendment on 24 April 2014, all
entities and individuals shall have the obligation to protect the environment. Enterprises, public
institutions and other business operators shall prevent and reduce environmental pollution and
ecological disruption, and assume liabilities for damage caused by them. The environmental
protection administrative department under the State Council shall develop the national
environmental quality standards, national pollutant discharge standards and monitoring
regulations. For matters not included in the national environmental quality standards and the
national pollutant discharge standards, the governments at the provincial level may develop local
environmental quality standards and pollutant discharge standards; and for matters included in
the national environmental quality standards and the national pollutant discharge standards, they
may develop more stringent environmental quality standards and local pollutant discharge
standards than the national standards. Local environmental quality standards and pollutant
discharge standards shall be filed with the environmental protection administrative department
under the State Council.
Pursuant to the Law of the PRC on Environment Impact Assessment (ʕശɛ͏΍ձ਷ᐑྤ
) issued on 28 October 2002 and latest amended on 29 December 2018, the State
shall implement classified administration of environmental impact assessment (the “ EIA ”) for
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construction projects in accordance with the degree of environmental impacts of construction
projects. Construction entities shall prepare an environmental impact report (the “ EIR ”), or an
environmental impact statement (the “ EIS ”), or fill out the Environmental Impact Registration
Form (the “ EIRF ”) (the “ EIA documents ”) according to the following rules: (i) for projects
with potentially significant environmental impacts, an EIR shall be prepared to provide a
comprehensive assessment of their environmental impacts; (ii) for projects with potentially slight
environmental impacts, an EIS shall be prepared to provide an analysis or specialised assessment
of the environmental impacts; and (iii) for projects with minimal environmental impacts which
do not warrant an environmental impact assessment, an EIRF shall be filled out. The EIR or EIS
of a construction project shall be submitted by the construction unit in accordance with the
regulations of the State Council to the ecological environment department with powers to
approve the project for review and approval, while the EIRF shall subject to a
record-filing-based management.
According to the Catalogue for the Classified Administration of the Environmental Impact
Assessment of Construction Projects (2008) (ணධͦᐑྤᅂᚤ൙ᄆʱᗳ၍ଣΤ፽ (2008) )
promulgated by the Ministry of Environmental Protection of the PRC, construction projects in
relation to the warehousing and logistics that do not involve toxic, harmful, or hazardous
materials shall be subject to the EIS. However, according to the Catalogue for the Classified
Administration of the Environmental Impact Assessment of Construction Projects (2021) (ண
ධͦᐑྤᅂᚤ൙ᄆʱᗳ၍ଣΤ፽ (2021) ) promulgated by the Ministry of Ecology and
Environment of the PRC, construction projects in relation to the commercial complexes not
relating to environmentally sensitive areas, warehousing and logistics industry (except for
dangerous goods), or catering service industry are no longer required to submit the EIA
documents.
LA WS AND REGULATIONS RELATING TO OVERSEAS LISTING
On 17 February 2023, the CSRC promulgated the Trial Administrative Measures of
Overseas Securities Offering and Listing by Domestic Companies (the “ Overseas Listing Trial
Measures ”) and five relevant guidelines, which became effective on 31 March 2023. Meanwhile,
the Special Provisions of the State Council for the Share Offerings and Listings Overseas of
Joint Stock Limited Companies ( )
and the Circular of the State Council Concerning Further Strengthening the Administration of
Share Issuance and Listing Overseas (ஷ
), which were previously the main institutional basis for overseas offering and listing by
domestic enterprises, were repealed on 31 March 2023.
According to the Overseas Listing Trial Measures, PRC domestic enterprises which seek to
issue and list securities in overseas markets by direct or indirect means are required to complete
the filing procedures with and submit relevant materials to the CSRC. The Overseas Listing
Trial Measures provides that an overseas offering and listing is prohibited if there is one of the
following circumstances: (1) the listing is specifically prohibited for financing purposes by laws,
administrative regulations, or applicable requirements imposed by the country; (2) the overseas
offering and listing might endanger national security as reviewed and determined by competent
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authorities under the State Council in accordance with relevant laws; (3) the domestic enterprise
or its controlling shareholders and de facto controllers have committed corruption, bribery,
embezzlement, misappropriation of property, or other criminal offences disruptive to the order of
the socialist market economy in recent three years; (4) the domestic enterprise is currently under
judicial investigations for suspicion of criminal offences or materially breaching laws or
regulations, where no definitive conclusions have been reached; or (5) there are material
ownership disputes with respect to equity interests held by controlling shareholders or equity
interests held by other shareholders controlled by controlling shareholders and/or de facto
controllers.
The Overseas Listing Trial Measures also provides that if the issuer meets both the
following criteria, the overseas securities offering and listing conducted by such issuer will be
deemed as an indirect overseas offering and listing by PRC domestic enterprises: (1) the amount
of any of the operating revenue, total profit, total assets or net assets of the domestic enterprise
represents over 50% of that of the relevant item in the issuer’s audited consolidated financial
statements for the most recent fiscal year; and (2) the main parts of the issuer’s business
activities are conducted in mainland China, or its principal place of business is located in
mainland China, or the majority of senior management in charge of its business operations and
management are PRC citizens or have their usual place of residence located in mainland China.
Where an issuer submits an application for an initial public offering to competent overseas
regulators, such issuer must file with the CSRC within three business days after such application
is submitted. The Overseas Listing Trial Measures also requires subsequent reports to be filed
with the CSRC on material events, such as a change of control or voluntary or forced delisting
of the issuer who has completed an overseas offering and listing. We submitted the required
filing materials to the CSRC on 28 June 2024.
In addition, in order to further strengthen the confidentiality and archives administration in
connection with overseas offerings and listings of domestic enterprises, clarify information
security responsibilities of listed companies, maintain national information security, and deepen
cross-border regulatory cooperation, the CSRC, the MOF, the National Administration of State
Secrets Protection, and the National Archives Administration revised the Provisions on
Strengthening Confidentiality and Archives Administration Concerning Overseas Securities
Offerings and Listings (CSRC Announcement [2009] No. 29) (̋੶ίྤ̮೯БᗇՎၾɪ̹
 (ᗇ္ึʮѓ [2009]29 ໮)), and promulgated the Provisions on
Strengthening Confidentiality and Archives Administration Concerning Overseas Securities
Offerings and Listings by Domestic Enterprises (CSRC Announcement [2023] No. 44) (̋
 (ᗇ္ึʮѓ [2023]44 ໮)) (the
“Provisions on Confidentiality and Archives Administration ”) on 24 February 2023. To align
with the Overseas Listing Trial Measures, “domestic enterprises” in the Provisions on
Confidentiality and Archives Administration are defined as enterprises that include domestic
joint stock companies that are to directly offer and list their securities overseas and domestic
operating entities that are to indirectly offer and list their securities overseas. At the same time,
procedural requirements have been added to the Provisions on Confidentiality and Archives
Administration which also clarifies the requirements of enterprises’ confidentiality
responsibilities and accounting archives administration.
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LA WS AND REGULATIONS RELATING TO CYBERSECURITY AND DATA
PROTECTION
According to the Cybersecurity Law of the PRC ( )
promulgated by the SCNPC on 7 November 2016 and came into effect on 1 June 2017, the PRC
promotes the construction of a socialised service system for cybersecurity and encourages
relevant enterprises and institutions to provide security services such as cybersecurity
certification, testing and risk assessment. Critical information infrastructure operators that intend
to purchase internet products and services that may affect national security must be subject to
the national security review organised by the national cyberspace authority in conjunction with
relevant departments under the State Council. Furthermore, operators of key information
infrastructure shall, during their operations in the PRC, store the personal information and
important data collected and produced within the territory of the PRC. Where cross-border
transfer of such data is necessary for business, a security assessment shall be conducted in
accordance with the measures formulated by the national cyberspace authority in conjunction
with the relevant departments under the State Council.
According to the Data Security Law of the PRC ( ) (the
“Data Security Law ”) promulgated by the SCNPC on 10 June 2021 and effective on 1
September 2021, “data” means any electronic or other means of recording information, and “data
processing” is defined as including the collection, storage, use, processing, transmission,
provision, and disclosure of data. The Data Security Law stipulates that the collection of data
shall be done in a lawful and proper manner, and that data shall not be stolen or obtained in any
other illegal manner. Data related to national security, the lifeblood of the national economy,
important people’s livelihood, major public interests, etc. are core data, and a more stringent
management system should be implemented. Data processors should, in accordance with the
provisions of laws and regulations, establish and improve the whole process of data security
management system, organise data security education and training, take appropriate technical
measures and other necessary measures to protect data security. In the event of a data security
incident, relevant measures shall be taken immediately, and the incident shall be disclosed to the
user in a timely manner and reported to the relevant competent authorities in accordance with
the regulations.
On 30 July 2021, the State Council promulgated the Regulations of Security Protection for
Critical Information Infrastructure (ᚐૢԷ ), which went into effect
on 1 September 2021. According to the Regulations of Security Protection for Critical
Information Infrastructure , critical information infrastructure, or the CII, refers to any important
network facilities or information systems of important industries and fields such as public
communications and information services, energy, transportation, water conservancy, finance,
public services, e-government affairs and national defence science, and other important ones
whose damage, function loss or data leakage may endanger national security, people’s livelihood
and public interests. According to the Regulations, the competent departments and supervisory
departments, which govern the important industries and fields, shall be responsible for
organising the identification of the CIIs in respective industries or fields, as the departments
responsible for the security protection of the CIIs, and such departments should promptly notify
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the CII operators of the identification results, and notify the public security department of the
State Council. As at the Latest Practicable Date, none of the business operations of the PRC
operating entities has been identified as a CII operator.
According to the Personal Information Protection Law of the PRC (ɛ
) (the “ Personal Information Protection Law ”) promulgated by the SCNPC on 20
August 2021 and effective on 1 November 2021, “personal information” is all kinds of
information relating to identified or identifiable natural persons recorded by electronic or other
means, excluding information after anonymization. Personal information of natural persons is
protected by law, and no organisation or individual may infringe upon the rights and interests of
personal information of natural persons. The processing of personal information shall have a
clear and reasonable purpose, and shall be directly related to the purpose of processing, and
adopt a way that has the least impact on the rights and interests of individuals. The collection of
personal information shall be limited to the smallest extent to achieve the purpose of processing
and shall not be excessive. The personal information processor shall be responsible for its
personal information processing activities and take necessary measures to ensure the security of
the personal information processed. Otherwise, the personal information processor may be
ordered to correct or suspend or terminate the provision of services, or confiscate the illegal
income, fines or other penalties. In the ordinary course of business, we from time to time
collect, store and use certain personal information of consumers, including that under our
customer loyalty programs. For example, (i) for consumers to place online orders through our
online applications, such as Weixin mini programme, we may collect their account names, phone
numbers and addresses, (ii) for consumers under our customer loyalty programs, to use points
through our Weixin mini programme, we collect the basic information, such as their phone
numbers and names.
On 28 December 2021, the Cyberspace Administration of China (the “ CAC ”), the NDRC,
the MIIT, and several other PRC governmental authorities jointly promulgated the Cybersecurity
Review Measures (), these Measures took effect on 15 February 2022 and
replaced the former Cybersecurity Review Measures promulgated on 13 April 2020. Pursuant to
the Cybersecurity Review Measures , a CII operator that purchases network products and
services, or an internet platform operator that conducts data processing activities, which affect or
may affect national security, shall be subject to a cybersecurity review according to the
Measures. In addition, the internet platform operator which processes the personal information
of more than one million users and intends to be listed on a foreign stock exchange must be
subject to a cybersecurity review. And the Cybersecurity Review Office under the CAC is
responsible for developing institutions and norms on cybersecurity review and organising
cybersecurity reviews.
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LA WS AND REGULATIONS RELATING TO FOREIGN INVESTMENT
According to the Foreign Investment Law of the PRC ( ) (the
“FIL ”), which was promulgated by the NPC on 15 March 2019 and came into effect on 1
January 2020, and the Implementation Rules for the Foreign Investment Law of the PRC ( ʕശ
ૢԷ ) (the “ Implementation Rules for the Foreign Investment
Law ”) promulgated by the State Council on 26 December 2019 and came into effect on 1
January 2020, the “foreign investment” refers to the investment activities in mainland China
carried out directly or indirectly by foreign natural persons, enterprises or other organisations.
The State adopts the pre-entry national treatment and negative list management system for
foreign investment. Pre-entry national treatment refers to the treatment accorded to foreign
investors and their investments at the stage of investment entry which is no less favourable than
the treatment accorded to domestic investors and their investments. Negative list management
system refers to a special administrative measure for the entry of foreign investment in specific
sectors as imposed by the PRC. Foreign investors are prohibited from investing in any areas
specified in the negative list, and must meet the conditions listed in the negative list before
investing in any restricted areas. Investments, profits, and other legitimate rights and interests of
foreign investors in mainland China are protected by law, and various national policies
supporting the development of enterprises are equally applicable to foreign-funded enterprises.
The State guarantees the equal participation of foreign-funded enterprises in the formulation of
standards and strengthens the information disclosure and social supervision of standard
formulation. The State also ensures that foreign-funded enterprises participate in government
procurement activities through fair competition in accordance with the law, and that the products
and services provided by foreign-invested enterprises in mainland China are treated equally in
government procurement according to the law. Except under special circumstances, the State
shall not expropriate any overseas investment.
According to the Measures for Reporting Foreign Investment Information (ࢹڦ
) promulgated by MOFCOM and the SAMR on 30 December 2019 and effective on 1
January 2020, foreign investors directly or indirectly engage in investment activities within the
territory of China, foreign investors or foreign-funded enterprises shall submit the investment
information to competent departments for commerce in accordance with these Measures. Foreign
investors or foreign-funded enterprises shall report investment information in a timely manner,
follow the principles of truthfulness, accuracy, and completeness, shall not make false or
misleading reports, and shall not have major omissions.
According to the Catalogue of Industries Encouraging Foreign Investment (2022 version)
(ོᎸ̮ਠҳ༟ପุͦ፽ (2022و)), which was promulgated by NDRC and MOFCOM on 26
October 2022 and effective from 1 January 2023, as well as the Special Administrative Measures
(Negative List) for the Access of Foreign Investment (2021 Edition) (ɝतй၍ଣણ
݄(૶ఊ )(2021و))( “ Negative List ”), which was promulgated by NDRC and MOFCOM
on 27 December 2021 and effective from 1 January 2022, and was replaced by the Special
Administrative Measures (Negative List) for the Access of Foreign Investment (2024 Edition)
(݄( ૶ఊ ) (2024و)) on 1 November 2024, foreign
investment industries are divided into the Encouraged Industry Catalogue and the Negative List.
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The Negative List is further subdivided into the “Catalogue of Restricted Foreign Investment
Industries” and the “Catalogue of Prohibited Foreign Investment Industries”. Industries that are
not included in the Negative List are considered as permitted foreign investment industries.
LA WS AND REGULATIONS RELATING TO INTELLECTUAL PROPERTIES
Trademark
The Trademark Law of the PRC () (the “ Trademark Law ”)
promulgated by the SCNPC on 23 August 1982, last amended on 23 April 2019 and taking effect
on 1 November 2019, and the Implementation Rules of the Trademark Law of the PRC (ʕശɛ
ૢԷ) promulgated by the State Council on 3 August 2002, last amended
on 29 April 2014 and taking effect on 1 May 2014 stipulate the application, examination and
approval, renewal, modification, transfer, use and invalidation of trademark registration, and
protect the exclusive right to use a trademark enjoyed by the trademark registrant. According to
the Trademark Law and the Implementation Rules of the Trademark Law of the PRC , the
principle of “first-to-file” is adopted with respect to trademark registration in China. Where a
trademark for which a registration has been made is identical or similar to an unregistered
trademark that has been previously used by another person on the same kind of or similar
commodities, the application for registration of such trademark may be rejected. The Trademark
Office of China National Intellectual Property Administration (“ Trademark Office ”) is
responsible for the registration of trademarks. The valid period of a registered trademark shall
be ten years from the date of approval of the registration. Upon expiry of the valid period, the
registrant shall go through the formalities for renewal within twelve months prior to the date of
expiry as required if the registrant needs to continue to use the trademark. If the registrant fails
to do so within the period, an extension period of six months may be granted. V alid period for
each renewal is ten years from the next day after expiry of the previous valid term. The
Trademark Office shall announce the trademarks subject to renewal of registration.
Moreover, according to the Trademark Law and the Implementation Rules of the Trademark
Law of the PRC , the trademark registrant may, by concluding a trademark licencing contract,
authorise others to use the registered trademark. For licenced use of a registered trademark, the
licensor shall file record of the licencing of the said trademark with the Trademark Office, while
non-filing of the licencing of a trademark shall not be contested against a good faith third-party.
The licensor shall supervise the quality of the goods on which the licencee uses the licensor’s
registered trademark, and the licencee shall guarantee the quality of the goods on which the
registered trademark is used.
Patent
According to the Patent Law of the PRC () promulgated by the
SCNPC on 12 March 1984, taking effect on 1 April 1985 and amended on 4 September 1992, 25
August 2000, 27 December 2008 and 17 October 2020, the patent administration departments of
the governments at the provincial level, autonomous regions and municipalities directly under
the Central Government are responsible for the patent administration within their respective
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administrative regions. The patent system adopts a first-to-file principle, which means that when
more than two persons submit patent applications for the same invention, only the person who
files the application first is entitled to obtain a patent of the invention. To be patentable, an
invention or a utility model must meet the criteria of novelty, inventiveness and practicability.
The protection period is twenty years for an invention patent and ten years for a utility model
patent and fifteen years for a design patent. Other persons may use the patent with the
permission or proper authorisation of the patent holder, otherwise such acts will constitute patent
infringement.
Copyright
According to the Copyright Law of the PRC ( ), which was
promulgated by the SCNPC on 7 September 1990, came into effect on 1 June 1991 and was
amended on 27 October 2001, 26 February 2010 and 11 November 2020, the works of Chinese
citizens, legal persons or other organisations, including literature, art, natural sciences, social
sciences, engineering technologies and computer software created in writing or oral or other
forms, whether published or not, shall enjoy the copyright. Copyright holder can enjoy multiple
rights, including the right of publication, the right of authorship and the right of reproduction.
According to the Measures for the Registration of Computer Software Copyright (ၑዚ
), which was promulgated by the National Copyright Administration on 20
February 2002, and came into effect on the same day, the National Copyright Administration is
primarily responsible for the registration and management of national software copyright and
recognises the China Copyright Protection Center as the software registration organisation. The
China Copyright Protection Center will grant certificates of registration to computer software
copyright applicants in compliance with the regulations of the Measures for the Registration of
Computer Software Copyright and the Regulations on Protection of Computers Software (ၑ
ᚐૢԷ) which was promulgated by the State Council on 4 June 1991, came into
effect on 1 October 1991 and was amended on 20 December 2001 and 30 January 2013.
Domain Name
According to the Administrative Measures for Internet Domain Names (ʝᑌၣਹΤ၍ଣ፬
), which were promulgated by the MIIT on 24 August 2017 and came into effect on 1
November 2017, the MIIT is responsible for managing Internet network domain names of China.
The principle of “first-to-file” is adopted for domain name services. The applicant of domain
name registration shall provide the agency of domain name registration with the true, accurate
and complete information about the domain name holder’s identity for the registration purpose,
and sign the registration agreements. Upon the completion of the registration process, the
applicant will become the holder of the relevant domain name.
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LA WS AND REGULATIONS RELATING TO PROPERTY LEASING
Pursuant to the Law on Administration of Urban Real Estate of the PRC (ʕശɛ͏΍ձ਷
), which was promulgated by the SCNPC on 5 July 1994 and was latest
amended on 26 August 2019, in case of house leasing, the lessor and lessee are required to enter
into a written lease contract, containing such provisions as the leasing term, usage, rental and
repair liabilities, as well as other rights and obligations of both parties, and go through
registration and filing procedures with the real estate administration department.
In addition, according to the Management Measures for the Lease of Commercial Housing
() promulgated by the Ministry of Housing and Urban-Rural
Development on 1 December 2010, and effective on 1 February 2011, the parties to a housing
lease shall enter into a lease contract in accordance with the law, and shall agree in the lease
contract on the handling of the housing when it is expropriated or demolished. Within 30 days
after the conclusion of the housing lease contract, the parties to the lease shall go to the
competent department of construction (real estate) of the people’s government of the
municipality, city or county where the leased housing is located to register and file the housing
lease. The parties to the housing lease can also entrust others in writing to handle the lease
registration and filing. In violation of the foregoing provisions, the competent construction (real
estate) departments of the people’s governments of the municipalities directly under the central
government, cities and counties shall order rectification within a time limit. If rectification is not
made by an individual within the time limit, a fine of less than RMB1,000 shall be imposed. If
rectification is not made by an entity within the time limit, a fine of more than RMB1,000 but
less than RMB10,000 shall be imposed.
LA WS AND REGULATIONS RELATING TO REAL ESTATE
Pursuant to the Land Administration Law of the PRC ( )
promulgated by the SCNPC on 25 June 1986 and last amended on 26 August 2019, China
implements the purpose-based land administration system (including agricultural land,
construction land and unused land). Any entity or individual shall use lands strictly in
accordance with purposes determined in the overall land utilisation planning. The registration of
the ownership and right of use of land shall be performed in accordance with laws and
administrative regulations pertaining to the real estate registration. The land ownership and use
right registered according to the law is protected by the law, and shall not be infringed upon by
any organisation or individual.
Pursuant to the Urban Real Estate Administration Law of the PRC (̹
) promulgated by the SCNPC on 5 July 1994 and last amended on 26 August
2019, China implements the registration and certification system for the land use right and house
ownership. After building a house on the real estate development land acquired in accordance
with laws, the owner shall submit the certificate of land use right to the house administration
department of the people’s government at or above the county level which shall verify the
application and grant the certificate of house ownership.
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LA WS AND REGULATIONS RELATING TO LABOUR, SOCIAL INSURANCE AND
HOUSING FUNDS
Labour Contract
Pursuant to the Labor Law of the PRC () promulgated by the
SCNPC on 5 July 1994 and amended and came into effect on 29 December 2018, the Labour
Contract Law of the PRC ( ) promulgated by the SCNPC on 29
June 2007, last amended on 28 December 2012 and came into effect on 1 July 2013 and the
Implementation Rules of the Labour Contract Law of the PRC (ྼ
ૢԷ) promulgated by the State Council on 18 September 2008 and came into effect on the
same date, an employer shall establish and improve labour rules and regulations according to the
laws, and shall strictly comply with the national standards, provide relevant training to its
employees, protect their labour rights and perform its labour obligations. If an employer
establishes labour relationship with an employee, they should enter into a written labour
contract. Labour contracts shall be categorised into fixed-term labour contract, unfixed-term
labour contract and labour contract for the completion of certain work assignments. The wages
payable by an employer to its employees shall not be less than local minimum wage. In addition,
an employer must establish and improve the labour safety and health system, stringently
implement national protocols and standards on labour safety and health, conduct labour safety
and health education for employees, so as to prevent accidents in the labour process and reduce
occupational hazards.
Social Insurance and Housing Provident Fund
In accordance with the Social Insurance Law of the PRC ( )
promulgated by the SCNPC on 28 October 2010, which was then amended and put into effect on
29 December 2018, the Provisional Regulations on Collection and Payment of Social Insurance
Premiums (ᎈ൬ᅄᖮᅲБૢԷ ) promulgated by the State Council on 22 January 1999,
which was then amended and put into effect on 24 March 2019, the Decision of the State
Council on Establishing a Basic Medical Insurance System for Urban Employees (׵
 ) promulgated by the State Council on 14 December
1998 and put into effect on the same day, the Decision of the State Council on Establishing a
Unified Basic Old-age Insurance System for Enterprise Employees (Ά
 ) promulgated by the State Council on 16 July 1997 and put
into effect on the same day, the Regulations on Work Injury Insurance (ᎈૢԷ)
promulgated by the State Council on 27 April 2003, which was amended on 20 December 2010
and put into effect on 1 January 2011, the Regulations on Unemployment Insurance (ᎈ
ૢԷ) promulgated by the State Council on 22 January 1999, as well as the Provisional
Measures on Maternity Insurance of Enterprise Employees ( )
promulgated by the Ministry of Labour and Social Security of the PRC (now repealed) on 14
December 1994 and put into effect on 1 January 1995, enterprises shall pay basic endowment
insurance, basic medical insurance, unemployment insurance, maternity insurance and
employment injury insurance for their employees in accordance with the statutory payment base
and proportion. Basic endowment insurance, basic medical insurance and unemployment
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insurance shall be jointly borne by enterprises and employees, while the maternity insurance and
employment injury insurance paid by enterprises. An employer that has not paid the social
insurance premium in full amount on time may be ordered to pay the required contributions
within a stipulated deadline or pay in full amount by the social insurance premium collecting
body and be subject to a late payment fee of up to 0.05% per day since the date of payment
default. If the employer still fails to make social insurance contributions within the stipulated
deadline, it may be subject to a fine ranging from one to three times of the amount overdue
imposed by the relevant administrative department.
In accordance with the Regulations on the Administration of Housing Provident Funds (И
၍ଣૢԷ) which was promulgated by the State Council on 3 April 1999 and amended
on 24 March 2019 and came into effect on the same day, enterprises must register at the housing
provident fund management center to pay and deposit housing provident funds and open housing
provident fund accounts for their employees. Enterprises are also required to pay and deposit
housing provident funds on behalf of their employees in full and in a timely manner. With
respect to any entity that fails to make deposit registration of the housing provident fund or fails
to complete the housing provident fund account establishment procedures for its employees, such
entity shall be ordered by the housing provident fund management center to complete such
procedures within a prescribed time limit; where failing to do so at the expiration of the time
limit, a fine of not less than RMB10,000 nor more than RMB50,000 shall be imposed.
Furthermore, if an employer is overdue in the contribution of, or underpays, the housing
provident fund, the housing provident fund management center shall order it to make the
contribution within a prescribed time limit; where the contribution has not been made after the
expiration of the time limit, an application may be made to a people’s court for compulsory
enforcement.
According to the Notice by the General Office of the State Administration of Taxation (the
“SAT”) on Conducing the Relevant Work Concerning the Administration of Collection of Social
Insurance Premiums in a Steady and Orderly Manner (ᖢѼϞҏਂλ
 ), which was promulgated on 13 September 2018, and the
Urgent Notice of the General Office of the Ministry of Human Resources and Social Security on
Implementing the Spirit of the Executive Meeting of the State Council in Stabilising the
Collection of Social Insurance Premiums (஫࿏ໝྼ਷ਕ৫੬
 ), which was promulgated on 21
September 2018, all the local authorities responsible for the collection and settlement of social
insurance premiums are strictly forbidden to conduct self-collection of historical unpaid social
insurance contributions from enterprises. The Notice on Implementing Measures on Further
Support and Serve the Development of Private Economy (ਕ͏ᐄ຾᏶
), which was promulgated by the SA T on 16 November 2018, repeats that
tax authorities at all levels shall not organise self-collection of arrears of taxpayers including
private enterprises in the previous years.
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LA WS AND REGULATIONS RELATING TO IMPORT AND EXPORT TRADE
According to the Foreign Trade Law of the PRC ( )
(“Foreign Trade Law ”) promulgated by the SCNPC on 12 May 1994 and amended on 30
December 2022, since 30 December 2022, no registration of foreign trade operators is required.
The PRC government allows the free import and export of goods and technologies, unless
otherwise provided by laws and administrative regulations. Before 30 December 2022, pursuant
to the pre-amendment Foreign Trade Law, a foreign trade operator who is engaged in the import
and export of goods or technologies shall process the filing and registration with the foreign
trade authority under the State Council or its entrusted agencies, unless otherwise provided by
the laws, administrative regulations and requirements of the foreign trade authority under the
State Council. Where a foreign trade operator fails to do so, the customs shall not handle the
formalities for declaration and clearance of the goods imported or exported by the operator.
According to the Customs Law of the PRC ()( “ Customs Law ”),
which was reviewed and passed by the SCNPC on 22 January 1987, last amended on 29 April
2021 and became effective on the same date, the customs of the PRC is the state’s entry and exit
customs supervision and administration authority. In accordance with the Customs Law and other
relevant laws and administrative regulations, the customs are responsible for the supervision of
the transport vehicles, goods, freight items, postal items and other items entering into and
departing from the PRC and collecting tariff and other duties and charges. All imported goods,
throughout the period from arrival in the territory to the customs clearance, all exported goods,
throughout the period from declaration to the customs to departure from the territory, and transit,
transshipment and through goods, throughout the period from arrival in the territory to departure
from the territory shall be subject to the supervision of the customs. Unless otherwise specified,
the declaration of import and export goods and the payment of customs duties may be handled
by the consignees or consignors of imported or exported goods or entrusted customs declaration
enterprises. In addition, pursuant to the Administrative Provisions of the PRC on the Filing of
Customs Declaration Entities ( ) promulgated by
the General Administration of Customs of the PRC (“ General Administration of Customs ”) on
19 November 2021 and became effective on 1 January 2022, the consignees and consignors of
imported or exported goods and customs declaration enterprises shall go through customs
declaration and filing procedures at the relevant administration department of customs in
accordance with the law.
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LA WS AND REGULATIONS RELATING TO FOREIGN EXCHANGE
Pursuant to the Regulation on Foreign Exchange Administration of the PRC (ʕശɛ͏΍
ձ਷̮ි၍ଣૢԷ) promulgated by the State Council on 29 January 1996, last amended on 5
August 2008 and became effective on the same date, the circulation of foreign currency is
prohibited within the territory of the PRC, and foreign currency denomination and settlement are
not allowed. The foreign exchange expenditure under current items shall, in accordance with the
administrative provisions of the foreign exchange administrative department of the State Council
on the payment and purchase of foreign exchange, be paid by an institution with its self-owned
foreign exchange upon valid documents or with the foreign exchange purchased from any
financial institution operating the foreign exchange settlement or sale business. In addition,
domestic entities or individuals who directly make overseas investment or involve in distribution
or trade of foreign securities or derivative products, shall go through the formalities for
registration in accordance with the provisions of the foreign exchange administration department
of the State Council.
Regarding the foreign exchange settlement management, the State Administration of
Foreign Exchange ( the “ SAFE ”) promulgated the Circular of the SAFE Concerning Reform of
the Administrative Approaches to Settlement of Foreign Exchange Capital of Foreign-invested
Enterprises (Hui Fa [2015] No. 19) (ഐි၍
(ි೯[2015]19 ໮)) (the “ Circular 19 ”) on 30 March 2015, which became
effective on 1 June 2015. Subsequently, SAFE further promulgated the Circular of the SAFE on
the Policies for Reforming and Standardizing Management of Foreign Exchange Settlement
under the Capital Account (Hui Fa [2016] No. 16) (ձ஝ᇍ༟͉ධͦ
(ි೯[2016]16 ໮)) (the “ Circular 16 ”) on 9 June 2016 which was partly
amended by SAFE Notice on Further Deepening the Reform to Facilitate Cross-border Trade
and Investment ( ) (the
“Circular 28 ”) on 4 December 2023. According to Circular 19, Circular 16 and Circular 28,
foreign exchange income 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
expenditures beyond its business scope or prohibited by PRC Laws and regulations, nor shall
they be provided as loans to its non-affiliated entities, except where it is expressly permitted in
the business scope. Violations of Circular 19 or Circular 16 could result in administrative
penalties.
The Circular of the SAFE on Further Advancing Foreign Exchange Administration Reform
to Enhance Authenticity and Compliance Reviews (Hui Fa [2017] No. 3) (׵
 (ි೯[2017]3 ໮)) (the “ Circular 3 ”)
promulgated by the SAFE on 26 January 2017 and became effective on the same date stipulates
that, several capital control measures with respect to the outward remittance of profits from
domestic institutions to overseas institutions. Specifically, a bank that handles outward
remittance of profits equivalent to more than US$50,000 for a domestic institution shall, under
the principle of genuine transactions, review the resolutions of the Board of Directors on
distribution of profits, original tax recordation form and audited financial statements, and stamp
and endorse the relevant original tax recordation form with the actual remittance amount and
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remittance date. Domestic institutions should hold income to account for previous years’ losses
in accordance with the laws before remitting the profits. Moreover, pursuant to the Circular 3, in
addition to providing corresponding materials as required, domestic institutions shall make
explanations of the sources and utilisation of capital (plans of utilisation), and provide board
resolutions, contracts and other certification materials for authenticity to the bank when
completing the registration and remitting procedures in connection with an outbound direct
investment.
LA WS AND REGULATIONS RELATING TO TAXATION
Enterprise Income Tax
Pursuant to the Enterprise Income Tax Law of the PRC ( )
(the “ EIT Law ”) promulgated by the SCNPC on 16 March 2007 and last revised and took effect
on 29 December 2018 and the Implementation Rules of the Enterprise Income Tax Law of the
PRC (ૢԷ ) promulgated by the State Council on 6
December 2007 and revised and took effect on 23 April 2019, a domestic enterprise, which is
established within the mainland China in accordance with the laws or established in accordance
with any laws of a foreign country (region) but with an actual management institution located in
the mainland China, shall be regarded as a resident enterprise. A resident enterprise shall be
subject to an EIT rate of 25% of any income generated within or outside the PRC. A preferential
EIT rate shall be applicable to any key industry and project which are supported and encouraged
by the State. High and new technology enterprises in need of key support from the State may
enjoy a reduced EIT rate of 15%.
Value-added Tax
Pursuant to the Provisional Regulations of the PRC on V alue-Added Tax (ʕശɛ͏΍ձ਷
೼ᅲБૢԷ), which was promulgated by the State Council on 13 December 1993, last
amended and became effective on 19 November 2017, and the Implementation Rules of the
Provisional Regulations of the PRC on V alue-added Tax (݄
), which was promulgated by the Ministry of Finance of the PRC (the “ MOF ”) on 25
December 1993, last amended on 28 October 2011 and became effective on 1 November 2011,
all enterprises and individuals that engage in the sale of goods, the provision of processing,
repair and replacement services, sale of services, intangible assets, real estate and the
importation of goods within the territory of the PRC are taxpayers of value-added tax (the
“VAT”) and shall pay V A T in accordance with the laws. According to the Notice of the MOF and
the SAT on the Adjustment to VAT Rates ( )
which was promulgated by the MOF and the STA on 4 April 2018 and came into effect on 1
May 2018, the original rates of 17% and 11% applicable to the taxpayers who have V A T taxable
sales activities or imported goods are adjusted to 16% and 10%, respectively. According to the
Announcement on Policies for Deepening the VAT Reform (ʮ
ѓ), which was promulgated by the MOF, the STA and the General Administration of Customs
on 20 March 2019 and became effective on 1 April 2019, the original rates of 16% or 10%
REGULATORY OVERVIEW
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applicable to the general V A T payers’ sales activities or imports goods that are subject to V A T
are adjusted to 13% or 9%, respectively.
Urban Maintenance and Construction Tax and Education Surcharge
According to the Notice on Unifying the System of Urban Maintenance and Construction
Tax and Education Surcharge Paid by Domestic and Foreign-invested Enterprises and
Individuals ( ), issued by
the State Council on 18 October 2010 and came into effect on 1 December 2010, since 1
December 2010, the Temporary Regulation on Urban Maintenance and Construction Tax of the
PRC (ண೼ᅲБૢԷ ) issued in 1985 and the Temporary
Provisions on the Collection of Education Surcharge ( ) issued in
1986 by the State Council shall apply to foreign-invested enterprises, foreign enterprises and
foreign individuals. The regulations, rules and policies on urban maintenance and construction
tax and education surcharge issued by the State Council and other competent departments since
1985 and 1986 in charge of relevant financial and tax authorities shall also apply to
foreign-invested enterprises, foreign enterprises and foreign individuals.
According to the Urban Maintenance and Construction Tax Law of the PRC (ʕശɛ͏΍
) promulgated by the SCNPC on 11 August 2020 and effective on 1
September 2021, replacing the Temporary Regulation on Urban Maintenance and Construction
Tax of the PRC, the units and individuals who pay V A T and consumption tax within the territory
of the PRC are the taxpayers of urban maintenance and construction tax. According to the Law,
urban maintenance and construction tax is calculated based on the actual amount of V A T and
consumption tax paid by the taxpayer according to the law. If the taxpayer is located in an urban
area, the tax rate is 7%; if the taxpayer is located in a county or town, the tax rate is 5%; if the
taxpayer is located in other areas, the tax rate is 1%.
According to the Temporary Provisions on the Collection of Education Surcharge (ᅄϗ઺
) promulgated by the State Council on 28 April 1986 and amended on 7
June 1990, 20 August 2005 and 8 January 2011, and the Announcement of the MOF and the SAT
on the Determination of Tax Basis for Urban Maintenance and Construction Tax and
Other Matters (ʮѓ ),
promulgated by the Ministry of Finance and the State Taxation Administration on 24 August
2021, the education surcharge is calculated based on the actual amount of V A T and consumption
tax paid by each unit and individual, and the education surcharge rate is 3%, which is paid at the
same time as V A T and consumption tax, respectively.
Dividend Withholding Tax
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 (ᅄ೼ձԣ˟ਊဍ
τર), which was promulgated on 21 August 2006 and effective from 8 December 2006,
the withholding tax rate of no more than 5% applies to dividends paid by a PRC company to a
REGULATORY OVERVIEW
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Hong Kong resident, provided that the recipient is a company that holds at least 25% of the
capital of the PRC company. The withholding tax rate of no more than 10% applies to dividends
paid by a PRC company to a Hong Kong resident if the recipient is a company that holds less
than 25% of the capital of the PRC company.
Furthermore, pursuant to the Circular of the State Administration of Taxation on Relevant
Issues Concerning the Implementation of Dividend Clauses in Tax Treaties (Guo Shui Han
[2009] No. 81) ( (਷೼Ռ [2009]81
໮)), which was promulgated on and effective from 20 February 2009, where a PRC resident
company pays dividends to a fiscal resident of the other contracting party to a tax treaty and
such fiscal resident of the other party (or dividend recipient) is the beneficiary of such
dividends, such dividends received by the fiscal resident of the other party are entitled to the
treatment under the tax treaty, provided that all of the following requirements should be
satisfied:
(1) the taxpayer entitled to the treatment under the tax treaty shall be the fiscal resident of
the other contracting party to a tax treaty;
(2) the taxpayer entitled to the treatment under the tax treaty shall be the beneficiary of
relevant dividends;
(3) dividends entitled to the treatment under the tax treaty shall be the equity investment
income such as dividends and bonuses determined under the PRC tax laws; and
(4) other requirements provided by the STA.
If the tax resident of the other contracting party to the tax agreement directly owns a
certain proportion or more of the capital (usually 25% or 10%) of a Chinese resident company
that pays dividends, the dividends obtained by the tax resident of the other contracting party can
be taxed at the tax rate specified in the tax agreement. The tax resident of the other contracting
party who needs to enjoy the benefits of the tax agreement should meet the following conditions
at the same time:
(1) such tax resident of the other contracting party who obtains dividends should be
limited to a company as provided in the tax agreement;
(2) owner’s equity interests and voting shares of the PRC resident company directly
owned by such tax resident of the other contracting party reaches a specified
percentage; and
(3) the capital proportion of the PRC resident company directly owned by such tax
resident of the other contracting party, at any time during the 12 months prior to the
acquisition of the dividends, reaches a specified percentage in the tax agreement.
REGULATORY OVERVIEW
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REGULATIONS RELATING TO THE FULL CIRCULATION OF H SHARES
“Full Circulation” represents listing and circulating on the Stock Exchange of the domestic
unlisted shares of an H-share listed company, including domestic unlisted shares held by
domestic shareholders prior to overseas listing, domestic unlisted shares additionally issued after
overseas listing, and unlisted shares held by foreign shareholders. On 14 November 2019, CSRC
announced the Guidelines for the “Full Circulation” Program for Domestic Unlisted Shares of
H-share Listed Companies ( Hˏ )( “ Guidelines
for the ‘Full Circulation’ ”), which were amended on 10 August 2023. As regulated in the
Guidelines for “Full Circulation”, shareholders of domestic unlisted shares have the flexibility to
jointly decide the amount and proportion of shares that will be included in the circulation
application. This decision should be reached through mutual consultation, ensuring compliance
with relevant laws, regulations and policies governing state-owned asset administration, foreign
investment and industry regulation. Meanwhile, the H-share listed company corresponding to
these shares may be authorised to file for “full circulation” with the CSRC. An unlisted
domestic joint stock company may file with the CSRC for “full circulation” at the time of its
initial public offering and listing overseas. After domestic unlisted shares are listed and
circulated on the Stock Exchange, they may not be transferred back to China. Pursuant to the
Overseas Listing Trial Measures, which came into effect on 31 March 2023, for a domestic
company directly offering and listing overseas, shareholders of its domestic unlisted shares
applying to convert such shares into shares listed and traded on an overseas trading venue shall
conform to relevant regulations promulgated by the CSRC. Additionally, they are required to
authorise the domestic company to submit the conversion application to the CSRC on their
behalf.
On 31 December 2019, China Securities Depository and Clearing Corporation Limited and
Shenzhen Stock Exchange jointly announced the Measures for Implementation of H-share “Full
Circulation” Business (the “ Measures for Implementation ”). The businesses of cross-border
share transfer registration, maintenance of deposit and holding details, transaction entrustment
and instruction transmission, settlement, management of settlement participants, services of
nominal holders, etc., in relation to the H-share “Full Circulation” business, are subject to these
Measures for Implementation.
REGULATORY OVERVIEW
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OVERVIEW
We are a wholesaler of grains and oil headquartered in Y angzhou, with retail operations of
supermarket and convenience stores focusing on the central region of Jiangsu Province under our
brand “Ꮂ ” (Hongxinlong*). According to the Industry Report, we ranked second among
supermarket operators in Y angzhou in terms of sales in 2023. Our history can be traced back to
1994 when Hongxin Trading (which was formerly known as Jiangdu Mall Co., Ltd.* (۬
ʮ̡ ) as at its establishment) was established in the PRC as a joint stock company with
limited liability by Jiangdu Supply and Marketing Building* ( ϪேԶቖɽข ), Jiangdu Supply
and Marketing (Group) Corporation* ( ϪேԶቖ (ණྠ)ᐼʮ̡ ) (both of which were, so far as our
Directors are aware, deregistered in the 1990s and owned by the Jiangdu’s Supply and Marketing
Cooperatives (ٟthen being a collectively-owned entity), Jiangdu Machinery and
Electronics Factory* ( Ϫேዚ૛ཥɿᐼᅀ ) (which is wholly owned by Y angzhou Jiangdu District
Supply and Marketing Cooperative* (ٟan Independent Third Party),
other corporate shareholders and the then employees of Hongxin Trading. In 2001, 98.45% of
the equity interests in Hongxin Trading were transferred from the then existing corporate
shareholders and certain natural persons to Mr. Gao and other natural persons.
Our Company (which was formerly known as Jiangdu Mall Hongxin Supermarket Chain
Co., Ltd.* (ʮ̡ ) as at its establishment) was established in the PRC
as a limited liability company in 2005 by Hongxin Trading and Jiangdu Supply and Marketing
Trade Union Committee. In 2007, our Company was converted into a joint stock company with
limited liability and renamed as Jiangsu Horizon Chain Supermarket Company Limited ( Ϫᘽ҃
ʮ̡ ). Upon completion of the conversion, Mr. Gao and 101 other
individuals became the shareholders of our Company in addition to the then existing
shareholders. Mr. Gao was also appointed as the Chairman and the general manager of our
Company. Pursuant to an acquisition agreement dated 29 December 2018, our Company acquired
95.68% of the equity interest in Hongxin Trading by way of issuance of Shares (the “ Hongxin
Trading Acquisition ”). Upon completion of the Hongxin Trading Acquisition, Hongxin Trading
has become a non-wholly-owned subsidiary of our Company.
As at the Latest Practicable Date, we operated 51 supermarkets and 109 convenience stores
in Jiangsu Province, out of which 49 supermarkets and 108 convenience stores are located in
Y angzhou, and two supermarkets and one convenience store are located in Taizhou. Apart from
supermarkets and convenience stores, we also operate two Malls located in Y angzhou, namely
Jiangdu Mall* (۬and Hongxinlong Mall* (ʕː ). For details of the key
business development of our Group, please refer to the paragraph headed “Business – Overview”
in this prospectus.
HISTORY AND DEVELOPMENT
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KEY BUSINESS MILESTONES
The following table sets out the key milestone in our business development:
Y ear Milestone
1994 Hongxin Trading was established as a joint stock company with limited
liability and was primarily engaged in shopping mall business
2001 Hongxin Trading obtained the approval for import and export rights ( ආ̈ɹ
຾ᐄᛆ ) from the Ministry of Foreign Trade and Economic Cooperation ( ࿁
຾᏶ΥЪ௅ ) of the PRC
2005 Our Company was established as a limited liability company and was
primarily engaged in the business of operating supermarkets and
convenience store chain
Our first township store, the Shaobo store, was opened
2007 Our Company was converted into a joint stock company with limited
liability and renamed as Jiangsu Horizon Chain Supermarket Company
Limited (ʮ̡ )
2008 Our Y angzhou branch company was established
2009 Our Yizheng branch company was established
2011 Our Baoying branch company was established
2012 Our Taizhou branch company was established
The Hongxinlong Logistics Park commenced operations
2014 Our “Ꮂ ” (Hongxinlong*) trademark was recognised as a Y angzhou
Famous Trademark (Τਠᅺ )
Our “Ꮂ ” (Hongxinlong*) trademark was recognised as a Jiangsu
Famous Trademark (ഹΤਠᅺ )
2016 We commenced the development of an multi-channel business model with
both online and offline operations
HISTORY AND DEVELOPMENT
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Y ear Milestone
2020 Our mini programmes “Ꮂϣ˚༺ ” (Hongxinlong Same Day Delivery*)
(later renamed as “ᒅ ” (Longhuiyigou*)) and “Ꮂ൴̹ ”
(Hongxinlong Supermarket*) (later renamed as “ᒅ ”
(Hongxinlong Shop in Store*) and “Ꮂ຅˚༺ ” (Hongxinlong Same Day
Delivery*)) were launched
We commenced operations of the central kitchen (ג)
We were recognised as a Key Supply Unit for Prevention and Control in
Jiangdu District, Y angzhou City* (ღԶᏐఊЗ )b y
the Office of the Command for the Prevention and Control of the Novel
Coronavirus Pneumonia Epidemic in Jiangdu District, Y angzhou City* ( ౮ψ
܃)
2021 We were accredited as an AAAA-Level Logistics Enterprise* (AAAAΆ
ุ) by the China Federation of Logistics & Purchasing (ၾમᒅᑌ
Υึ)
We were accredited as a Safe Consumption Demonstration Unit of Jiangsu
Province* (ͪᇍఊЗ ) by the Jiangsu Provincial Safe
Consumption Creation Activity Office* (܃)
and Jiangsu Provincial Administration for Market Regulation* (̹ఙ
္ຖ၍ଣ҅ )
We were recognised as a Key Enterprise for Ensuring People’s Livelihood
Supply in Y angzhou City* (ᓃΆุ ) by the Commerce
Bureau of Y angzhou City* ( ౮ψ̹ਠਕ҅ )
We were recognised as a Key Enterprise for Ensuring People’s Livelihood
Supply in Y angzhou City* (ᓃΆุ ) by the Command for
the Prevention and Control of the Novel Coronavirus Pneumonia Epidemic
in Jiangdu District, Y angzhou City* (ઋԣછʈЪ
౨௅ )
2022 We commenced our New Retailing ( อཧਯ ) operations, utilising short
videos and live streaming on Douyin to increase our exposure and open up
sales channels
2023 We entered the Meituan platform, leveraging the third-party food delivery
platform to boost store sales
HISTORY AND DEVELOPMENT
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OUR CORPORATE DEVELOPMENT
The following describes the corporate history of our Company and its subsidiaries.
Our Company
Establishment in October 2005
Our Company was established in the PRC as a limited liability company on 19 October
2005 under its former name of Jiangdu Mall Hongxin Supermarket Chain Co., Ltd.* (۬
ʮ̡ ) with an initial registered capital of RMB1 million, which was owned as
to 80% by Hongxin Trading and 20% by Jiangdu Supply and Marketing Trade Union Committee.
Our Company is principally engaged in the operation of supermarket and convenience store
chain.
Conversion into a joint stock company and capital increase in September 2007
Our Company was renamed as Jiangsu Horizon Chain Supermarket Company Limited ( Ϫᘽ
ʮ̡ ) and converted into a joint stock company on 30 September 2007.
On 30 September 2007, the registered capital of our Company was increased from RMB1 million
to RMB30 million. The newly increased registered capital was subscribed by the then existing
shareholders and 102 new individual shareholders at the subscription price of RMB1.00 per
Share. The following table sets out the shareholding structure of our Company immediately after
completion of the conversion and capital increase as mentioned above:
Shareholders
Number of
Shares held
Percentage of
shareholding
(%)
Hongxin Trading 6,160,000 20.53
Jiangdu Supply and Marketing Trade Union Committee 200,000 0.67
Mr. Gao 4,000,000 13.33
Mr. Zhang 2,240,000 7.47
Mr. Y uan 1,800,000 6.00
20 individuals who are directors, supervisors, senior
management members of our Group or their
associates
(1) 7,370,000 24.56
79 individuals who are Independent Third Parties
including employees and/or ex-employees of our
Group or their associates
(2) 8,230,000 27.43
Total 30,000,000 100.00
HISTORY AND DEVELOPMENT
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Notes:
1. These 20 individuals include Gao Y uping ( ৷̻͗ ), Xu Shihe ( ஢˰ձ ), Y u Qin (ೞ), Yin Qin ( Ιා),
Guo Xia ( ெᒳ), Zhan Mingyu (͗ ), Hu Qinghua (ᅅശ ), Xia Zhonglin (؍׀ࢀLeng Y uemei ( и˜
ૠ), Zhu Zheng (݁Wu Jie ( юᆎ), Li Qian (࠺Cao Songyun (ථ ), Y ao Xinhua (อശ ), Quan
Aijun (ࠏZhu Aizhen (ޜShen Zhigen ( ӏқЌ ), Ni Hua (ശ), Wang Ying ( ӓ጑) and Xu
Shiqiang ( ஢˰੶ ).
Each of such individuals was interested in less than 5% of equity interest in our Company.
2. These 79 individuals include Li Dongmei ( ҽ̆ૠ ), Tian Xiuqin ( ͞Ӹೞ ), Chang Jianquan (ݰ࢕Xu
Jun (ڲࢱZhang Jun (ࠏZhang Y outing ( ੵϞణ ), Jiang Lei ( ᇸᆾ), Mao Hongxia (ᒳ ), Li Aimin
(ҽฌ͏ ), Wang Jingsong (ؒDai Hongqing ( Ꮦ҃ᅅ ), Guan Y ueqin ( ၍˜ೞ ), Mei Ping ( ૠ̻), Y an
Shuqin (ೞ ), Pan Lingmei (֊ ), Jiang Xianyue ( Ϫᜑ˜ ), Kan Chuanling (ޛXu Qing (ࢱ
ڡLu Shouping ( ௔ྪറ ), Zhang Guangyou ( ੵΈʾ ), Teng Lin ( ᆚ೙), Shen Cheng (۬Wang
Jinliang (Ԅ ), Zhang Y u ( ੵ͗), Zhao Xingwang (׶Shen Xiuyun ( ӏӸථ ), Xu Fangding (˙
֛Zhu Jun (ࠏHuang Weiyong (ۇTang Manjiang ( ಷတϪ ), Zhu Qing ( ϡ૶), Zhao Xiuqin
(ႻӸೞ ), Bu Chunnu (ɾ ), Shi Chenlin (؍Zhang Xiaoqiu (߇Li Chunlan (ళ ),
Quan Haizhen (ޜShi Xia (ᒳ), Zhu Hairong ( ϡऎ࿲ ), Hu Yingchun (݆ڎߡXu Chunling (݆ࢱ
ޛGao Jie ( ৷ᆎ), Gu Haijun (ࠏHuang Haiyan ( රऎዲ ), Ji Qin (૶), Li Bin ( ҽⅳ), Li Chun
(݆Li Xia ( ҽᒳ), Sun Li (஁), Wang Chunlin (؍݆Xia Guifen (ځ࣭ࢀZhang Aiping ( ੵฌ
̻), Zhu Yinshan ( ϡვʆ ), Chou Chunyun (ථ ), Hu Jun (ڲߡSun Wenping (˖റ ), Wang Xia ( ˮ
ᒳ), Wang Y uanhe ( ˮʩᚲ ), Xia Jin (ᆩ), Xiang Y ang ( Σජ), Zhang Li ( ੵᘆ), Zhang Min ( ੵს), Chen
Hui ( ௓ᅆ), Gao Shangyun (ථ ), Han Juan (ࢇLi Wenjian ( ҽ˖਄ ), Liu Zongyun (ථ ), Mao
Y uhong (ߎSang Maojun (ࢇ߱ࣳSha Limei ( Ӎ༁ૠ ), Shen Li ( ӏ஁), Sun Jian (ܔ࢑Wang Ping
(ˮറ), Xu Juan (ࢇXue Hong (ߎY ao Min (ઽ), Y u Mei ( ɲૠ), Zhang Xuehe ( ੵኪձ ) and
Zhou Jihong (ߎ.)
Each of such individuals was interested in less than 5% of equity interest in our Company.
HISTORY AND DEVELOPMENT
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Subsequent changes in registered capital and shareholding
Subsequent to the conversion of our Company into a joint stock company, several rounds of
capital increase and equity transfer took place and our Company brought in new Shareholders
and Pre-IPO Investors. As at the Latest Practicable Date, our registered capital was
RMB160,684,910, comprising 160,684,910 Shares. The changes in our registered capital and
shareholding after the conversion and up to the Latest Practicable Date are summarised as
follows:
Month and Y ear Changes in registered capital and shareholding
September 2010 Equity transfer . Pursuant to equity transfer agreements all dated 26
September 2010, Hongxin Trading and 98 individual shareholders
transferred their equity interest of an aggregate of 21,950,000 Shares
(representing approximately 73.17% of equity interest) in our
Company to Mr. Gao, Mr. Zhang, Ni Hua (ശ) and Kan Chuanling
(ޛat the consideration of RMB1 per Share which was
determined based on the paid-up registered capital of our Company.
Upon completion of the said equity transfers, the registered capital
of our Company was owned as to 66.03%, 0.67%, 20.90%, 4.73%,
4.33% and 3.33% by Mr. Gao, Jiangdu Supply and Marketing Trade
Union Committee, Mr. Zhang, Mr. Y uan, Ni Hua (ശ) and Kan
Chuanling (ޛrespectively.
Ni Hua (ശ) is a director of Hongxin Trading, and Kan Chuanling
(ޛis the vice-chairman of the trade union of Hongxin Trading
and an Independent Third Party.
March 2011 Equity transfer . Pursuant to an equity transfer agreement dated 26
March 2011, Jiangdu Supply and Marketing Trade Union Committee
transferred its equity interest of 200,000 Shares (representing
approximately 0.67% of equity interest) in our Company to Mr. Gao
at the consideration of RMB1.65 per Share, which was determined
with reference to the net asset value per Share based on the then
latest financial statements of our Company. Upon completion of the
said equity transfer, the registered capital of our Company was
owned as to 66.70%, 20.90%, 4.73%, 4.33% and 3.33% by Mr. Gao,
Mr. Zhang, Mr. Y uan, Ni Hua (ശ) and Kan Chuanling (ޛ,)
respectively.
HISTORY AND DEVELOPMENT
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Month and Y ear Changes in registered capital and shareholding
December 2012 Capital increase. On 20 December 2012, the registered capital of
our Company was increased from RMB30 million to RMB50
million. The newly increased registered capital was subscribed by
Mr. Gao, Mr. Y uan and 15 other individuals at the subscription price
of RMB1.40 per Share, which was determined with reference to the
net asset value per Share based on the then latest financial
statements of our Company. The following table sets out the
shareholding structure of our Company immediately after
completion of the capital increase as mentioned above:
Shareholders
Number of
Shares held
Percentage of
shareholding
(%)
– Mr. Gao 25,010,000 50.02
– Mr. Zhang 6,270,000 12.54
– Mr. Y uan 6,140,000 12.28
8 individuals who are directors,
supervisors, senior
management members of our
Group or their associates
(Note) 7,210,000 14.42
9 individuals who are
Independent Third Parties
including employees and/or
ex-employees of our Group or
their associates
(Note) 5,370,000 10.74
Total 50,000,000 100.00
Note: Each of such individuals was interested in less than 5% equity interest in our
Company.
HISTORY AND DEVELOPMENT
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Month and Y ear Changes in registered capital and shareholding
October 2013 Equity transfer . Each of Kan Chuanling (ޛand Ni Hua (ശ)
transferred their equity interest of 1,000,000 Shares (representing
approximately 2% of equity interest) and 1,300,000 Shares
(representing approximately 2.60% of equity interest) in our
Company to Mr. Y uan pursuant to equity transfer agreements dated
22 October 2013 and 25 October 2013, respectively, at the
consideration of RMB1.40 per Share, which was determined with
reference to the net asset value per Share based on the then latest
financial statements of our Company. The following table sets out
the shareholding structure of our Company immediately after
completion of the equity transfers as mentioned above:
Shareholders
Number of
Shares held
Percentage of
shareholding
(%)
– Mr. Gao 25,010,000 50.02
– Mr. Y uan 8,440,000 16.88
– Mr. Zhang 6,270,000 12.54
7 individuals who are directors,
supervisors, senior
management members of our
Group or their associates
(Note) 5,910,000 11.82
8 individuals who are
Independent Third Parties
including employees and/or
ex-employees of our Group or
their associates
(Note) 4,370,000 8.74
Total 50,000,000 100.00
Note: Each of such individuals was interested in less than 5% equity interest in our
Company.
HISTORY AND DEVELOPMENT
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Month and Y ear Changes in registered capital and shareholding
February 2015 Equity transfer . Pursuant to an equity transfer agreement dated 6
February 2015, Zhang Jun (ࠏan Independent Third Party,
transferred his equity interest of 1,770,000 Shares (representing
approximately 3.54% of equity interest) in our Company to Zhu
Zheng (݁a supervisor of Hongxin Pharmacy) at the
consideration of RMB1.80 per Share, which was determined with
reference to the net asset value per Share based on the then latest
financial statements of our Company. The following table sets out
the shareholding structure of our Company immediately after
completion of the equity transfer as mentioned above:
Shareholders
Number of
Shares held
Percentage of
shareholding
(%)
– Mr. Gao 25,010,000 50.02
– Mr. Y uan 8,440,000 16.88
– Mr. Zhang 6,270,000 12.54
8 individuals who are directors,
supervisors, senior
management members of our
Group or their associates
(Note) 7,680,000 15.36
7 individuals who are
Independent Third Parties
including employees and/or
ex-employees of our Group or
their associates
(Note) 2,600,000 5.20
Total 50,000,000 100.00
Note: Each of such individuals was interested in less than 5% equity interest in our
Company.
HISTORY AND DEVELOPMENT
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Month and Y ear Changes in registered capital and shareholding
March 2017 Equity transfer . Pursuant to an equity transfer agreement dated 1
March 2017, Shi Xia (ᒳ), an Independent Third Party, transferred
her equity interest of 100,000 Shares (representing approximately
0.20% of equity interest) in our Company to Zhu Zheng (݁a
supervisor of Hongxin Pharmacy) at the consideration of RMB1.65
per Share, which was determined with reference to the net asset
value per Share based on the then latest financial statements of our
Company. The following table sets out the shareholding structure of
our Company immediately after completion of the equity transfer as
mentioned above:
Shareholders
Number of
Shares held
Percentage of
shareholding
(%)
– Mr. Gao 25,010,000 50.02
– Mr. Y uan 8,440,000 16.88
– Mr. Zhang 6,270,000 12.54
8 individuals who are directors,
supervisors, senior
management members of our
Group or their associates
(Note) 7,780,000 15.56
6 individuals who are
Independent Third Parties
including employees and/or
ex-employees of our Group or
their associates
(Note) 2,500,000 5.00
Total 50,000,000 100.00
Note: Each of such individuals was interested in less than 5% equity interest in our
Company.
HISTORY AND DEVELOPMENT
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Month and Y ear Changes in registered capital and shareholding
January 2019 Capital increase and Hongxin Trading Acquisition. Our Company
entered into an acquisition agreement dated 29 December 2018 with
Ruichuanda Investment, Mr. Gao, Mr. Y uan and nine other
individuals (being Xu Shihe ( ஢˰ձ ), Hu Qinghua (ᅅശ ), Yin
Qin ( Ιා), Zhu Zheng (݁Guo Xia ( ெᒳ), Li Dongmei ( ҽ̆
ૠ), Kan Chuanling (ޛZhen Yizuo ( ँ̸່ ) and Huang
Haiyan ( රऎዲ )) (collectively the “ Hongxin Trading Vendors ”),
pursuant to which our Company acquired 95.68% equity interest in
Hongxin Trading held by the aforesaid parties by way of issuing
53,657,135 Shares to the Hongxin Trading V endors at the issue price
of RMB3.62 per Share, which was determined with reference to the
valuation of our Company and Hongxin Trading as at 30 June 2018
based on two valuation reports prepared by an independent valuer
both dated 29 December 2018. On 14 January 2019, the registered
capital of our Company was increased from RMB50 million to
RMB103,657,135. Save and except for Mr. Gao, Mr. Y uan,
Ruichuanda Investment, Xu Shihe ( ஢˰ձ ) (being a supervisor of
Hongxin Trading), Hu Qinghua (ᅅശ ) (being a director of
Hongxin Trading), Yin Qin ( Ιා) (being a director of Hongxin
Trading), Zhu Zheng (݁being a supervisor of Hongxin
Pharmacy) and Guo Xia ( ெᒳ) (being a director of Hongxin
Trading), the other counterparties were Independent Third Parties.
Pursuant to the Acting-in-concert Confirmation, the Concert Parties
(Mr. Gao, Ruichuanda Investment (which is in turn wholly-owned by
Mr. Gao), Mr. Y uan and Mr. Zhang) confirm that they have been
acting in concert in the management and operation of our Group
since January 2019, and they have agreed to continue to act in
concert and reach consensus on any proposal related to the daily
management and operation of our Group presented to the general
meeting of the Shareholders of our Company for voting. For further
details, please refer to the paragraph headed “Acting-in-concert
Confirmation” in this section. The following table sets out the
shareholding structure of our Company immediately after
completion of the capital increase and Hongxin Trading Acquisition
as mentioned above:
Shareholders
Number of
Shares held
Percentage of
shareholding
(%)
The Concert Parties 65,144,976 62.85
– Mr. Gao 26,292,302 25.36
– Ruichuanda Investment 21,410,776 20.66
– Mr. Y uan 11,171,898 10.78
– Mr. Zhang 6,270,000 6.05
Xu Shihe ( ஢˰ձ )
(1) 10,870,051 10.49
HISTORY AND DEVELOPMENT
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Month and Y ear Changes in registered capital and shareholding
Shareholders
Number of
Shares held
Percentage of
shareholding
(%)
Hu Qinghua (ᅅശ )(1) 5,599,690 5.40
10 individuals who are
directors, supervisors, senior
management members of our
Group or their associates
(2) 16,744,637 16.15
10 individuals who are
Independent Third Parties
including employees and/or
ex-employees of our Group or
their associates
(2) 5,297,781 5.11
Total 103,657,135 100.00
Notes:
(1) Xu Shihe ( ஢˰ձ ) is a supervisor of Hongxin Trading, and Hu Qinghua (ᅅ
ശ) is a director of Hongxin Trading.
(2) Each of such individuals was interested in less than 5% equity interest in our
Company.
For more details of the Hongxin Trading Acquisition, please refer to
the paragraph headed “Our Corporate Development – Our
Subsidiaries – Hongxin Trading” in this section.
HISTORY AND DEVELOPMENT
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--- page 182 ---
Month and Y ear Changes in registered capital and shareholding
July 2019 Capital increase and Pre-IPO Investment by Jiangdu Fund. Pursuant
to the Jiangdu Fund Capital Increase Agreement, Jiangdu Fund
subscribed for 16,393,442 Shares at the consideration of RMB60
million (i.e. RMB3.66 per Share), which was determined after arm’s
length negotiations between the parties, taking into account the
valuation of our Company as at 30 June 2018 based on the valuation
report issued by an independent valuer on 29 December 2018 as
well as the business prospects of our Company. The registered
capital of our Company increased from RMB103,657,135 to
RMB120,050,577 upon completion of the capital increase on 15 July
2019. The following table sets out the shareholding structure of our
Company immediately after completion of the capital increase as
mentioned above:
Shareholders
Number of
Shares held
Percentage of
Shareholding
(%)
The Concert Parties 65,144,976 54.26
– Mr. Gao 26,292,302 21.90
– Ruichuanda Investment 21,410,776 17.83
– Mr. Y uan 11,171,898 9.31
– Mr. Zhang 6,270,000 5.22
Jiangdu Fund 16,393,442 13.66
Xu Shihe ( ஢˰ձ )
(1) 10,870,051 9.05
11 individuals who are directors,
supervisors, senior
management members of our
Group or their associates
(2) 22,344,327 18.61
10 individuals who are
Independent Third Parties
including employees and/or
ex-employees of our Group or
their associates
(2) 5,297,781 4.41
Total 120,050,577 100.00
HISTORY AND DEVELOPMENT
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--- page 183 ---
Month and Y ear Changes in registered capital and shareholding
Notes:
(1) Xu Shihe ( ஢˰ձ ) is a supervisor of Hongxin Trading.
(2) Each of such individuals was interested in less than 5% equity interest in our
Company.
For more details of the Pre-IPO Investment by Jiangdu Fund, please
refer to the paragraph headed “Pre-IPO Investments” in this section.
November 2019 Capital increase and Pre-IPO Investments by Minsheng Agricultural
and Batch A Investors. Pursuant to the Minsheng Agricultural and
Batch A Investors Capital Increase Agreement, (i) Minsheng
Agricultural subscribed for 500,000 Shares and (ii) Batch A
Investors in aggregate subscribed for 12,382,599 Shares, all at the
consideration of RMB3.66 per Share, which was determined after
arm’s length negotiations between the parties with reference to the
subscription price in the previous round of share subscription by
Jiangdu Fund completed in July 2019. The registered capital of our
Company increased from RMB120,050,577 to RMB132,933,176
upon completion of the capital increase on 28 November 2019. The
following table sets out the shareholding structure of our Company
immediately after completion of the capital increase as mentioned
above:
Shareholders
Number of
Shares held
Percentage of
Shareholding
(%)
The Concert Parties 66,674,976 50.16
– Mr. Gao 26,292,302 19.78
– Ruichuanda Investment 21,410,776 16.11
– Mr. Y uan 11,171,898 8.40
– Mr. Zhang 7,800,000 5.87
Jiangdu Fund 16,393,442 12.33
Xu Shihe ( ஢˰ձ )
(1) 10,870,051 8.18
Yin Qin ( Ιා)(1) 9,060,000 6.82
Jiaqi LLP 2,790,000 2.10
Minsheng Agricultural 500,000 0.38
HISTORY AND DEVELOPMENT
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--- page 184 ---
Month and Y ear Changes in registered capital and shareholding
Shareholders
Number of
Shares held
Percentage of
Shareholding
(%)
12 individuals who are
directors, supervisors, senior
management members of our
Group or their associates
(2) 19,970,000 15.02
12 individuals who are
Independent Third Parties
including employees and/or
ex-employees of our Group or
their associates
(2) 6,674,707 5.02
Total 132,933,176 100.00
Notes:
(1) Xu Shihe ( ஢˰ձ ) is a supervisor of Hongxin Trading, and Yin Qin ( Ιා)i s
a director of Hongxin Trading.
(2) Each of such individuals was interested in less than 5% equity interest in our
Company.
For more details of the Pre-IPO Investments by Minsheng
Agricultural and Batch A Investors, please refer to the paragraph
headed “Pre-IPO Investments” in this section.
HISTORY AND DEVELOPMENT
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--- page 185 ---
Month and Y ear Changes in registered capital and shareholding
July to August
2020
Capital increase and Pre-IPO Investment by Jiequan Fund. Pursuant
to the Jiequan Fund Subscription Agreement and the Jiequan Fund
First Supplemental Agreement, Jiequan Fund subscribed for
21,558,441 Shares at the consideration of RMB83 million (i.e.
RMB3.85 per Share), which was determined after arm’s length
negotiations between the parties, taking into account the valuation
of our Company as at 31 December 2019 based on the valuation
report issued by an independent valuer on 15 June 2020. The
registered capital of our Company increased from RMB132,933,176
to RMB154,491,617 upon completion of the capital increase on 12
August 2020.
Equity transfer . Pursuant to two equity transfer agreements dated 18
July 2020 and 20 July 2020, Li Dongmei ( ҽ̆ૠ ), an Independent
Third Party, transferred her equity interest of 294,707 and 1,000,000
Shares (representing 0.22% and 0.75% equity interest) to Hu
Qinghua (ᅅശ ), a director of Hongxin Trading, and Shen
Y ongsheng ( ӏ͑͛ ), an Independent Third Party, respectively, at the
consideration of RMB3.85 per Share, which was determined based
the subscription price in the aforesaid round of capital increase.
The following table sets out the shareholding structure of our
Company immediately after completion of the capital increase and
equity transfer as mentioned above:
Shareholders
Number of
Shares held
Percentage of
shareholding
(%)
The Concert Parties 66,674,976 43.16
– Mr. Gao 26,292,302 17.02
– Ruichuanda Investment 21,410,776 13.86
– Mr. Y uan 11,171,898 7.23
– Mr. Zhang 7,800,000 5.05
Jiequan Fund 21,558,441 13.95
Jiangdu Fund 16,393,442 10.61
Xu Shihe ( ஢˰ձ )
(1) 10,870,051 7.04
Yin Qin ( Ιා)(1) 9,060,000 5.86
Jiaqi LLP 2,790,000 1.81
Minsheng Agricultural 500,000 0.32
HISTORY AND DEVELOPMENT
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--- page 186 ---
Month and Y ear Changes in registered capital and shareholding
Shareholders
Number of
Shares held
Percentage of
shareholding
(%)
12 individuals who are
directors, supervisors, senior
management members of our
Group or their associates
(2) 20,264,707 13.12
12 individuals who are
Independent Third Parties
including employees and/or
ex-employees of our Group or
their associates
(2) 6,380,000 4.13
Total 154,491,617 100.00
Notes:
(1) Xu Shihe ( ஢˰ձ ) is a supervisor of Hongxin Trading, and Yin Qin ( Ιා)i s
a director of Hongxin Trading.
(2) Each of such individuals was interested in less than 5% equity interest in our
Company.
For more details of the Pre-IPO Investment by Jiequan Fund, please
refer to the paragraph headed “Pre-IPO Investments” in this section.
HISTORY AND DEVELOPMENT
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--- page 187 ---
Month and Y ear Changes in registered capital and shareholding
September 2020 Capital increase and Pre-IPO Investment by Batch B Investors.
Pursuant to a shareholders’ resolution of our Company passed on 15
August 2020, Batch B Investors in aggregate subscribed for
6,193,293 Shares at the consideration of RMB3.85 per Share, which
was determined after arm’s length negotiations between the parties
with reference to the subscription price in the previous round of
share subscription by Jiequan Fund completed in August 2020. The
registered capital of our Company increased from RMB154,491,617
to RMB160,684,910 upon completion of the capital increase on 16
September 2020. The following table sets out the shareholding
structure of our Company immediately after completion of equity
transfer and capital increase as mentioned above and up to the
Latest Practicable Date:
Shareholders
Number of
Shares held
Percentage of
shareholding
(%)
The Concert Parties 66,674,976 41.48
– Mr. Gao 26,292,302 16.36
– Ruichuanda Investment 21,410,776 13.32
– Mr. Y uan 11,171,898 6.95
– Mr. Zhang 7,800,000 4.85
Jiequan Fund 21,558,441 13.42
Jiangdu Fund 16,393,442 10.20
Xu Shihe ( ஢˰ձ )
(1) 10,870,051 6.77
Yin Qin ( Ιා)(1) 9,060,000 5.64
Jiaqi LLP 2,790,000 1.74
Y ongqi LLP 2,138,000 1.33
Minsheng Agricultural 500,000 0.31
12 individuals who are
directors, supervisors, senior
management members of our
Group or their associates
(2) 20,980,000 13.06
12 individuals who are
Independent Third Parties
including employees and/or
ex-employees of our Group or
their associates
(2) 9,720,000 6.05
Total 160,684,910 100.00
HISTORY AND DEVELOPMENT
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--- page 188 ---
Month and Y ear Changes in registered capital and shareholding
Notes:
(1) Xu Shihe ( ஢˰ձ ) is a supervisor of Hongxin Trading, and Yin Qin ( Ιා)i s
a director of Hongxin Trading.
(2) Each of such individuals was interested in less than 5% equity interest in our
Company.
For more details of the Pre-IPO Investment by Batch B Investors,
please refer to the paragraph headed “Pre-IPO Investments” in this
section.
As advised by our PRC Legal Advisers, all the changes in our registered capital and
shareholding as set out above have been duly completed pursuant to the applicable PRC laws,
regulations and rules and are legally valid under the applicable PRC laws, regulations and rules.
Our Subsidiaries
Since the establishment of our Company, we have sought to expand our presence in the
PRC and further our business development. We have acquired or established various subsidiaries
to (i) manage and expand our store network; and (ii) explore new business lines. The details of
our subsidiaries are set out as follows:
Hongxin Trading
Hongxin Trading was established in the PRC as a joint stock company with limited liability
on 26 June 1994 under its former name of Jiangdu Mall Co., Ltd.* (ʮ̡ )
with an initial registered capital of RMB11 million. Hongxin Trading is principally engaged in
shopping mall business.
HISTORY AND DEVELOPMENT
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--- page 189 ---
The following table sets out the shareholding structure of Hongxin Trading as at the date of
its establishment:
Shareholders
Number of
shares held
Percentage of
shareholding
(%)
Jiangdu Supply and Marketing Building*
(ϪேԶቖɽข ) 7,000,000 63.60
33 corporations within the Jiangsu Supply and
Marketing System* ( ϪேԶቖӻ୕ ) 1,500,000 13.60
Jiangdu Supply and Marketing (Group) Corporation*
(ϪேԶቖ (ණྠ)ᐼʮ̡ ) 1,000,000 9.10
Jiangdu Machinery and Electronics Factory*
(Ϫேዚ૛ཥɿᐼᅀ ) 500,000 4.60
268 employee individuals 1,000,000 9.10
Total 11,000,000 100.00
Multiple rounds of equity transfers in Hongxin Trading took place between 1996 and 1999.
Pursuant to the shareholders’ resolutions of Hongxin Trading passed on 20 March and 20 August
2001, certain corporate shareholders transferred an aggregate of 10,830,000 shares in Hongxin
Trading to Mr. Gao and 228 other individuals.
In 2002, Hongxin Trading was renamed as Jiangsu Hongxin Trading Co., Ltd.* (ڦ
ʮ̡ ). Subsequently, multiple rounds of equity transfers in Hongxin Trading took
place between 2002 and 2008. Until 2008, all remaining collective shares in Hongxin Trading
held by collective enterprise shareholders had been transferred to individual shareholders, and
the equity of Hongxin Trading has since then ceased to include collective ownership shares ( ණ
΅ ).
HISTORY AND DEVELOPMENT
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--- page 190 ---
The registered capital of Hongxin Trading was increased from RMB11 million to RMB22
million on 6 February 2006. The newly increased registered capital was subscribed by Mr. Gao
and 93 other individuals at the subscription price of RMB1.05 per share. Subsequently, the
registered capital of Hongxin Trading was increased from RMB22 million to RMB33 million on
2 March 2010. The newly increased registered capital was subscribed by Ruichuanda Investment
and 134 other individuals at the subscription price of RMB1.5 per share. The following table
sets out the shareholding structure of Hongxin Trading immediately after completion of capital
increase as mentioned above:
Shareholders
Number of
shares held
Percentage of
shareholding
(%)
Mr. Gao and other individuals 23,444,744 71.04
Ruichuanda Investment 9,555,256 28.96
Total 33,000,000 100.00
In relation to the Hongxin Trading Acquisition, on 29 December 2018, our Company
entered into the an acquisition agreement with the Hongxin Trading V endors, pursuant to which
our Company acquired an aggregate of 95.68% equity interest in Hongxin Trading held by the
aforesaid parties by way of issuing Shares to the Hongxin Trading V endors at the issue price of
RMB3.62 per Share, which was determined with reference to the valuation of our Company and
Hongxin Trading as at 30 June 2018 based on the valuation reports prepared by an independent
valuer both dated 29 December 2018. Save and except for Mr. Gao, Mr. Y uan, Ruichuanda
Investment, Xu Shihe ( ஢˰ձ ) (being a supervisor of Hongxin Trading), Hu Qinghua (ᅅശ )
(being a director of Hongxin Trading), Yin Qin ( Ιා) (being a director of Hongxin Trading),
Zhu Zheng (݁being a supervisor of Hongxin Pharmacy) and Guo Xia ( ெᒳ) (being a
director of Hongxin Trading), the other counterparties were Independent Third Parties. As
advised by our PRC Legal Advisers, the Hongxin Trading Acquisition has been properly and
legally completed and settled, and all applicable regulatory approvals having been obtained.
Upon completion of the Hongxin Trading Acquisition, Hongxin Trading became a
non-wholly-owned subsidiary of our Company.
HISTORY AND DEVELOPMENT
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--- page 191 ---
The following table sets out the shareholding structure of Hongxin Trading immediately
after completion of the Hongxin Trading Acquisition:
Shareholders
Number of
shares held
Percentage of
shareholding
(%)
Our Company 31,575,774 95.68
169 individuals 1,424,226 4.32
Total 33,000,000 100.00
Subsequent to the Hongxin Trading Acquisition, multiple rounds of equity transfers took
place among the minority individual shareholders of Hongxin Trading who held an aggregate of
4.32% equity interest in Hongxin Trading, and the last round of such equity transfers took place
in November 2021. The following table sets out the shareholding structure of Hongxin Trading
immediately after completion of the equity transfer as mentioned above and up to the Latest
Practicable Date:
Shareholders
Number of
shares held
Percentage of
shares held
(%)
Our Company 31,575,774 95.68
148 individuals 1,424,226 4.32
Total 33,000,000 100.00
As advised by our PRC Legal Advisers, all the changes in the registered capital and
shareholding of Hongxin Trading as set out above have been duly completed pursuant to the
applicable PRC laws, regulations and rules and are legally valid under the applicable PRC laws,
regulations and rules.
Hongxinlong Agricultural Products
Hongxinlong Agricultural Products was established in the PRC as a limited liability
company on 5 July 2013 with an initial registered capital of RMB5 million. Hongxinlong
Agricultural Products is principally engaged in wholesaling.
Since its establishment and up to the Latest Practicable Date, Hongxinlong Agricultural
Products is wholly owned by our Company.
HISTORY AND DEVELOPMENT
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--- page 192 ---
Runbaijia Trading
Runbaijia Trading was established in the PRC as a limited liability company on 12
December 2019 with an initial registered capital of RMB2 million. Runbaijia Trading is
principally engaged in wholesaling.
Since its establishment and up to the Latest Practicable Date, Runbaijia Trading is wholly
owned by our Company.
Hongxin Pharmacy
Hongxin Pharmacy was established in the PRC as a limited liability company on 14 May
2014 with an initial registered capital of RMB2 million. During the Track Record Period and up
to the Latest Practicable Date, Hongxin Pharmacy is principally engaged in retailing.
Since its establishment and up to the Latest Practicable Date, Hongxin Pharmacy is wholly
owned by our Company.
Xintongyuan Trading
Xintongyuan Trading was established in the PRC as a limited liability company on 30
January 2007 with an initial registered capital of RMB0.5 million. During the Track Record
Period and up to the Latest Practicable Date, Xintongyuan Trading is principally engaged in the
wholesale and retail of alcoholic beverages.
The following table sets out the shareholding structure of Xintongyuan Trading as at the
date of its establishment:
Shareholders
Registered
capital
subscribed for
Percentage of
shareholding
(RMB) (%)
Y angzhou New District Tongyuan Commerce & Trade
Co., Ltd.* (ʮ̡ )(1) 350,000 70.00
Gao Y ongnian ( ৷͑ϋ )(2) 150,000 30.00
Total 500,000 100.00
Notes:
(1) Y angzhou New District Tongyuan Commerce & Trade Co., Ltd.* (ʮ̡ ) was a
limited liability company established in the PRC on 15 April 1997, which was primarily engaged in
wholesale and retail trading business, and was controlled by Gao Ronggui ( ৷࿲൮ ), an Independent Third
Party.
HISTORY AND DEVELOPMENT
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--- page 193 ---
(2) An Independent Third Party.
Pursuant to an equity transfer agreement dated 16 April 2007, Y angzhou New District
Tongyuan Commerce & Trade Co., Ltd.* (ʮ̡ ) transferred its 70%
equity interest in Xintongyuan Trading to Chen Y unhe ( ௓ථձ ) at the consideration of
RMB350,000, which was determined based on the paid-up registered capital of Xintongyuan
Trading. The following table sets out the shareholding structure of Xintongyuan Trading
immediately after completion of the equity transfer as mentioned above:
Shareholders
Registered
capital
subscribed for
Percentage of
shareholding
(RMB) (%)
Chen Y unhe ( ௓ථձ )(Note) 350,000 70.00
Gao Y ongnian ( ৷͑ϋ )(Note) 150,000 30.00
Total 500,000 100.00
Note: An Independent Third Party.
Pursuant to a certificate of completion dated 2 June 2008, Gao Y ongnian ( ৷͑ϋ )
transferred his 30% equity interest in Xintongyuan Trading to Gao Y onggui ( ৷͑൮ )a tt h e
consideration of RMB150,000, which was determined based on the paid-up registered capital of
Xintongyuan Trading. The following table sets out the shareholding structure of Xintongyuan
Trading immediately after completion of the equity transfer as mentioned above:
Shareholders
Registered
capital
subscribed for
Percentage of
shareholding
(RMB) (%)
Chen Y unhe ( ௓ථձ )(Note) 350,000 70.00
Gao Y onggui ( ৷͑൮ )(Note) 150,000 30.00
Total 500,000 100.00
Note: An Independent Third Party.
HISTORY AND DEVELOPMENT
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--- page 194 ---
Pursuant to the certificates of completion both dated 8 December 2010, Chen Y unhe ( ௓ථ
ձ) and Gao Y onggui ( ৷͑൮ ) transferred their equity interest in Xintongyuan Trading to our
Company at the consideration of RMB350,000 and RMB150,000, respectively, which was
determined based on the paid-up registered capital of Xintongyuan Trading. The following table
sets out the shareholding structure of Xintongyuan Trading immediately after completion of the
equity transfer as mentioned above:
Shareholder
Registered
capital
subscribed for
Percentage of
shareholding
(RMB) (%)
Our Company 500,000 100.00
Total 500,000 100.00
Pursuant to an equity transfer agreement dated 20 July 2017, our Company transferred its
100% equity interest in Xintongyuan Trading to Zhang Jiamei (ߕ࢕an associate of Mr.
Zhang) at the consideration of RMB500,000, which was determined based on the paid-up
registered capital of Xintongyuan Trading. This equity transfer was conducted primarily for the
purpose of streamlining our corporate and business structure, as the principal business of our
Group is supermarket and convenience store chain operations while Xintongyuan Trading is
principally engaged in the wholesale and retail of alcoholic beverages.
The following table sets out the shareholding structure of Xintongyuan Trading
immediately after completion of the equity transfer as mentioned above:
Shareholder
Registered
capital
subscribed for
Percentage of
shareholding
(RMB) (%)
Zhang Jiamei (ߕ࢕500,000 100.00
Total 500,000 100.00
Pursuant to an equity transfer agreement dated 28 May 2018, Zhang Jiamei (ߕ࢕)
transferred her 100% equity interest in Xintongyuan Trading to our Company at the
consideration of RMB500,000, which was determined based on the paid-up registered capital of
Xintongyuan Trading as we have decided to re-incorporate Xintongyuan Trading into our Group
structure after reassessment of the potential synergies between Xintongyuan Trading’s alcoholic
beverages’ retail and wholesale business and our core supermarket and convenience store
operations. Recognizing opportunities for vertical integration and the competitive advantage
HISTORY AND DEVELOPMENT
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--- page 195 ---
stemming from the ability to secure a steady supply of alcohol products from Xintongyuan
Trading, our Directors believe that including Xintongyuan Trading in our Group is beneficial to
our overall business operations and financial performance. As advised by our PRC Legal
Advisers, the above transfer has been properly and legally completed and settled, and all
applicable regulatory approvals having been obtained.
The following table sets out the shareholding structure of Xintongyuan Trading
immediately after completion of the equity transfer as mentioned above and up to the Latest
Practicable Date:
Shareholder
Registered
capital
subscribed for
Percentage of
shareholding
(RMB) (%)
Our Company 500,000 100.00
Total 500,000 100.00
As advised by our PRC Legal Advisers, all the changes in the registered capital and
shareholding of Xintongyuan Trading as set out above have been duly completed pursuant to the
applicable PRC laws, regulations and rules and are legally valid under the applicable PRC laws,
regulations and rules.
Muyuan Supply Chain
Muyuan Supply Chain was established in the PRC as a limited liability company on 26
August 2019 with an initial registered capital of RMB10 million. During the Track Record
Period and up to the Latest Practicable Date, Muyuan Supply Chain is principally engaged in
supply and sales of meals.
HISTORY AND DEVELOPMENT
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--- page 196 ---
The following table sets out the shareholding structure of Muyuan Supply Chain as at the
date of its establishment:
Shareholders
Registered
capital
subscribed for
Percentage of
shareholding
(RMB) (%)
Our Company 5,100,000 51.00
Y angzhou Fresh Supply Materials Co., Ltd.*
(ʮ̡ )(Note) 4,900,000 49.00
Total 10,000,000 100.00
Note: Y angzhou Fresh Supply Materials Co., Ltd.* (ʮ̡ ) is a limited liability company
established in the PRC on 29 August 2018, which is primarily engaged in wholesale and retail trading
businesses, and is controlled by Li Y un ( ҽᘾ), a supervisor of Muyuan Supply Chain.
Pursuant to an equity transfer agreement dated 5 November 2019, Y angzhou Fresh Supply
Materials Co., Ltd.* (ʮ̡ ) transferred its equity interest in Muyuan Supply
Chain to Y angzhou Jiangdu District Supply and Marketing Investment Co., Ltd.* ( ౮ψ̹Ϫேਜ
ʮ̡ ) at nil consideration. As at the date of the said equity transfer agreement,
Y angzhou Fresh Supply Materials Co., Ltd.* (ʮ̡ ) was owned as to 66% by
Y angzhou Jiangdu District Supply and Marketing Investment Co., Ltd.* ( ౮ψ̹ϪேਜԶቖҳ༟
ʮ̡ ). The equity transfer was conducted at nil consideration as Y angzhou Fresh Supply
Materials Co., Ltd.* (ʮ̡ ) had not made any actual capital contribution to
Muyuan Supply Chain as at the date of the said equity transfer agreement. The following table
sets out the shareholding structure of Muyuan Supply Chain immediately after completion of the
equity transfers as mentioned above:
Shareholders
Registered
capital
subscribed for
Percentage of
shareholding
(RMB) (%)
Our Company 5,100,000 51.00
Y angzhou Jiangdu District Supply and
Marketing Investment Co., Ltd.*
(ʮ̡ )
(Note) 4,900,000 49.00
Total 10,000,000 100.00
HISTORY AND DEVELOPMENT
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--- page 197 ---
Note: Y angzhou Jiangdu District Supply and Marketing Investment Co., Ltd.* (ʮ̡ )
is a limited liability company established in the PRC on 21 September 2011, which is primarily engaged in
leasing and business services, and is directly wholly-owned by Y angzhou Jiangdu District Supply and
Marketing Cooperative* (ٟan Independent Third Party.
On 12 November 2021, the registered capital of Muyuan Supply Chain was increased from
RMB10 million to RMB20 million. The newly increased registered capital was subscribed by our
Company and Y angzhou Whole Journey Worry Free Modern Agricultural Services Co., Ltd* ( ౮
ʮ̡ ), at the subscription price of RMB10 million, which was
based on the amount of registered capital subscribed. The following table sets out the
shareholding structure of our Company immediately after completion of the capital increase as
mentioned above:
Shareholders
Registered
capital
subscribed for
Percentage of
shareholding
(RMB) (%)
Our Company 10,200,000 51.00
Y angzhou Jiangdu District Supply and
Marketing Investment Co., Ltd.*
(ʮ̡ )
(1) 4,900,000 24.50
Y angzhou Whole Journey Worry Free
Modern Agricultural Services Co., Ltd*
(ʮ̡ )
(2) 4,900,000 24.50
Total 20,000,000 100.00
Notes:
(1) Y angzhou Jiangdu District Supply and Marketing Investment Co., Ltd.* (ʮ̡
is a limited liability company established in the PRC on 21 September 2011, which is primarily engaged in
leasing and business services, and is directly wholly-owned by Y angzhou Jiangdu District Supply and
Marketing Cooperative* (ٟan Independent Third Party.
(2) Y angzhou Whole Journey Worry Free Modern Agricultural Services Co., Ltd* (ਕ
ʮ̡ ) is a limited liability company established in the PRC on 30 September 2017, which is primarily
engaged in agricultural services, and is controlled by Y angzhou Jiangdu District Supply and Marketing
Cooperative* (ٟan Independent Third Party.
On 7 June 2022, the registered capital of Muyuan Supply Chain was further increased from
RMB20 million to RMB35 million. The newly increased registered capital was subscribed by our
Company at the subscription price of RMB15 million, which was based on the amount of
registered capital subscribed.
HISTORY AND DEVELOPMENT
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The following table sets out the shareholding structure of Muyuan Supply Chain
immediately after completion of the capital increase as mentioned above and up to the Latest
Practicable Date:
Shareholders
Registered
capital
subscribed for
Percentage of
shareholding
(RMB) (%)
Our Company 25,200,000 72.00
Y angzhou Jiangdu District Supply and Marketing
Investment Co., Ltd.* (ࠢ
ʮ̡)(1) 4,900,000 14.00
Y angzhou Whole Journey Worry Free Modern
Agricultural Services Co., Ltd* ( ౮ψΌ೻ೌᅊତ˾
ʮ̡ )(2) 4,900,000 14.00
Total 35,000,000 100.00
Notes:
(1) Y angzhou Jiangdu District Supply and Marketing Investment Co., Ltd.* (ʮ̡
is a limited liability company established in the PRC on 21 September 2011, which is primarily engaged in
leasing and business services, and is directly wholly-owned by Y angzhou Jiangdu District Supply and
Marketing Cooperative* (ٟan Independent Third Party.
(2) Y angzhou Whole Journey Worry Free Modern Agricultural Services Co., Ltd* (ਕ
ʮ̡ ) is a limited liability company established in the PRC on 30 September 2017, which is primarily
engaged in agricultural services, and is ultimately controlled by Y angzhou Jiangdu District Supply and
Marketing Cooperative* (ٟan Independent Third Party.
As advised by our PRC Legal Advisers, all the changes in the registered capital and
shareholding of Muyuan Supply Chain as set out above have been duly completed pursuant to
the applicable PRC laws, regulations and rules and are legally valid under the applicable PRC
laws, regulations and rules.
Jiangsu Horizon (HK)
Jiangsu Horizon (HK) was established in Hong Kong as a limited liability company on 31
March 2011 with a share capital of HK$1,000,000. Jiangsu Horizon (HK) has no business
operations during the Track Record Period and up to the Latest Practicable Date.
HISTORY AND DEVELOPMENT
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On the date of its incorporation, 1,000,000 shares of Jiangsu Horizon (HK) were issued and
allotted to Hongxin Trading. Since its incorporation and up to the Latest Practicable Date,
Jiangsu Horizon (HK) is wholly-owned by Hongxin Trading. Upon completion of the Hongxin
Trading Acquisition pursuant to an acquisition agreement dated 29 December 2018, Hongxin
Trading has become a direct non-wholly-owned subsidiary of our Company, and Jiangsu Horizon
(HK) has become an indirect non-wholly-owned subsidiary of our Company.
DISPOSAL AND DEREGISTRATION DURING AND SUBSEQUENT TO THE TRACK
RECORD PERIOD
Disposal of equity interest in Y angzhou City Jiangdu District Binjiang Rural Microfinance
Co., Ltd.* (ʮ̡ ) (“Binjiang Microfinance”)
As at the commencement of the Track Record Period, Hongxin Trading held 25,000,000
shares (representing 25% of equity interest) in Binjiang Microfinance. Binjiang Microfinance is
principally engaged in the provision of monetary and financial services.
Pursuant to an equity transfer agreement dated 6 April 2021, Hongxin Trading transferred
its equity interest of 5,000,000 shares (representing 5% of equity interest) in Binjiang
Microfinance to Pan Lingmei (֊ ), an Independent Third Party, at the consideration of
RMB5,000,000, which was determined with reference to the paid-up registered capital of
Binjiang Microfinance and its equity attributable to shareholders of approximately RMB1.03 per
share based on its audited financial statements for the year ended 31 December 2020. Upon
completion of the equity transfer, Hongxin Trading held 20,000,000 shares (representing 20% of
equity interest) in Binjiang Microfinance.
On 10 May 2021, the registered capital of Binjiang Microfinance was reduced from
RMB100,000,000 to RMB80,000,000 by way of repurchase of 20,000,000 shares held by
Hongxin Trading at the consideration of RMB20 million, which was determined with reference
to the net asset value per share of Binjiang Microfinance based on its audited financial
statements for the year ended 31 December 2020. Upon completion of the share repurchase and
capital reduction, Hongxin Trading ceased to hold any equity interest in Binjiang Microfinance.
Since we only held minority interests in Binjiang Microfinance, and Binjiang Microfinance
did not directly relate to, nor form part of, our principal business, we disposed of our interest in
Binjiang Microfinance to streamline our corporate structure. As advised by our PRC Legal
Advisers, as confirmed by our Directors and according to the inquiry on the PRC Enterprise
Credit Information Publicity System, Binjiang Microfinance did not have any material
non-compliance since the commencement of the Track Record Period and up to the date of
completion of the aforesaid share repurchase and capital reduction, and as at the date of
completion of the aforesaid share repurchase and capital reduction, Binjiang Microfinance had
no records of administrative penalties and was not listed on the List of Enterprises with
Abnormal Operations ( ຾ᐄମ੬Τ፽ ) or the List of Enterprises with Serious Illegal and
Dishonest Conduct (ΆุΤఊ ) of the PRC Enterprise Credit Information Publicity
System. Based on the audited account of Binjiang Microfinance, Binjiang Microfinance was loss
HISTORY AND DEVELOPMENT
– 189 –


--- page 200 ---
making for the financial year ended 31 December 2020, being the immediate financial year prior
to its disposal.
Disposal of equity interest in Bank of Jiangsu Co., Ltd.* (ʮ̡ ) (“Bank of
Jiangsu”)
Prior to its disposal, Hongxin Trading held 168,137 A shares (representing approximately
0.0009% of the then share capital) in Bank of Jiangsu. Bank of Jiangsu is principally engaged in
banking business, whose shares are listed on the Shanghai Stock Exchange (stock code: 600919).
On 15 November, 18 November, 6 December and 9 December 2024, Hongxin Trading
disposed of 68,137 A shares, 50,000 A shares, 20,000 A shares and 30,000 A shares of Bank of
Jiangsu for an aggregate consideration of RMB1,536,547 (excluding transaction costs) at the
average selling price of approximately RMB9.14 per A share of Bank of Jiangsu through
on-market transactions. Immediately after its last disposal on 9 December 2024, Hongxin
Trading ceased to hold any shares in Bank of Jiangsu.
We disposed of our minority interests in Bank of Jiangsu to realise our passive investment.
As advised by our PRC Legal Advisers, as confirmed by our Directors and according to the
inquiry on the PRC Enterprise Credit Information Publicity System, Bank of Jiangsu did not
have any material non-compliance since the commencement of the Track Record Period and up
to the date of completion of the aforesaid disposal, and as at the date of completion of the
aforesaid disposal, Bank of Jiangsu had no records of administrative penalties and was not listed
on the List of Enterprises with Abnormal Operations ( ຾ᐄମ੬Τ፽ ) or the List of Enterprises
with Serious Illegal and Dishonest Conduct (ΆุΤఊ ) of the PRC Enterprise
Credit Information Publicity System.
Deregistration of Y angzhou Suyan Health Kitchen Co., Ltd. * (ʮ̡ )
(“Suyan Health”)
Suyan Health, a limited liability company established in the PRC on 23 June 2017, was
deregistered on 16 January 2024. Immediately before its deregistration, Suyan Health was owned
by our Company as to approximately 25.6%. So far as our Directors are aware, Suyan Health
was principally engaged in the sale of table salt and agricultural products prior to its
deregistration.
As advised by our PRC Legal Advisers, as confirmed by our Directors and according to the
inquiry on the PRC Enterprise Credit Information Publicity System, Suyan Health did not have
any material non-compliance since the commencement of the Track Record Period and up to the
date of its deregistration, as at its date of deregistration, Suyan Health had no records of
administrative penalties and was not listed on the List of Enterprises with Abnormal Operations
(຾ᐄମ੬Τ፽ ) or the List of Enterprises with Serious Illegal and Dishonest Conduct (ج
ΆุΤఊ ) of the PRC Enterprise Credit Information Publicity System.
HISTORY AND DEVELOPMENT
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Deregistration of Tianchang Hongxinlong Chain Supermarket Co., Ltd. * (Ꮂஹᕁ
ʮ̡ ) (“Tianchang Hongxinlong”)
Tianchang Hongxinlong, a limited liability company established in the PRC on 14 August
2020, was deregistered on 12 August 2024. Since its establishment and up to its deregistration,
Tianchang Hongxinlong had been wholly owned by our Company. Tianchang Hongxinlong was
principally engaged in retailing prior to its deregistration.
Tianchang Hongxinlong was deregistered following the deregistration and closure of one of
our Group’s Retail Stores, which did not obtain the Fire Safety Approval. For further details,
please refer to the paragraph headed “Business – Non-compliance – (3) Failure to complete Fire
Safety Approvals” in this prospectus. Apart from operating a Retail Store which had been
closed, Tianchang Hongxinlong did not conduct any other business activities during the Track
Record Period and up to the date of its deregistration.
As advised by our PRC Legal Advisers, as confirmed by our Directors and according to the
inquiry on the PRC Enterprise Credit Information Publicity System, Tianchang Hongxinlong did
not have any material non-compliance since the commencement of the Track Record Period and
up to the date of its deregistration, and as at its date of deregistration, Tianchang Hongxinlong
had no records of administrative penalties and was not listed on the List of Enterprises with
Abnormal Operations ( ຾ᐄମ੬Τ፽ ) or the List of Enterprises with Serious Illegal and
Dishonest Conduct (ΆุΤఊ ) of the PRC Enterprise Credit Information Publicity
System.
PRE-IPO INVESTMENTS
Background of the Pre-IPO Investments and Information of the Pre-IPO Investors
Jiangdu Fund
Pursuant to the Jiangdu Fund Capital Increase Agreement, Jiangdu Fund subscribed for
16,393,442 Shares at the consideration of RMB60 million (i.e. RMB3.66 per Share). For details,
please refer to the paragraph headed “Our Corporate Development – Our Company” in this
section.
Jiangdu Fund is a limited liability company established in the PRC on 9 October 2017,
which is owned as to approximately 99.9% by Wuhu Xinning Investment Partnership Enterprise
(Limited Partnership)* (ྐྵҳ༟ΥྫΆุ (Υྫ )) (“ Wuhu Xinning ”) and 0.1% by
Y angzhou Longchuan Holdings Financial Investment Co., Ltd.* (ʮ
̡). Wuhu Xinning is a limited partnership established in the PRC, which is owned as to
approximately 69.75% by China Cinda Asset Management Co., Ltd. (΅Ϟ
ʮ̡ ) (whose shares are listed on the Stock Exchange (stock code: 1359)) (“ China Cinda ”),
approximately 15.63% by Y angzhou Longchuan Holding Financial Investment Co., Ltd.* ( ౮ψ
ʮ̡ )( “ Longchuan Financial ”), approximately 14.45% by Y angzhou
Longchuan Holding Group Co., Ltd.* (ப΂ʮ̡ )( “ Longchuan
HISTORY AND DEVELOPMENT
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--- page 202 ---
Holding ”), and approximately 0.17% by Cinda Capital Management Co., Ltd.* (༺༟͉၍ଣϞ
ʮ̡ )( “ Cinda Capital ”). Each of Longchuan Financial and Longchuan Holding is indirectly
wholly-owned by Y angzhou Guolian Holding Group Co., Ltd.* (ʮ̡ ),
which is a wholly-state-owned enterprise. Cinda Capital is the general partner of Wuhu Xinning
and is indirectly wholly-owned by China Cinda. To the best of our Directors’ knowledge,
information and belief and having made all reasonable enquiries, Jiangdu Fund and its ultimate
beneficial owners are Independent Third Parties.
Jiangdu Fund is principally engaged in industrial investment, equity investment, and asset
management businesses. Jiangdu Fund generally invests in businesses in Jiangdu District across
various industries. Our Company was shortlisted as a Key Cultivation Enterprise for Listing in
Jiangdu District (ᓃ੃ԃΆุ ) by the Office of the Leading Group for the ‘513’
Action Plan for Capital Market Development in Jiangdu District, Y angzhou City* ( ౮ψ̹Ϫேਜ
ண ‘513’܃in 2018. Recognizing our Company’s potential,
Jiangdu Fund expressed optimism about our future prospects and, after negotiations between the
parties, decided to invest in our Company by way of Pre-IPO Investment.
Our Directors believe that our Group would benefit from the capital raised from the
Pre-IPO Investment by Jiangdu Fund, Jiangdu Fund’s knowledge and experience in corporate
governance, and the endorsement of our Company’s performance, strength and prospects
reflected by the Pre-IPO Investment.
Minsheng Agricultural and Batch A Investors
Pursuant to the Minsheng Agricultural and Batch A Investors Capital Increase Agreement,
Minsheng Agricultural subscribed for 500,000 Shares at the consideration of RMB3.66 per
Share. For details, please refer to the paragraph headed “Our Corporate Development – Our
Company” in this section.
Minsheng Agricultural is a limited liability company established in the PRC on 9 December
2016 which is owned as to 75% by Y angzhou Y uantou Agricultural Service Co. Ltd.* ( ౮ψ̹๕
ʮ̡ ) (which is ultimately owned by Y angzhou Jiangdu District Supply and
Marketing Cooperative* (ٟ“() Y angzhou Jiangdu SMC ”), a pubic
institution organised by the Y angzhou Jiangdu People’s Government (ִ݁o f
the PRC), 15% by Y angzhou Jiangdu Agricultural Services Association* (ਕ
՘ึ), a social organisation registered in Jiangdu District, Y angzhou City, and 10% by Y angzhou
Whole Journey Worry Free Modern Agricultural Services Co., Ltd* (ਕ
ʮ̡ ) (which is ultimately owned by Y angzhou Jiangdu SMC). To the best of our Directors’
knowledge, information and belief and having made all reasonable enquiries, Minsheng
Agricultural and its ultimate beneficial owners are Independent Third Parties.
HISTORY AND DEVELOPMENT
– 192 –


--- page 203 ---
Minsheng Agricultural is principally engaged in the sales and maintenance of agricultural
machinery, trading of agricultural products, daily necessities, and food items, cultivation and
sale of fruits and vegetables, and provides warehousing services and agricultural technology
transfer. The controlling shareholder of Minsheng Agricultural, Y angzhou Jiangdu SMC, serves
to create a platform.
Our Directors believe that our Group would benefit from the capital raised from the
Pre-IPO Investment by Minsheng Agricultural and the endorsement of our Company’s
performance, strength and prospects reflected by the Pre-IPO Investment.
Batch A Investors
Pursuant to the Minsheng Agricultural and Batch A Investors Capital Increase Agreement,
Batch A Investors in aggregate subscribed for 12,382,599 Shares at the consideration of
RMB3.66 per Share. For details, please refer to the paragraph headed “Our Corporate
Development – Our Company” in this section.
Batch A Investors comprise Jiaqi LLP and 23 individuals which include four new investors
and 19 existing Shareholders including Mr. Zhang (one of our Controlling Shareholders). Among
these 23 individuals, 13 individuals are directors, supervisors, senior management members of
our Group or their associates, whereas 10 individuals are Independent Third Parties. All of these
23 individuals are employees or ex-employees of our Group.
Jiaqi LLP is a limited partnership established in the PRC on 22 July 2019 which is held by
32 partners. Xu Jun (ڲࢱan Independent Third Party, as the general partner holds 7.53% of
partnership interest in Jiaqi LLP and 31 individuals as limited partners hold 92.47% of
partnership interest in Jiaqi LLP in aggregate, including Mr. Zhang holding 7.17%, Cao Songyun
(ථ ) (supervisor of Hongxin Trading) holding 7.17%, Ni Hua (ശ) (director of Hongxin
Trading) holding 3.58% and Tan Qingqing (ڡڡsupervisor of Runbaijia Trading) holding
1.79%, and 27 individuals who are Independent Third Parties holding 72.77% of partnership
interest in Jiaqi LLP in aggregate, among which Tang Manjiang ( ಷတϪ ) holds 14.34%, Dai
Hongqing ( Ꮦ҃ᅅ ) holds 9.68%, Teng Lin ( ᆚ೙) holds 5.38%, and each of the remaining 24
Independent Third Parties holds 0.36% to 3.58% of partnership interest in Jiaqi LLP . The general
partner and all limited partners of Jiaqi LLP are employees or ex-employees of our Group.
Our Directors believe that the investments made by Batch A Investors, which include
current and former employees of our Group, will serve as an incentive for these individuals to
contribute to the growth and success of our operations.
Jiequan Fund
Pursuant to the Jiequan Fund Subscription Agreement and the Jiequan Fund First
Supplemental Agreement, Jiequan Fund subscribed for 21,558,441 Shares at the consideration of
RMB83 million (i.e. RMB3.85 per Share). For details, please refer to the paragraph headed “Our
Corporate Development – Our Company” in this section.
HISTORY AND DEVELOPMENT
– 193 –


--- page 204 ---
Jiequan Fund is a limited partnership established in the PRC on 17 April 2018. The general
partners of Jiequan Fund are Jiangsu New Supply and Marketing Fund Management Co., Ltd.*
(ʮ̡ ), which held 0.74% partnership interest in Jiequan Fund, and
Jiangsu Houji Private Equity Fund Management Co., Ltd.* (ʮ̡ ),
which held 0.26% partnership interest in Jiequan Fund and is also the fund manager of Jiequan
Fund. Jiangsu New Supply and Marketing Fund Management Co., Ltd.* (၍ଣϞ
ʮ̡ ) is ultimately controlled by All-China Federation of Supply and Marketing Cooperatives
(ٟ“() ACFSMC ”), a joint organization of national supply and marketing
cooperatives under the leadership of the State Council of the PRC. Jiangsu Houji Private Equity
Fund Management Co., Ltd.* (ʮ̡ ) is controlled by Jiangsu Houji
Investment Management Co., Ltd.* (ʮ̡ ), which is in turn held
as to 40% by Wang Xiaoming (׼as to 30% by Ge Zheng (݁and as to 30%
by Fan Miao (↿ߪThe limited partners of Jiequan Fund are Nanjing New
Supply and Marketing Enterprise Management Co., Ltd.* (ʮ̡ )
which held 49.60% partnership interest in Jiequan Fund, Jiangsu Government Investment Fund
(Limited Partnership)* (ږ( Υྫ )) which held 29.64% partnership interest
in Jiequan Fund and Nanjing Y angzi State-owned Assets Investment Group Co., Ltd.* (ԯ౮ɿ
ப΂ʮ̡ ) which held 19.76% partnership interest in Jiequan Fund and is in
turn wholly owned by Nanjing Jiangbei Xinqu Administrative Committee (ԯϪ̏อਜ၍ଣ։
ึ), a PRC government entity.
Nanjing New Supply and Marketing Enterprise Management Co., Ltd.* (ԯอԶቖΆุ၍
ʮ̡ ) is held as to approximately 40.2% by Jiangsu Suhe Investment Operation Group
Co., Ltd.* (ʮ̡ ), as to approximately 39.8% by Beijing Zhonghe
Guoneng Investment Management Partnership (Limited Partnership)* ( ̏ԯʕΥ਷ঐҳ༟၍ଣΥ
ྫΆุ (Υྫ )), and as to approximately 19.9% by Jiangsu Sanhong Enterprise Management
Center (Limited Partnership)* ( Ϫᘽɧ҃Άุ၍ଣʕː (Υྫ )). Jiangsu Suhe Investment
Operation Group Co., Ltd.* (ʮ̡ ) is wholly owned by Jiangsu
Supply and Marketing General Cooperative (ٟ“() Jiangsu SMC ”), a public
institution organised by the Jiangsu Provincial People’s Government (ִ݁o ft h e
PRC. Beijing Zhonghe Guoneng Investment Management Partnership (Limited Partnership)* ( ̏
ԯʕΥ਷ঐҳ༟၍ଣΥྫΆุ (Υྫ )) is managed by Jiangsu New Supply and Marketing
Fund Management Co., Ltd* (ʮ̡ ) as its managing partner. Jiangsu
New Supply and Marketing Fund Management Co., Ltd* (ʮ̡ )i s
majority controlled by New Supply and Marketing Industry Development Fund Management Co.,
Ltd.* (ப΂ʮ̡ ), which is in turn ultimately controlled by the
ACFSMC. Jiangsu Sanhong Enterprise Management Center (Limited Partnership)* ( Ϫᘽɧ҃Ά
ุ၍ଣʕː (Υྫ )) is managed byʮ̡ as its managing
partner, which is in turn ultimately controlled by Jiangsu SMC.
Jiangsu Government Investment Fund (Limited Partnership)* (ږ
(Υ
ྫ)) is managed by Jiangsu Jincai Investment Co., Ltd.* (ʮ̡ ), which is in
turn wholly owned by the Department of Finance of Jiangsu Province (ᝂ ).
HISTORY AND DEVELOPMENT
– 194 –


--- page 205 ---
To the best of our Directors’ knowledge, information and belief and having made all
reasonable enquiries, Jiequan Fund and its ultimate beneficial owners are Independent Third
Parties.
Jiequan Fund is primarily engaged in equity investment, whose investment scope includes
industries related to the supply and marketing ( Զቖ) system, as well as the “Three Agricultural
Aspects” ( ɧ༵), focusing on agriculture, rural areas, and farmers, which aspects are prioritised
under the rural revitalisation strategy. The Pre-IPO Investment made by Jiequan Fund in our
Company has the primary objective of promoting the development of rural chain operation
networks within the Jiangdu Supply and Marketing Cooperative system (ӻ୕ ),
accelerating the expansion of rural markets, and supporting farmers in Jiangdu District.
Our Directors believe that our Group would benefit from the capital raised from the
Pre-IPO Investment by Jiequan Fund, Jiequan Fund’s knowledge and experience in the
development of rural chain operation networks, and the endorsement of our Company’s
performance, strength and prospects reflected by the Pre-IPO Investment.
Batch B Investors
Batch B Investors comprise Y ongqi LLP and eight individuals all of whom were the then
existing Shareholders and were also part of Batch A Investors. Among these eight individuals,
three individuals are directors, supervisors, senior management members of our Group or their
associates, whereas five individuals are Independent Third Parties. All of these eight individuals
are employees or ex-employees of our Group.
Y ongqi LLP is a limited partnership established in the PRC on 3 August 2020 which is held
by 40 partners. Zhu Shu ( ϡ⤳), an Independent Third Party, as the general partner holds 1.87%
of partnership interest in Y ongqi LLP . 39 individuals as limited partners hold 98.13% of
partnership interest in Y ongqi LLP in aggregate, including Xia Tonghui (Νሾ ) (associate of
Mr. Zhang) holding 1.87% of partnership interest, and 38 individuals who are Independent Third
Parties holding 96.28% of partnership interest in Y ongqi LLP in aggregate, among which Zhu
Qing ( ϡ૶) holds 14.03%, Y u Guangying (ߵholds 9.35%, Liu Meng (֗holds 6.08%,
Guo Min ( ெઽ) holds 5.61%, and each of the remaining 34 Independent Third Parties holds
0.47% to 4.68% of partnership interest in Y ongqi LLP . The general partner and all limited
partners (save for Y u Guangying) of Y ongqi LLP are employees or ex-employees of our Group.
Our Directors believe that the investments made by Batch B Investors, which include
current and former employees of our Group, will serve as an incentive for these individuals to
contribute to the growth and success of our operations.
HISTORY AND DEVELOPMENT
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--- page 206 ---
Details of the Pre-IPO Investments
Details of the Pre-IPO Investments are set out below:
Jiangdu Fund Minsheng Agricultural Batch A Investors Jiequan Fund Batch B Investors
Date of agreement: 20 June 2019 28 October 2019 28 October 2019 20 June 2020 N/A (1)
Number of Shares
subscribed:
16,393,442 Shares 500,000 Shares 12,382,599 Shares 21,558,441 Shares 6,193,293 Shares
Amount of consideration
paid:
RMB60,000,000 RMB1,830,000 RMB45,320,312.34 RMB83,000,000 RMB23,844,178
Cost per Share (2) : RMB3.66 RMB3.66 RMB3.66 RMB3.85 RMB3.85
Date of full payment of
consideration:
25 June 2019 20 November 2019 22 November 2019 31 July 2020 1 September 2020
Basis of determination of
consideration:
The consideration was
determined after arm’s
length negotiations
between the parties taking
into account the valuation
of our Company as at 30
June 2018 based on the
valuation report issued by
an independent valuer on
29 December 2018 and the
business prospects of our
Company.
The consideration was
determined after arm’s
length negotiations
between the parties with
reference to the
subscription price in the
previous round of share
subscription by Jiangdu
Fund completed in July
2019.
The consideration was
determined after arm’s
length negotiations
between the parties with
reference to the
subscription price in the
previous round of share
subscription by Jiangdu
Fund completed in July
2019.
The consideration was
determined after arm’s
length negotiations
between the parties with
reference to the valuation
of our Company as at 31
December 2019 based on
the valuation report issued
by an independent valuer
on 15 June 2020.
The consideration was
determined after arm’s
length negotiations
between the parties with
reference to the
subscription price in the
previous round of share
subscription by Jiequan
Fund completed in August
2019.
HISTORY AND DEVELOPMENT
– 196 –


--- page 207 ---
Jiangdu Fund Minsheng Agricultural Batch A Investors Jiequan Fund Batch B Investors
Premium to Offer Price (3) : 44.66% 44.66% 44.66% 52.17% 52.17%
Shareholding in our
Company upon completion
of the Global Offering
(without taking into
account any Shares which
may be allotted and issued
pursuant to the exercise of
the Over-allotment
Option):
7.65% 0.23% Jiaqi LLP: 1.31%
Mr. Zhang: 3.64%
The remaining 22
individuals in aggregate:
17.80% (each of these
individuals would hold
less than 5% of the total
issued share capital of our
Company upon completion
of the Global Offering)
10.07% Y ongqi LLP: 1.00%
8 individuals in aggregate:
6.23% (each of these
individuals will hold less
than 5% of equity interest
in our Company upon
completion of the Global
Offering)
Lock-up arrangement: The Shares held by the Pre-IPO Investors are not subject to any lock-up pursuant to the terms of the Pre-IPO Investments. However, according to the PRC
Company Law, the Pre-IPO Investors shall not transfer their Shares in our Company within one year from the Listing Date. For further details, please
refer to the paragraph headed “Share Capital – Lock-up Periods” in this prospectus.
Use of proceeds: The proceeds received by our Group from the Pre-IPO Investments were used for the expansion of our operations, general working capital of our Group,
and repayment of loans. As at the Latest Practicable Date, the proceeds raised from the Pre-IPO Investments have been fully utilised.
HISTORY AND DEVELOPMENT
– 197 –


--- page 208 ---
Jiangdu Fund Minsheng Agricultural Batch A Investors Jiequan Fund Batch B Investors
Public float: As Jiangdu Fund would hold
less than 10% of the total
issued share capital of our
Company upon completion
of the Global Offering and
is not a core connected
person of our Company
nor an associate of such
core connected persons,
the Shares held by Jiangdu
Fund will be part of the
public float.
As Minsheng Agricultural
would hold less than 10%
of the total issued share
capital of our Company
immediately upon
completion of the Global
Offering and is not a core
connected person of our
Company nor an associate
of such core connected
persons, the Shares held
by Minsheng Agricultural
will be part of the public
float.
Mr. Zhang would be a
Controlling Shareholder
upon completion of the
Global Offering and the
Shares held by Mr. Zhang
would not be considered
as part of the public float.
As each of the remaining
investors comprising
Batch A Investors, save
and except for Mr. Zhang,
would hold less than 10%
of the total issued share
capital of our Company
immediately upon
completion of the Global
Offering and is not a core
connected person of our
Company nor an associate
of such core connected
persons, the Shares held
by each of the remaining
investors comprising
Batch A Investors, save
and except for Mr. Zhang,
will be part of the public
float.
Jiequan Fund would be a
substantial Shareholder
upon completion of the
Global Offering and the
Shares held by Jiequan
Fund would not be
considered as part of the
public float.
As each of the investors
comprising Batch B
Investors would hold less
than 10% of the total
issued share capital of our
Company immediately
upon completion of the
Global Offering and is not
a core connected person
of our Company nor an
associate of such core
connected persons, the
Shares held by each of the
investors comprising
Batch B Investors will be
part of the public float.
HISTORY AND DEVELOPMENT
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Notes:
(1) No agreement was entered into by the Batch B Investors with our Company in relation to the Pre-IPO
Investment. The share subscription by Batch B Investors was conducted pursuant to a shareholders’
resolution of our Company passed on 15 August 2020 and was completed on 16 September 2020.
(2) Calculated by dividing the consideration paid by the Pre-IPO Investor(s) by the number of Shares
subscribed for by the Pre-IPO Investor(s).
(3) Calculated based on the assumption that the Offer Price is HK$2.75 per H Share, being the mid-point of
the indicative Offer Price range of HK$2.50 to HK$3.00, and on the assumption that the translations of
Renminbi into Hong Kong dollars are based on the rate of HK$1.00 : RMB0.92.
Special rights granted to the Pre-IPO Investors
Pursuant to the Jiangdu Fund Capital Increase Agreement, Jiangdu Fund is granted certain
special rights in relation to the Shares, including but not limited to repurchase right, drag-along
right, liquidation preference, veto right on major matters and special information right. On 23
August 2023, a supplemental agreement (the “ Jiangdu Fund Supplemental Agreement ”) in
relation to the Jiangdu Fund Capital Increase Agreement was entered into between the parties
thereto, pursuant to which the parties agreed that all special rights granted to Jiangdu Fund
under the Jiangdu Fund Capital Increase Agreement were terminated on the date of the
supplemental agreement and shall be reinstated on the day following the occurrence of any of
the following circumstances: (i) our Company’s listing application is rejected, denied,
invalidated, terminated or suspended for review and cannot be restored; (ii) our Company
voluntarily withdraws the listing application and decides not to re-submit the listing application;
(iii) the Listing is not completed within six months from the date of approval of the Listing; or
(iv) the Listing is not completed on or before 30 June 2024. Further, on 17 May 2024, Jiangdu
Fund gave an undertaking (the “ Jiangdu Fund Undertaking ”) pursuant to which Jiangdu Fund
undertook not to pursue the restoration of the special rights granted to Jiangdu Fund under the
Jiangdu Fund Capital Increase Agreement if our Company submits the listing application to the
Stock Exchange on or before 30 June 2024 and the special rights will remain not reinstated so
long as the Listing is approved and completed by 30 June 2025.
Pursuant to the Jiequan Fund Subscription Agreement and the Jiequan Fund First
Supplemental Agreement, Jiequan Fund is granted certain special rights in relation to the Shares,
including but not limited to repurchase right, anti-dilution right, right of first refusal, tag-along
right, liquidation preference, veto right on major matters and special information right. On 18
September 2023, a second supplemental agreement in relation to the Jiequan Fund Subscription
Agreement was entered into between the parties thereto (the “ Jiequan Fund Second
Supplemental Agreement ”), pursuant to which the parties agreed that all special rights granted
to Jiequan Fund under the Jiequan Fund Subscription Agreement shall be terminated on the date
of submission of a listing application by our Company to the Stock Exchange, the SFC or the
CSRC and shall be reinstated in the event of withdrawal of the listing application by our
Company or the rejection of the listing application by the Stock Exchange, the SFC or the CSRC
(whichever occurs earlier).
HISTORY AND DEVELOPMENT
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No special rights were granted to Minsheng Agricultural, Batch A Investors and Batch B
Investors.
Compliance with the Pre-IPO Investment Guidance
On the basis that (i) the Pre-IPO Investments were completed no less than 120 clear days
before the Listing Date; and (ii) all the special rights granted to the Pre-IPO Investors, if any,
have been terminated as at the Latest Practicable Date or will be terminated upon the Listing,
the Sole Sponsor is of the view that the Pre-IPO Investments are in compliance with Chapter 4.2
of the Guide for New Listing Applicants issued by the Stock Exchange.
PUBLIC FLOAT
Upon completion of the Global Offering, the Shares held by certain Shareholders who are
our core connected persons will not be counted towards the public float for the purpose of the
Listing Rules. Details of these Shareholders are set out below:
Shareholders who are our core
connected persons Number of Shares held
Shareholding
percentage of the issued
share capital of the
Company immediately
upon the completion of
the Global Offering
(1)
The Concert Parties 66,674,976 31.11%
– Mr. Gao 26,292,302 12.27%
– Ruichuanda Investment 21,410,776 9.99%
– Mr. Y uan 11,171,898 5.21%
– Mr. Zhang 7,800,000 3.64%
Jiequan Fund 21,558,441 10.07%
Xu Shihe ( ஢˰ձ )
(2) 10,870,051 5.07%
Yin Qin ( Ιා)(2) 9,060,000 4.23%
12 individuals who are directors,
supervisors, senior management
members of our Group or their
associates
(3) 20,980,000 9.79%
Notes:
(1) Assuming that the Over-allotment Option is not exercised.
(2) Xu Shihe ( ஢˰ձ ) is a supervisor of Hongxin Trading, and Yin Qin ( Ιා) is a director of Hongxin
Trading.
(3) Each of such individuals will be interested in less than 5% equity interest in our Company.
HISTORY AND DEVELOPMENT
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Save as provided above, (1) no other Shareholders will be a core connected person of the
Company upon Listing and therefore the Shares held by all the other existing Shareholders will
count towards the public float; and (2) upon the completion of the Global Offering (assuming
that the Over-allotment Option is not exercised), all the other Shareholders will collectively hold
85,103,442 Shares (representing approximately 39.72% of the issued share capital of the
Company) which will be counted towards the public float for the purpose of the Listing Rules.
CESSATION OF SALES OF TOBACCO PRODUCTS AND DISPOSAL OF TOBACCO
PRODUCT INVENTORY ASSETS
During the Track Record Period, our supermarket business involved the sales of tobacco
products in the PRC. Upon Listing, our Company will become a foreign-invested enterprise and
may be prohibited from carrying on the sales of tobacco products pursuant to the restriction
imposed on foreign-invested enterprise under the applicable PRC laws and regulations, namely
the PRC Tobacco Monopoly Law ( ), Tobacco Retail Licence
Management Measures ( ), Special Administrative Measures
(Negative List) for Foreign Investment Access (Edition 2021) (݄( ࠋ
૶ఊ )(2021و)) and Special Administrative Measures (Negative List) for Foreign
Investment Access (Edition 2024) (݄( ૶ఊ )(2024و)) which
replaced Special Administrative Measures (Negative List) for Foreign Investment Access
(Edition 2021) and was effective on 1 November 2024. As a result of such potential prohibition,
our Group ceased the sales of tobacco products on 31 December 2023.
In 2022, as our Group began preparations for the Global Offering, we initiated plans to
cease our sales of tobacco products and started seeking potential business partners. Y uan
Guanglong ( ঺ᄿᎲ ), with whom Mr. Zhang became acquainted in or around 2010 through
tobacco business dealings, came across Mr. Zhang in an occasion of business dealings in relation
to the tobacco business in or around March 2023. During that occasion, Mr. Zhang and Y uan
Guanglong discussed about our Group’s plans to cease its sales of tobacco products and Y uan
Guanglong expressed his interest in taking over our tobacco product inventory assets. In
anticipation of this cooperation, Jiangsu Hongxinlong Supermarket Chain Co., Ltd.* (ڦ
ʮ̡ )( “ Hongxinlong Supermarket ”) was specifically established by Y uan
Guanglong and Shao Mingsan (ɧ ) in September 2022 with the intention of acquiring the
product inventory assets from our Group. So far as our Directors are aware, (i) Y uan Guanglong
has been involved in the tobacco business since or around 1998 in the form of sole
proprietorship; and (ii) Shao Mingsan was acquainted with and cooperated with Y uan
Guanglong, and both of them have years of experience in the local tobacco retail business. Our
Group has agreed to collaborate with Hongxinlong Supermarket for the tobacco product
inventory asset transfer in view of their experience in the tobacco industry. The collaboration
between our Group and Hongxinlong Supermarket commenced in August 2023 when
Hongxinlong Supermarket began leasing our store spaces for the operation of tobacco business.
The terms in respect of the leasing arrangement were essentially identical to those later
formalised in the Tobacco Business Cooperation Agreement, as further particularised below. The
finalisation of the Tobacco Business Cooperation Agreement took additional time as the
HISTORY AND DEVELOPMENT
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agreement underwent amendments to incorporate various feedback received during the proposed
Listing process.
On 6 June 2024, our Company entered into a cooperation agreement (൴̹ஹ
ΥЪ՘ᙄ ) (the “ Tobacco Business Cooperation Agreement ”)
with Hongxinlong Supermarket, pursuant to which the parties thereto confirmed and ratified the
arrangement by which our Group transferred its tobacco product inventory assets to Hongxinlong
Supermarket at the consideration of approximately RMB21 million, which was determined based
on the original acquisition cost of the tobacco product inventory incurred by our Group. The
physical transfer of the tobacco product inventory assets contemplated thereunder was completed
on 31 December 2023 upon which our Group ceased the sales of tobacco products. The
consideration for the aforesaid transfer was fully settled by Hongxinlong Supermarket by 31
December 2024, where the extended settlement timeline was primarily necessitated by
Hongxinlong Supermarket’s need to secure external financing. Our Group did not recognise any
gain or loss from the transfer of the tobacco product inventory assets as such assets were
transferred on a cost basis. Furthermore, pursuant to the Tobacco Business Cooperation
Agreement, the parties thereto confirmed and ratified the arrangement by which our Group
agreed to lease certain areas of our stores to Hongxinlong Supermarket for its sales of tobacco
products for the period which commenced from 1 August 2023 to 31 December 2028. The
annual rent shall be RMB2 million (tax inclusive) in aggregate in the case that Hongxinlong
Supermarket leases not more than 200 stores from our Group. In the event that Hongxinlong
Supermarket leases more than 200 stores from our Group, the annual rent shall be charged at the
following rates: (i) for stores with a floor area of more than 500 sq.m., the annual rent shall be
RMB20,000 per store; (ii) for stores with a floor area between 200 sq.m. to 500 sq.m., the
annual rent shall be RMB15,000 per store; and (iii) for stores with a floor area below 200 sq.m.,
the annual rent shall be RMB10,000 per store. The period from the actual commencement of rent
for each store (i.e. August 2023) until 31 December 2024 shall be considered as the first period
for the purpose of rent payable, taking into account the transition process and the actual status
of the obtaining of the relevant licenses by Hongxinlong Supermarket. Thereafter, the rent will
be payable based on the calendar year with payment deadline before the end of each year. There
were no material changes to the key terms of the lease before and after the execution of the
Tobacco Business Cooperation Agreement.
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The table below sets forth the amount of rental income (after tax) recognised by us from
the rent received by our Group for each year/period during the Track Record Period and up to
the Latest Practicable Date:
FY2021 FY2022 FY2023 9M2024
Subsequent to
the Track
Record Period
and up to the
Latest
Practicable
Date
Amount of rental income
(after tax) recognised
(RMB million) ––– 1 . 9–
For the purpose of ensuring a consistent and seamless shopping experience for our
customers, we have permitted Hongxinlong Supermarket to operate its tobacco business under
our “Hongxinlong” brand name, exclusively at our designated venues pursuant to the Tobacco
Business Cooperation Agreement, provided that Hongxinlong Supermarket shall not use our
“Hongxinlong” brand name to conduct any other business or to conduct its tobacco business at
any venue other than in our stores nor authorise any third party to use it. To mitigate the risk of
misuse of our “Hongxinlong” brand name, we have incorporated specific terms and undertakings
in the Tobacco Business Cooperation Agreement, including but not limited to that: (i) our Group
retains the right to withdraw the authorisation for Hongxinlong Supermarket to use our
“Hongxinlong” brand name at any time; (ii) in the event of a breach of the Tobacco Business
Cooperation Agreement’s terms or in response to regulatory inquiries, Hongxinlong Supermarket
is obligated to change its company name within a timeframe specified by our Group; and (iii)
Hongxinlong Supermarket has undertaken to compensate and indemnify our Group for any losses
resulting from its use of our trade name or business name, or from its breach of relevant clauses
in the Tobacco Business Cooperation Agreement, including but not limited to economic losses,
legal fees, reputational damage other related losses. We will take proactive measures to regularly
monitor and prevent any misuse of our “Hongxinlong” brand name, including but not limited to
conducting periodic on-site inspections at stores leased to Hongxinlong Supermarket, performing
regular market surveys to detect any unauthorised use of our brand name, as well as requesting
written confirmations from Hongxinlong Supermarket at intervals to ensure their compliance
with the brand name usage terms as stipulated in the Tobacco Business Cooperation Agreement.
Our Directors are of the view that such arrangement ensures uninterrupted business operations
and customer traffic on the one hand, and safeguard our brand’s reputation and ensure its use
aligns with the values and standards our Group has set over the years on the other hand. To the
best knowledge of our Directors, since its establishment (i.e. 8 September 2022) and up to the
Latest Practicable Date, Hongxinlong Supermarket has neither engaged in any other business
activities nor operated any tobacco businesses at locations other than the premises leased from
our Group.
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Hongxinlong Supermarket is owned as to 60% by Y uan Guanglong ( ঺ᄿᎲ ) and 40% by
Shao Mingsan (ɧ ). Hongxinlong Supermarket and its ultimate beneficial owners are
Independent Third Parties. To the best knowledge of our Directors, there are no other past or
present relationships or dealings (including, without limitation, business, employment, family,
trust, financing, shareholding, fund flow or otherwise) between Hongxinlong Supermarket and
its ultimate beneficial owners on the one hand and our Group on the other hand, including their
shareholders, directors, supervisors or senior management, or any of their respective associates.
As advised by our PRC Legal Advisers, the Tobacco Business Cooperation Agreement is valid,
legal and binding. As at the Latest Practicable Date, the title of the tobacco product inventory
assets has been transferred to Hongxinlong Supermarket. Upon completion of the aforesaid
transfer, and as at the Latest Practicable Date, our Group has ceased to carry on sales of tobacco
products.
ACTING-IN-CONCERT CONFIRMATION
Pursuant to the Acting-in-concert Confirmation, the Concert Parties (being Mr. Gao,
Ruichuanda Investment (which is in turn wholly-owned by Mr. Gao), Mr. Y uan and Mr. Zhang)
confirm that they have been acting in concert in the management and operation of our Group
since January 2019, and they have agreed to continue to act in concert and reach consensus on
any proposal related to the daily management and operation of our Group presented to the
general meeting of the Shareholders of our Company for voting. Hence, they are considered as
persons acting in concert with each other in respect of our Company within the meaning of the
Takeovers Codes and will continue to act in concert with each other in the decision-making of
our Group.
As at the Latest Practicable Date, Mr. Gao is able to exercise approximately 29.68% of the
voting rights in our Company through (i) his personal capacity as to approximately 16.36%; and
(ii) Ruichuanda Investment as to approximately 13.32%. Mr. Y uan is able to exercise
approximately 6.95% voting rights in our Company through his personal capacity. Mr. Zhang is
able to exercise approximately 4.85% voting rights in our Company through his personal
capacity. As such, as at the Latest Practicable Date, the Concert Parties are able to exercise
voting rights of approximately 41.48% of the total issued shares of our Company.
Immediately following the completion of the Global Offering (assuming that the
Over-allotment Option is not exercised), the Concert Parties will be entitled to exercise voting
rights of approximately 31.11% of the total issued shares of our Company, and are considered as
our Controlling Shareholders upon Listing.
HISTORY AND DEVELOPMENT
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CORPORATE STRUCTURE
The following chart sets out our corporate and shareholding structure immediately prior to
the Global Offering:
Other 24
individuals(6)Mr. Gao Mr. Yuan Jiequan
Fund(2)
Jiangdu
Fund(3) Mr. Xu Shihe
Our Company
Jiaqi LLP(4)Ms. Yin Qin Yongqi LLP(5) Minsheng
Agricultural
Onshore
Offshore
Concert Parties(1)
Ruichuanda
Investment Mr. Zhang
16.36%
Hongxin Trading(7)
Jiangsu Horizon
(HK)(8)
Muyuan Supply
Chain(13)
Hongxinlong
Agricultural
Products(9)
Runbaijia
Trading(10)
Hongxin
Pharmacy(11)
Xintongyuan
Trading(12)
95.68%
100%
100% 100% 100% 100% 72%
13.32% 6.95% 4.85% 13.42% 10.20% 6.77% 5.64% 1.74% 1.33% 0.31% 19.11%
Notes:
(1) Mr. Gao, Ruichuanda Investment, Mr. Y uan and Mr. Zhang are parties acting in concert with each other pursuant
to the Acting-in-concert Confirmation. As at the Latest Practicable Date, the Concert Parties are able to exercise
voting rights of approximately 41.48% of the total issued shares of our Company.
(2) Jiequan Fund is a limited partnership established in the PRC. The general partners of Jiequan Fund are Jiangsu
New Supply and Marketing Fund Management Co., Ltd.* (ʮ̡ )( “ NSM Fund ”), which
held 0.74% partnership interest in Jiequan Fund, and Jiangsu Houji Private Equity Fund Management Co., Ltd.*
(ʮ̡ ), which held 0.26% partnership interest in Jiequan Fund and is also the fund
manager of Jiequan Fund. NSM Fund is ultimately controlled by All-China Federation of Supply and Marketing
Cooperatives (ٟThe limited partners of Jiequan Fund are Nanjing New Supply and
Marketing Enterprise Management Co., Ltd.* (ʮ̡ ) which held 49.60% partnership
interest in Jiequan Fund, Jiangsu Government Investment Fund (Limited Partnership)* (ږ( Ϟ
Υྫ )) which held 29.64% partnership interest in Jiequan Fund and Nanjing Y angzi State-owned Assets
Investment Group Co., Ltd.* (ப΂ʮ̡ ) which held 19.76% partnership interest in
Jiequan Fund.
(3) Jiangdu Fund is a limited liability company established in the PRC, which is owned as to approximately 99.9%
by Wuhu Xinning Investment Partnership Enterprise (Limited Partnership)* (ྐྵҳ༟ΥྫΆุ (Υྫ ))
(“Wuhu Xinning ”) and 0.1% by Y angzhou Longchuan Holdings Financial Investment Co., Ltd.* (ٰ
ʮ̡ ). Wuhu Xinning is a limited partnership established in the PRC, which is owned as to
approximately 69.75% by China Cinda Asset Management Co., Ltd. (ʮ̡ ) (whose
shares are listed on the Stock Exchange (stock code: 1359)) (“ China Cinda ”), approximately 15.63% by
Y angzhou Longchuan Holding Financial Investment Co., Ltd.* (ʮ̡ )( “ Longchuan
Financial ”), approximately 14.45% by Y angzhou Longchuan Holding Group Co., Ltd.* (ࠢ
ப΂ʮ̡ )( “ Longchuan Holding ”), and approximately 0.17% by Cinda Capital Management Co., Ltd.* (༺༟
ʮ̡ )( “ Cinda Capital ”). Each of Longchuan Financial and Longchuan Holding is indirectly
HISTORY AND DEVELOPMENT
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wholly-owned by Y angzhou Guolian Holding Group Co., Ltd.* (ʮ̡ ), which is a
wholly-state-owned enterprise. Cinda Capital is the general partner of Wuhu Xinning and is indirectly
wholly-owned by China Cinda.
(4) Jiaqi LLP is held by 32 partners. Xu Jun (ڲࢱan Independent Third Party, as the general partner holds 7.53%
of partnership interest in Jiaqi LLP . 31 individuals as limited partners hold 92.47% of partnership interest in
Jiaqi LLP in aggregate, including Mr. Zhang holding 7.17%, Cao Songyun (ථ ) (supervisor of Hongxin
Trading) holding 7.17%, Ni Hua (ശ) (director of Hongxin Trading) holding 3.58%, Tan Qingqing (ڡڡ)
supervisor of Runbaijia Trading) holding 1.79%, and 27 individuals who are Independent Third Parties holding
72.77% of partnership interest in aggregate, among which Tang Manjiang ( ಷတϪ ) holds 14.34%, Dai Hongqing
(Ꮦ҃ᅅ ) holds 9.68%, Teng Lin ( ᆚ೙) holds 5.38%, and each of the remaining 24 Independent Third Parties
holds 0.36% to 3.58% of partnership interest in Jiaqi LLP . The general partner and all limited partners of Jiaqi
LLP are employees or ex-employees of our Group.
(5) Y ongqi LLP is held by 40 partners. Zhu Shu ( ϡ⤳), an Independent Third Party, as the general partner holds
1.87% of partnership interest in Y ongqi LLP . 39 individuals as limited partners hold 98.13% of partnership
interest in Y ongqi LLP in aggregate, including Xia Tonghui (Νሾ ) (associate of Mr. Zhang) holding 1.87% of
partnership interest, and 38 individuals who are Independent Third Parties holding 96.28% of partnership interest
in aggregate, among which Zhu Qing ( ϡ૶) holds 14.03%, Y u Guangying (ߵholds 9.35%, Liu Meng ( ᄎ
֗holds 6.08%, Guo Min ( ெઽ) holds 5.61%, and each of the remaining 34 Independent Third Parties holds
0.47% to 4.68% of partnership interest in Y ongqi LLP . The general partner and all limited partners (save for Y u
Guangying) of Y ongqi LLP are employees or ex-employees of our Group.
(6) Such 24 individuals consist of 12 individuals who are directors, supervisors, senior management members of our
Group or their associates holding 13.06% of our Shares in aggregate, as well as 12 individuals who are
Independent Third Parties (including employees and/or ex-employees of our Group or their associates holding
6.05% of our Shares in aggregate). Each of these 24 individuals holds less than 5% of equity interest in our
Company.
(7) Hongxin Trading is a company established in the PRC with limited liability, which is owned as to 95.68% by our
Company and 4.32% by a total of 148 individuals in aggregate.
(8) Jiangsu Horizon (HK) is a company incorporated in Hong Kong with limited liability.
(9) Hongxinlong Agricultural Products is a company established in the PRC with limited liability.
(10) Runbaijia Trading is a company established in the PRC with limited liability.
(11) Hongxin Pharmacy is a company established in the PRC with limited liability.
(12) Xintongyuan Trading is a company established in the PRC with limited liability.
(13) Muyuan Supply Chain is a company established in the PRC with limited liability, which is owned as to 72% by
our Company, 14% by Y angzhou Jiangdu District Supply and Marketing Investment Co., Ltd.* ( ౮ψ̹ϪேਜԶ
ʮ̡ ), and 14% by Y angzhou Whole Journey Worry Free Modern Agricultural Services Co., Ltd* ( ౮
ʮ̡ ). Y angzhou Jiangdu District Supply and Marketing Investment Co., Ltd.* ( ౮
ʮ̡ ) is a limited liability company established in the PRC on 21 September 2011,
which is primarily engaged in leasing and business services, and is directly wholly-owned by Y angzhou Jiangdu
District Supply and Marketing Cooperative* (ٟan Independent Third Party.
Y angzhou Whole Journey Worry Free Modern Agricultural Services Co., Ltd* (ࠢ
ʮ̡) is a limited liability company established in the PRC on 30 September 2017, which is primarily engaged in
agricultural services, and is ultimately controlled by Y angzhou Jiangdu District Supply and Marketing
Cooperative* (ٟand Y angzhou Supply and Marketing Cooperative* ( ౮ψ̹ԶቖΥЪ
ٟboth of which are Independent Third Parties.
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The following chart sets out our corporate and shareholding structure immediately after the
Global Offering (assuming the Over-allotment Option is not exercised):
Public
Shareholders
Other 24
individuals(6)Mr. Gao Mr. Yuan Jiequan
Fund(2)
Jiangdu
Fund(3) Mr. Xu Shihe
Our Company
Jiaqi LLP(4)Ms. Yin Qin Yongqi LLP(5) Minsheng
Agricultural
Onshore
Offshore
Concert Parties(1)
Ruichuanda
Investment Mr. Zhang
12.27%
Hongxin Trading(7)
Jiangsu Horizon
(HK)(8)
Muyuan Supply
Chain(13)
Hongxinlong
Agricultural
Products(9)
Runbaijia
Trading(10)
Hongxin
Pharmacy(11)
Xintongyuan
Trading(12)
95.68%
100%
100% 100% 100% 100% 72%
9.99% 5.21% 3.64% 10.07% 7.65% 5.07% 4.23% 1.31% 1.00% 14.33% 0.23% 25%
Notes: Please refer to the notes under “Corporate Structure” in this section above.
* For identification purpose only
HISTORY AND DEVELOPMENT
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OVERVIEW
We are a wholesaler of grains and oil headquartered in Y angzhou, with retail operations of
supermarket and convenience stores focusing on the central region of Jiangsu Province under our
brand “Ꮂ ” (Hongxinlong*). According to the Industry Report, we ranked the second among
supermarket operators in Y angzhou in terms of sales in 2023 with a market share of
approximately 9.1%, the fifth among supermarket operators in the central region of Jiangsu
Province in terms of sales in 2023 with a market share of approximately 2.3%, and around the
twentieth among supermarket operators in Jiangsu Province in terms of sales in 2023 with a
market share of approximately 0.4%. As at the Latest Practicable Date, we operated 51
supermarkets and 109 convenience stores in Jiangsu Province, out of which 49 supermarkets and
108 convenience stores are located in Y angzhou, and two supermarkets and one convenience
store are located in Taizhou. Apart from supermarkets and convenience stores, we also operate
two Malls located in Y angzhou, namely Jiangdu Mall* (۬and Hongxinlong Mall* (ڦ
ʕː ). Jiangdu Mall* (۬was opened in 1995, covering a gross floor area of
approximately 6,000 square meters, and Hongxinlong Mall* (ʕː ) was opened in
2020, covering a gross floor area of approximately 3,000 square meters.
For our wholesale operations, we sell grains and oil, food products and other products to
resellers and other retail operators including other operators of supermarkets and convenience
stores as well as catering business operators. As at the Latest Practicable Date, we have secured
our district distribution rights with 15 suppliers in respect of products of 29 brands or series of
brands, including renowned brands of dairy products, oil and liquors, out of which six for
distribution in Jiangdu District, Y angzhou, six for distribution in Y ancheng City, one for Tinghu
Town of Y ancheng City, one for Y angzhou City and one for distribution of liquor of a renowned
brand in designated store in Jiangdu District, Y angzhou. As at the Latest Practicable Date, we
had successfully renewed the district distribution agreements with ten suppliers and we were
attending to the renewal of the district distribution agreements with five suppliers, which
continued to supply products of the authorised brands to us. Our Directors confirm that there is
no impediment to the renewal of the district distribution agreements of these five suppliers. The
distribution rights under the agreements are not expressed to be exclusive in nature. Pursuant to
the agreements, we generally enjoy better pricing terms than other distributors without such
district distributorship rights. We also sell garment and wooden products to overseas customers
and household appliances to distributors and retailers.
Our supermarkets provide a wide range of daily consumer products to cater for the daily
needs of our customers, which could be broadly categorised as raw and fresh food, grains and
oil, non-staple food and household products, while our convenience stores open for 16 or 24
hours a day to cater for quick purchases of everyday consumable products. We adopt the
strategies of standardised branding and store design, centralised procurement, centralised
inventory control and distribution as well as unified management for our Retail Stores for the
purpose of our chain store management. These unities allow us to benefit from economies of
scale, streamline operations, and provide a predictable shopping experience for our customers. In
light of the increasing prevalence of e-commerce in the PRC, during the Track Record Period,
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we had two mini programmes “ᒅ ” (Longhuiyigou*) and “Ꮂ຅˚༺ ” (Hongxinlong
Same Day Delivery*) for our Retail Stores.
We sell fashion and apparel, children’s wear, cosmetics and personal care, jewellery,
accessories, footwear, household appliances, consumer electronics, liquor and miscellaneous
products at our Malls. We endeavour to provide a wide range of merchandise to cater for the
demand for trendy and fashionable products. Moreover, we operate a mini programme
“۬Jiangdu Mall*) for online sale of products offered at our Malls. We have also
cooperated with three third-party e-commerce platforms, namely Douyin, JD.com and WeChat
for online sale of merchandise to our customers.
For our retail operations, we receive sales proceeds from (i) general sales to consumers at
our Retail Stores and Malls and (ii) bulk sales to customers including corporate and government
entities. We also receive sales amounts for concessionaire sales at our Retail Stores and Malls
and charge the concessionaires certain percentage of gross sale amounts or the agreed sales
target, whichever is the higher, as commissions. Ancillary to our retail operations, we lease some
shop floor area or shop premises in our Retail Stores and Malls to other retail operators like
restaurants, hotels and pharmacies, etc and receive rental income.
To support our wholesale and retail operations, apart from having two warehouses, we
operate a distribution centre in Jiangdu, Y angzhou to enable daily stocking, order picking and
packing in a high flow velocity. The distribution centre is equipped with our WMS system to
monitor real time inventory information and allows us to efficiently manage our inventory
control. The WMS system is linked to the ERP system adopted by our supermarkets and
convenience stores, which enables us to distribute products to our supermarkets and convenience
stores in a timely manner. The WMS system is also linked to our B2B supply chain system,
which facilitates us to place orders with our suppliers in an efficient and effective manner.
Leveraging our ability to source and supply quality and fresh food ingredients, we also
operate a central kitchen to produce meals and snacks and deliver to local corporates, schools or
government entities. As at the Latest Practicable Date, our central kitchen was located at
Y angzhou and had the capacity to produce 10,000 sets of meals for lunch and 10,000 sets of
meals for dinner per day.
For FY2021, FY2022, FY2023 and 9M2024, the revenue generated from our wholesale
operations amounted to approximately RMB525.3 million, RMB512.3 million, RMB686.5
million and RMB572.4 million, representing approximately 36.7%, 38.6%, 49.0% and 56.9% of
our total revenue, respectively. For the same years/period, the revenue generated from our retail
operations amounted to approximately RMB888.5 million, RMB787.9 million, RMB688.6
million and RMB417.8 million, representing approximately 62.0%, 59.3%, 49.1% and 41.5% of
our total revenue, respectively.
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In terms of revenue contribution, our retail operations were our major revenue contributor
for FY2021 and FY2022, but our wholesale operations caught up to level with our retail
operations for FY2023 and overtook our retail operations for 9M2024. Such change in revenue
mix was mainly attributable to the impact of COVID-19 pandemic and cessation of sales of
tobacco products on our retail operations and the change in food consumption behaviour of
consumer and that we gradually focused more on our wholesale operations.
Our revenue decreased from approximately RMB1,432.2 million for FY2021 to
approximately RMB1,328.7 million for FY2022 and increased to approximately RMB1,402.0
million for FY2023, and our revenue increased from approximately RMB987.8 million for
9M2023 to approximately RMB1,005.8 million for 9M2024. Our profit for the year increased
from approximately RMB35.1 million for FY2021 to approximately RMB51.1 million for
FY2022 and further increased to approximately RMB51.6 million for FY2023, and our profit for
the period decreased from approximately RMB30.5 million for 9M2023 to approximately
RMB24.1 million for 9M2024 mainly due to the impact of the Listing expenses. For detailed
analysis of our financial performance during the Track Record Period, please refer to the
paragraph headed “Financial Information – Principal components of the consolidated statements
of profit or loss” in this prospectus.
OUR COMPETITIVE STRENGTHS
We believe that our success and potential for future growth is attributable to the following
competitive strengths:
Our brand “Ꮂ ” (Hongxinlong *) is a recognised brand in Jiangsu Province
Since the inception of our business which dated back to 1994, we have been
positioning our Group as providing quality products at competitive price and attentive
customer service. After years of operation and accumulation, we believe we have built up
trust, confidence and loyalty from our customers, which is proven by the accreditation of
our trademark “Ꮂ ” (Hongxinlong*) as a Jiangsu Famous Trademark (ഹΤਠᅺ )
by Jiangsu Provincial Administration for Industry and Commerce and as a Y angzhou
Well-known Trademark (Τਠᅺ ) by Y angzhou City Administration for Industry
and Commerce in 2014. Please refer to the paragraph headed “Certifications and awards” in
this section for further details of such awards and recognitions. According to the Industry
Report, we are known for offering high-quality and reasonably priced commodities,
comfortable and convenient shopping environment, attentive customer service and the
ability to accurately grasp the consumption habits and shopping preferences of local
consumers, and the local consumers have strong recognition and loyalty to our brand. We
believe this high degree of brand recognition is a valuable asset of our Group, which
enables us to differentiate ourselves from our competitors and attract more customers. It
also serves as a solid foundation from which we are able to expand further in the central
region of Jiangsu Province.
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Our retail operations and wholesale operations bring complementary benefits and
synergies to each other
We have developed our integrated wholesale and retail operations over the years. This
varied business model provides significant competitive advantages and synergies that
benefit us from multiple income sources and risk mitigation.
On the retail side, our extensive network of 51 supermarkets, 109 convenience stores
and two Malls in Jiangsu Province as at the Latest Practicable Date gives our Group
unparalleled reach and access to a large and diverse consumer base and grants us close ties
with the local communities. This provides our Group valuable customer data and insights
that can be leveraged to optimise our product assortment, pricing, and marketing strategies.
At the same time, our wholesale division sources and distributes a wide range of
consumer goods, food and beverage, and household products to different resellers and retail
operators. The demand from our customers for both our wholesale and retail operations
gives us significant purchasing power and the ability to negotiate favourable terms with our
suppliers.
By integrating both the wholesale and retail functions, we are able to achieve
significant economies of scale and operational efficiencies. This complementary
retail-wholesale model allows us to offer competitive prices and a wide product selection to
our wholesale and retail customers. The synergies created strengthen our position as an
integrated shopping and supply solution in the regional market of Jiangsu Province.
We have various procurement channels to secure stable supply of products
We source our products from a wide variety of suppliers including manufacturers,
district distributors, wholesalers of agricultural and food products as well as agricultural
cooperatives. For each of FY2021, FY2022, FY2023 and 9M2024, we procured products
from over 900 suppliers for our wholesale and retail operations. We do not substantially
rely on any single supplier. Our largest supplier for each of FY2021, FY2022, FY2023 and
9M2024 accounted for approximately 7.5%, 12.5%, 25.5% and 30.5% of our total purchase
of the corresponding years/period, respectively. Our various procurement channels enhance
our supply chain resilience, which is instrumental to our ability to secure a stable and
continuous supply of products for our wholesale and retail operations during the Track
Record Period, despite the challenges posed by the disruption to supply chain during the
COVID-19 pandemic.
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In addition, maintaining multiple channels for sourcing provides flexibility to us and
allows us to quickly adapt to changing market conditions and fluctuations in demand. If
one supplier is unable to meet the requirements, alternative suppliers can be leveraged to
maintain a steady supply. By having access to a variety of suppliers, we can adjust our
sourcing strategies and adapt to evolving circumstances. Moreover, our multiple sourcing
channels provide us access to a wider range of merchandise and enhance the product
offerings at our Retail Stores and Malls.
Our extensive network of Retail Stores and wholesale customers as well as our
centralised procurement result in our higher bargaining power for more favourable terms
and pricing options from our suppliers for purchase in bulk. This in turn enables us to set
more competitive pricing for our sales and maintain the appeal of our Retail Stores and
wholesale operations. Meanwhile, our bulk procurement quantity helps foster the
willingness of suppliers to supply to us, which is proven by the grant of district
distributorship rights to us by some renowned brands of dairy products, oil and liquors
during the Track Record Period.
Diversifying supplier channels also help to introduce competition among our suppliers,
motivate them to maintain high-quality standards and deliver consistent products to secure
ongoing business from us. This competition can drive our suppliers to continuously
improve their processes, resulting in better quality products for our business.
We have established supply chain management systems
We have a distribution centre and two warehouses with total gross floor area of
approximately 18,900 sq.m. located at Jiangdu District, Y angzhou, which support our
wholesale and retail operations. Our distribution centre adopts our WMS system, which is
connected to our ERP , POS and B2B supply chain systems to provides real time inventory
information, allowing us to maintain efficient inventory control as well as facilitating our
order placement with suppliers and product distribution to our Retail Stores and wholesale
customers. We typically purchase products in bulk quantities and warehouse them in our
warehouses or distribution centre for subsequent distribution to our Retail Stores and
wholesale customers. Such supply chain has the benefits of receiving discounts for bulks
and reducing inventory management costs. Owing to our effort in maintaining a stable and
sufficient inventory level of our popular products, we have been able to replenish the
supply of popular products in a timely manner.
The major information technology systems we deploy include the ERP system, the
POS system and B2B supply chain system which support the procurement, inventory, sales
and logistics of our products. These systems collect and monitor real time sales information
to facilitate our inventory analysis and procurement decision making. Our management
adjusts sales strategies, replenish products and arrange delivery to our Retail Stores and
certain wholesale customers according to real time sales information processed by and
centralised in our ERP system. Benefiting from our ERP system, POS system and B2B
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supply chain system, we are able to maintain the optimum level of stocks at our Retail
Stores in line with consumer preferences and the latest market trends.
We have an experienced and professional management team
Our management team has extensive industry knowledge and experience in the retail
and supply chain industries in the PRC. Each of Mr. Gao, our Chairman and executive
Director, and Mr. Y uan, our executive Director, has over 40 years of experience in the
supermarket and supply chain businesses, respectively. Further, Mr. Zhang and Mr. Y ao, our
executive Directors and members of our senior management, have over 30 years and 15
years of experience in the supermarket and supply chain businesses, respectively. For
details of the experience of our Directors and members of our senior management, please
refer to the section headed “Directors, Supervisors and Senior Management” in this
prospectus. We believe their insights and knowledge of the local market can continue to
allow our Group to formulate the right model and strategies for our business growth, to
identify the optimal product mix and secure strategic locations for our supermarkets and
convenience stores, and to implement our business plans effectively and successfully.
We adopt an approach that aims to maintain satisfactory customer services to our
customers
We have adopted an approach that aims to maintain satisfactory customer services to
our customers. We have established membership schemes for our Retail Stores and Malls
respectively. As at the Latest Practicable Date, our membership scheme for Retail Stores
and Malls had over 420,000 and 200,000 members, respectively. With such membership
schemes, we could keep our members informed of our promotional activities as well as
featured products, while we could better understand the preference of our customers. This
allows us to strategically enhance our product portfolio and provide suitable customer
service to further promote our brand.
We actively solicit market information and customers’ feedback in order to better
understand our customers’ preferences and purchase patterns. This is achieved through
customer services hotlines, online customer services platform for our customers to raise
enquiries and lodge complaints with us regarding our products and services. Our sales team
would also follow up with our bulk sales and wholesale customers.
During the Track Record Period, we maintained mini programmes “ᒅ ”
(Longhuiyigou*) and “Ꮂ຅˚༺ ” (Hongxinlong Same Day Delivery*) for our Retail
Stores and “۬Jiangdu Mall*) for online sale of products offered at our Malls.
Real time data generated by these mini programmes reflects shopping behaviour,
preferences and demand of our customers. We believe that the use of these mini
programmes not only allows us to offer convenient shopping experience to our customers,
but also enables us to perform targeted marketing and formulate sales strategies according
to prevailing market trends.
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OUR BUSINESS STRATEGIES
The principal business objectives of our Group are to further strengthen our market
position, increase our market share and capture the growth in the PRC retail industry. We intend
to achieve our business objective mainly through (i) expanding our presence and number of
Retail Stores; (ii) expanding our warehousing capacity by establishing a new distribution centre;
(iii) expanding our processing capacity of meals by establishing a new central kitchen; and (iv)
enhancing our ERP system and infrastructure systems to improve our operational efficiency.
Strengthen our market position further by expanding our presence and number of Retail
Stores
We aim to continue to strengthen our market position in the central region of Jiangsu
Province particularly in Y angzhou and Taizhou through expansion of our retail network in the
neighbouring cities of our existing markets in Jiangsu Province. Leveraging our in-depth
understanding of local customers’ preferences and their spending habits, we will continue to
expand our retail network primarily in the central region of Jiangsu Province where we believe
there exists promising growth and development potential and comparatively lesser competition
from major international and national supermarket operators. We will continue to actively
develop new markets and open additional outlets when we found suitable location and
opportunities. In deciding whether to enter into a new market, we will take into account various
factors such as the local population profile, their consumption and spending patterns, pedestrian
flow nearby the potential outlets, and existence of any market competitors nearby.
We have strong commitment in supplying quality products including daily fresh food like
vegetables, fruits and meats to our consumers. In order to attract more consumers to visit our
Retail Stores, we plan to open a total of 12 supermarkets and 30 convenience stores in Jiangsu
Province and Anhui Province from the Latest Practicable Date to the first quarter of 2026 and
offer a variety of products such as grains and oil, non-staple food and household products. In
particular, we plan to open three supermarkets and six convenience stores in Y angzhou, and
seven supermarkets and 18 convenience stores in Taizhou. Our Directors are of the view that
there will be sufficient market demand for the Company to expand and open in total 42
additional Retail Stores by the first quarter of 2026 considering the trend and industry statistic
of small and medium-sized chain supermarkets and the necessity for physical stores.
As advised by the Industry Consultant, the retail sales of small and medium-size chain
supermarkets with a sales area of below 6,000 sq.m. amounted to approximately RMB7.99
billion in 2023 in central region of Jiangsu Province. The retail sales of small and medium-sized
chain supermarkets from 2017 to 2023 increased at a CAGR of 14.5%. It is expected that the
retail sales of small and medium-sized chain supermarkets in the central region of Jiangsu
Province from 2024E to 2027E will increase at a CAGR of 7.7%. Such robust upward trend
presents a significant opportunity for our Group to enhance our competitive advantage and drive
sustainable growth by expanding its sales network. Besides, according to the Industry
Consultant, due to social needs, habits, familiarity and cash payment preferences, elders are
more inclined to shop at physical retail stores like supermarkets and convenience stores and are
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less inclined to shopping online. The trend in population aging in the PRC therefore provides a
stable or even growing customer base for physical retail stores. In Y angzhou, the elderly
population has been continuously growing, with the proportion of residents aged 60 and above in
Y angzhou increasing from approximately 19.23% in 2010 to approximately 28.59% in 2023. In
Taizhou, the proportion of residents aged 60 and above has also been continuously increasing
from approximately 22.14% in 2010 to approximately 30.50% in 2023. The elders with age over
60 has grown to over 25% of the total population and that the percentage of the elders with age
over 60 has been growing in both Y angzhou and Taizhou. Such trend is expected to enhance the
demand for physical retail stores which can better cater to the preferences and needs of the
aging population. With this one-stop shopping experience convenient to our consumers, we
believe this will allow us to cater for the needs of our consumers in line with their shopping
habits, enhance our profitability through selling higher profit margins products such as those
non-staple food, and facilitate us to expand our retail business into new markets in the Jiangsu
Province and Anhui Province. During the Track Record Period, we accumulated experience in
operating Retail Stores in Tianchang, Anhui despite their closure in 2024. Having considered
that such closure was undertaken merely for the purpose of rectifying certain non-compliance for
failure to complete the fire safety approvals for those Retail Stores (please refer to the paragraph
headed “Business – Non-compliance – (3) Failure to complete Fire Safety Approvals” in this
section for details), which was not related to the business efficiency or profitability of those
Retail Stores, our Directors are of the view that expanding our retail network to Anhui can
enhance our market presence and drive our growth by leveraging our prior experience and
understanding of local customers’ preferences and their spending habits.
Each of our new supermarkets and convenience store is expected to have a gross floor area
of approximately 1,000 sq.m. and 100 sq.m., respectively. For site selection of new Retail
Stores, we will evaluate whether there is sufficient population and consumers’ demand in a
potential area to support a new Retail Store by considering factors including whether the daily
foot traffic passing by the Retail Store reaches at least 1,500 visits for supermarket and 300
visits for convenience store, whether there are a minimum of 800 resident households nearby,
whether there is any landmark building in the vicinity, the distance to the nearest bus stop as
well as age demographics and income level of residents nearby etc.. Taking into account the
potential cannibalization effect on our other Retail Store nearby, while balancing it against the
potential revenue to be generated from the new Retail Store, we generally will not open a new
Retail Store at areas in which we already have another Retail Store within an approximately
five-minute walking distance, unless we have sufficient traffic data showing that the traffic is
sizeable enough to support an additional Retail Store in that location. Any proposal to open a
new Retail Store is subject to the approval of our management, which collectively oversee the
expansion of our Retail Stores as a whole to avoid any over-aggressive expansion or
cannibalization effect. Based on our management’s best estimation and past experience, the
opening of new Retail Stores is expected to incur a total capital expenditure of approximately
RMB32.4 million (equivalent to approximately HK$35.1 million), of which, approximately
RMB30.0 million (equivalent to approximately HK$32.5 million) will be financed with the net
proceeds from the Global Offering, and approximately RMB2.4 million (equivalent to
approximately HK$2.6 million) will be financed by our internal resources.
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The table below sets forth the number of supermarkets and convenience stores estimated to
be opened and relevant capital expenditure for each quarter from the Listing Date up to the first
quarter of 2026:
From
the Listing
Date to
30 June
2025
From
1 July
2025 to
30 September
2025
From
1 October
2025 to
31 December
2025
From
1 January
2026 to
31 March
2026
Number of Retail Stores to be opened:
By types of Retail Stores
– Supermarkets 3333
– Convenience stores 6699
By province and city
– Jiangsu Province
 Y angzhou including Gaoyou and
Yizheng 634–
 Taizhou 3568
 Y ancheng –––4
– Anhui Province
 Tianchang –12–
Estimated total capital expenditure
(RMB’000) 7,680 7,680 8,520 8,520
In respect of our Retail Stores that were opened during the Track Record Period, it
generally took us within approximately one to two months to open a new supermarket and within
approximately one month to open a new convenience store.
The breakeven period is the period required for a Retail Store to generate turnover
equivalent to its operating costs for the first time. The operating costs mainly consist of the
expected rental expenses, staff costs, costs of goods sold and utilities expenses. We expect that
the new supermarkets and convenience stores that we plan to open will have an average
breakeven period of approximately three to six months and two months, respectively, on the
assumption that the future turnover growth rates and gross profit margins will be similar to those
opened during the year 2023. In respect of our Retail Stores that were opened during the Track
Record Period, the range of breakeven period for new supermarkets and convenience stores were
approximately one to six months and one to seven months, respectively. In particular, the
convenience stores with a longer breakeven period were mainly the ones opened in 2021
whereby the sale performance was affected by COVID-19 pandemic.
The investment payback period is the time required for a Retail Store to generate its net
profit equivalent to its initial setup costs for the first time. The initial setup costs mainly consist
of equipment costs, decoration costs and installation cost for fire safety system and monitoring
system. We expect that the new supermarkets and convenience stores that we plan to open will
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have an investment payback period of approximately two to three years and four to five years,
respectively, on the assumption that the future turnover will increase in line with our overall
business growth, no material change in the market demand and no material increase in the costs
of purchased products and labour costs. In respect of our Retail Stores that were opened during
the Track Record Period, the range of investment payback period for new supermarkets and
convenience stores were approximately one to two years and two to three years, respectively.
Expanding our warehousing capacity by establishing a new distribution centre
As at the Latest Practicable Date, we had one distribution centre and two warehouses in
Jiangdu District, Jiangsu Province with a total gross floor area of approximately 18,900 sq.m.
for storing the products sold at our Retail Stores and to our wholesale customers. In view of our
anticipated business growth and increasing inventory flow, we expect to experience a rising
demand for warehousing space. As at the Latest Practicable Date, the utilisation rates of our
distribution centre and warehouses were over 80%. As such, in order to leverage the market
growth and deepen our market penetration, our Directors believe it is imperative for us to
enhance our warehousing capabilities. In this regard, we plan to set up a new distribution centre
(the “ New Distribution Centre ”).
In selecting the location of the New Distribution Centre, we have considered a number of
criteria, among others, including (i) whether there exists any mature infrastructure development
in terms of electricity supply and transportation network for such location; and (ii) whether the
land is in close proximity to our existing distribution centre and warehouses to allow a more
efficient management of our daily operations and facilitate collaboration among our different
warehouses. As at the Latest Practicable Date, we have considered several locations which can
serve as suitable locations of our New Distribution Centre but we have not entered into any
legally binding agreement for land acquisition as at the Latest Practicable Date. The land
acquisition will be subject to bidding, auction or listing procedures. We plan to use 10,000 sq.m.
of the land for the construction of the New Distribution Centre.
Based on our management’s best estimation and past experience, it would take
approximately eight months to complete the construction of the New Distribution Centre upon
acquisition of land and an additional four months for the New Distribution Centre to fully come
into operation. The New Distribution Centre will be equipped with cold storage facilities and
general storage facilities to accommodate the storage needs of different types of products.
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Our Directors believe that the expansion of our warehousing capacity by setting up the
New Distribution Centre is justifiable, considering the following factors:
(A) Inadequate storage capacity of our existing distribution centre and warehouses
Our Directors believe that the high utilisation rate of our existing distribution centre
and warehouses had limited our ability to obtain more business from our retail customers as
we do not have adequate storage space to store the products to be supplied to our Retail
Stores. Our Directors consider that the New Distribution Centre will be able to satisfy our
need for storage space arising from our long-term business growth and is complementary to
our business strategy of expanding the number of our Retail Stores.
(B) Expected market growth of the supermarket and convenience store retail markets in
the central region of Jiangsu Province
Our Directors believe that there is substantial demand in the supermarket and
convenience store retail markets in the central region of Jiangsu Province. According to the
Industry Report, the nominal GDP of the PRC had increased at a CAGR of approximately
7.17% from 2017 to 2023 to reach approximately RMB126,058 billion in 2023. In
particular, according to the Industry Report, the nominal GDP of the central region of
Jiangsu Province had increased at a CAGR of approximately 6.76% from 2017 to 2023 to
reach approximately RMB2,596.8 billion in 2023. The per capita disposable income of the
PRC residents had increased from approximately RMB26,000 in 2017 to approximately
RMB39,000 in 2023, representing a CAGR of approximately 6.99%. In particular, the per
capita disposable income of residents in the central region of Jiangsu Province had
increased from approximately RMB31,500 in 2017 to approximately RMB50,000 in 2023,
representing a CAGR of approximately 8.01%. Such increasing trends indicate higher
purchasing power and willingness to spend on food and household products by retail
customers in the central region of Jiangsu Province, which will contribute to the growing
retail sales of chain supermarkets and convenience stores in such region.
Further, according to the Industry Report, the retail sales of chain supermarkets in the
central region of Jiangsu Province decreased from approximately RMB23.9 billion in 2017
to approximately RMB20.0 billion in 2023, representing a CAGR of approximately -3.0%.
The retail sales of convenience stores in the central region of Jiangsu Province increased
from approximately RMB3.08 billion in 2017 to approximately RMB6.83 billion in 2023,
representing a CAGR of approximately 14.2%. According to the Industry Report, driven by
the strong economic growth momentum and increasing income and expenditure level, it is
forecasted that the market size of supermarket chain retail market in the central region of
Jiangsu Province will increase from approximately RMB20.6 billion in 2024 to
approximately RMB22.5 billion in 2027 at a CAGR of approximately 3.1%, and the market
size of convenience store retail market in the central region of Jiangsu Province will
increase from approximately RMB7.85 billion in 2024 to approximately RMB10.7 billion in
2027 at a CAGR of approximately 11.0%. Our Directors believe that enhancing our
warehousing capabilities will enable us to capture more business opportunities from the
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growth in the supermarket chain and convenience store retail markets in the central region
of Jiangsu Province.
Expanding our processing capacity of meals by establishing a new central kitchen
During the Track Record Period, our revenue from supply and sales of meals increased
from approximately RMB7.7 million for FY2021 to approximately RMB15.3 million for
FY2023, representing an increase of approximately 98.7%. For 9M2024, our revenue from
supply and sales of meals amounted to approximately RMB4.7 million. As at the Latest
Practicable Date, we had a central kitchen located at Y angzhou for preparation of meals and
could produce 10,000 sets of meals for lunch and 10,000 sets of meals for dinner per day. We
mainly supply meals for lunch orders and during FY2021, FY2022, FY2023 and 9M2024, the
maximum number of lunch orders or dinner orders processed by us in a day had reached
approximately 5,100, 6,300, 8,700 and 5,500, respectively. The processing capacity of our
central kitchen during the Track Record Period was mainly constrained by the processing
capacity for lunch orders or dinner orders since the production for lunch meals and dinner meals
is distinctly separate and hence any excess capacity for lunch production cannot be reallocated
to dinner production and vice versa. As we will face legal liabilities and reputation risk if we
fail to deliver the meals to our customers on time, it is not commercially viable to exhaust the
processing capacity of our central kitchen.
According to the Industry Report, the sales of prepared food in the central region of
Jiangsu Province increased from approximately RMB2.39 billion in 2017 to approximately
RMB7.75 billion in 2023, representing a CAGR of 21.7%. Driven by the increasing demand for
convenient, fast and diverse food processing options among consumers, it is forecasted that the
sales of prepared food in the central region of Jiangsu Province will increase from
approximately RMB10.64 billion in 2024 to approximately RMB19.78 billion in 2027,
representing a CAGR of approximately 23.0%.
With a view to capitalise on the business opportunities in the prepared food market in the
PRC, we intend to expand our processing capacity of meals by establishing a new central
kitchen in addition to the Muyuan Central Kitchen. We plan to construct an additional central
kitchen (the “ New Central Kitchen ”) with a gross floor area of approximately 3,000 sq.m. on
the same parcel of land to be acquired for the construction of the New Distribution Centre. It is
estimated that the New Central Kitchen will have a capacity of preparing 10,000 sets of meals
for lunch and 10,000 sets of meals for dinner per day. Based on our management’s best
estimation and past experience, it would take approximately four months to complete the
construction of the New Central Kitchen and an additional one month for the New Central
Kitchen to come into full operation.
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Our Directors believe that the expansion of our processing capacity of meals will enable us
to take up more orders from customers and accommodate the increase in demand for our meals.
Further, the New Central Kitchen will enhance our operational flexibility and stability in
providing meals to our customers. In case of any disruption to the operation of our existing
central kitchen, we are able to relocate our operation therein to the New Central Kitchen,
thereby reducing the impact on our business operations.
Breakeven period refers to the length of time required for the New Central Kitchen to
generate sufficient monthly revenue to cover its monthly operating expenses incurred for the
relevant month, taking into account the non-cash items such as depreciation expenses. Our
Directors estimate that the breakeven period for the New Central Kitchen will be approximately
one month after it comes into operation.
Investment payback period refers to the length of time required for the New Central
Kitchen to generate sufficient accumulated cash inflows to recover the initial investment costs.
Our Directors estimate that the investment payback period for the New Central Kitchen will be
approximately three years after it comes into operation.
Enhancing our ERP system and infrastructure systems to improve our operational
efficiency
We believe that an advanced ERP system is essential to support our business growth and
internal controls. We plan to establish a centralised ERP system to support and manage our
business expansion and improve our operational efficiency. The centralised ERP system will be
able to manage various aspects of our business operations which include (i) sales management;
(ii) supply chain management; (iii) financial management; (iv) accounting management; (v)
inventory management; (vi) operation flow management; (vii) quality control management; and
(viii) human resources management. The centralised ERP system will be equipped with an online
portal which allows us to monitor our procurement, sales and inventory data on a real-time
basis, which in turn facilitates our production planning, procurement decision-making, inventory
analysis, and sale and logistics analysis. We would also upgrade our general office software, so
as to enable us to maintain our operations in an orderly and efficient manner.
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OUR BUSINESS MODEL
Our business entails the following operations:
 Wholesale operations: We sell grains and oil, food products and other products to
resellers and other retail operators including other operators of supermarkets and
convenience stores as well as catering business operators. As at the Latest Practicable
Date, we have secured our district distribution rights with 15 suppliers in respect of
products of 29 brands or series of brands, including renowned brands of dairy
products, oil and liquors, out of which six for distribution in Jiangdu District,
Y angzhou, six for distribution in Y ancheng City, one for Tinghu Town of Y ancheng
City, one for Y angzhou City and one for distribution of liquor of a renowned brand in
designated store in Jiangdu District, Y angzhou. As at the Latest Practicable Date, we
had successfully renewed the district distribution agreements with ten suppliers and
we were attending to the renewal of the district distribution agreements with five
suppliers, which continued to supply products of the authorised brands to us. Our
Directors confirm that there is no impediment to the renewal of the district
distribution agreements of these five suppliers. The distribution rights under the
agreements are not expressed to be exclusive in nature. Pursuant to the agreements,
we generally enjoy better pricing terms than other distributors without such district
distributorship rights. We also sell garment and wooden products to overseas
customers and household appliances to distributors and retailers.
In respect of our wholesales, food was our major revenue contributor during the Track
Record Period. Sales of food accounted for approximately 90.6%, 85.6%, 91.7%,
93.3% and 93.1% of our revenue from wholesales for FY2021, FY2022, FY2023,
9M2023 and 9M2024, respectively. In particular, oil was our major food product for
our wholesale operations in term of revenue contribution. For FY2021, FY2022,
FY2023, 9M2023 and 9M2024, sales of oil accounted for (i) approximately 74.6%,
73.4%, 70.0%, 72.3% and 73.2% of our revenue from sales of food under our
wholesales, respectively; and (ii) approximately 67.7%, 62.8%, 64.2%, 67.5% and
68.2% of our revenue from wholesales, respectively. For breakdown of our revenue
from wholesales by product types, please refer to the paragraph headed “Our products
portfolio – Revenue derived from our products” in this section below.
Our Group commenced wholesale business since 2002 and has accumulated years of
experience in the wholesale market in the PRC. Oil has been our major food products
sold under our wholesale operations during the Track Record Period. During FY2021,
we secured our district distributorship rights in Y angzhou City with Yihai Kerry Food
Marketing Co., Ltd. Nanjing Branch* (ԯʱʮ̡ )
(“Yihai Kerry ”) for the distribution of oil in which the Yihai Kerry is the brand
owner. Yihai Kerry is a PRC subsidiary of a company listed on the Shenzhen Stock
Exchange engaging in oilseeds crushing, edible oils refining, manufacturing of
specialty fats and oleochemicals, processing of corn, wheat and soybean, as well as
the sustainable multi-stage processing of rice, raw food materials, central kitchen and
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R&D in grains and oil processing technology. According to publicly available
information, Yihai Kerry group is one of the largest grains and oil production and
processing groups in the PRC, and it held a dominant position with a market share of
39.0% in 2023, ranking the first in the PRC. Our Directors are of the view that our
district distribution rights with Yihai Kerry provided a solid foundation to our Group’s
purchase of oil for our wholesale operations and contributed to the growth of our
wholesale operations during the Track Record Period. Prior to securing our district
distributorship rights with Yihai Kerry, our Group purchased oil from more dispersed
suppliers. For each of FY2022, FY2023 and 9M2024, Yihai Kerry became our largest
supplier, and our purchase with Yihai Kerry amounted to approximately RMB141.9
million, RMB282.3 million and RMB284.5 million for FY2022, FY2023 and 9M2024,
representing approximately 12.5%, 25.5% and 30.5% of our total purchase,
respectively. As an illustration of the significance of our collaboration with Yihai
Kerry to the growth of our wholesale operations, our revenue from sales of oil under
our wholesale operations increased significantly from approximately RMB311.0
million for FY2022 to approximately RMB436.1 million for FY2023, and increased
significantly from approximately RMB293.3 million for 9M2023 to approximately
RMB387.6 million for 9M2024. Of which, for FY2022, FY2023 and 9M2024, our
sales of oil purchased from Yihai Kerry accounted for approximately 52.5%, 72.3%
and 84.3% of our revenue from sales of oil under our wholesale operations,
respectively.
To the best knowledge of our Directors, Yihai Kerry granted similar district
distributorship rights in Y angzhou City to not more than three companies including us.
Despite our district distributorship rights with Yihai Kerry is not exclusive, our
Directors are of the view that our Group was able to expand our wholesale operations
and benefit from our district distributorship rights with Yihai Kerry primarily
attributable to the following factors: (i) we offered favourable credit terms to our
wholesale customers for oil. For example, for FY2022, FY2023 and 9M2024, our five
largest customers were wholesale customers in each year/period during the Track
Record Period (save for Customer G for FY2022 which was a bulk sales customer) in
which the products we sold to them were mainly oil we purchased from Yihai Kerry,
and these customers were given a credit period of up to 90 days. According to the
Industry Consultant, the credit terms for wholesalers of cooking oil in Jiangsu
Province are typically up to 60 days. Nevertheless, certain wholesalers with longer
history or a more established presence in the market may adopt more competitive
credit policies by offering more favorable terms in an effort to enhance their market
share and strengthen their market position. To the best knowledge of our Directors,
our Group’s credit terms are not least competitive than our competitors; (ii) in
addition to oil and to a less extent, we also sell other day-to-day food products such as
grains and milk, which we believe are essential for meeting the needs of our
wholesale customers; and (iii) instead of being only a wholesaler, our brand was
boosted by retail operations whereby we also operate supermarkets and convenience
stores. According to the Industry Report, we ranked the second among supermarket
operators in Y angzhou in terms of sales in 2023 with a market share of approximately
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9.1%, the fifth among supermarket operators in the central region of Jiangsu Province
in terms of sales in 2023 with a market share of approximately 2.3%, and around the
twentieth among supermarket operators in Jiangsu Province in terms of sales in 2023
with a market share of approximately 0.4%.
Our latest distributorship agreement with Yihai Kerry will expire in end of December
2025, and pursuant to it, the agreement remains effective until a renewed
distributorship agreement is entered into or if either party terminates the agreement.
Our distributorship agreement with Yihai Kerry is renewable annually, and our Group
has successfully renewed with Yihai Kerry since the first distributorship agreement
with it.
 Retail operations: We operate our supermarkets and convenience stores under our
brand “Ꮂ ” (Hongxinlong*), as well as two Malls, with geographical focus in the
central region of Jiangsu Province. We receive sales proceeds from (i) general sales to
consumers at our Retail Stores and Malls; and (ii) bulk sales to customers including
corporate and government entities. We also receive sales amounts for concessionaire
sales at our Retail Stores and Malls and charge the concessionaires certain percentage
of gross sale amounts or the agreed sales target, whichever is the higher, as
commissions.
Our supermarkets provide a wide range of daily consumer products to cater for the
daily needs of our customers, which could be broadly categorised as raw and fresh
food, grains and oil, non-staple food and household products, while our convenience
stores open for 16 or 24 hours a day to cater for quick purchases of everyday
consumable products. We adopt the strategies of standardised branding and store
design, centralised procurement, centralised inventory control and distribution as well
as unified management for our Retail Stores for the purpose of our chain store
management. These unities allow us to benefit from economies of scale, streamline
operations, and provide a predictable shopping experience for our customers.
We sell fashion and apparel, children’s wear, cosmetics and personal care, jewellery,
accessories, footwear, household appliances, consumer electronics, liquor and
miscellaneous products at our Malls. We endeavour to provide a wide range of
merchandise to cater for the demand for trendy and fashionable products.
 Rental operations: Ancillary to our retail operations, we lease some shop floor area
or shop premises in our Retail Stores and Malls to other retail operators like
restaurant, hotels and pharmacies, etc. and receive rental income.
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 Supply and sales of meals: We operate a central kitchen to produce meals and deliver
to local corporates, schools or government entities. Leveraging our ability to source
and supply quality and fresh food ingredients, we also operate a central kitchen to
produce meals and deliver to local corporates, schools or government entities. As at
the Latest Practicable Date, our central kitchen was located at Y angzhou and had the
capacity to produce 10,000 sets of meals for lunch and 10,000 sets of meals for dinner
per day.
The table below sets forth a breakdown of our total revenue by operations during the Track
Record Period:
FY2021 FY2022 FY2023 9M2023 9M2024
RMB’000 % RMB’000 % RMB’000 % RMB’000 % RMB’000 %
(unaudited)
Wholesale operations:
– Sale of goods
 Wholesales (Note 1) 515,654 36.0 495,056 37.3 679,641 48.5 434,820 44.0 568,338 56.5
– Commission income from
sales and supply of
goods 9,639 0.7 17,283 1.3 6,860 0.5 6,405 0.6 4,073 0.4
Sub-total 525,293 36.7 512,339 38.6 686,501 49.0 441,225 44.6 572,411 56.9
Retail operations:
– Sale of goods
(Note 2)
 General sales: 751,615 52.5 613,209 46.2 616,813 44.0 472,480 47.8 362,049 36.0
– Supermarkets 446,875 31.2 390,094 29.4 383,592 27.4 306,482 31.0 222,588 22.1
– Convenience stores 113,165 7.9 117,664 8.9 93,848 6.7 70,296 7.1 39,650 4.0
– Malls 191,575 13.4 105,451 7.9 139,373 9.9 95,702 9.7 99,811 9.9
 Bulk sales 104,176 7.2 143,930 10.8 38,883 2.8 30,145 3.1 34,963 3.5
– Commission income from
concessionaire sales 32,718 2.3 30,748 2.3 32,894 2.3 21,795 2.2 20,752 2.1
Sub-total 888,509 62.0 787,887 59.3 688,590 49.1 524,420 53.1 417,764 41.6
Rental income from
operating lease 10,668 0.8 10,573 0.8 11,566 0.8 9,585 1.0 10,910 1.1
Supply and sales of meals 7,723 0.5 17,886 1.3 15,315 1.1 12,603 1.3 4,725 0.4
Total revenue 1,432,193 100 1,328,685 100 1,401,972 100 987,833 100 1,005,810 100
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Notes:
1. Wholesales include the sale of grains and oil, food products and other products.
2. The revenue generated from our mini programmes and e-commerce platforms for Retail Stores and Malls
amounted to approximately RMB14.6 million, RMB6.6 million, RMB22.7 million and RMB22.8 million
for FY2021, FY2022, FY2023 and 9M2024, respectively.
3. Included in our total revenue was the insignificant amount of approximately RMB7.1 million, RMB1.3
million, RMB0.3 million and nil for FY2021, FY2022, FY2023 and 9M2024, respectively, attributable to
our sales to our franchisees and franchise fee. We have terminated the franchise scheme in 2023.
WHOLESALE OPERATIONS
Our network of supermarkets and convenience store chain and Mall business, we gradually
expand our wholesale operations over the years. In 2001, Hongxin Trading (which was formerly
known as Jiangdu Mall Co., Ltd.* (ʮ̡ )) obtained the approval for import
and export rights from the Ministry of Foreign Trade and Economic Cooperation of the PRC ( ࿁
຾᏶ΥЪ௅ ), pursuant to which Hongxin Trading was permitted to engage in the import
and export of merchandise. Over the years, we develop our wholesale and retail operations
simultaneously, which helps to bring complementary benefits and synergies to our business.
We believe that our wholesale model is commonly used in the wholesale industry in the
PRC and is in line with the industry norm. Our Directors believe such model allows us to grow
our wholesale operations by reaching the downstream customer groups of our wholesale
customers and their sales network, and this helps us to broaden our consumer base at
comparatively lower costs. For FY2021, FY2022, FY2023 and 9M2024, our revenue from
wholesale operations amounted to approximately RMB525.3 million, RMB512.3 million,
RMB686.5 million and RMB572.4 million, respectively, representing approximately 36.7%,
38.6%, 49.0% and 56.9% of our total revenue, respectively. During the Track Record Period, all
of its revenue was generated in the PRC, considering that the control over products sold under
our Group’s wholesale business was passed to its wholesale customers (whether located within
or outside the PRC) within the PRC.
During the Track Record Period, we conducted three major types of wholesale, namely:
• sale of grains and oil, food products and other products to local customers;
• sale of household appliances to local customers; and
• sale of garment and wooden products to overseas customers.
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In respect of our wholesales, food was our major revenue contributor during the Track
Record Period. Sales of food accounted for approximately 90.6%, 85.6%, 91.7%, 93.3% and
93.1% of our revenue from wholesales for FY2021, FY2022, FY2023, 9M2023 and 9M2024,
respectively. In particular, oil was our major food product for our wholesale operations in term
of revenue contribution. For FY2021, FY2022, FY2023, 9M2023 and 9M2024, sales of oil
accounted for (i) approximately 74.6%, 73.4%, 70.0%, 72.3% and 73.2% of our revenue from
sales of food under our wholesales, respectively; and (ii) approximately 67.7%, 62.8%, 64.2%,
67.5% and 68.2% of our revenue from wholesales, respectively. For breakdown of our revenue
from wholesales by product types, please refer to the paragraph headed “Our products portfolio
– Revenue derived from our products” in this section below.
Our Group commenced wholesale business since 2002 and has accumulated years of
experience in the wholesale market in the PRC. Oil has been the one of our food products sold
under our wholesale operations. During FY2021, we secured our district distributorship rights in
Y angzhou City with Yihai Kerry Food Marketing Co., Ltd. Nanjing Branch* (ᐄቖ
ԯʱʮ̡ )( “ Yihai Kerry ”) for the distribution of oil in which the Yihai Kerry is the
brand owner. Yihai Kerry is a PRC subsidiary of a company listed on the Shenzhen Stock
Exchange engaging in oilseeds crushing, edible oils refining, manufacturing of specialty fats and
oleochemicals, processing of corn, wheat and soybean, as well as the sustainable multi-stage
processing of rice, raw food materials, central kitchen and R&D in grains and oil processing
technology. According to publicly available information, Yihai Kerry group is one of the largest
grains and oil production and processing groups in the PRC, and it held a dominant position
with a market share of 39.0% in 2023, ranking first in the PRC. Our Directors are of the view
that our district distribution rights with Yihai Kerry provided a solid foundation to our Group’s
purchase of oil for our wholesale operations and contributed to the growth of our wholesale
operations during the Track Record Period. Prior to securing our district distributorship rights
with Yihai Kerry, our Group purchased oil from more dispersed suppliers. For each of FY2022,
FY2023 and 9M2024, Yihai Kerry became our largest supplier, and our purchase with Yihai
Kerry amounted to approximately RMB141.9 million, RMB282.3 million and RMB284.5 million
for FY2022, FY2023 and 9M2024, representing approximately 12.5%, 25.5% and 30.5% of our
total purchase, respectively. As an illustration of the significance of our collaboration with Yihai
Kerry to the growth of our wholesale operations, our revenue from sales of oil under our
wholesales increased significantly from approximately RMB311.0 million for FY2022 to
approximately RMB436.1 million for FY2023, and increased significantly from approximately
RMB293.3 million for 9M2023 to approximately RMB387.6 million for 9M2024. Of which, for
FY2022, FY2023 and 9M2024, our sales of oil purchased from Yihai Kerry accounted for
approximately 52.5%, 72.3% and 84.3% of our revenue from sales of oil under our wholesales,
respectively.
To the best knowledge of our Directors, Yihai Kerry granted similar district distributorship
rights in Y angzhou City to not more than three companies including us. Despite our district
distributorship rights with Yihai Kerry is not exclusive, our Directors are of the view that our
Group was able to expand our wholesales and benefit from our district distributorship rights
with Yihai Kerry primarily attributable to the following factors: (i) we offered favourable credit
terms to our wholesale customers for oil. For example, for FY2022, FY2023 and 9M2024, our
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five largest customers in each year/period during the Track Record Period were wholesale
customers (save for Customer G for FY2022 which was a bulk sales customer) in which the
products we sold to them were mainly oil we purchased from Yihai Kerry, and these customers
were given a credit period of up to 90 days. According to the Industry Consultant, the credit
terms for wholesalers of cooking oil in Jiangsu Province are typically up to 60 days.
Nevertheless, certain wholesalers with longer history or a more established presence in the
market may adopt more competitive credit policies by offering more favorable terms in an effort
to enhance their market share and strengthen their market position. To the best knowledge of our
Directors, our Group’s credit terms are not least competitive than our competitors; (ii) in
addition to oil and to a less extent, we also sell other day-to-day food products such as grains
and milk, which we believe are essential for meeting the needs of our wholesale customers; and
(iii) instead of being only a wholesaler, our brand was boosted by retail operations whereby we
also operate supermarkets and convenience stores. According to the Industry Report, we ranked
second among supermarket operators in Y angzhou in terms of sales in 2023 with a market share
of approximately 9.1%, the fifth among supermarket operators in the central region of Jiangsu
Province in terms of sales in 2023 with a market share of approximately 2.3%, and around the
twentieth among supermarket operators in Jiangsu province in terms of sales in 2023 with a
market share of approximately 0.4%.
Our latest distributorship agreement with Yihai Kerry will expire in end of December 2025,
and pursuant to it, the agreement remains effective until a renewed distributorship agreement is
entered into or if either party terminates the agreement. Our distributorship agreement with Yihai
Kerry is renewable annually, and our Group has successfully renewed with Yihai Kerry since the
first distributorship agreement with it.
Sale of grains and oil, food products and other products to local customers
As a wholesaler of grains and oil with retail operations of supermarkets and convenience
stores, we leverage our collective purchase power to negotiate better prices and terms with our
suppliers. As such, we are able to attract wholesale customers which procure grains and oil, food
products and other products from us at comparatively competitive prices. We sell grains and oil,
food products and other products to local customers in the PRC, which mainly include resellers
and other retail operators including other operators of supermarkets and convenience stores as
well as catering business operators. In respect of sale of grains and oil, food products and other
products, our Group recognises revenue on gross basis.
District distributorship rights
According to the Industry Report, the wholesale markets in different districts of the PRC
are governed by a system of district-level distributorship rights. After years of operation and
accumulation, we have gained the trust of different suppliers and brand owners, and obtained
district distributorship rights for their products. As at the Latest Practicable Date, we have
secured our district distribution rights with 15 suppliers in respect of products of 29 brands or
series of brands, including renowned brands of dairy products, oil and liquors, out of which six
for distribution in Jiangdu District, Y angzhou, six for distribution in Y ancheng City, one for
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Tinghu Town of Y ancheng City, one for Y angzhou City and one for distribution of liquor of a
renowned brand in designated store in Jiangdu District, Y angzhou. As at the Latest Practicable
Date, we have successfully renewed the district distribution agreements with ten suppliers and
are currently in the renewal process with the remaining five suppliers. All 15 suppliers continue
to provide products of authorised brands to us. Our Directors confirm that there are no
impediments to renewing all district distribution agreements. The distribution rights under the
agreements are not expressed to be exclusive in nature. Pursuant to the agreements, we generally
enjoy better pricing terms than other distributors without such district distributorship rights. Our
rights to distribute such products are confined to the regions as stipulated in the distributorship
agreements.
The following table sets out the salient terms of the district distributorship agreements:
Term: Usually for 12 months
Distribution territory(ies): Six for distribution in Jiangdu District, Y angzhou,
six for distribution in Y ancheng City, one for Tinghu
Town of Y ancheng City, one for Y angzhou City and
one for distribution of liquor of a renowned brand in
designated store in Jiangdu District, Y angzhou
Some agreements expressly restrict sales at online
channels, gas stations and vending machines.
Minimum purchase
commitments/sales targets:
Some agreements set out some annual, quarterly
and/or monthly minimum purchase commitments or
sales targets.
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Consequences for failing to meet
the minimum purchase
commitments/sales targets:
Some contracts set out one or more of the following
consequences:
1. We may bear the liability for breach of contract
and we may need to compensate the supplier for
its economic loss.
2. The supplier is entitled to terminate the
agreement.
3. If we fails to meet the targets for consecutive
months, the supplier is entitled to terminate the
agreement.
4. The supplier may adjust the authorised area or
open it up to other distributors.
5. The supplier may deduct certain amount from
our deposit or forfeit our deposit.
Sales rebates: Under some agreements, we are entitled to certain
sales rebates if we meet the sales targets.
Return arrangements: We are usually required to notify the supplier within
3 to 10 days upon identifying quality issues with the
products. Products may only be returned upon
confirmation by both parties.
Out of the 15 district distributorship rights we have secured as at the Latest Practicable
Date, we have maintained business relationship with the suppliers for around one to 13 years, in
particular seven for over 4 years and four for over ten years.
During the Track Record Period, there were incidents where we might have failed to meet
the minimum purchase commitments or sales targets under the district distribution agreements.
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The following sets out the relevant facts regarding the possible breaches and renewal
status:
Type of
products Minimum purchase commitment
Shortfall between
the minimum
purchase
commitment and
actual purchase Renewal status
Supplier J Liquor RMB9 million from 6 December 2019
to 25 November 2022
RMB0.45 million Renewed in 2023
RMB2 million from 27 February 2023
to 5 December 2023
RMB1 million Renewed in 2024
RMB1.5 million from 6 December 2023
to 5 December 2024
RMB0.97 million No impediment in
renewing 2025
agreement
Supplier E Liquid Milk RMB62.05 million from 1 January 2021
to 31 December 2021
RMB4.42 million Renewed in 2022
RMB62.01 million from 1 January 2022
to 31 December 2022
RMB4.95 million Renewed in 2023
RMB59.67 million from 1 January 2023
to 31 December 2023
RMB10.51 million Renewed in 2024
RMB56 million from 1 January 2024
to 31 December 2024
RMB16.12 million Renewed in 2025
Supplier K Hair Products RMB2 million from 1 December 2022
to 30 November 2023
RMB0.55 million Renewed in 2024
RMB1.45 million from 1 December
2023 to 30 November 2024
Approximately
RMB0.22 million
Renewed in 2025
Supplier L Baby Food RMB2.8 million from January 2021
to December 2021
Approximately
RMB0.52 million
Renewed in 2022
RMB4 million from 1 January 2022
to 31 December 2022
Approximately
RMB0.93 million
Renewed in 2023 and
2024
RMB6.5 million from 1 January 2024
to 31 December 2024
Approximately
RMB2.9 million
No impediment in
renewing 2025
agreement
According to the district distributorship agreements, if we fail to meet the minimum
purchase commitments or sales targets, we may face the following consequences: (i) we may
bear the liability for breach of contract and we may need to compensate the supplier for its
economic loss; (ii) the supplier may be entitled to terminate the agreement; (iii) the supplier may
adjust the authorised area or open it up to other distributors; and/or (iv) the supplier may deduct
certain amount from our deposit or forfeit our deposit. In particular, if we fail to meet the
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minimum purchase commitments or sales targets for prolonged period of time, and especially
when the supplier identifies another market player which they believe the market player can
achieve higher sales than us, the supplier may consider terminating our district distributorship
rights or refuse to renew our rights upon expiry.
As advised by Industry Consultant, it is not uncommon in the PRC wholesale market that
suppliers granting district distributorship rights for their products do not usually strictly enforce
the minimum purchase commitments or impose penalties on the distributors for failing to meet
the minimum purchase commitments because (i) the sales of branded products are dependent on
the popularity of brands and the branding strategies of the suppliers, which may be beyond the
control of the distributors; and (ii) the suppliers rely on the distributors to distribute the products
and penalising the distributors with reasonable sales performance may deter them from
cooperating with these suppliers.
During the Track Record Period, we had not received any penalties for failing to meet any
of the minimum purchase commitments under the district distributorship agreements. As at the
Latest Practicable Date, we had successfully renewed the district distribution agreements with
Supplier E, Supplier K, and Supplier L and we were attending to the renewal of the district
distribution agreements with Supplier J, which continued to supply products of the authorised
brands to us. Our Directors confirm that there is no impediments to the renewal of that said two
district distribution agreements.
We are only allowed to return products with quality issues to our suppliers. As such, we
bear inventory risk of any unsold products. For details, please refer to the paragraph headed
“Risk Factors – We may be subject to the risk of obsolescence for our inventory” in this
prospectus.
Agreements with our wholesale customers
We generally enter into sales agreements with our wholesale customers for grains and oil,
food products and other products. The terms of sales agreements range from one to three years.
Our wholesale customers place purchase orders with us on an order-by-order basis during the
term of the sales agreements. The purchase orders specify the brands, types, quantities and unit
prices of the products.
Pursuant to the sales agreements, we generally require upfront payment from customers
before delivery of goods. We may grant credit terms of up to three months to some customers
with long-term business relationship with us and/or high creditworthiness.
For bulk items like grains and oil, we may arrange our suppliers to deliver the products to
the locations designated by our customers directly. For other food products, generally we arrange
delivery of the products to our customers from our distribution centre or warehouses.
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We have a seller/buyer relationship with our wholesale customers as we sell goods to our
wholesale customers. We are not responsible for any of their unsold stock and do not allow for
any refund or return of the products sold to our wholesale customers except for return of
defective products pursuant to the terms of the sales agreements.
Sale of household appliances to local customers
With our wide network of customers and suppliers and wealth of consumer data collected
from our daily interaction with consumers, we gain insights into popular merchandise and the
market demand for seasonal products. On behalf of our wholesale customers including
distributors and retailers, we source household appliances from brand owners in wholesale
quantities. We generally enter into sales contracts with our wholesale customers for household
appliances on an order by order basis, specifying the brands, specifications, quantities and unit
prices of the products. We generally require our wholesale customers to pay deposits or payment
in full before or upon arranging delivery of the household appliances by our suppliers to the
locations designated by our customers. Our suppliers only accept return of products with quality
issues. In respect of sale of household appliances, our Group recognises revenue on net basis. In
determining our commission income, we generally take into account factors including the
volume and amount of sales orders and the costs of sourcing the goods. During the Track Record
Period, our commission percentage ranged from approximately 0.2% to 1.0%.
Sale of garment and wooden products to overseas customers
We commenced our export sales in 2002. We sell garment and wooden products to
customers in overseas countries including the United States and the Philippines. On behalf of
our overseas customers, we source garment and wooden products from PRC manufacturers in
wholesale quantities. We generally enter into sales contracts with our wholesale customers for
garment and wooden products on an order by order basis, specifying the specifications,
quantities and unit prices of the products. We grant our wholesale customers credit terms up to
90 days. We only accept return of products with quality issues. Our suppliers arrange delivery of
products to our overseas customers while we handle the customs clearance of the shipment. Our
suppliers only accept return of products with quality issues. In respect of sale of garment and
wooden products, our Group recognises revenue on net basis. In determining our commission
income, we generally take into account factors including the volume and amount of sales orders
and the costs of sourcing the goods. To the best knowledge of our Directors, they generally
procured from our Group in light of our good product quality, suitability and reasonable pricing.
During the Track Record Period, our commission percentage ranged from approximately 3.3% to
7.4%.
In relation to our export sales of garment to a customer in the United States, we are advised
by our U.S. Legal Advisers that we will not be the party responsible for the payment of any
tariffs if we ship our products to our U.S. customer on a free on board (FOB) basis. As such, as
all of our products to our U.S. customer were shipped on FOB basis, our U.S. customer is the
importer of record and is responsible for payment of tariffs, if any. As advised by our U.S. Legal
Advisers, during the Track Record Period and up to the Latest Practicable Date, our export sales
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to the United States are also not subject to any tariff, quotas, embargoes, sanctions and/or
anti-dumping and countervailing duties. The U.S. government announced to impose additional
tariff of 10% on goods from the PRC in February 2025 and imposed a further additional tariff of
10% on 4 March 2025. As advised by our U.S. Legal Advisers, the garment we mainly sold to
the U.S. during the Track Record Period would be subject to a tariff ranging from approximately
34.6% to 59.5% if those products are shipped from or originated from the PRC and entered the
U.S. on or after 4 March 2025. Our Directors are of the view that the recent increase in tariff by
the U.S. government up to the Latest Practicable Date is not expected to have a material adverse
impact on our business operations having considered (i) the products we sell under our
wholesales business are predominantly food within the PRC; and (ii) our U.S. customer advised
that our long business relationship (over 20 years) with it, our good understanding on its
requirements, our financial capabilities and the fact that there has been no significant
interruption to our business relationship even during the COVID-19 pandemic were among the
key factors it considers in doing business with us, and it would not cease doing business with us
merely because of the tariff increase so far. For the related risk factor on the increase in tariff
imposed by the U.S. government, please refer to the paragraph headed “Risk Factors – Any
further increase in the tariff imposed on our products exporting to the U.S. may have a material
adverse impact on us” in this prospectus.
Management of our wholesale customers
Our relationship with our wholesale customers is a seller/buyer relationship as we sell
goods to our wholesale customers and recognise revenue from our sales to them. We have
limited control over our wholesale customers and they are under no contractual obligation to
provide us with any information regarding their inventory levels and sales data in respect of
products sold by us. For the associated risks, please refer to the paragraph headed “Risk Factors
– We may not be able to assess the sales and inventory levels of our wholesale customers or
correctly predict the sales trends of our products” in this prospectus.
We are not responsible for any of their unsold stock and do not allow for any refund or
return of the products sold to our wholesale customers except for return of defective products
pursuant to the terms of the agreements between us and our wholesale customers. Our wholesale
customers on-sell products sold by us to their downstream customers. We do not have direct
contractual relationship with the downstream customers of our wholesale customers.
Risk of channel stuffing
We regularly communicate with our wholesale customers to understand their demand for
products. We also monitor the purchase pattern of our wholesale customers and hold discussions
with our wholesale customers when there are significant variations in their demand. Our
Directors are of the view that the risk of excessive inventory accumulation by our wholesale
customers and the risk of channel stuffing of the products sold by us to our wholesale customers
are low because (i) grains and oil and food products are perishable in nature and have short shelf
lives; (ii) we only grant our wholesale customers credit terms up to three months; (iii) our
wholesale customers can only return the products with quality issues, and we did not experience
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any material sales return or product exchanges from our wholesale customers during the Track
Record Period.
Risk of cannibalisation among our wholesale customers
Our Directors are of the view that the risk of cannibalisation among our wholesale
customers for grains and oil and food products is low because the products sold under our
wholesale operations are daily consumer products and necessities, thus our Directors believe that
there are stable and substantial market demand for such products from end customers. According
to the Industry Report, the wholesales of grains and oil in the central region of Jiangsu Province
increased from approximately RMB7.9 billion in 2017 to approximately RMB16.7 billion in
2023, representing a CAGR of approximately 13.32%. Driven by the increasing trend of
population in the PRC and the PRC’s government policies in promoting the development of the
agricultural industry, it is forecasted that the wholesales of grains and oil in the central region of
Jiangsu Province will increase from approximately RMB18.0 billion in 2024 to approximately
RMB23.3 billion in 2027, representing a CAGR of approximately 8.0%.
Relationship with our wholesale customers
We have a large number of wholesale customers for grains and oil, food products and other
products. For each of FY2021, FY2022, FY2023 and 9M2024, we had more than 1,900
wholesale customers for such products, and the revenue generated from our wholesale operations
for such products amounted to approximately RMB515.7 million, RMB495.1 million, RMB679.6
million and RMB568.3 million, respectively. Our Group identified the wholesale customers who
had placed orders with us in the prior financial years as recurring wholesale customers. The
revenue generated from these recurring wholesale customers for FY2021, FY2022, FY2023 and
9M2024 amounted to approximately RMB416.4 million, RMB419.8 million, RMB552.7 million
and RMB413.2 million, respectively.
The following table sets forth changes in the number of our wholesale customers, which are
mainly distributors and resellers, during the periods indicated below:
FY2021 FY2022 FY2023 9M2024
At the commencement of year/period 1,954 2,447 2,378 1,950
Addition during the year/period 1,129 811 193 1,042
Decrease during the year/period (636) (880) (621) (748)
Net increase/(decrease) 493 (69) (428) 294
At the end of the year/period 2,447 2,378 1,950 2,244
Turnover rate
(Note) 32.5% 36.0% 26.1% 38.4%
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Note: Number of wholesale customers terminated or not renewed as a percentage of number of wholesale
customers at the beginning of the year/period. As advised by the Industry Consultant, during the Track
Record Period, market turnover rate of regional distributors in the PRC was generally 20% to 40%.
The number of our wholesale customers decreased during FY2023 and slightly increased
for 9M2024 despite that the number of our wholesale customers in 9M2024 was still less than
those in FY2021 and FY2022. Such changes were mainly driven by wholesale distributor
consolidation in the PRC market in 2023 and 2024. As advised by the Industry Consultant, the
distribution sector in the PRC, particularly food distributors, features a vast number of players,
ranging from small local distributors to large national companies. The fierce price competition
made it more challenging for smaller or individual distributors to survive through till the end of
COVID-19 pandemic.
RETAIL OPERATIONS
We operate our Retail Stores under our brand “Ꮂ ” (Hongxinlong*). As at the Latest
Practicable Date, we operated 51 supermarkets and 109 convenience stores in Jiangsu Province,
out of which 49 supermarkets and 108 convenience stores are located in Y angzhou, and two
supermarkets and one convenience store are located in Taizhou.
Our supermarkets provide a wide range of daily consumer products which could be broadly
categorised as raw and fresh food, grains and oil, non-staple food and household products to
cater for the daily needs of our customers, while our convenience stores open for 16 or 24 hours
a day to cater for quick purchases of everyday consumable products.
We also operate two Malls located in Y angzhou, namely Jiangdu Mall* (۬and
Hongxinlong Mall* (ʕː ), and offer for sale fashion and apparel, cosmetics and
personal care, children’s wear, jewellery, accessories, footwear, household appliances, consumer
electronics, liquor and miscellaneous products at our Malls.
We receive sales proceeds from (i) general sales to consumers at our Retail Stores and
Malls; and (ii) bulk sales to customers including corporate and government entities. We also
receive sales amounts for concessionaire sales at our Retail Stores and Malls and charge the
concessionaires certain percentage of gross sale amounts or the agreed sales target, whichever is
the higher, as commissions. Our revenue generated from retail operations amounted to
RMB888.5 million, RMB787.9 million, RMB688.6 million and RMB417.8 million for FY2021,
FY2022, FY2023 and 9M2024, respectively, representing 62.0%, 59.3%, 49.1% and 41.5% of
our total revenue, respectively. Ancillary to our retail operations, we lease some shop floor area
or shop premises in our Retail Stores and Malls to other retail operators like restaurants, hotels
and pharmacies, etc and receive rental income.
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Our Retail Store network
As at the Latest Practicable Date, we operated 160 Retail Stores, consisting of 51
supermarkets and 109 convenience stores in Jiangsu Province.
The following table sets forth the changes in the number of our supermarkets during the
periods indicated below:
FY2021 FY2022 FY2023 9M2024
After
30 September
2024 and up
to the Latest
Practicable
Date
At the commencement of
year/period 48 54 53 52 51
Addition during the year/period 6–1–1
Termination during the
year/period – (1) (2) (1) (1)
Net increase/(decrease) 6 (1) (1) (1) –
At the end of the year/period 54 53 52 51 51
The following table sets forth the changes in the number of our convenience stores during
the periods indicated below:
FY2021 FY2022 FY2023 9M2024
After
30 September
2024 and up
to the Latest
Practicable
Date
At the commencement of
year/period 102 107 109 109 107
Addition during the year/period 95423
Termination during the
year/period (4) (3) (4) (4) (1)
Net increase/(decrease) 52–2–
At the end of the year/period 107 109 109 107 109
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During FY2021, FY2022, FY2023 and 9M2024, closure of our Retail Stores was mainly
due to failure to renew expired leases at favourable terms. During the Track Record Period, we
also closed certain Retail Stores to remedy certain non-compliance for failure to complete the
fire safety approvals for those Retail Stores. For details, please refer to the paragraph headed
“Business – Non-compliance – (3) Failure to complete Fire Safety Approvals” in this section.
The increase in the number of Retail Stores during the periods was attributable to our strategy to
expand our presence of retail network in the central region of Jiangsu Province.
The following table sets out the number of our Retail Stores by geographical locations as at
the Latest Practicable Date:
Supermarkets
Convenience
stores
Jiangsu Province
Y angzhou 49 108
Taizhou 2 1
Total 51 109
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Set forth below is a map showing the approximate locations of our Retail Stores and Malls
as at the Latest Practicable Date:
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Retail Stores to be opened
We aim to continue to strengthen our market position in the central region of Jiangsu
Province particularly in Y angzhou and Taizhou through expansion of our retail network in the
neighbouring cities of our existing markets in Jiangsu Province. In particular, we plan to open
three supermarkets and six convenience stores in Y angzhou, and seven supermarkets and 18
convenience stores in Taizhou out of proceeds from the Global Offering. For details, please refer
to the paragraph headed “Our business strategies – Strengthen our market position further by
expanding our presence and number of Retail Stores” in this section.
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Selection of location
We believe that the strategic location of our Retail Stores is crucial to our success. The
following are the major factors that we would normally take into account during our Retail
Stores selection process:
 size of the store;
 convenience and accessibility;
 proximity to our existing stores or existence of any similar competitors nearby;
 level of pedestrian flow and vehicles traffic flow; and
 consumption power of the target customers in the area.
We strategically select some prime locations in the urban and rural areas in the central
region of Jiangsu Province as the sites of our Retail Stores. We believe such strategy is
beneficial to us as we can mitigate the risk of cannibalisation among our Retail Stores. Our
Retail Stores in rural areas help integrate urban elements and amenities into rural areas and
empowered rural residents to access the modern conveniences of urban life. This approach is in
line with the “rural revitalization” strategy and the longstanding commitments of the PRC
government to narrowing the urban-rural divide and enabling rural populations to enjoy the
benefits of the country’s rapid development.
Measures to avoid cannibalisation among our Retail Stores
To avoid cannibalisation among our Retail Stores, we have implemented the following
measures:
(i) during the process of site selection, we evaluate whether there is sufficient population
and consumers’ demand in a potential area to support a new Retail Store. For factors
to be considered during the evaluation, please refer to the paragraph headed “Our
Business Strategies – Strengthen our market position further by expanding our
presence and number of Retail Stores” in this section. We generally will not open a
new Retail Store at areas in which we already have another Retail Store within an
approximately five-minute walking distance, unless we have sufficient traffic data
showing that the traffic is sizeable enough to support an additional Retail Store in that
location. Among our 51 supermarkets and 109 convenience stores as at the Latest
Practicable Date, none of the Retail Stores are located within an approximately
five-minute walking distance from another Retail Store;
(ii) during the process of site selection, we take into account the potential cannibalisation
effect on our other Retail Store nearby, while balancing it against the potential
revenue to be generated from the new Retail Store;
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(iii) any proposal to open a new Retail Store is subject to the approval of our management,
which collectively oversee the expansion of our Retail Stores as a whole to avoid any
over-aggressive expansion or cannibalisation effect; and
(iv) we conduct post-investment review of the operational and financial performance of
our new Retail Stores after they have been opened in the assessment conducted for all
Retail Stores on a regular basis, respectively. If the performance of a new Retail Store
is below our expectation, we will review whether its performance could be improved
by launching marketing and promotional activities to attract customers and boost
sales. We also continuously monitor the operational and financial performance of all
our Retail Stores as a whole. If there is any unsatisfactory performance, we will carry
out analysis and adjust our strategies accordingly.
Chain store management
We adopt the following strategies for our chain store management, which benefit us from
economies of scale, streamlining our operations, and providing a predictable shopping
experience for our customers:
 Standardised branding and store design : To give our customers a consistent and
recognisable experience throughout our chain of supermarkets and convenience stores,
we adopt standardised branding and store design for our Retail Stores. We require all
our Retail Stores to prominently display our trademark “Ꮂ ” (Hongxinlong*) and
logos, to adopt consistent colour schemes, fonts and images throughout marketing and
in-store materials, and to advertise using our standard slogans, taglines or brand
messages. Our Retail Stores also adopt similar floor layouts, product placements and
consistent interior design elements. We believe a high degree of standardisation of
branding and store design helps to differentiate us from our competitors, enhance our
brand awareness and foster our customers’ loyalty.
 Centralised inventory control and distribution : Our ERP system monitors the
inventory levels of our Retail Stores and sends an alert to our distribution centre
automatically when the inventory levels of our Retail Stores drop below certain levels.
Our procurement team will then arrange delivery of products to our Retail Stores for
replenishment. This enables more effective inventory control and distribution and
reduce the risk of stockouts or excess inventory, and ultimately leading to improved
customer satisfaction and reduce inventory obsolescence. For more details of our
inventory control and distribution for our Retail Stores, please refer to the paragraph
headed “Inventory management, warehousing and logistics” in this section.
 Centralised procurement : Our ERP system will send an alert to our procurement team
automatically when the inventory levels at our distribution centre and warehouses drop
below the set minimum levels. Our procurement team will then place orders with our
suppliers. We usually make procurement in large quantities, rather than making
frequent purchases in small quantities, to leverage our collective purchase power to
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negotiate better prices and terms with our suppliers. Our centralised procurement
eliminates the need for individual stores to handle their own purchasing activities,
streamlines our procurement process and reduce our administrative costs. This
“Operation-Procurement Separation” ( ᐄમʱᕎ ) model helps to increase the
accountability of procurement decisions and mitigate the risk of collusion between
suppliers and individual Retail Store to conduct improper marketing and sales
practices which are contrary to our Group’s strategies and planning. This also ensures
a consistent product offerings across all of our Retail Stores and generates a wealth of
consumer data for us, which provides us with insights into buying patterns, supplier
performance, and the effectiveness of promotional activities, all of which facilitate our
strategic planning and operational improvements.
 Unified management : We adopt unified management for all our Retail Stores. Our
head office oversees and coordinates the operations of multiple individual Retail
Stores. Major strategic decisions such as expansion plans are made by our head office.
Our marketing team at our head office is responsible for decision on product
assortment, pricing, and marketing campaigns, rather than independently by individual
store managers. Store managers of the Retail Stores inspect the physical appearance
and expiry dates of stock, monitors sales and consumer behaviours and report to our
head office regularly. Through our ERP system, our head office is able to monitor the
daily sales performance of each Retail Store and adjust our marketing strategies from
time to time. Our head office also conducts unified accounting for all of our Retail
Stores, which ensure the overall efficiency of our Group.
Our Malls
As at the Latest Practicable Date, we operated two Malls, namely Jiangdu Mall* ( Ϫேਠ
۬and Hongxinlong Mall* (ʕː ).
Jiangdu Mall* (۬is a shopping mall located in Jiangdu District, Y angzhou City. It
was opened in 1995 and covers an area of approximately 6,000 square meters. The mall is a
department store equipped with various concessionaires, supermarkets, pharmacies, etc. to meet
the consumers’ shopping needs.
Hongxinlong Mall* (ʕː ) is a multi-storey shopping mall located in Daqiao
Town, Jiangdu District, Y angzhou City. It was opened in 2020 and it covers an area of
approximately 3,000 square meters. The mall is equipped with various concessionaires, cinema,
restaurants, etc. to meet the shopping and entertainment needs of consumers.
During the Track Record Period, our revenue from general sales in Malls was substantially
contributed by Jiangdu Mall* (۬which accounted for over 95% of our revenue from
general sales in Malls. Jiangdu Mall did not obtain the Fire Safety Inspection Certificate, despite
the atrium of Jiangdu Mall has completed Fire Safety Review (as defined below). For details of
non-compliance and remedies, please refer to the paragraph headed “Non-compliance – (3)
Failure to complete Fire Safety Approvals” in this section below.
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Types of sales
General sales
General sales refer to the sales of our products to retail customers, usually local residents
living in the surrounding communities, who come to our Retail Stores or Malls in person to shop
and purchase. Customers generally pay at purchase. Our revenue from general sales to customers
at our Retail Stores and Malls amounted to approximately RMB751.6 million, RMB613.2
million, RMB616.8 million and RMB362.0 million for FY2021, FY2022, FY2023 and 9M2024,
respectively, representing 52.5%, 46.2%, 44.0% and 36.0% of our total revenue, respectively.
The following table sets forth the breakdown of our revenue and gross profit margin from
general sales by Retail Stores and Malls for the years/periods indicated:
FY2021 FY2022 FY2023 9M2023 9M2024
Revenue
Gross
profit
margin Revenue
Gross
profit
margin Revenue
Gross
profit
margin Revenue
Gross
profit
margin Revenue
Gross
profit
margin
RMB’000 % RMB’000 % RMB’000 % RMB’000 % RMB’000 %
(unaudited)
Retail Stores 560,040 507,758 477,440 376,778 262,238
– Supermarkets 446,875 23.8 390,094 24.7 383,592 25.8 306,482 27.7 222,588 26.2
– Convenience stores 113,165 14.0 117,664 14.1 93,848 16.1 70,296 16.7 39,650 21.7
Malls 191,575 12.0 105,451 16.3 139,373 17.2 95,702 17.7 99,811 16.7
Total from general sales 751,615 19.3 613,209 21.2 616,813 22.4 472,480 24.0 362,049 23.1
Bulk sales
Bulk sales from our Retail Stores refer to the sales of our products to customers who
purchase our products in large quantities, for whom we generally offer credit terms to our bulk
sales customers. Our bulk sale customers include corporate and government entities, and they
place orders with our Retail Stores or our sales team of our head office. Payments are made by
our bulk sale customers in advance of delivery. Alternatively, we grant credit terms ranging from
0 to 90 days to our bulk sale customers. We may offer certain discount to our pre-set selling
price of the products to bulk sale customers for their purchase in large quantities, and discounts
for bulk sales shall be approved by our head office.
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The following table sets forth changes in the number of our bulk sale customers during the
periods indicated below:
FY2021 FY2022 FY2023 9M2024
At the commencement of year/period 984 953 810 156
Addition during the year/period 526 37 31 66
Decrease during the year/period (557) (180) (685) (55)
Net (decrease)/increase (31) (143) (654) 11
At the end of the year/period 953 810 156 167
The number of our bulk sales customers decreased significantly during FY2023 and
9M2024 mainly driven by the easing of COVID-19 pandemic in the PRC. In 2021, we were
recognised as a Key Enterprise for Ensuring People’s Livelihood Supply in Y angzhou City* ( ౮
ᓃΆุ ) by the Command for the Prevention and Control of the Novel
Coronavirus Pneumonia Epidemic in Jiangdu District, Y angzhou City* (ف٬ڿ
౨௅ ). During the COVID-19 pandemic in FY2021 and FY2022, we had a high
number of bulk sales customers. In addition, as advised by the Industry Consultant, during the
lock-downs in the PRC, driven by uncertainty about future availability and the desire to
minimise shopping trips, consumers in the PRC exhibited a stock piling behaviour as they
tended to rush to stockpile essentials such as rice, oil, canned foods and hygiene products.
However, following the lifting of restrictions with COVID-19 pandemic largely behind in the
PRC, consumers in the PRC returned to more regular shopping habits, which led to the decrease
in the number of our bulk sales customers.
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The major differences between bulk sales and wholesale operations are summarised as
follows:
Bulk sales Wholesale operations
End customers Y es No
Onward distribution No Y es
Major product type All products available in
supermarkets and
convenience stores
Grains, oil, milk and alcoholic
beverages
Major customer type Corporate and government
entities
Resellers and other retail
operators including other
operators of supermarkets
and convenience stores as
well as catering business
operators
Typical credit terms and
payment method
Within 3 months; by bank
transfer
Within 3 months; by bank
transfer
Delivery Direct delivery by our Group
or by the supplier/
manufacturer to end
customers
Direct delivery by our Group
or by the supplier/
manufacturer to wholesale
customers or self pick-up
by wholesale customers
Concessionaire sales
We enter into concessionaire sale agreements with our concessionaires and charge
commission at a percentage of gross sales amounts for the right to occupy designated areas of
our Retail Stores and Malls, set up their own sales counters and sell their products. Products
offered by our concessionaires for sale at our Retail Stores include raw and fresh food,
non-staple food and household products, while products offered by our concessionaires for sale
at our Malls include fashion and apparel, cosmetics and personal care, jewellery, accessories,
footwear, children’s wear, household appliances, consumer electronics and miscellaneous
products, ranging from local brands to international brands. These concessionaire sales
arrangements enable us to offer a broader range of products to our customers while we do not
have to bear the risks and costs of inventory management, including the risks associated with
obsolete products.
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Under the concessionaire sale agreements, we would agree with our concessionaires about
the details of the product types and their respective prices, duration, commission rates, sales
target, profit guarantee by the concessionaires, settlement arrangements, promotion and
marketing activities, responsibilities for ancillary costs such as design, decoration, fitting and
removal expenses, and pricing policies. We are generally entitled to terminate the concessionaire
sale agreements if the concessionaires fail to meet the agreed sales target, commit any conduct
which prejudice our reputation and the interests of our customers or materially breach the terms
of the agreement.
We collect the payments for concessionaire sales from consumers through our designated
cashier counters in our Retail Stores and Malls on behalf of the concessionaires. The
concessionaires are not allowed to collect payment on their own. The concessionaires issue
invoices to us on a monthly basis. We retain the commission income at a certain percentage from
the gross sales proceeds before we make payment to the concessionaires. We normally settle the
payment with the concessionaires within two to three months following the month of sale.
The following table sets forth the amount due to concessionaires as at the year/period end
and the gross sale amounts (exclusive of value added tax) from concessionaires sales during the
year/period end:
For the year ended/As at 31 December
For the
period ended/
As at
30 September
20242021 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000
Amount due to concessionaires 39,022 38,256 34,800 18,749
Gross sale amounts (exclusive of value
added tax) from concessionaires sales 219,669 187,609 183,106 113,890
The following table sets forth the gross sales amounts (exclusive of value added tax) and
our commission from concessionaire sales for the years/period indicated:
FY2021 FY2022 FY2023 9M2024
Gross sale amounts (exclusive of value
added tax) from concessionaire sales
(RMB’000) 219,669 187,609 183,106 113,890
Commission income from concessionaire
sales (RMB’000) 32,718 30,748 32,894 20,752
Commissions as a percentage of
concessionaire sales 14.9% 16.4% 18.0% 18.2%
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During the Track Record Period, our commissions as a percentage of concessionaire sales
increased from approximately 14.9% for FY2021 to approximately 16.4% for FY2022, and
further increased to approximately 18.0% and 18.2% for FY2023 and 9M2024, respectively. The
increasing commissions as a percentage of concessionaire sales was due to the combined effect
of (i) the decreasing gross sale amounts from concessionaire sales, in particular from FY2021 to
FY2022 mainly due to COVID-19 pandemic; and (ii) the stable trend of our commission income
mainly due to the profit guarantee by the concessionaires.
E-commerce
In light of the increasing prevalence of e-commerce in the PRC, during the Track Record
Period, we had two mini programmes “ᒅ ” (Longhuiyigou*) and “Ꮂ຅˚༺ ”
(Hongxinlong Same Day Delivery*) for our Retail Stores and a mini programme “۬”
Jiangdu Mall*) for our Malls. These mini programmes are linked to the popular mobile
application WeChat. The mini programmes complement operation and sales of our Retail Stores
and Malls by allowing purchase of our products around the clock throughout the year. Registered
customers could place orders for the products available online and pay with electronic payments
such as WeChat pay, and they could select to pick up the ordered products at our Retail Stores,
Malls or delivery of our products to their designated locations. Leveraging the business model of
“online shopping, pick up offline and home delivery (ژwe
believe such mini programmes are able to offer our customers the convenience of real time
products information and place orders directly at anytime from anywhere, such that our
customers are more accustomed to purchase our products online.
We have also cooperated with three third-party e-commerce platforms, namely Douyin,
JD.com and WeChat for online sale and delivery of our products at our Malls to our customers.
By purchasing our products through these e-commerce platforms, customers could enjoy the
convenience of saving transportation time and costs and speedy delivery of the products.
The revenue generated from our mini programmes and e-commerce platforms for Retail
Stores and Malls amounted to approximately RMB14.6 million, RMB6.6 million, RMB22.7
million and RMB22.8 million for FY2021, FY2022, FY2023 and 9M2024, respectively,
representing 1.0%, 0.5%, 1.6% and 2.3% of our total revenue, respectively.
Measures to avoid cannibalisation between offline and online sales
During the Track Record Period, sales generated from our mini programmes and
e-commerce platforms for Retail Stores and Malls only serve as an additional channel for our
customers to place orders for our products. We believe the risk of cannibalisation between our
offline and online sales is limited because:
1. Different customer segments : Online and offline shopping attract different customer
segments. Some customers prefer the convenience of online shopping, while others
enjoy the experience of shopping in-store.
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2. Shopping behaviour : Customers may use both channels for different purposes. For
example, they may shop online for convenience and bulk items, while visiting
physical stores for fresh produce, meat and bakery items so that they can inspect the
quality and freshness of the products.
3. Logistics and delivery : The logistics of online shopping, including delivery time,
minimum purchase amount to qualify for free delivery and delivery fees, may
influence customer choices. Some customers may prefer shopping in-store to avoid
delivery fees or to receive their items immediately.
4. Multi-channel strategy : By integrating both online and offline experience, we offer
our customers channels which best suit their needs and therefore enhance their
purchase experience and loyalty and trust towards our brands.
As disclosed above, we believe the risk of cannibalisation between our offline and online
sales is limited. In the event the risk of cannibalisation increased, we can adopt the following
measures to minimise such risk:
1. “Online shopping, pick up offline and home delivery” model : Our customers can
order online and choose to pick up their groceries in-store. This can drive foot traffic
to physical stores while providing the convenience of online shopping.
2. Differentiated pricing, stock keeping units and promotions : We may implement
distinct strategies in terms of pricing and stock keeping units for online and offline
channels. For example, we may offer exclusive discounts or promotions for online
shoppers while maintaining in-store promotions which encourage foot traffic. We may
also set exclusive product lines or products with different packagings or limited-time
offers which are only available in-store to create a reason for customers to visit.
3. Enhanced in-store experience : We focus on creating a unique and enjoyable in-store
shopping experience which cannot be replicated online. This includes food product
sampling, cooking demonstrations or personalised customer service.
4. Cross-promotion : We can promote online shopping options in-store through signage,
flyers or staff recommendations. Conversely, we can encourage online customers to
visit physical stores by highlighting in-store events or promotions.
Franchise operations
During the Track Record Period, we had a franchise scheme for operation of franchised
supermarkets and franchised convenience stores. We generated insignificant revenue of
approximately RMB7.1 million, RMB1.3 million, RMB0.3 million and nil from sales to our
franchisees for FY2021, FY2022, FY2023 and 9M2024, respectively, representing not more than
0.5% of our revenue for the corresponding years/period. We received franchise fees of
approximately RMB341,000, RMB78,000, RMB279,500 and nil for FY2021, FY2022, FY2023
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and 9M2024, respectively. Pursuant to the franchise agreements with our franchisees, our
franchisees are allowed to use our trademark “Ꮂ ” (Hongxinlong*) within the designated
franchise outlets while they are not required to purchase any products from us. To strengthen the
protection of our trademark and in light of the insignificant amount of revenue and franchise
fees generated from our franchise operations, we have terminated the franchise scheme in 2023.
Customer services
We believe that customer service is a crucial part for our success as a Retail Stores
operator and Malls operator, as it could increases customer loyalty and satisfaction. Each of our
Malls have a customer service counter, where we provide customers services such as offline
pick-up points, product return, lost and found services, alterations on apparel, shoe and watch
repair, rest areas, merchandise availability notification, customer service hotline, missing
persons broadcasting, complaints counter and information centre.
We actively solicit market information and customers’ feedback in order to better
understand our customers’ preferences and purchase patterns. This is achieved through customer
services hotlines, online customer services platform for our customers to raise enquiries and
lodge complaints with us regarding our products and services.
We also endeavour to handle customers’ complaints (if any) promptly. Our operation team
is responsible for investigating the facts associated with such complaints and usually would
provide feedback within one day from the date of receipt of feedback and complaints. During the
Track Record Period, we from time to time received certain complaints from our customers
mainly relate to products description, product quality, staff services and/or requests for refund or
exchange. Our Directors confirmed that all the complaints were immaterial and did not have any
material adverse impact on our Group or our business operation.
Marketing and promotional activities
In order to attract customers’ attention and maintain their interest and loyalty in shopping
at our Retail Stores and Malls, we organise promotional activities and sales events from time to
time. Such promotional activities and sales events includes festival sales organised during
festivals such as the Chinese New Y ear and anniversary of our Group as well as seasonal sales
based on the sales strategies of our Group and market trend. Our procurement team would also
suggest promotional activities for clearance certain products if the inventory level of such
products were too high or the expiry date is approaching.
For FY2021, FY2022, FY2023 and 9M2024, our marketing expenses amounted to
approximately RMB7.3 million, RMB5.8 million, RMB6.3 million and RMB5.7 million,
respectively.
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Customer membership programmes
We maintain a membership programme for our Retail Stores (the “ Retail Stores
Membership Programme ”). Customers of our Retail Stores could become a member upon
registration and there is no minimum purchase amount for joining the Retail Stores Membership
Programme. As at the Latest Practicable Date, we have more than 420,000 members under our
Retail Stores Membership Programme. Members under our Retail Stores Membership Programme
could enjoy certain membership benefits and accumulate points based on purchases. The
accumulated points are redeemable for coupons.
We also maintain a membership programme for our Malls (the “ Malls Membership
Programme ”). Upon purchase of our products, customers could join our Malls Membership
Programme. As at the Latest Practicable Date, we had more than 200,000 members under our
Malls Membership Programme. Members under our Malls Membership Programme could
accumulate points based on purchases and the accumulated points are redeemable for different
items, such as gift or coupons.
Our Directors believe that the Retail Stores Membership Programme and Malls Membership
Programme could facilitate our communication with our customers to understand their
preferences and for disseminating updates for our marketing and promotional activities. By
providing membership discounts and point accumulation schemes, we create value for our
members, boost up our sales and cultivate emotional bonding of our customers simultaneously
and thereby procuring more recurring businesses.
Return and exchange policy
For products sold at our Retail Stores, we generally allow customers to return and exchange
the products within seven days of purchase by presenting the invoices provided that (1) there is
no damage to the products and the return or exchange would not affect resale of the products or
(2) the products have quality issues. These general rules are subject to certain exceptions for
selected categories of products like fresh food, products with shelf life within 15 days, tobacco
and liquors, which we do not generally allow product return or exchange.
For products sold at our Malls, we generally allow customers to return or exchange the
products within seven days of purchase by presenting the invoices provided that (1) there is no
damage to the products and the return or exchange would not affect resale of the products or (2)
the products have quality issues. These general rules are subject to certain exceptions for
selected categories of products like jewellery, mobile phones, cosmetics and innerwear, etc.,
which we do not generally allow product return or exchange save for products with quality
issues.
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In unusual circumstances of quality issues or other irregularities in products originated
from manufacturing processes or other defaults of our upstream suppliers, we would be
responsible to recall problematic products sold to our customers and seek reimbursements on
product procurement costs and expenses incurred in such recall actions from the relevant
suppliers of the problematic products.
During the Track Record Period, we did not experience any material claim for product
returns or exchanges due to product quality defects or damages or any related product liability
claims.
Settlement and cash management
The majority of our retail customers settle their purchases at our Retail Stores and Malls by
cash and electronic payment. We also receive payment by way of prepaid cards and coupons.
Cash and cash management
While cash payments has become less popular in the PRC in recent years, our Retail Stores
and Malls still handle certain amount of cash every day. Therefore, we have in place certain
internal control measures in relation to cash management to prevent misappropriation of cash.
All transactions of our Retail Stores and Malls are conducted and concluded through our POS
system. All cash received are required to be kept in our cashier machines. We deposit cash
received from sales into our bank accounts within one business day from the date of sales, while
maintaining sufficient cash-on-hand in each Retail Store. If cash in cashier machine exceeded
RMB20,000, cashier shall inform the store manager and arrange deposit with bank. At the end of
each shift, the cashier counts the cash received in the cashier machine during his/her shift and
record in the cashier records. If the cash count is inconsistent with the record, the cashier is
required to be responsible for the deficit. The store managers of our Retail Stores monitor the
amount of cash received from sales every day and the record shown in our POS system, and
report to our finance department. Our finance department also designates staff to stocktake the
amount of cash at our Retail Stores and Malls and check with the records kept by our finance
department at regular interval. In addition, we have installed CCTV surveillance system in all of
our Retail Stores and Malls which operates 24 hours.
Our Directors confirm that there was no incident of any material cash misappropriation
during the Track Record Period and up to the Latest Practicable Date.
Electronic payment
Our Retail Stores and Malls accept electronic payments, such as WeChat pay and Alipay.
Our POS system is linked to the electronic payment systems and payment status could be shown
on our POS system instantly. The transaction amount settled by electronic payments is usually
credited into our designated bank account within one business day after the date of the
transaction. During the Track Record Period, service charges of not more than 1% on the
transaction amount were generally imposed by the electronic payments operators.
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Prepaid cards
Customers could purchase prepaid cards at our Retail Stores and our Malls, respectively.
Customers can pay for goods from our Retail Stores or our Malls at a later date using the
balances in the prepaid cards. We usually sell prepaid cards at full price.
Amount that we receive from the issuance of prepaid cards is an advance we receive from
customers that is recorded on our consolidated statements of financial position, but is not
recognised as our revenue until the customers redeem the prepaid cards when purchasing our
merchandise. The prepaid cards issued by our Group do not have an expiry date. For details,
please refer to the paragraph headed “Financial Information – Contract liabilities” in this
prospectus.
As at 31 December 2021, 31 December 2022, 31 December 2023 and 30 September 2024,
the balance of contract liabilities in respect of our prepaid cards amounted to approximately
RMB63.7 million, RMB64.3 million, RMB62.0 million and RMB66.5 million, respectively.
Our Company and Hongxin Trading were registered under the Measures for the
Administration of Single-purpose Commercial Prepaid Cards (for Trial Implementation)* ( ఊ͜
ج( ༊Б)) and Detailed Rules for the Implementation of the Measures for
the Administration of Single-purpose Commercial Prepaid Cards in Jiangsu Province (Trial
Implementation)* (ج( ༊Б)) for issuance of the
prepaid cards. As advised by our PRC Legal Advisers, according to the confirmation letter
issued by Y angzhou Municipal Bureau of Commerce* ( ౮ψ̹ਠਕ҅ ), our Group has complied
with the relevant law and regulations relating to issuance of prepaid cards during the Track
Record Period.
Coupons
Members under our Retail Stores Membership Programme and Malls Membership
Programme could accumulate reward points based on purchases and the accumulated points are
redeemable for different items, including coupons.
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Rental operations
During the Track Record Period, we generated rental income mainly from leasing some
shop floor area or shop premises in our Retail Stores and Malls to other retail operators like
restaurants, hotels and pharmacies, etc. and receive rental income. During the Track Record
Period, the GFA (and as a percentage of total GFA of all Retail Stores and Malls) of the Retail
Stores and Malls that are leased out, the occupancy rate and the average fee per GFA are set out
as follows:
As of 31 December
As of
30 September
2021 2022 2023 2024
(Approximately)
GFA of the Retail Stores and Malls
that are leased out 28,000 m 2 30,000 m 2 32,000 m 2 31,000 m 2
Total GFA of all Retail Stores and
Malls 98,000 m 2 98,000 m 2 93,000 m 2 92,000 m 2
% of total GFA of all Retail Stores
and Malls leased out 28.96% 31.08% 34.01% 34.23%
Average annual rental income per
GFA leased out RMB255/m 2 RMB274/m 2 RMB261/m 2 RMB234/m 2
As at the Latest Practicable Date, we entered into 77 lease agreements for leasing our
properties of a total gross floor area of approximately 55,000 sq.m., of which approximately
32,000 sq.m. was in respect of the Retail Stores and Malls and approximately 23,000 sq.m. was
in respect of our land and warehouses with an average rental income of approximately RMB56
per GFA leased out. All of our tenants are Independent Third Parties. We select such tenants
based on our customers’ preferences and the market trends of the products or services of our
tenants. The complementary nature of their products and services could offer our customers a
choice for greater variety of products and create a convenient one-stop shopping experience to
our customers. We believe the synergistic effect created is able to attract more customers to shop
at our Retail Stores and widen our customer base. According to the Industry Report, in order to
generate additional source of income and diversify the business operations within the outlet, it is
common for supermarket and shopping mall operators in the PRC to lease part of the outlet
areas to providers of other products and/or services.
The tenants generally enter into lease agreements with us for terms ranging from one to ten
years based on our standard form, which sets out details of the designated areas, the types of
business of the tenants, the rents, settlement arrangements, cooperation regarding expansion,
decoration and maintenance, and responsibilities for ancillary costs such as design, decoration
and fitting expenses. The tenants generally have the right to design and decorate their designated
areas and are responsible for the costs. In addition, they are generally responsible for employing
their own staff and for maintaining their merchandise or service at a quality acceptable to our
customers.
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For FY2021, FY2022, FY2023 and 9M2024, our rental income (inclusive of management
fee) from leasing certain areas in our Retail Stores and Malls to our tenants amounted to
approximately RMB10.7 million, RMB10.6 million, RMB11.6 million and RMB10.9 million,
respectively.
IMPACT OF THE OUTBREAK OF COVID-19 ON OUR OPERATIONS
Due to the emergence of the COVID-19 pandemic in the PRC in early 2020, the PRC
government imposed various lockdown measures during the Track Record Period (FY2021 and
FY2022) to contain its spread. Such measures included but not limited to, stay-at-home orders
for residents, with only one person per household allowed to leave for essential tasks every few
days, massive testing for the whole population and contact tracing efforts to identify and isolate
close contacts of positive cases. These stringent measures imposed restrictions on residents’
mobility which in turn had adverse impacts on the number of customers visiting and shopping in
our Retail Stores and Malls and thus our revenue generated therefrom. Besides, our operations
experienced material disruptions as a result of (i) temporary closure of certain of our Retail
Stores and Malls during FY2021 and FY2022; and (ii) shortening of the opening hours of our
Retail Stores and Malls. For instance, during FY2021, over 20 of our Retail Stores and our
Malls experienced temporary closure in August and September 2021 and the temporary closure
in FY2021 for each of the relevant Retail Stores and Malls lasted for no more than 45 days. In
addition, towards the end of FY2022 when the restriction was initially lifted, the infection cases
significantly increased which adversely affected the number of customers visiting and shopping
in our Retail Stores and Malls over the high-season end of year sales, despite that only one of
our Retail Stores was temporarily closed for 7 days due to the restrictions imposed by the PRC
government during the end of FY2022. As a result of these, our revenue from general sales
decreased significantly from approximately RMB751.6 million for FY2021 to approximately
RMB613.2 million for FY2022. Apart from the above, delivery of products from and to us was
adversely affected as a result of restrictive transportation measures such as heavy restriction on
travelling from and to Y angzhou and suspension of public transportation within Y angzhou.
Despite these challenges, we managed to maintain a relatively stable gross profit from sales
of goods at approximately RMB230.9 million and RMB238.8 million for FY2021 and FY2022,
respectively, which was primarily contributed by our bulk sales, the revenue and gross profit of
which increased from approximately RMB104.2 million and RMB21.4 million for FY2021,
respectively, to approximately RMB143.9 million and RMB46.8 million for FY2022. As advised
by the Industry Consultant, during the lock-downs in the PRC, driven by uncertainty about
future availability and the desire to minimise shopping trips, consumers in the PRC exhibited a
stock piling behaviour as they tended to rush to stockpile essentials such as rice, oil, canned
foods and hygiene products, which contributed to the increase in bulk sales in the PRC market.
During the COVID-19 pandemic, we assisted in procuring and distributing essential daily
necessities when various lockdown measures were imposed by the PRC government to ensure
prevention and control of spread, and were recognised as a (i) Key Supply Unit for Prevention
and Control in Jiangdu District, Y angzhou City* (ღԶᏐఊЗ )b yt h e
Office of the Command for the Prevention and Control of the Novel Coronavirus Pneumonia
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Epidemic in Jiangdu District, Y angzhou City* (౨௅
܃in 2020; and (ii) Key Enterprise for Ensuring People’s Livelihood Supply in Y angzhou
City* (ᓃΆุ ) by the Commerce Bureau of Y angzhou City* ( ౮ψ̹ਠਕ҅ )
and Key Enterprise for Ensuring People’s Livelihood Supply in Y angzhou City* (ڭ
ᓃΆุ ) by the Command for the Prevention and Control of the Novel Coronavirus
Pneumonia Epidemic in Jiangdu District, Y angzhou City* (ઋԣછʈЪ
౨௅ ) in 2021.
In April 2022, a white list was established by Shanghai Municipal Commission of
Commerce (ึ ) for enterprises providing daily necessities during the COVID-19
pandemic in Shanghai to ensure effective epidemic prevention and the guarantee of daily
necessities. Due to the normalisation of production and daily life order and resumption of
business operations in Shanghai, the white list had ceased to be updated and used since 1 June
2022 and all information contained thereon is no longer available for inspection.
SUPPLY AND SALES OF MEALS
Leveraging our ability to source and supply quality and fresh food ingredients, we also
operate a central kitchen to produce meals and snacks and deliver to local corporates, schools or
government entities at the general price range of RMB8 to RMB25 per meal and RMB1.5-2.5
per snack. As at the Latest Practicable Date, our central kitchen was located at Y angzhou and
had the capacity to produce 10,000 sets of meals for lunch and 10,000 sets of meals for dinner
per day.
The salient terms of the relevant agreements are set forth below:
Term Generally ranging from 6 months to 1 year, subject
to customers’ need
Payment terms For schools: advance monthly payment for the
following month
For other customers: generally up to 15 days
Food safety issues In case of food safety issues caused by our Group or
resulted from any of our acts, our Group shall bear
all liabilities arising therefrom.
Renewal In case of schools or government entities, our Group
is required to participate in annual bidding for the
purpose of renewal.
In other cases, advance notice shall be served on our
Group by customers generally one month before
expiry as to their intention of renewal.
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The general workflow of our central kitchen entails:
1. Procurement of food ingredients: Our procurement team procures food ingredients for
our meals based on the menu set. Upon delivery of the food ingredients, our staff
would inspect and check the quality of the food ingredients to ensure that the food
ingredients comply with our food safety standards.
2. Cooking: According to the menu set, we prepare and cook the dishes using our
machines and equipment. We usually cook the dishes daily and three hours before the
specified delivery time of our meals.
3. Packaging of the meals: Meals offered by us are generally Chinese-style food. We
package the meals according to the menu.
4. Delivery to customers and consumption by end consumers: We are generally
responsible for delivering the meals to locations designated by our customers and
ensuring that the meals meet the required temperature upon delivery.
5. Return of cutleries and containers and cleaning and disinfection of cutleries and
containers: We use reusable cutleries and containers for our meals. We collect the used
cutleries and containers from our customers after one hour of delivery of the meal. We
would then clean and conduct disinfection of cutleries and containers for reuse.
As at the Latest Practicable Date, the premises at which our central kitchen is situated have
certain title defects due to the absence of relevant land use right certificate. For details, please
refer to the paragraph headed “Non-compliance – (1) Failure to obtain certain land use right
certificates and property ownership certificates – Failure to obtain certain property ownership
certificates” in this section. We have enacted a relocation plan to remedy the non-compliance.
For details, please refer to the paragraph headed “Non-compliance – (1) Failure to obtain certain
land use right certificates and property ownership certificates – Current status and remedies” in
this section.
According to the Industry Report, the sales of prepared food in the central region of
Jiangsu Province increased from approximately RMB2.39 billion in 2017 to approximately
RMB7.75 billion in 2023, representing a CAGR of 21.66%. Driven by the increasing demand for
convenient, fast and diverse food processing options among consumers, it is forecasted that the
sales of prepared food in the central region of Jiangsu Province will increase from
approximately RMB10.64 billion in 2024 to approximately RMB19.78 billion in 2027,
representing a CAGR of approximately 22.96%. With a view to capitalise on the business
opportunities in the prepared food market in the PRC, we intend to apply approximately
RMB26.0 million (equivalent to approximately HK$28.1 million), or approximately 26.4% of the
net proceeds from the Global Offering will be used for establishing a new central kitchen for
meals. For details, please refer to the paragraph headed “Our business strategies – Expanding
our production capacity of meals by establishing a new central kitchen” in this section.
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OUR PRODUCTS PORTFOLIO
Through our wholesale and retail operations, we offer a wide range of daily consumer
products for our customers.
The table below sets forth the major category of our products, major products in such
category, general price range and major reasons for price fluctuation regarding our wholesale
distribution operation:
Category
(Note 1) Examples of products
General price
range
Garment Ladies’ fashion and men’s fashion USD3.3–39
Wooden products Wooden doors and flooring RMB147–221
Household appliances Televisions, air conditioner,
washing machines and refrigerators
RMB300–25,000
Food products
(Note 2) – Grains and oil
– Dairy products
– Liquor
RMB4.2–278.3
RMB2.15–144
RMB3–32,000
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The table below sets forth the major category of products offered at our Retail Stores and
Malls and the general price range:
Category Examples of products
General price
range
(RMB)
Retail Stores (Note 3)
Raw and fresh food V egetables, fruits, meat and poultry 0.5–60
Grains and oil Rice, grains, wheat, beans, flour and
starch and cooking oil
4.5–168
Non-staple food
– Sauces, and
condiments
Cooking sauce and various food
seasoning ingredients
0.5–168
– Dairy products Ice-cream, milk and cheese 1.2–135
– Frozen food Frozen meat, frozen dim sum and frozen
hotpot food
0.9–688
– Packaged food and
commodities
Biscuits, candies, chocolate, pastries,
chips, jellies, nuts, noodles and
canned food
0.5–425
– Drinks and
beverages
Alcoholic beverages, water, carbonated
drinks, juice, soft drinks and beverage
powder
1–1,380
Household products Household cleaners, laundry products,
paper products, bedding, hair and
skincare products, towels, clothes,
stationeries, household appliances and
kitchen appliances
0.3–7,999
Malls
(Note 4)
Fashion and apparel and
children’s wear
Ladies’ fashion, men’s fashion, sport
wear, leisure wear, children’s
clothing, shoes and baby clothing
25–29,800
Cosmetics and personal
care
Skincare, cosmetics and perfume 30–5,000
Jewellery V arious kinds of jewellery made of
gold, platinum, pearl, silver, jade and
other materials
38–350,000
Accessories and
footwear
Eyeglasses, watches, belts, bags,
women’s shoes, men’s shoes and sport
shoes
30–20,000
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Category Examples of products
General price
range
(RMB)
Household appliances
and consumer
electronics
Refrigerators, washing machines,
televisions, air conditioners, kitchen
appliances, small appliances,
smartphones, computers and
earphones
79–40,000
Liquor – 118–13,500
Miscellaneous products Bedding, snacks 12.9–4,940
Notes:
1. The major reason of price fluctuation of the products during the Track Record Period was mainly due to
fluctuation in production costs.
2. We have obtained district distributorship rights from suppliers for certain food products.
3. The major reasons of price fluctuation of the products during the Track Record Period were mainly due to
fluctuation in production costs, weather and seasonality.
4. The major reasons of price fluctuation of the products during the Track Record Period were mainly due to
promotional activities, seasonality, different brands and types of products.
As advised by our PRC Legal Advisers, according to the Notice of the Ministry of Finance
and the State Administration of Taxation on Issues Concerning the Exemption of V A T at the
Stage of Circulation of V egetables (೼Ϟᗫ
)( ৌ೼[2011]137 ໮) and the Notice of the Ministry of Finance and the State
Administration of Taxation on the V alue-added Tax Exemption Policies for Certain Fresh Meat
and Egg Products in Circulation (ஷᐑື
)( ৌ೼[2012]75 ໮) (together referred as “ Notices ”) issued by Ministry of
Finance and the State Administration of Taxation, the relevant goods including vegetables and
defined fresh meat categories referred in the Notices are V A T exempted. Certain raw and fresh
food sold at our Retail Stores are within the categories of the Notices and are V A T exempted.
For FY2021, FY2022, FY2023 and 9M2024, approximately RMB114.3 million, RMB126.1
million, RMB88.4 million and RMB54.5 million of our revenue from sales of raw and fresh food
were within the categories of the Notices that were V A T exempted, respectively.
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Revenue derived from our products
The following table sets forth the breakdown of our revenue from sales of goods which was
recognised on gross basis for the years/periods indicated:
FY2021 FY2022 FY2023 9M2023 9M2024
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(unaudited)
Wholesale Operations
Wholesales:
Non-food products 48,257 71,379 56,377 29,029 39,064
Food 467,397 423,677 623,264 405,791 529,274
Oil 348,887 310,971 436,086 293,345 387,592
Grains 15,282 24,697 33,425 15,662 39,202
Alcoholic beverages 56,550 50,237 97,661 51,976 60,063
Milk 42,976 33,111 34,314 26,374 26,900
Others 3,702 4,661 21,778 18,434 15,517
Sub-total 515,654 495,056 679,641 434,820 568,338
Retail Operations
Retail Stores and bulk sales:
Food (Note 1) 525,228 491,901 384,236 297,524 253,733
Non-food products 75,735 64,945 81,813 58,177 46,874
Tobacco products 67,708 99,158 54,788 54,788 –
Discount and coupon deduction (4,455) (4,316) (4,514) (3,566) (3,406)
664,216 651,688 516,323 406,923 297,201
Malls:
Electronic appliances 49,463 35,422 72,928 45,516 49,579
Fashion, apparel and children’s wear 57,602 16,904 16,104 11,146 11,430
Gold, jewellery and accessories 61,619 43,751 43,732 34,226 35,357
Others
(Note 2) 25,501 10,874 9,652 6,535 5,331
Discount and coupon deduction (2,610) (1,500) (3,043) (1,721) (1,886)
191,575 105,451 139,373 95,702 99,811
Sub-total 855,791 757,139 655,696 502,625 397,012
Aggregate revenue from wholesales,
general sales and bulk sales 1,371,445 1,252,195 1,335,337 937,445 965,350
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Notes:
1. Food under our retail operations mainly include raw and fresh food, grains, oil and non-staple food.
2. Others include cosmetics, beauty products, stationeries and other groceries.
In respect of our wholesale operations, food was the most significant type of goods in
terms of revenue contribution during the Track Record Period. Our revenue from sales of food
increased significantly from approximately RMB423.7 million for FY2022 to approximately
RMB623.3 million for FY2023 and also increased significantly from approximately RMB405.8
million for 9M2023 to approximately RMB529.3 million for 9M2024. As advised by the
Industry Consultant, the increase in wholesale of food in the PRC in 2023 and 2024, particularly
as a result of recovery from COVID-19 pandemic, was driven by a combination of economic
recovery and pent-up demand. In particular, as COVID-19 restrictions were lifted, businesses
resumed normal operations, including resellers, retail operators such as operators of
supermarkets and convenience stores as well as catering business operators. This resurgence in
economic activity led to increased demand for wholesale food supplies as food service
establishments sought to replenish stock. In addition, during the lockdowns, businesses in the
PRC tended to postpone many purchases particularly in the food sector. As restrictions eased,
there was a tendency to purchase food supplies to meet the needs of retail operators and catering
business operators, thereby driving up wholesale sales. Furthermore, our increase in revenue
from sales of food under our wholesale operations for 9M2024 as a result of a change in food
consumption behaviour which in turn led to an increase in the demand for food ingredients (such
as grains and oil) at the wholesale level. As advised by the Industry Consultant, in 2024, there
has been a notable increase in the number of individuals dining out at restaurants, which was
mainly driven by several key factors including, (1) the gradual recovery of the general economy
in Y angzhou and the PRC has resulted in increased disposable income for consumers, enabling
greater spending on dining out; (2) restaurants are proactively seeking to attract customers in
order to recover from business losses incurred during the lockdowns; and (3) many people
appreciate the social aspect of dining out, which fosters gatherings with friends and family in a
lively atmosphere. As a result of the increasing number of individuals dining out at restaurants,
consumers have reduced their spending on food purchased from supermarkets at the retail level,
while at the same time the demand for food ingredients (such as grains and oil) at the wholesale
level increased.
In respect of our retail operations, food was the most significant type of goods in terms of
revenue contribution during the Track Record Period. For FY2021, FY2022, FY2023 and
9M2024, the percentage of revenue from sales of food to revenue from Retail Stores and bulk
sales was approximately 79.1%, 75.5%, 74.4% and 85.4%, respectively. The increase in such
percentage for 9M2024 was mainly driven by the nil revenue contribution from sales of tobacco
products for 9M2024 as a result of our cessation of sales of tobacco products. On 31 December
2023, our Group ceased the sales of tobacco products. For details of such cessation, please refer
to the paragraphs headed “History and Development – Cessation of sales of tobacco products
and disposal of tobacco product inventory assets” and “Business – Our product portfolio –
Cessation of sales of tobacco products and disposal of tobacco product inventory assets” in this
prospectus.
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Our revenue from sales of food under our retail operations decreased from approximately
RMB525.2 million for FY2021 to approximately RMB491.9 million for FY2022, which was
mainly driven by the negative impact brought by the epidemic measures/lockdown for
COVID-19 in Y angzhou during 2022 in which our Retail Stores were required to shorten our
operating hours. Our revenue from sales of food under our retail operations further decreased to
approximately RMB384.2 million for FY2023, which was mainly driven by the negative impact
of change in shopping habits on our bulk sales following the restrictions were lifted with
COVID-19 pandemic largely behind in the PRC. For 9M2024, our revenue from sales of food
under our retail operations decreased to approximately RMB253.7 million from approximately
RMB297.5 million for 9M2023. Such decrease was mainly driven by the abovementioned change
in food consumption behaviour of consumer.
Driven by the decrease in revenue from sales of food and our cessation of sales of tobacco
products as disclosed above, our revenue from sales of goods (which was recognised on gross
basis) under our retail operations decreased from approximately RMB502.6 million for 9M2023
to approximately RMB397.0 million for 9M2024.
Our revenue from sales of electronic appliances under our retail operations increased
significantly from approximately RMB35.4 million for FY2022 to approximately RMB72.9
million for FY2023. As advised by the Industry Consultant, as the restrictions were lifted with
COVID-19 pandemic largely behind in the PRC, consumers in the PRC were eager to spend on
electronic appliances, leading to a surge in sales as people sought to upgrade or replace older
devices, and in particular, with more time spent at home during lockdowns, many consumers in
the PRC tended to take on home improvement projects.
Our revenue from sales of fashion, apparel and children’s wear and gold, jewellery and
accessories under our retail operations decreased significantly from approximately RMB57.6
million and RMB61.6 million for FY2021, respectively, to approximately RMB16.9 million and
RMB43.8 million for FY2022, respectively. As advised by the Industry Consultant, the impact of
lock-down in the PRC had led to a decline in the sales of fashion, apparel and children’s wear
and gold, jewellery and accessories in the PRC, primarily due to the priority of consumers in the
PRC to focus their spending on essentials as well as the closing down of physical retail and
department stores. In particular, (i) the need to stay at home and the unavailability of fitting
rooms had hindered the sales of fashion, apparel and children’s wear; and (ii) consumers tended
to purchase luxury goods such as gold and jewellery physically in store, and were more cautious
in buying luxury items in view of the uncertainty on the economic recovery after COVID-19
pandemic.
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Cessation of sales of tobacco products and disposal of tobacco product inventory assets
Due to the restriction imposed on foreign-invested enterprises to carry on the sales of
tobacco products in the PRC under the applicable PRC laws and regulations, namely the PRC
Tobacco Monopoly Law ( ), Tobacco Retail Licence Management
Measures ( ), Special Administrative Measures (Negative List) for
Foreign Investment Access (Edition 2021) (݄( ૶ఊ ) (2021 ϋ
و)) and Special Administrative Measures (Negative List) for Foreign Investment Access
(Edition 2024) (݄( ૶ఊ ) (2024و)) which replaced Special
Administrative Measures (Negative List) for Foreign Investment Access (Edition 2021) and was
effective on 1 November 2024, our Group ceased the sales of tobacco products. For the details
of such cessation, please refer to the paragraph headed “History and Development – Cessation of
sales of tobacco products and disposal of tobacco product inventory assets” in this prospectus.
During the Track Record Period, the gross profit generated from sales of tobacco products
was RMB8.4 million, RMB12.0 million, RMB6.3 million and nil for FY2021, FY2022, FY2023
and 9M2024 respectively, which represented approximately 3.0%, 4.0%, 2.1% and nil of our
total gross profit for the respective years/period.
PRICING POLICY
For wholesale, when setting the wholesale price, we also consider the type of the
merchandise, the sales volume, the profit margin under the prevailing market conditions and
indicative price list from our suppliers.
In order to maintain our competitiveness in the market, we believe that offering quality
daily consumer products at competitive prices is important for our success. We have adopted a
“cost-plus” pricing policy, pursuant to which we set target prices with different profit margins
over our products taking into consideration our costs of goods sold and the associated
operational costs. We would also conduct market research from time to time and compare prices
of similar products offered by our competitors to ensure that our products remained sufficiently
competitive with those set by our competitors while still capable of meeting our targeted profit
margins. We adjust our retail prices of our products based on the prevailing market trends,
sourcing prices, seasonality and the pricing strategy as determined by our management. The
retail prices set by our procurement department for our retail products are inputted and recorded
in our ERP System.
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OUR CUSTOMERS
The customers of our wholesale operations mainly include resellers and other retail
operators including other operators of supermarkets and convenience stores as well as catering
business operators. During the Track Record Period, we generally offer to our wholesale
customers credit terms of up to three months.
The customers of our retail operations mainly consist of general sale customers and bulk
sale customers. General sale customers are primarily individuals, usually local residents living in
the communities, who come to our Retail Stores or Malls in person to shop and purchase, and
typically settle payments in cash, credit cards, electronic payment such as WeChat pay and
Alipay or pre-paid cards on their purchase. Bulk sale customers include corporate and
government entities, which purchase products in large quantities and they typically settle
payments by bank transfer. During the Track Record Period, our bulk sale customers generally
made payment to us in advance of delivery. Alternatively, we offered credit terms ranging from
0 to 90 days to our bulk sale customers during the Track Record Period.
The customers for our meals are local corporates, schools or government entities, and they
typically settle payments by bank transfer. During the Track Record Period, our customers for
our meals generally made payment to us in advance. Alternatively, our customers for our meals
made monthly payment to us following the delivery of meals.
During the Track Record Period and up to the Latest Practicable Date, we did not have any
material disputes with our customers. We had a limited number of claims for defective products
sold at our Retail Stores and Malls, and such claims, whether on an individual or an aggregate
basis are not considered to have any material adverse impact on our Group during the Track
Record Period.
Major customers
For FY2021, FY2022, FY2023 and 9M2024, our revenue attributable to our largest
customer in each year/period during the Track Record Period accounted for approximately 5.7%,
12.4%, 16.2% and 11.2% of our total revenue, respectively, while our revenue attributable to our
five largest customers in each year/period during the Track Record Period in aggregate
accounted for approximately 18.8%, 26.8%, 31.8% and 28.5% of our total revenue, respectively.
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The following table sets forth a breakdown of our five largest customers during each of
FY2021, FY2022, FY2023 and 9M2024:
FY2021
Rank Customer Principal business
Major types of
products
purchased
Type of
customers
Business
relationship with
the customer
commenced in
Typical credit
terms and
payment method
Revenue derived
from the customer
RMB’000 %
1 Suzhou Qingsui Food
Co., Ltd.* ( ᘽψᅅᐦ
ʮ̡ )
A PRC company
principally engaging in
the wholesale business
of grains and oil
Soybean oil Wholesale
customer
2020 up to 90 days; by
bank transfer
81,070 5.7
2 Jiangsu Fukangyuan
Grain and Oil Co.,
Ltd.* ( Ϫᘽ၅ੰ๕
ʮ̡ )
A PRC company
principally engaging in
the wholesale business
of oil
Soybean oil Wholesale
customer
2020 up to 90 days; by
bank transfer
74,901 5.2
3 Wuxi Kangzhuang
Agricultural
Development Co.,
Ltd.* ( ೌ፼ੰ୿ุ༵
ʮ̡ )
A PRC company
principally engaging in
the sale of grains and
oil, liquor and other food
products through
multiple sales channels
including but not limited
to retail, bulk sale and
wholesale
Soybean oil Wholesale
customer
2020 up to 90 days; by
bank transfer
42,659 3.0
4 Shanghai Xirui Food
Sales Co., Ltd.*
(ቖਯ
ʮ̡ )
A PRC company
principally engaging in
the retail and wholesale
business of grains and
oil
Soybean oil and
rice
Wholesale
customer
2020 100% advance
payment; by
bank transfer
35,479 2.5
5 Zhangjiagang Feiniao
Grain and Oil Trading
Co., Ltd.* (࠭
ʮ̡ )
and Jiangsu Xunye
Food Co., Ltd.* ( Ϫᘽ
ʮ̡ )
Two PRC companies with
a common shareholder
principally engaging in
the wholesale business
of grains and oil
Soybean oil Wholesale
customer
2021 up to 90 days; by
bank transfer
35,163 2.5
Five largest customers combined 269,272 18.8
All other customers 1,162,921 81.2
Total revenue 1,432,193 100
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FY2022
Rank Customer Principal business
Major types of
products
purchased
Type of
customers
Business
relationship with
the customer
commenced in
Typical credit
terms and
payment method
Revenue derived
from the customer
RMB’000 %
1 Jiangsu Fukangyuan
Grain and Oil Co.,
Ltd.* ( Ϫᘽ၅ੰ๕
ʮ̡ )
A PRC company
principally engaging in
the wholesale business
of oil
Soybean oil Wholesale
customer
2020 up to 90 days; by
bank transfer
164,501 12.4
2 Wuxi Kangzhuang
Agricultural
Development Co.,
Ltd.* ( ೌ፼ੰ୿ุ༵
ʮ̡ )
A PRC company
principally engaging in
the sale of grains and
oil, liquor and other food
products through
multiple sales channels
including but not limited
to retail, bulk sale and
wholesale
Soybean oil Wholesale
customer
2020 up to 90 days; by
bank transfer
57,974 4.4
3 Wuxi Kaifu Supply
Chain Management
Co., Ltd.* ( ೌ፼කబ
ʮ̡ )
and Wuxi Zhilian
Agricultural Food
Trading Co., Ltd.*
(׸
ʮ̡ )
Two PRC companies with a
common shareholder and
under common control
principally engaging in
the wholesale business
of grains and oil
Soybean oil Wholesale
customer
2022 up to 90 days; by
bank transfer
56,168 4.2
4 Customer G A local government
authority at Hongqiao
Town, Minhang District,
Shanghai, the PRC
Fruits and
vegetables
Bulk sale
customer
2022 50% of the
contract sum
payable within
two days upon
signing of
contract;
balance to be
paid within five
days upon
acceptance of
products; by
bank transfer
41,690 3.1
5 Zhangjiagang Feiniao
Grain and Oil Trading
Co., Ltd.* (࠭
ʮ̡ )
and Jiangsu Xunye
Food Co., Ltd.* ( Ϫᘽ
ʮ̡ )
Two PRC companies with a
common shareholder
principally engaging in
the wholesale business
of grains and oil
Soybean oil Wholesale
customer
2021 up to 90 days; by
bank transfer
35,832 2.7
Five largest customers combined 356,165 26.8
All other customers 972,520 73.2
Total revenue 1,328,685 100
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FY2023
Rank Customer Principal business
Major types of
products
purchased
Type of
customers
Business
relationship with
the customer
commenced in
Typical credit
terms and
payment method
Revenue derived
from the customer
RMB’000 %
1 Jiangsu Fukangyuan
Grain and Oil Co.,
Ltd.* ( Ϫᘽ၅ੰ๕
ʮ̡ )
A PRC company
principally engaging in
the wholesale business
of oil
Soybean oil Wholesale
customer
2020 up to 90 days; by
bank transfer
227,426 16.2
2 Zhangjiagang Feiniao
Grain and Oil Trading
Co., Ltd.* (࠭
ʮ̡ )
and Jiangsu Xunye
Food Co., Ltd.*
(ࠢ
ʮ̡)
Two PRC companies with
a common shareholder
principally engaging in
the wholesale business
of grains and oil
Soybean oil and
rice
Wholesale
customer
2021 up to 90 days; by
bank transfer
81,939 5.8
3 Wuxi Kaifu Supply
Chain Management
Co., Ltd.* ( ೌ፼කబ
ʮ̡ )
and Wuxi Zhilian
Agricultural Food
Trading Co., Ltd.*
(׸
ʮ̡ )
Two PRC companies with
a common shareholder
and under common
control principally
engaging in the
wholesale business
of grains and oil
Soybean oil and
rice
Wholesale
customer
2022 up to 90 days; by
bank transfer
61,190 4.4
4 Hong Hai (Suzhou)
Food Technology Co.,
Ltd.* ( ᒿऎ(ᘽψ)ۜ࠮
ʮ̡ )
A PRC company
principally engaging
in the supply of food
products for
Chinese-style meals
Soybean oil Wholesale
customer
2023 up to 60 days; by
bank transfer
39,104 2.8
5 Wuxi Kangzhuang
Agricultural
Development Co.,
Ltd.* ( ೌ፼ੰ୿ุ༵
ʮ̡ )
A PRC company
principally engaging in
the sale of grains and
oil, liquor and other food
products through
multiple sales channels
including but not limited
to retail, bulk sale and
wholesale
Soybean oil Wholesale
customer
2020 up to 90 days; by
bank transfer
36,911 2.6
Five largest customers combined 446,570 31.8
All other customers 955,402 68.2
Total revenue 1,401,972 100
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9M2024
Rank Customer Principal business
Major types of
products
purchased
Type of
customers
Business
relationship with
the customer
commenced in
Typical credit
terms and
payment method
Revenue derived
from the customer
RMB’000 %
1 Jiangsu Fukangyuan
Grain and Oil Co.,
Ltd.* ( Ϫᘽ၅ੰ๕ᔋ
ʮ̡ )
A PRC Company
principally engaging in
the wholesale business
of oil
Soybean oil Wholesale
customer
2020 up to 90 days; by
bank transfer
113,070 11.2
2 Zhangjiagang Feiniao
Grain and Oil Trading
Co., Ltd.* (࠭
ʮ̡ )
and Jiangsu Xunye
Food Co., Ltd. * ( Ϫ
ʮ̡ )
Two PRC companies with
a common shareholder
principally engaging in
the wholesale business
of grains and oil
Soybean oil Wholesale
customer
2021 up to 90 days; by
bank transfer
55,049 5.5
3 Shanghai Saifu Grain
and Oil Co., Ltd.* ( ɪ
ʮ̡ )
A PRC company
principally engaging in
the wholesale business
of grains and oil
Soybean oil Wholesale
customer
2024 up to 90 days; by
bank transfer
51,091 5.1
4 Jiangsu Y uelingwan
Agricultural
Technology Co., Ltd.*
(Ҧ
ʮ̡ ) and
Shanghai Haorun
Industrial Co., Ltd.*
(ʮ
̡)
Two PRC companies with
a common shareholder
principally engaging in
the wholesale business
of grains and oil
Grains and oil Wholesale
customer
2020 up to 90 days; by
bank transfer
37,641 3.7
5 Hong Hai (Suzhou)
Food Technology Co.,
Ltd.* ( ᒿऎ(ᘽψ)ۜ࠮
ʮ̡ )
A PRC company
principally engaging
in the supply of food
products for Chinese
style meals
Soybean oil Wholesale
customer
2023 up to 60 days; by
bank transfer
30,028 3.0
Five largest customers combined 286,879 28.5
All other customers 718,931 71.5
Total revenue 1,005,810 100
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The five largest customers of our Group in each year/period during the Track Record Period
are Independent Third Parties to us. None of our Directors and their associates, or any
Shareholders who owned more than 5% of the number of Shares in issue as at the Latest
Practicable Date had any interest in any of the five largest customers of our Group in each
year/period during the Track Record Period.
To the best knowledge of our Directors, there are no past or present relationships or
dealings (including, without limitation, business, employment, family, trust, financing,
shareholding, fund flow or otherwise) between our Group (including its subsidiaries,
shareholders, directors, supervisors or senior management, or any of their respective associates)
and its five largest customers in each year/period during the Track Record Period.
Except for Customer G, which is a local government authority and is regarded as our bulk
sale customer, all of our major customers are our wholesale customers.
OUR SUPPLIERS
Our suppliers include manufacturers, suppliers and distributors of food products and
merchandise. Our procurement department has a set of internal quality assessment criteria for
selection of our suppliers taking into consideration their reputation, quality and price of goods
and products supplied. We select only those suppliers which are able to meet our standards and
satisfy our selection criteria. Each of our suppliers is subject to our annual assessment and
evaluation over their quality and price of products supplied to us. During the Track Record
Period, all of our suppliers are domestic suppliers in the PRC. We generally make advance
payments to our suppliers through bank transfer.
We believe that alternative suppliers for most of our products are readily available and the
loss of any single supplier would not have any material impact on our business. We generally
have alternative source of supply for comparable products and we do not anticipate significant
difficulties in obtaining the substitutes. We believe that we have maintained good relationships
with our suppliers and we are able to source our products in a reliable manner and at reasonable
commercial terms. During the Track Record Period, we did not experience any material
interruption, shortage or delays of supply from our suppliers.
We did not experience any significant shortage of supply of products from our suppliers
during the Track Record Period and the sourcing prices of the products were relatively stable. If
we experience substantial increase in the sourcing prices of our products, we would renegotiate
the prices with our suppliers in order to maintain our profit margins. Our procurement
department is responsible for the procurement of our products based on data available in our
ERP and WMS systems and maintaining reasonable level of inventory of our products.
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Major suppliers
For FY2021, FY2022, FY2023 and 9M2024, our purchase from our largest supplier in each
year/period during the Track Record Period accounted for approximately 7.5%, 12.5%, 25.5%
and 30.5% of our total purchase costs, respectively, while our purchase from our five largest
suppliers in each year/period during the Track Record Period in aggregate accounted for
approximately 28.0%, 35.9%, 42.4% and 50.0% of our total purchase costs, respectively.
The following tables set out the breakdown of our purchase from our five largest suppliers
during each of FY2021, FY2022, FY2023 and 9M2024 and their respective background:
FY2021
Rank Supplier Principal business
Major types of
purchases
Type of
suppliers
Business
relationship with
the supplier
commenced in
Typical credit
terms and
payment method
Purchases by us from
the supplier
RMB’000 %
1 Y angzhou Qianbaijia
Trading Co., Ltd.*
(ࠢ
ʮ̡), Y angzhou
Xinbaoli Trading Co.,
Ltd.* ( ౮ψอᘒ஁
ʮ̡ ) and
Jiangsu Y ouchu
Technology Co., Ltd.*
(ࠢ
ʮ̡)
Three PRC companies with
a common shareholder or
under common control
principally engaging in
the sale of grains and oil
and liquor
Soybean oil and
rice
Distributor for
certain grains
and liquor
products;
wholesaler for
other grains and
oil and liquor
2016 up to 30 days; by
bank transfer
98,017 7.5
2 Suzhou Kangda Supply
Chain Management
Co., Ltd.* ( ᘽψੰ༺
ʮ̡ )
A PRC company
principally engaging
in the sale of oil
Soybean oil and
rapeseed oil
Wholesaler 2020 up to 20 days; by
bank transfer
91,992 7.0
3 Shanghai Ruixiang Oils
& Fats Co., Ltd.*
(ࠢ
ʮ̡)
A PRC company
principally engaging in
the sale of grains and oil
Soybean oil Wholesaler 2019 up to 30 days; by
bank transfer
59,517 4.6
4 Y angzhou Mengsheng
Trading Co., Ltd.*
(ࠢ
ʮ̡)
A PRC company engaging
in the distribution of
liquor
Liquor Distributor 2021 100% advance
payment; by
bank transfer
59,296 4.5
5 Supplier E A branch office of a
company listed on the
Shanghai Stock
Exchange engaging in
the processing,
manufacturing and sales
of dairy products and
health drinks in the PRC
and overseas
Dairy products Brand owner 2013 100% advance
payment; by
bank transfer
57,631 4.4
Five largest suppliers combined 366,453 28.0
All other suppliers 940,109 72.0
Total 1,306,562 100
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--- page 280 ---
FY2022
Rank Supplier Principal business
Major types of
purchases
Type of
suppliers
Business
relationship with
the supplier
commenced in
Typical credit
terms and
payment method
Purchases by us from
the supplier
RMB’000 %
1 Yihai Kerry Food
Marketing Co., Ltd.
Nanjing Branch*
(ᐄቖ
ԯʱʮ̡ )
A PRC subsidiary of a
company listed on the
Shenzhen Stock
Exchange engaging in
oilseeds crushing, edible
oils refining,
manufacturing of
specialty fats and
oleochemicals,
processing of corn,
wheat and soybean, as
well as the sustainable
multi-stage processing of
rice, raw food materials,
central kitchen and R&D
in grains and oil
processing technology
Soybean oil Brand owner 2020 100% advance
payment; by
bank transfer
141,867 12.5
2 Y angzhou Qianbaijia
Trading Co., Ltd.*
(ࠢ
ʮ̡), Y angzhou
Xinbaoli Trading Co.,
Ltd.* ( ౮ψอᘒ஁
ʮ̡ ) and
Jiangsu Y ouchu
Technology Co., Ltd.*
(ࠢ
ʮ̡)
Three PRC companies with
a common shareholder or
under common control
principally engaging in
the sale of grains and oil
and liquor
Soybean oil and
rice
Distributor for
certain grains
and liquor
products;
wholesaler for
other grains and
oil and liquor
2016 up to 10 days; by
bank transfer
127,287 11.2
3 Supplier E A branch office of a
company listed on the
Shanghai Stock
Exchange engaging in
the processing,
manufacturing and sales
of dairy products and
health drinks in the PRC
and overseas
Dairy products Brand owner 2013 100% advance
payment; by
bank transfer
57,056 5.0
4 Y angzhou Mengsheng
Trading Co., Ltd.*
(ࠢ
ʮ̡)
A PRC company engaging
in the distribution of
liquor
Liquor Distributor 2021 100% advance
payment; by
bank transfer
45,018 4.0
5 Y angzhou Tobacco
Company Jiangdu
Branch* ( ౮ψ̹๧ণ
ʮ̡Ϫேʱʮ̡ )
A PRC company engaging
in the distribution of
tobacco
Tobacco Distributor 2008 100% advance
payment; by
bank transfer
36,035 3.2
Five largest suppliers combined 407,263 35.9
All other suppliers 725,907 64.1
Total 1,133,170 100
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--- page 281 ---
FY2023
Rank Supplier Principal business
Major types of
purchases
Type of
suppliers
Business
relationship with
the supplier
commenced in
Typical credit
terms and
payment method
Purchases by us from
the supplier
RMB’000 %
1 Yihai Kerry Food
Marketing Co., Ltd.
Nanjing Branch*
(ᐄቖ
ԯʱʮ̡ )
A PRC subsidiary of a
company listed on the
Shenzhen Stock
Exchange engaging in
oilseeds crushing, edible
oils refining,
manufacturing of
specialty fats and
oleochemicals,
processing of corn,
wheat and soybean, as
well as the sustainable
multi-stage processing of
rice, raw food materials,
central kitchen and R&D
in grains and oil
processing technology
Soybean oil Brand owner 2020 100% advance
payment; by
bank transfer
282,320 25.5
2 Y angzhou Qianbaijia
Trading Co., Ltd.*
(ࠢ
ʮ̡), Y angzhou
Xinbaoli Trading Co.,
Ltd.* ( ౮ψอᘒ஁
ʮ̡ ) and
Jiangsu Y ouchu
Technology Co., Ltd.*
(ࠢ
ʮ̡)
Three PRC companies with
a common shareholder or
under common control
principally engaging in
the sale of grains and oil
and liquor
Soybean oil and
rice
Distributor for
certain grains
and liquor
products;
wholesaler for
other grains and
oil and liquor
2016 up to 10 days; by
bank transfer
53,349 4.8
3 Supplier E A branch office of a
company listed on the
Shanghai Stock
Exchange engaging in
the processing,
manufacturing and sales
of dairy products and
health drinks in the PRC
and overseas
Dairy products Brand owner 2013 100% advance
payment; by
bank transfer
49,159 4.5
4 Jiangsu Xinanyi Trading
Co., Ltd.* ( Ϫᘽːτ
ʮ̡ )
A PRC company
principally engaging in
the sale of grains and oil
and liquor
Edible oil and
rice
Wholesaler 2023 100% advance
payment; by
bank transfer
42,118 3.8
5 Y angzhou Mengsheng
Trading Co., Ltd.*
(ࠢ
ʮ̡)
A PRC company engaging
in the distribution of
liquor
Liquor Distributor 2021 100% advance
payment; by
bank transfer
41,664 3.8
Five largest suppliers combined 468,610 42.4
All other suppliers 637,129 57.6
Total 1,105,739 100
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--- page 282 ---
9M2024
Rank Supplier Principal business
Major types of
purchases
Type of
suppliers
Business
relationship with
the supplier
commenced in
Typical credit
terms and
payment method
Purchases by us from
the supplier
RMB’000 %
1 Yihai Kerry Food
Marketing Co., Ltd.
Nanjing Branch*
(ᐄቖ
ԯʱʮ̡ )
and Yihai Kerry Food
Marketing Co., Ltd.
Shanghai Branch*
(ᐄቖ
ʮ̡ɪऎʱʮ̡ )
A PRC subsidiary of a
Company listed on the
Shenzhen Stock
Exchange engaging in
oilseeds crushing, edible
oils refining,
manufacturing of
specialty fats and
oleochemicals,
processing of corn,
wheat and soybean, as
well as the sustainable
multi-stage processing of
rice, raw food materials,
central kitchen and R&D
in grains and oil
processing technology
Soybean oil Brand owner 2020 100% advance
payment; by
bank transfer
284,515 30.5
2 Y angzhou Qianbaijia
Trading Co., Ltd.*
(ࠢ
ʮ̡), Y angzhou
Xinbaoli Trading Co.,
Ltd.* ( ౮ψอᘒ஁
ʮ̡ ) and
Jiangsu Y ouchu
Technology Co., Ltd.*
(ࠢ
ʮ̡)
Three PRC companies with
a common shareholder or
under common control
principally engaging in
the sale of grains and oil
and liquor
Soybean oil and
rice
Distributor for
certain grains
and liquor
products;
wholesaler for
other grains and
oil and liquor
2016 up to 10 days; by
bank transfer
91,570 9.8
3 Y angzhou Mengsheng
Trading Co., Ltd.*
(ࠢ
ʮ̡)
A PRC company engaging
in the distribution of
liquor
Liquor Distributor 2021 100% advance
payment; by
bank transfer
36,639 3.9
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Rank Supplier Principal business
Major types of
purchases
Type of
suppliers
Business
relationship with
the supplier
commenced in
Typical credit
terms and
payment method
Purchases by us from
the supplier
RMB’000 %
4 Supplier E A branch office of a
company listed on the
Shanghai Stock
Exchange engaging in
the processing,
manufacturing and sales
of dairy products and
health drinks in the PRC
and overseas
Dairy products Brand owner 2013 100% advance
payment; by
bank transfer
34,794 3.7
5 Y angzhou Duolianxi
Communication
Equipment Co., Ltd.*
(౮ψ̹εᑌᖩஷৃ
ʮ̡ )
A PRC company
principally engaging
in the sale of
communication
equipment, electronic
devices, new energy
vehicles and provision of
telecommunications
services
Mobile phones
and televisions
Distributor 2021 up to 10 days; by
bank transfer
19,591 2.1
Five largest suppliers combined 467,109 50.0
All other suppliers 465,717 50.0
Total revenue 932,826 100
Note:
(1) Notwithstanding that there were some changes in the composition of our five largest suppliers for each
year/period of the Track Record Period, our key top suppliers remained largely consistent throughout the Track
Record Period. For instance, (i) the group of Y angzhou Qianbaijia Trading Co., Ltd.* (ʮ
̡), Y angzhou Xinbaoli Trading Co., Ltd.* (ʮ̡ ) and Jiangsu Y ouchu Technology Co.,
Ltd.* (ʮ̡ (with whom we started procurement since 2016); (ii) Supplier E (with whom we
started procurement from 2013); and (iii) Y angzhou Mengsheng Trading Co., Ltd.* (ʮ̡ )
(with whom we started procurement from 2021) remained to be one of the five largest suppliers consistently
throughout the Track Record Period. Furthermore, the group of Yihai Kerry Food Marketing Co., Ltd. Nanjing
Branch* (ԯʱʮ̡ ) and Yihai Kerry Food Marketing Co., Ltd. Shanghai Branch*
(ʮ̡ɪऎʱʮ̡ ) remained to be our largest supplier for each of FY2022, FY2023 and
9M2024. Besides, out of the five largest suppliers during each year/period of the Track Record Period, our
business relationship with four, four, three and three of them for each of FY2021, FY2022, FY2023 and 9M2024,
respectively, commenced prior to the Track Record Period.
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The emergence of COVID-19 pandemic since 2020 has caused widespread disruption in the supply chains,
transportation, manufacturing and logistics in the PRC. As advised by the Industry Consultant, to ensure
continuity and stability of supply and to meet consumer needs effectively during COVID-19 pandemic, it is not
uncommon for retail operators especially supermarket operators to diversify their sourcing in order to mitigate
risks associated with relying on a single supplier or region in respect of a particular type of products. Besides, a
diversified supply chain may provide retail operators with greater flexibility in response to the changing market
conditions including but not limited to consumer behavior and government regulations during COVID-19
pandemic.
The five largest suppliers of our Group in each year/period during the Track Record Period
are Independent Third Parties to us. None of our Directors and close associates, or any
Shareholders who owned more than 5% of the number of Shares in issue as at the Latest
Practicable Date had any interest in any of the five largest suppliers of our Group in each
year/period during the Track Record Period.
Overlapping of customers and suppliers
Wuxi Kangzhuang Agricultural Development Co., Ltd. * (
ʮ̡ ) and
Jiangsu Y ouchu Technology Co., Ltd. * (ʮ̡ )
During the Track Record Period, Wuxi Kangzhuang Agricultural Development Co., Ltd.*
(ʮ̡ )( “ Wuxi Kangzhuang ”) and Jiangsu Y ouchu Technology Co., Ltd.*
(ʮ̡ )( “ Jiangsu Y ouchu ”), which are one of our five largest customers
during each of FY2021, FY2022 and FY2023 and one of our five largest suppliers during each
of FY2021, FY2022, FY2023 and 9M2024, respectively, share a common shareholder with less
than 50% shareholding interest in both companies. The common shareholder ceased to be a
shareholder of Jiangsu Y ouchu in November 2023. According to publicly available information
and our Directors’ best knowledge, there is no overlapping between the management of Wuxi
Kangzhuang and Jiangsu Y ouchu. We sold soybean oil and liquor to Wuxi Kangzhuang. The
revenue derived from Wuxi Kangzhuang amounted to approximately RMB42.7 million,
RMB58.0 million, RMB36.9 million and RMB29.3 million, respectively, accounting for
approximately 3.0%, 4.4%, 2.6% and 2.9% of our total revenue for FY2021, FY2022, FY2023
and 9M2024, respectively. Pursuant to the terms of agreements between Wuxi Kangzhuang and
our Group, Wuxi Kangzhuang made advance payment to our Group before delivery.
We purchased soybean oil from Jiangsu Y ouchu. The purchases from Jiangsu Y ouchu
amounted to approximately RMB30.3 million, RMB107.4 million, RMB22.5 million and
RMB17.8 million, respectively, accounting for 2.3%, 9.5%, 2.0% and 1.9% of our total
purchases for FY2021, FY2022, FY2023 and 9M2024, respectively. Pursuant to the terms of
agreements between Jiangsu Y ouchu and our Group, the credit term granted by Jiangsu Y ouchu
to us is 30 days.
We purchased soybean oil with a specific container volume from Jiangsu Y ouchu of
approximately RMB22.5 million for FY2023. During the same year, we sold soybean oil with
the same container volume to Wuxi Kangzhuang of approximately RMB9.2 million. Such
revenue derived accounted for approximately 0.7% of our total revenue for FY2023.
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Our Directors confirmed that negotiations of the salient terms of our sales to and purchase
from Wuxi Kangzhuang and Jiangsu Y ouchu were conducted separately. As a result, the sales
and purchases in question were incidental transactions, neither inter-connected with nor
inter-conditional upon each other or otherwise considered as one transaction.
Wuxi Kaifu Supply Chain Management Co., Ltd. * (
ʮ̡ ), Wuxi
Zhilian Agricultural Food Trading Co., Ltd. * (ʮ̡ ) and Jiangsu
Huixiangfu Supply Chain Management Co., Ltd. * (ʮ̡ )
Wuxi Kaifu Supply Chain Management Co., Ltd.* (ʮ̡ )( “ Wuxi
Kaifu ”) and Wuxi Zhilian Agricultural Food Trading Co., Ltd.* (ʮ̡ )
(“Wuxi Zhilian Agricultural ”) comprises two PRC companies with a common shareholder and
under common control. One of the two PRC companies, Wuxi Zhilian Agricultural, shares a
common shareholder and is under common control with Jiangsu Huixiangfu Supply Chain
Management Co., Ltd.* (ʮ̡ )( “ Jiangsu Huixiangfu ”) which was
our supplier for FY2023. During the Track Record Period, we sold soybean oil and rice to Wuxi
Kaifu and Wuxi Zhilian Agricultural. The revenue derived from Wuxi Kaifu and Wuxi Zhilian
Agricultural amounted to nil, approximately RMB56.2 million, RMB61.2 million and RMB13.3
million, respectively, accounting for nil, approximately 4.2%, 4.4% and 1.3% of our total
revenue for FY2021, FY2022, FY2023 and 9M2024, respectively. Pursuant to the terms of
agreements between Wuxi Kaifu and Wuxi Zhilian Agricultural and our Group, Wuxi Kaifu and
Wuxi Zhilian Agricultural made advance payment to our Group before delivery.
During the Track Record Period, we purchased soybean oil from Jiangsu Huixiangfu. The
purchases from Jiangsu Huixiangfu amounted to nil, nil, approximately RMB21.4 million and
nil, respectively, accounting for nil, nil, approximately 1.9% and nil of our total purchases for
FY2021, FY2022, FY2023 and 9M2024, respectively. We generally make advance payment to
Jiangsu Huixiangfu before delivery.
Out of the total revenue derived from Wuxi Kaifu and Wuxi Zhilian Agricultural for
FY2023, there was one single sales transaction of soybean oil amounting to approximately
RMB1.4 million and the relevant products were procured from Jiangsu Huixiangfu. Such revenue
accounted for approximately 0.1% of our total revenue for FY2023. After we purchased soybean
oil from Jiangsu Huixiangfu from April to June 2023, Wuxi Kaifu encountered demand for
soybean oil with the same specifications in June 2023. As we were able to supply the soybean
oil readily, they purchased soybean oil from us.
The terms of transaction with each of Wuxi Kangzhuang, Wuxi Kaifu and Wuxi Zhilian
Agricultural, Jiangsu Y ouchu and Jiangsu Huixiangfu were similar to those with our other
customers and suppliers, which our Directors considered to be normal commercial terms.
Save as disclosed above, to the best knowledge of our Directors, (i) none of our five largest
customers in each year/period during the Track Record Period were also our supplier; and (ii)
none of our five largest suppliers in each year/period during the Track Record Period were also
our customers during the Track Record Period.
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PROCUREMENT AND QUALITY CONTROL
Selection of suppliers
We maintain a list of approved suppliers and our procurement team shall procure from the
suppliers on our list of approved suppliers. For new suppliers, our procurement team would
assess and evaluate the suppliers and their products by considering the licences and
qualifications held by the suppliers, the background and capacity of the suppliers, the
specifications of the products, the licences or registration of the products, whether the products
comply with the relevant laws and regulations, independent test reports as well as the price
offered by the suppliers. The potential supplier will be required to provide documents proving
its corporate background and relevant certifications or qualifications possessed by the potential
supplier for meeting certain international or local standards.
For existing products, our procurement team would also conduct periodical reviews on the
supplier and the products supplied by it, including obtaining updated licences and qualifications.
We may also require suppliers to provide production licences, hygiene licences, trademark
registration certificates and test reports issued by independent third parties in respect of products
to be procured by us that provide assurance on regulatory compliance, food or products safety
and/or quality manufacturing process, where applicable, of the products to be procured by us.
Further, our procurement agreements with our suppliers generally provide that we are
entitled to return defective products to our suppliers and all product defects or product liability
in respect of any product supplied to us are the responsibilities of our suppliers.
Procurement of products
We generally enter into procurement agreements with suppliers for a term of one to two
years. Our procurement team would monitor the inventory level of our products through our
WMS system and place purchase orders with our suppliers based on the demand for the products
at our Retail Stores. We generally place purchase orders for food merchandise on a weekly basis
and non-food merchandise on a bi-weekly basis. We usually make procurement in large
quantities, rather than making frequent purchases in small quantities, in order to take advantage
of the discount of bulk purchase from suppliers and save overhead expenses such as
administrative and transportation costs.
Agreements with our suppliers
Our agreements with our suppliers can be broadly categorised into two types: (i)
procurement agreements pursuant to which we procure the products for our retail operations and
wholesale operations; and (ii) district distributorship agreements pursuant to which we act as
their district distributor in the designated territories specified in the agreements.
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We typically enter into procurement agreements with our suppliers for our retail operations
and wholesale operations. We place purchase orders with our suppliers on an order-by-order
basis during the term of the procurement agreements. Set out below are the typical terms of our
procurement agreements:
 Term: Typically one to two year(s)
 Minimum purchase commitment: Nil
 Delivery arrangements: Our suppliers are responsible for delivery in general.
 Credit term and payment method: We are usually required to make payment before
delivery or are granted credit term ranging from 0 to 60 days by bank transfer.
 Product quality requirements: The products and their packaging and labels shall be in
compliance with the applicable laws and regulations in the PRC. The agreements
specify the requirements on minimum remaining shelf life of the products.
 Product returns and exchange: We generally have the right to return products to our
suppliers if the products are defective, the packaging is damaged, the remaining shelf
life of the products is less than the minimum period specified in the agreements, the
labels of the products do not comply with the applicable PRC laws and regulations or
the products do not comply with the agreement between us and our suppliers.
We enter into distribution agreements with some suppliers including some renowned
brands, pursuant to which we act as their district distributor in the designated territories
specified in the agreements. We place purchase orders with our suppliers on an order-by-order
basis during the term of the distribution agreements. Set out below are the typical terms of our
distribution agreements:
 Term: Typically one to two year(s)
 Products: The agreements stipulate the brand and type of products to be supplied.
 Geographical area: We are restricted to carry out the sub-distribution and/or retail
sales within the designated territories and are prohibited from distributing to any other
places or areas.
 Minimum purchase commitment: For certain distribution agreements, we are required
to purchase a minimum purchase amount per annum, failing which the suppliers may
terminate the agreements and/or we might be held liable for breach of the agreements
and damages.
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 Sales target: For certain distribution agreements, we are subject to annual and monthly
sales targets, failing which the suppliers may terminate the agreements and/or we
might be held liable for breach of the agreements and damages.
 Pricing policies: The prices of the products are to be adjusted and agreed by the
parties according to the prevailing market price on the date of order. For certain
distribution agreements, we are prohibited from selling below the suggested selling
price for our sales to our customers.
 Delivery arrangements: Our suppliers are responsible for delivery in general or we
collect the products from our suppliers.
 Credit term and payment method: We are usually required to make payment before
delivery by bank transfer.
 Other obligations of our Group: (for Supplier D) We are required to conform to the
storage needs and requirements to achieve a certain level of storage safety, layout,
temperature and humidity.
 Product returns and exchange: We generally have the right to return products with
quality issue to our suppliers.
 Termination clause: Our suppliers generally have the right to terminate the agreements
if we are in breach of the terms of the agreements, fail to meet the sales target for
three months, or are subject to winding-up proceedings.
Delivery of products by suppliers and quality check
Depending on the nature of the products and the delivery capacity of the suppliers, some
products are directly delivered to our Retail Stores by the suppliers and some products are
delivered to our distribution centre. Upon the delivery of the products to our Retail Stores or our
distribution centre, our staff would inspect and randomly check the quantity and packaging of
the delivered products and report to our procurement team any irregularities of the delivered
products. Those damaged or defected products will be returned to the suppliers. Products passing
quality check will be recorded in WMS system and ERP system and be stored in the warehouse
of the Retail Stores or the distribution centre.
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Storage of goods
We have implemented “first in, first out” policy at our distribution centre and our Retail
Stores to mitigate the risk of occurrence of early production and late sales caused by random
display. Frontline staff are required to check products on display in the Retail Stores on a daily
basis to avoid sale of expired or damaged products. In particular, frontline staff shall check the
quality of perishable food products to ensure their qualities are in compliance with the agreed
and regulatory standards so that they are then supplied at an acceptable level of freshness to our
customers and avoid sale of expired food products.
FOOD SAFETY
For FY2021, FY2022, FY2023 and 9M2024, our revenue from sales of food (including
grains and oil, food products, etc.) accounted for approximately 69.3%, 68.9%, 71.9% and
77.8% of our total revenue, respectively. As such, food safety is a critical concern for our
business. According to the Product Quality Law of the PRC ( ), we
shall be responsible for exchange of or refund for products sold by us if they do not conform to
the applied product standard as carried on the product or its packaging. In addition, according to
the PRC Food Safety Law ( ) and the Implementation Rules of
PRC Food Safety Law (ૢԷ ), we as the seller are liable for
ensuring the food we sold is safe, meets quality standards and is properly labeled which are
emphasized, for instance, that if we as the seller fulfill our obligations of inspecting incoming
food, providing sufficient evidence to prove that we do not know the food does not meet the
safety standards, and explaining the source of the food, we could be exempt from penalties. For
details of the relevant laws and regulations concerning food safety, please refer to the paragraph
headed “Regulatory Overview – Product Liability” and “Regulatory Overview – Food safety” in
this prospectus.
As we place strong emphasis on food safety and quality, we have adopted the following
food safety measures:
Selection of food suppliers
Before adding a food supplier to our list of approved suppliers, our procurement staff
require the food supplier to provide certifications for food safety and quality. We require
our food suppliers to provide a copy of valid business licences, food production licences,
food operation licences, food quality compliance certificates, trademark registration
certificates, test reports issued by independent third parties in respect of products, quality
inspection compliance reports, mandatory certificates (for food subject to national
mandatory certification), inspection and quarantine certificates for imported food,
procurement invoices (if applicable). We monitor our food suppliers of food by regular
assessment and request updated licences and registrations from time to time. If the food
products supplied by a supplier fail to meet the required food safety and quality standards,
or if there is any material food safety or quality issue concerning such supplier, we may
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suspend or terminate the procurement from such supplier. We only renew procurement
agreements with our food suppliers if the suppliers continue to meet the qualifications.
Procurement
We prohibit our procurement team from procuring food products that (i) are produced
by non-food raw materials, harmful substances or recycled food; (ii) are supplied by
companies without necessary licences; (iii) contain pathogenic microorganisms, pesticide
residues, veterinary drug residues, heavy metals, pollutants, and other harmful substances
exceeding food safety standard limits; (iv) are spoiled, contaminated or adulterated; (v) are
from poultry, livestock, or aquatic animals that are dead from disease, poisoning, or
unknown causes; (vi) are uninspected or non-quarantined meat; (vii) are contaminated by
packaging materials, containers, transport vehicles, etc.; (viii) are expired; or (ix) are
prepackaged without labels or proper labels; (x) fail to meet food safety standards or
requirements.
We request our suppliers to only supply products with labeling with details of
products including origin, name and address of the manufacturer, ingredients,
specifications, grading, date of production, shelf life, warning and usage (if any) in
compliance with the relevant laws and regulations. Although we do not generally conduct
any third party laboratory testing to check the composition of products intended to be
procured by us, our procurement team will inspect food packaging labels to ascertain
whether such labels are in compliance with the relevant laws and regulations. In addition,
all of our suppliers are required to warrant the accuracy and completeness of such product
information that are necessary in the labeling for us to assess the safety and quality of the
target products, in compliance with the relevant laws and regulations.
Quality check upon delivery by suppliers
In general, upon delivery of the products, the incoming products shall be inspected
based on the corresponding purchase orders or contracts. If the quality, specifications, or
quantity of a batch of products delivered does not match the purchase order or contract, our
Group will not accept the batch of goods and will proceed with the relevant return process.
We have different inspections for different kinds of food upon delivery by our
suppliers. Our quality control officers perform quality controls on food products on a daily
basis upon their delivery to our distribution centre or Retail Stores, including checks and
inspections on their appearance, packaging, names and information of products, bar codes,
production and/or expiry dates, quantities and quality. For raw and fresh food including
vegetable, fruits, meat and seafood, the suppliers shall provide a pesticide residue testing
report issued by a qualified third-party testing agency upon delivery of products. We will
assess the authenticity and validity of the report to check if the products comply with
national and industry standards. Before the raw and fresh food is stored, we conduct sample
testing in our own laboratory to detect pesticide residue and ensure the accuracy and
timeliness of the test results. We also retain certain samples of each batch of raw and fresh
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food for not less than 48 hours to facilitate traceability and investigation in case of any
food safety issue. For quality checks and inspections, we also give top priority to
perishable food products to ensure their qualities are in compliance with the agreed and
regulatory standards so that they are then supplied at an acceptable level of freshness to our
customers.
Logistics and warehouse conditions
Our warehouse team stationed in our distribution centre and warehouses perform
designated check procedures upon delivery of products to our distribution centre and
warehouses. These quality checks include checks on brand name, quantity ordered, barcode
of products, product appearance, smell, packaging, date of expiry and net weight.
Besides, our distribution centre and warehouses are equipped with fire protection and
temperature and humidity control systems, with the relevant results recorded. Our logistics
teams are also responsible for monitoring and recording the temperature of the cold storage
section of our distribution centre and warehouses and to avoid over-stacking or
compression of products in the cold storage section, so as to prevent any quality issues
arising from unexpected or accidental changes or fluctuations of temperature in the cold
storage section of our distribution centre and warehouses.
Procedures to check food expiry and disposal of expired or rotten food products
Food products are stored in our distribution centre and warehouses by batch and on a
first-in first-out principle to prevent expiration and for better management of shelf life of
products. Warehouse staff and relevant personnel will conduct regular inventory checks on
the stock, and verify the product information and quantity registered in the ERP system
based on the results of such checks. During the inventory checks, the shelf life of the
products will be checked, and products approaching their expiry dates will be listed
separately, with the expiry dates marked to determine whether disposal is necessary. If any
product is found to be rotten, they should be disposed of promptly.
After our products are delivered to our Retail Stores for sale, our store manager is
responsible for supervising our front-line sales staff to conduct regular checks on our
in-store products, so as to maintain the safety and quality of our in-store inventory and to
ensure the expired products be removed from the shelves.
We establish a designated section or display for near-expiry food products, with clear
signage stating “Near-Expiry Food Area” and “Please consume before expiry date”.
For food products which are vulnerable to various quality influential factors, such as
storage temperature, packaging method and standard and nature and substances of products,
notwithstanding that the specific products have not expired yet, our store manager is
responsible for supervising our front-line sales staff to conduct additional quality checks
regularly.
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Our Internal Control Consultant is of the view that there are no material deficiencies
relating to the aforesaid enhanced internal controls on supplier selection and food safety,
and there are no matters identified suggesting these enhanced internal control measures are
inadequate or ineffective.
Immaterial food safety incidents
Despite our quality control procedures for selecting suppliers and quality checks and
inspections, in light of the volume of products handled by us daily, we may not always be able
to detect quality issues of products or fraud. For the associated risks, please refer to the
paragraph headed “Risk Factors – We may be subject to food safety issue, product liability
claims or product recalls relating to defective products sold by us” in this prospectus.
During the Track Record Period, we had received administrative penalties for supplying
certain products which failed to comply with the food safety laws and regulations. For example,
in 2022, we were procured by a local government authority at Hongqiao Town, Minhang
District, Shanghai, the PRC (Customer G) to provide living support supplies to residents affected
by COVID-19. Some residents complained that certain vermicelli supplied by us was
manufactured by a company which had been deregistered. Shanghai City Minhang District
Administration for Market Regulation* ( ɪऎ̹඘Бਜ̹ఙ္ຖ၍ଣ҅ ) had launched an
investigation on the incident.
During the Track Record Period, we have generated revenue of approximately RMB41.7
million from Customer G. The vermicelli concerned accounted for a negligible amount of
revenue generated from Customer G. We procured the vermicelli concerned from a company
named “ʮ̡ ” (the “ Alleged Supplier ”). Before procuring vermicelli from
the Alleged Supplier, we had obtained a stamped copy of a business registration certificate, a
stamped copy of the production permit and a copy of the testing report in respect of the
vermicelli concerned. However, we subsequently discovered that the vermicelli procured from
the Alleged Supplier was in fact manufactured by an individual passing off another
manufacturer’s name and production address, with the food label containing false information,
and had infringed a famous trademark. We launched a recall of the vermicelli and made a public
apology.
Upon investigation by Shanghai City Minhang District Administration for Market
Regulation* ( ɪऎ̹඘Бਜ̹ఙ္ຖ၍ଣ҅ ), the authority found that we failed to verify the
authenticity of the batch number, trademark registration and labelling information in respect of
the vermicelli. As a result, in 2022, we were ordered by the authority to pay fines of
RMB370,000, which were duly settled in November 2022.
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Our Directors considered that such incident has limited impact on our Group’s operations
and financial performance. Notwithstanding that, any incident of food safety issue concerning
products supplied by us will affect our reputation and customers’ confidence in our brands and
products sold by us. As such, we have adopted enhanced internal control measures in relation to
mitigate the risk of recurrence of similar incident. In particular, upon obtaining a stamped copy
of the business registration certificate from our suppliers, we will also verify the subsistence of
the suppliers via online search platforms.
Our Directors confirmed that (i) save for the aforesaid incident, our Group was not subject
to other material food safety incident, or any material claims, relating to counterfeit products or
intellectual property infringement; and (ii) we have not received any material customer
complaints, product recalls or product liability claims during the Track Record Period and up to
the Latest Practicable Date.
INVENTORY MANAGEMENT, W AREHOUSING AND LOGISTICS
Inventory management
Our procurement team would monitor the inventory level of our products through our ERP
system and WMS system and place purchase orders with our suppliers based on the demand for
the products at our Retail Stores and Malls. We generally place purchase orders for food
merchandise on a weekly basis and non-food merchandise on a bi-weekly basis for our Retail
Store operations. In order to maintain an optimal level of inventory to balance our inventory
holding costs and the need to provide a wide variety of products in sufficient quantities for the
selection of our customers, we regularly review, determine and adjust our inventory level from
time to time with reference to the historical and recent sales of different products, the historical
and recent turnover days for different products and the cost effectiveness for logistics in
ordering different products. We would also identify and clear out obsolete inventories or
unpopular products or products that are near to its expiry date through special promotion or
discounted sales.
As we offer a wide variety of products at our Retail Stores and Malls, we rely on our
information technology systems to monitor and manage our inventory level. Our ERP system
allows us to track the sales, inventories level and movement of each product in each of our
Retail Stores and Malls on a real time basis. Based on these real time sales information
centralised in our information technology systems, we could make timely responses and
adjustments to our sales strategies, replenish and deliver products to our Retail Stores, Malls and
distribution centre in a timely manner. Our ERP system records product description, product mix
and number of products in individual Retail Stores and our Malls. In case the inventory level of
our products in a Retail Store, Malls or our distribution centre falls below a preset value, our
ERP system will generate an alert to our procurement team for replenishment. Our WMS system
and ERP system therefore enable us to monitor and manage our inventory level to avoid any
issues relating to shortage of or aged products.
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As at 31 December 2021, 31 December 2022, 31 December 2023 and 30 September 2024,
the balance of our inventories amounted to approximately RMB286.4 million, RMB324.0
million, RMB266.3 million and RMB317.6 million, respectively, representing approximately
37.5%, 34.7%, 25.9% and 31.0%, respectively of our total current assets as at the same dates.
Our average number of inventory turnover days (calculated based on average inventories divided
by costs of sales times 365 days) for FY2021, FY2022, FY2023 and 9M2024 were
approximately 77.5 day, 108.5 days, 97.9 days and 100.2 days (annualised), respectively. As at
31 December 2021, 31 December 2022, 31 December 2023 and 30 September 2024, our balance
of provision for write-down of inventories amounted to approximately RMB8.9 million, RMB8.6
million, RMB10.2 million and RMB11.0 million, respectively, representing approximately 3.0%,
2.6%, 3.7% and 3.4% of our gross inventories balance as at the same dates.
Warehousing
We adopt different types of storage methods for our products such as room temperate
storage, cold storage and freezer storage depending on the type and nature of such products in
order to keep and maintain the freshness or storage needs of such products. As at the Latest
Practicable Date, we have one distribution centre and two warehouses. The table below sets out
the details of our distribution centre and warehouses as well as their respective utilisation rate
during the Track Record Period and as at the Latest Practicable Date:
Utilisation Rate
Location Rental period Specific usage Gross floor area FY2021 FY2022 FY2023 9M2024
Latest
Practicable
Date
(Approximate
sq.m.) (Approximate %)
Industrial Concentration
Zone, Shaobo Town,
Jiangdu District, Jiangsu
Province (Ϫேਜ
Ьᕄʈุණʕਜ )
Self-owned property Distribution centre
used partly for
storage of products
of supermarket, and
partly for rental
11,741.63 85.33 85.05 84.97 83.27 85.97
No. 114, Jianghuai Road,
Fairy Town, Jiangdu
District, Jiangsu (޲
Ϫேਜ̀ɾᕄϪଊ༩ 114
໮)
1 September 2022
to 31 August
2025
Warehouse used for
storage of alcoholic
beverages, milk and
health supplements
3,062 85.85 86.25 84.91 83.25 86.38
No. 10 Ranhua Road, Fairy
Town, Jiangdu District,
Jiangsu (Ϫேਜ̀
ʷ༩ 10໮)
10 February 2024 to
9 February 2029
Warehouse used partly
for storage of
alcoholic beverages,
and partly for rental
4,056 87.48 87.66 87.27 89.86 91.61
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Notes:
1. Our distribution centre had our unit loads stacked on top of each other and stored on the wooden pallets.
The calculation is based on the assumption that the maximum number of pallets our distribution centre can
accommodate at one time is approximately 14,146 pallets. The utilisation rate is calculated by the total
number of pallets with products stored divided by 14,146 pallets.
2. The utilisation rate is calculated by the total volume (in cubic metre) of products stored at the warehouse
as at the Latest Practicable Date divided by the total volume (in cubic metre) of the warehouse.
The distribution center is designed to cover a radius of 100 kilometers and the Retail Stores
are organised into 13 delivery routes based on their geographical locations. Under normal
circumstances, (i) raw and fresh food products will be delivered on the same day, (ii) products
of ambient temperature will be delivered within 48 hours within the Jiangdu District, and (iii)
other products will be delivered within 72 hours. During the Track Record Period, our Group
mainly relied on our own fleet for all deliveries, and as of the Latest Practicable Date, our
logistics team consisted of 73 employees and was equipped with 53 delivery truck, to meet our
delivery and distribution needs. Our Group might also engage external third party service
providers to ensure time delivery of products when we encountered high demands during
holidays.
There is also a storeroom inside each of our Retail Stores and our Malls for storage of
some inventory for its business operation. Depending on the nature of the products and the
delivery capacity of the suppliers, some products are directly delivered to our Retail Stores by
the suppliers and are stored in the storeroom before they are displayed for sale.
Logistics
Our Group maintain our own logistics team for delivery of products to our Retail Stores
regularly from our distribution centre. As at the Latest Practicable Date, our logistics team
owned and operated 53 transportation vehicles for delivery of products between our distribution
centre, warehouses, Retails Stores and Malls. We cooperated with three e-commerce platforms,
namely Douyin, JD.com and WeChat for online sale and delivery of our products to our
customers. By purchasing our products through these e-commerce platforms, customers could
enjoy the convenience of saving transportation time and costs and speedy delivery of the
products. Some of our Retail Stores also maintain transportation vehicles for delivery of
products to their customers.
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INFORMATION TECHNOLOGY
Our integrated information technology systems are essential for supporting our daily
business operations, including procurement, sales, inventory management, stock replenishments,
membership management, financial data management and other administrative functions. Our
major information technology systems include ERP system, POS system, WMS system and B2B
supply chain system.
Our POS system is used in all of our Retail Stores and Malls. All transactions of our Retail
Stores and Malls are conducted and concluded through our POS system, which is linked to our
ERP system. Our ERP system allows us to track the sales, inventories level and movement of
each products in each of our Retail Stores and Malls on a real time basis. Based on these real
time sales information centralised in our information technology systems, we could make timely
responses and adjustments to our sales strategies, replenish and deliver products to our Retail
Stores, Malls and distribution centre in a timely manner. Besides, our ERP system also supports
our daily financial management by providing fundamental financial data on real time basis for
accounting purpose.
Our ERP system and WMS system are adopted for monitoring the inventory level of our
products. Our ERP system records product description, product mix and number of products in
our Retail Stores and our Malls, while our WMS system records the locations and quantities of
our inventories in our distribution centre. Our WMS system is linked to our ERP system. Our
ERP system monitors the inventory levels of our Retail Stores and Malls and sends an alert to
our procurement team automatically when the inventory levels of our Retail Stores drop below
certain levels. Our procurement team will then arrange delivery of products to our Retail Stores
from our distribution centre or warehouses for replenishment.
Our ERP system will send an alert to our procurement team automatically when the
inventory levels at our distribution centre and warehouses drop below the set minimum levels,
and our procurement team shall arrange for replenishment from our suppliers accordingly. Our
WMS system and ERP system therefore enable us to monitor and manage our inventory level to
avoid any issues relating to shortage of or aged products.
Besides, our WMS system records the weight and quantity of products delivered by our
logistics team within a period of time. Such data are used by our management to assess the work
efficiency of our logistics staff.
Distinctive user IDs have been assigned to individual staff or a group of staff, such as
purchasing staff, marketing staff, warehouse and logistics staff, front-line-sales staff and
information technology staff, etc. with differentiated scope of access rights. Access right control
is stringently managed with reference to employees’ different job grading, departmental
segregation and job requirements.
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SEASONALITY
Our business is slightly affected by seasonality. We usually record higher sales revenue
during holidays and festivals, such as Chinese New Y ear and anniversary of our Group. We also
usually record a higher sales revenue during September to February of the next year, as there are
more Chinese traditional festivals during this period.
LICENCES AND REGISTRATIONS
As confirmed by our Directors and as advised by our PRC Legal Advisers, with the
exception of our failure to complete the required fire safety approvals pursuant to relevant PRC
laws and regulations as disclosed in the paragraph headed “Non-compliance” below in this
section during the Track Record Period and up to the Latest Practicable Date, we maintained all
licences and registrations required to carry out our operation in the PRC. As at the Latest
Practicable Date, we hold the following material licences and registrations in relation to our
business in the PRC:
Licence/registration Purpose
Y ear of
grant/first
registration Expiry date
Food operation licence
(຾ᐄ஢̙ᗇ )
Conduct business
in food selling
17 April 2007 to
9 January 2025
1 April 2025
(Note 1)
to 24 February
2030 (Note 2)
Filing for food operation
for selling
pre-packaged food
only
(຾ᐄසቖਯཫ̍
ࣩ)
Sale of
pre-packaged
food
28 January 2022
to 23 November
2022
No expiry date
Fire safety inspection
certificates
(ᗇ )
Conduct retail
stores and
shopping malls
business
9 December 2005
to 27 September
2023
No expiry date
Hygiene Licence
(ሊ͛஢̙ᗇ )
Conduct retail
stores and
shopping malls
business
8 June 1999 to
17 January
2024
12 April 2025
(Note 1)
to 17 January
2029 (Note 2)
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Licence/registration Purpose
Y ear of
grant/first
registration Expiry date
Publications operation
permit
(຾ᐄ஢̙ᗇ )
Sale of books and
newspaper
17 November
2005 to
26 March 2024
30 April 2028
Notes:
1. In relation to the licences which are expiring in April 2025, our Group either has submitted (for those that
are expiring on or before 12 April 2025) or is in the process of preparing documentation for renewal of the
relevant licences. As advised by our PRC Legal Advisers, there will be no legal impediments to renew the
necessary licences and permits when they expire provided that we are able to meet the relevant
requirements and conditions imposed by the competent government authorities.
2. The dates specified represent the range of expiry dates of the relevant licence held by different licence
holding entities.
During the Track Record Period, we did not experience any material difficulty in renewing
the business licences, permits and certificates of our business operations. As advised by our PRC
Legal Advisers, there will be no legal impediments to renew the necessary licences and permits
when they expire provided that we are able to meet the relevant requirements and conditions
imposed by the competent government authorities.
CERTIFICATIONS AND A W ARDS
We have obtained/received the following awards, certificates and recognition over the
years:
Award/Certificate/Recognition Awarding organisation/institution
Y ears of
first grant
Civilised Unit in Jiangsu
Province* (ఊЗ )
Jiangsu Provincial Steering
Committee for Ideological and
Ethical Advancement* (ၚग़
ࡰ)
1997
Credit Management Unit* (ڦ
ఊЗ)
Jiangsu Consumers’ Association* ( Ϫ
՘ึ )
1999
Credit Management Unit* (ڦ
ఊЗ)
China Consumers’ Association* ( ʕ਷
՘ึ )
2001
Jiangsu Province E-commerce
Demonstration Enterprise*
(ཥɿਠਕͪᇍΆุ )
Department of Commerce of Jiangsu
Province* (ਠਕᝂ )
2012
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Award/Certificate/Recognition Awarding organisation/institution
Y ears of
first grant
Y angzhou Famous Trademark
(Τਠᅺ )
Y angzhou Administration for Industry
and Commerce* (݁
၍ଣ҅ )
2014
Jiangsu Famous Trademark
(ഹΤਠᅺ )
Jiangsu Provincial Administration for
Industry and Commerce* (ʈ
၍ଣ҅ )
2014
Key Supply Unit for Prevention
and Control in Jiangdu
District, Y angzhou City*
(ღ
ԶᏐఊЗ )
Office of the Command for the
Prevention and Control of the
Novel Coronavirus Pneumonia
Epidemic in Jiangdu District,
Y angzhou City* ( ౮ψ̹Ϫேਜอ
౨௅፬
܃)
2020
AAAA-level Logistics
Enterprise* (AAAAΆุ )
China Federation of Logistics and
Purchasing (ၾમᒅᑌΥ
ึ)
2021
Safe Consumption
Demonstration Unit of Jiangsu
Province* (ːऊ൬௴
ͪᇍఊЗ )
Jiangsu Provincial Safe Consumption
Creation Activity Office* (޲
܃and
Jiangsu Provincial Administration
for Market Regulation* (̹
ఙ္ຖ၍ଣ҅ )
2021
Key Enterprise for Ensuring
People’s Livelihood Supply in
Y angzhou City* ( ౮ψ̹͏͛
ᓃΆุ )
Commerce Bureau of Y angzhou City*
(౮ψ̹ਠਕ҅ )
2021
Key Enterprise for Ensuring
People’s Livelihood Supply in
Y angzhou City* ( ౮ψ̹͏͛
ᓃΆุ )
Command for the Prevention and
Control of the Novel Coronavirus
Pneumonia Epidemic in Jiangdu
District, Y angzhou City* ( ౮ψ̹Ϫ
౨௅ )
2021
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ENVIRONMENTAL, SOCIAL AND GOVERNANCE MATTERS
Board Governance
We acknowledge the responsibility on environmental protection, social responsibilities and
is aware of the climate-related issues that may have impacts on our business operations. We
committed to comply with the environmental, social and governance (“ ESG ”) reporting
requirements upon Listing and committed to operating our business in a lawful, ethical and
responsible attitude.
We have established a set of internal policies with respect to ESG issues. For
environmental matters, we have adopted various policies and procedures related to (i)
conservation of resources, (ii) responding to climate change, and (iii) treatment of exhaust gas,
sewage and solid waste, among other aspects. For social matters, we have adopted policies and
procedures related to (i) supplier management, (ii) product responsibility, (iii) occupational
safety and health, and (iv) customer complaints and handling, among other aspects. For
governance matters, we have adopted an employee manual that encompasses policies on different
areas, such as conflict of interest, anti-corruption, etc., and have provided regular compliance
training for employees to enhance internal regulatory compliance and ethical business practices.
We conduct periodic reviews to monitor our compliance with the above policies and procedures.
The Board of Directors (“ The Board ”) is directly and collectively responsible for the
supervision and oversight of execution of climate-related matters and ESG performance. The
Board will be informed through various channels of the risks and findings related to
environmental, social and governance, the results of the review of existing strategies, objectives
and policies, and the results of the Group’s materiality assessment. Under the supervision of the
Board, the Group actively identifies and monitors environmental, social and climate-related risks
and opportunities. At the same time, the Board also evaluates transactions based on the
identified ESG risks and opportunities, assesses whether each transaction meets sustainability
requirements and relevant social responsibility standards, and captures relevant ESG
opportunities. The Board will delegate authority to management and relevant department heads
to develop and implement ESG policies and establish an ESG Committee to monitor the progress
of ESG. We expect to set up the ESG Committee before listing. After listing, we will publish an
ESG report each year pursuant to the reporting requirements under the Listing Rules to facilitate
long-term strategies and seek continuous improvements.
ESG Risk Management and Strategy
For the purpose of overseeing our Group’s risk management and internal controls, we have
adopted or will adopt certain risk management and internal control framework, policies,
procedures and measures in order to address major risks or compliance requirements identified.
For more details related to the overall risk management and internal control framework, policies,
procedures and measures, please see the paragraph headed “Risk management and internal
control” in this section.
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Assessment of material ESG-related issues is a three-step process, including:
 Step 1. Identification of material issues
Based on the industry research, the materiality maps of Morgan Stanley Capital
International (“ MSCI ”) and Sustainability Accounting Standards Board (“ SASB ”) and
comparative industry analysis, we identified a series of sustainability issues relevant
to our environment and social impact and performance.
 Step 2. Ranking of material issues
We prepared questionnaires to conduct the stakeholder survey, and we ranked the
material issues based on the survey results.
 Step 3. V erification and establishment of materiality matrix
We collected and analysed the survey results and assigned priority levels to the
identified issues based on their potential impact. This approach led to the creation of a
two-dimensional matrix that clearly demonstrates the importance of each issue to our
stakeholders as well as to the business. The results were reviewed by our management
and external experts.
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These environmental, social and climate-related issues may lead to various risks and
opportunities to us, potentially impacting our Group in different ways. Our Group
identified 6 material ESG-related issues which have significant impacts on our
business and stakeholders and listed below:
Materials Issues Impact Period
Potential Risks, Impacts and Our
Strategies Environmental Target
Energy Management Medium-Term Increasingly stringent carbon emission
requirements are expected in the future
and may impact the business operations
of our Group. Potential impacts on the
business operations of our Group include
resulting in heavy fines and legal
consequences and jeopardising our
Group’s reputation if our Group is
unable to comply with the relevant
requirements under the increasing
regulatory pressure.
We have developed resource-saving
policies and procedures to reduce energy
consumption and enhance energy
management by setting guidelines for
electricity usage in our offices and retail
stores, and optimising transport and
delivery routes to reduce vehicle energy
consumption. We provide environmental
training courses for our employees to
raise their awareness and develop an
environmentally friendly culture in the
Group.
We have strictly abided with
the Energy Conservation
Law of the PRC to fulfil
energy management
responsibilities, promote
energy conservation
measures, and ultimately
achieve energy saving and
emissions reduction
targets.
We have set an energy
saving target to reduce
energy intensity of our
own operations by 5% by
2028, with 2023 as the
base year.
Our investment in measures to reduce
energy consumption, such as purchasing
electric vehicles and LED lighting,
upgrading air-conditioners, amounted to
RMB1,183,694, RMB710,950,
RMB1,276,822 and RMB359,100 for
FY2021, FY2022, FY2023 and 9M2024,
respectively.
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Materials Issues Impact Period
Potential Risks, Impacts and Our
Strategies Environmental Target
Waste Management Long-Term Inadequate waste management practices
may lead to environmental pollutions
when disposing hazardous materials or
non-recyclable waste improperly.
Non-compliance with waste management
regulations can result in penalties and
legal consequences for supermarkets,
which eventually affects our Group’s
reputation and finances. We have strictly
complied with the “Solid Waste Pollution
Prevention and Control Law of the
People’s Republic of China”. During the
Track Record Period, we did not have
any material non-compliance against
waste related laws and regulations.
Internally, we have waste management
procedures in place to ensure responsible
disposal of hazardous and non-hazardous
waste. In respect of the non-hazardous
waste, we are committed to minimising
the generation of such waste and
enhancing waste resource utilisation
through better inventory management
and avoidance of overstocking. In
respect of the hazardous waste, we have
engaged certified third parties to collect
and process.
For FY2021, FY2022, FY2023 and
9M2024, our investment in waste
treatment and measures to reduce waste
generation was RMB195,092,
RMB188,798, RMB180,092 and
RMB256,445, respectively.
We have strictly abided with
the Solid Waste Pollution
Prevention and Control
Law of the PRC to
regulate and control solid
waste management,
minimise the generation of
solid waste, promote
resource utilisation, and
protect the environment
and public health.
We have set a waste
reduction target to reduce
the intensity of waste
generation by 10% by
2028, with 2023 as the
base year.
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Materials Issues Impact Period
Potential Risks, Impacts and Our
Strategies Environmental Target
Labour Management Long-Term Potential disputes arising from employee
dissatisfaction with wages, benefits and
fairness may initiate controversy and
impair our Group’s reputation for a
significant period of time. Insufficient
skilled employees may reduce the
efficiency of our Group’s production
lines and eventually jeopardise the
long-term competitiveness of our Group.
We have formulated human resource
management policies and established
management systems as to promotion
and welfare in order to safeguard
employee’s rights across different
aspects such as recruitment,
advancement, payment, termination,
equal opportunities, diversity, prevention
of discrimination and benefits. Besides,
we have implemented various measures
and procedures to prohibit child and
forced labour. For FY2021, FY2022,
FY2023 and 9M2024, employee
remuneration and benefits amounted to
approximately RMB113.3 million,
RMB111.8 million, RMB105.0 million
and RMB69.2 million, respectively. For
further details related to our labour
management, please see the paragraph
headed “Labour Management” in this
section.
We have strictly abided with
the Labour Law of the
PRC and the Labour
Contract Law of the PRC
to protect the rights and
interests of employee,
ensure fair and
harmonious labour
relations, and promote
social stability and
economic development.
We aim to promote fairness
and equity in the
workplace, provide equal
opportunities for our
employees and increase
employee satisfaction.
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Materials Issues Impact Period
Potential Risks, Impacts and Our
Strategies Environmental Target
Operational
Compliance
Long-Term Potential operational compliance risks are
expected in the future, as we operate in
the retail industry with a complex supply
chain system and a wide range of
products for daily life of our customers.
Therefore, regulatory compliance, supply
chain compliance and product quality &
safety are very crucial to us. It may
impact the business operations of our
Group. If any food safety problems
caused by any non-compliance exist, that
may potentially threaten the health and
safety of customers. Our Group may also
face fines, reputational damage or legal
proceedings. We provide training on
product quality control and management
to enhance our employees’ awareness of
compliance. During the Track Record
Period, we did not have any material
non-compliances with operation related
ESG laws and regulations. For FY2021,
FY2022, FY2023 and 9M2024, our
financial investment in meeting
operational compliance requirements was
RMB409,426, RMB262,680,
RMB706,329 and RMB101,944,
respectively. The cost of meeting
operational compliance includes but is
not limited to the fee for environmental
testing and cleaning and purchasing or
replacing fire extinguishers. For further
details related to operational compliance,
please see the paragraph headed
“Operational Compliance” and “Supply
Chain Management” in this section.
We have strictly complied
and will continue to
comply with
environmental and social
related laws and
regulations of the PRC to
ensure that:
 No breaches of laws at
the operational level;
 No penalties imposed by
regulatory authorities;
and
 No negative news
exposures concerning our
Group throughout the
year.
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Materials Issues Impact Period
Potential Risks, Impacts and Our
Strategies Environmental Target
Privacy & Data
Security
Long-Term Insecure database and servers may
significantly increase the possibility of
data leakage resulting from hacker
attacks and our Group may fail to
maintain privacy and data security.
Under this circumstances, our Group
may be fined and held liable for
violating relevant laws and regulations,
and also be liable for high litigation and
compensation costs. Such litigation and
compensation may also cause significant
economic risks and impair the reputation
of our Group. During the Track Record
Period, we did not have any material
non-compliances with any privacy and
data security related laws and
regulations. As of 30 September 2024,
we did not suffer from any financial
losses as a result of leakage of
confidential company information or
customer information. To prevent such
incidents and ensure the security of
Group’s database, for FY2021, FY2022,
FY2023 and 9M2024, our financial
investment in upgrading information
infrastructure such as servers and
firewall, etc., and purchasing licensed
software was RMB394,800, RMB47,200,
RMB104,500 and RMB773,639,
respectively. We also conduct training
for our employees on the importance of
data and privacy security to raise their
awareness of data and privacy
protection. For further details related to
Privacy & Data Security, please see the
paragraph headed “Privacy & Data
Security” in this section.
We have strictly abided and
will continue to strictly
abide by the Internet
Security Law of the PRC,
the Personal Information
Protection Law of the
PRC, and the Data
Security Law of the PRC
to prevent any leakage of
confidential company
information or customer
information.
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Materials Issues Impact Period
Potential Risks, Impacts and Our
Strategies Environmental Target
Supply Chain
Management
Long-Term Selecting appropriate suppliers can
minimise the environmental and social
impacts throughout the supply chain. If
the suppliers are not able to fulfil their
environmental and social responsibilities
and comply with relevant laws and
regulations, our Group may face the risk
of reputation being impaired within the
industry. We have established
procurement and supplier management
procedures as well as a supplier
admission and performance review
system, giving preference to suppliers
with internationally recognised
certifications, requiring suppliers to
comply with environmental protection
laws and purchasing materials and/or
manufacturing in a responsible and
sustainable manner. For further details
related to supply chain management,
please see the paragraph headed “Supply
Chain Management” in this section.
Our supply chain
management target is to
establish a sustainable,
transparent and ethical
supply chain system that
ensures product quality
and safety, protects labour
rights, improves supply
chain efficiency and
builds good relationships
with suppliers.
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Metrics and Targets
Environmental Matters
We endeavour to minimise the potential environmental and climate-related risks and
impacts from daily operation and to foster green operation within the Group. We strictly abide
by the environmental-related laws and regulations involving air emissions, wastewater discharge,
and waste disposal of the PRC. We are aware of the environmental impacts that our business
operations may induce and the resources that are required for the business operation. We have
taken into account the quantitative information that reflects our management of
environmental-related risks. We monitor the following metrics to assess and manage the
environmental and climate-related risks and opportunities arising from our business operation:
Climate Change
We recognise that global warming presents a diverse array of risks to our business
operations. As part of our proactive approach, we diligently identify and monitor
climate-related risks and opportunities that may affect our business, strategy, and financial
performance. Under our policies and procedures for responding to climate change, we have
set our goals to support the national “3060” carbon peak and neutrality targets by reducing
the greenhouse gas emissions and striving for smooth operations while ensuring the safety
of our employees.
For climate-related physical risks, climate change induces more frequent and severe
extreme weather events, such as floods, heat waves, hurricane and storms. These events
have the potential to inflict damage on the physical infrastructure of assets, including
buildings, warehouses, and goods. Additionally, they can lead to project planning and
implementation delays, transportation challenges, disruptions in the supply chain, and
negative impacts on the workforce. These combined effects may ultimately have an impact
on our overall business operations. The business premise of one of our Group’s entities is
located in coastal area, which may be vulnerable during extreme weather events. We have
implemented crisis and emergency management strategies to effectively handle the
increasingly frequent and severe extreme weather events associated with climate change.
We maintain property insurances for properties and other assets that are vulnerable to
extreme weather damage or other physical impacts caused by climate change. Furthermore,
through workshops and training programs, we have better understood the impact of
climate-related risks on our business operations. We also assess climate-related risks in our
supply chain by evaluating the vulnerability of our suppliers located in flood-prone areas or
other high-risk regions. By identifying alternative sources of supply and establishing robust
contingency plans, we aim to minimise disruptions caused by climate-related events and
ensure the continuity of our operations. Additionally, we will closely monitor daily
observatory predictions and promptly notify our employees and other personnel of any
related measures in case of extreme weather.
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For climate-related transition risks, one significant transition risk involves the need to
allocate greater capital expenditure towards low-carbon commodity replacements. Besides,
with evolving policies and regulations, we may be exposed to litigation risks if we fail to
address climate change in accordance with the relevant policies or regulations. These risks
may lead to an increase in capital expenditures due to the need to constructing new
facilities and implementation of new practices and processes and alterations in the income
mix and sources.
To effectively manage these transition risks, we prioritise the selection of locally
sourced products and organic food to minimise carbon emissions during transportation and
supply chain. Furthermore, we remain committed to closely monitoring national and
industry policies as well as consumer preferences. By staying informed of the latest
developments in climate-related policies and regulations, we can proactively adjust our
product strategy to align with evolving market demands and sustainability requirements.
For climate-related opportunities, we have observed an increasing demand from
customers and a growing regulatory emphasis on the transition to low-carbon products. We
have increased our investments in sustainable products and brands, including organic food,
locally sourced food and other environmentally friendly products to develop and promote
low emission products.
The capital expenditures on climate-related risks include investment in energy
efficient products, operating costs for asset repairs, and the costs associated with
purchasing property insurances etc. With regard to the climate-related opportunities, we
also purchased sustainable products including organic food, local food and plant-based
food, which amounted to RMB144.33 million, RMB206.17 million, RMB124.44 million
and RMB86.99 million as at 31 December 2021, 2022, 2023 and 30 September 2024,
respectively.
Emission Control
The primary source of air pollutant emissions is the combustion of fuel from the
Group’s vehicles, stationary equipment and direct emissions of pollutants. Typical air
pollutants emitted include nitrogen oxides, sulphur oxides and particulate matter. The
following table sets forth the amount of air pollutant emissions from our Group during the
Track Record Period.
Air Emissions (kg) 2021 2022 2023 9M2024
Nitrogen Oxides (NO x) 4,110.56 4,057.71 4,178.33 2,817.94
Sulphur Oxides (SO x) 5.39 3.92 4.63 3.24
Particulate Matter (PM) 332.66 322.77 325.73 221.55
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Referring to “How to Prepare an ESG Report – Appendix II: Reporting Guidance on
Environmental KPIs” (“ Appendix II ”) provided by the Stock Exchange, the Group’s
greenhouse gas emissions are primarily classified into three scopes: (i) scope 1 includes
direct emissions from the combustion of fuels of the Group’s vehicles and stationary
equipment as well as the use of refrigerant; (ii) scope 2 includes indirect emissions from
purchased electricity; and (iii) scope 3 other includes indirect emissions from the business
air travel, treatment of waste paper and electricity used for fresh water and sewage
processing. The following table sets forth the amount of greenhouse gas emissions during
the Track Record Period:
Greenhouse Gases Emissions 2021 2022 2023 9M2024
Total GHG Emissions (tCO 2e) 11,738 11,972 12,274 10,080
Scop e 1 – Direct emissions 2,814 2,711 2,828 2,640
Scop e 2 – Energy indirect
emissions 8,852 9,186 9,368 7,381
Scop e 3 – Indirect emissions 72 75 79 59
Intensity (tCO 2e/RMB million of
revenue) 6.41 6.48 8.27 9.46
Use of Resources
Energy Management
We regularly review the energy consumption data and seek for opportunities to
optimise energy use and improve energy efficiency wherever possible. Our energy
consumption is classified into direct and indirect energy consumption. The direct energy
consumption is from the fuel consumption of vehicles and stationary source. The indirect
energy consumption is from the consumption of purchased electricity. We have set an
energy saving target to reduce energy intensity of our own operations by 5% by 2028, with
2023 as the base year.
Energy Consumption 2021 2022 2023 9M2024
Total Energy Consumption (MWh) 23,830 23,725 24,215 18,637
Direct energy consumption
(MWh) 7,932 7,227 7,391 5,381
Indirect energy consumption
(MWh) 15,898 16,498 16,824 13,256
Intensity (MWh/RMB million of
revenue) 13.02 12.85 16.32 17.48
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Waste Management
We strictly comply with the “Solid Waste Pollution Prevention and Control Law of the
People’s Republic of China” and are committed to reducing the generation of waste. The
non-hazardous waste generated by our Group mainly includes daily office waste and
product packaging. Office waste will be collected and processed in a proper and legal
manner. We also recycle paper, metals and plastics by using waste sorting bins. In addition,
the usage of materials is evaluated regularly in order to avoid overstocking. The hazardous
waste generated by our Group comprises waste light tube, toner cartridge, computers and
lubricant. All hazardous waste generated is properly collected and treated. We have set our
target to reduce the intensity of waste generation by 10% by 2028, with 2023 as the base
year.
Waste Generation 2021 2022 2023 9M2024
Waste generated (tons) 33.21 31.20 30.67 22.20
Intensity (kg/RMB million of
revenue) 18.15 16.90 20.68 20.83
Water Usage
The usage of municipal water contributes to the majority of water consumption for the
operation of the office and physical stores. Thus, we inevitably generate a small amount of
domestic sewage which is discharged into the municipal sewage pipe network for treatment.
We understand the importance of water conservation as water is a precious resource.
Therefore, we have implemented various water conservation measures. For instance, putting
up water saving reminder labels in washrooms and pantries to raise the employee’s
awareness of water saving, reducing water pressure to the lowest practical level and
checking water meter readings regularly. We monitor our sewage discharge levels on a
periodic basis.
Water Consumption 2021 2022 2023 9M2024
Total Water Consumption (m 3) 96,137 92,007 78,302 52,423
Intensity (m 3/RMB million of
revenue) 52.53 49.83 52.79 49.18
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Social Matters
Labour Management
We are committed to promoting fairness and equity in the workplace, as well as providing
equal opportunities to employees. We have formulated multiple measures in order to protect the
rights of employees, including but not limited to recruitment and dismissal, development and
training, compensation and benefits as well as occupational health and safety. We lay emphasis
on providing targeted trainings for employees to fulfil the needs of different positions.
Meanwhile, we also encourage employees to participate in external training, seminars and
sharing sessions to enrich their professional knowledge.
In terms of employees’ development, we prioritise internal promotions based on the skills
and performance of employees, thereby encouraging and rewarding the contributions of
hardworking employees. In order to promote the corporate culture and professionalism of our
Group, we provide employees with abundant opportunities for professional development and
clear career paths, and value and recognise the contributions of outstanding employees.
As of 30 September 2024, the metrics related to social indicators are as follows:
Employment indicators 2021 2022 2023 9M2024
Number of total employees 1,974 1,829 1,696 1,580
By gender
Male 261 226 227 219
Female 1,713 1,603 1,469 1,361
By employment type
Full-time 1,941 1,800 1,636 1,536
Part-time 33 29 60 44
By age group
< 30 years old 116 88 49 44
30–50 years old 1,304 1,226 1,009 976
> 50 years old 554 515 638 560
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Employee Turnover Rate 2021 2022 2023 9M2024
Total 13% 5% 10% 20%
By gender
Female 14% 5% 11% 20%
Male 11% 6% 2% 16%
By age group
< 30 years old 50% 17% 9% 59%
30–50 years old 13% 6% 10% 14%
> 50 years old 6% 2% 10% 26%
By Geographical Region
PRC 13% 5% 10% 20%
Hong Kong 0% 0% 0% 0%
Occupational Health and Safety
We recognise the importance of occupational safety and health. Therefore, we strictly
comply with relevant occupational safety laws such as the Law of the PRC on Work Safety and
the Law of the PRC on the Prevention and Control of Occupational Diseases. We have
established a clear and effective reporting system. Any reports of unsafe and unhealthy
environments in the workplace will be responded immediately and the cause of any injuries will
be investigated to prevent same incidents from happening again. We also provide safety training
for employees to raise their safety awareness. In addition, we have established contingency
measures for different emergency situations as well as organised regular emergency evacuation
drills and inspection of fire safety facilities to ensure staff safety. During the Track Record
Period, we did not have any material non-compliance issues and accidents with regard to
occupational health and safety.
Operational Compliance
Due to the nature of our business, operational compliance is vital to us. We have
established a strict food safety management system to ensure the quality and safety of food
products, strengthen quality control on product labels and descriptions, and implement
environmental management plans. To further ensure the quality of supermarket products, the
purchasing department reviews the qualifications and certifications of suppliers every year. We
have also formulated a quality management system in order to manage and track customer
feedback and take different actions on product quality and safety matters. All public product
sales and marketing information is reviewed to ensure compliance with legal requirements and
that it is not false or misleading. We also will supervise the content of advertisements and
product labels to ensure the content is clear and authentic as well as establish specific
advertising and product label design requirements, promotional data application methods or
precautions.
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Anti-corruption
We have always adhered to the principle of integrity in business operations and strictly
abide by the Criminal Law of the PRC, Anti-Unfair Competition Law of the PRC, Anti-money
Laundering Law of the PRC and other national laws and regulations in terms of anti-corruption
and anti-money laundering. To reinforce the principles stated therein, we have developed an
anti-corruption and anti-money laundering policy and implemented a reporting system to allow
for the confidential submission of any instances of perceived or potential misconducts. We have
established different reporting channels, including reporting hotline, email and mailbox, etc. We
encourage employees and related parties to report any internal violations of discipline, law,
fraud, and behaviours that damage the group’s interests and image in an orderly manner. In
addition, we conduct anti-corruption and anti-money laundering training for new employees and
introduce our internal policy about anti-corruption and anti-money laundering, anti-corruption
laws and regulations, etc. to raise their awareness of anti-corruption.
Privacy and Data Security
As our business involves the information of major brands and customers, we attach great
importance to data security and customer privacy protection. We strictly comply with relevant
laws and regulations. Customer information is collected and used in a responsible and
non-discriminatory manner by restricting the use of the customer information to purposes
consistent with those identified in our contracts. We also advise employees on issues related to
handling of customer information. Employees are only allowed to obtain customer information
when necessary. Our computer databases are further secured in order to safeguard the
information of the customers.
Supply Chain Management
We take into account the potential environmental and social risk management practices of
the suppliers during the supplier selection process. We will evaluate suppliers’ product quality,
delivery time, processing capacity, compliance, emphasising the selection of suppliers with
internationally acknowledged certifications in environmental and social risk management.
Suppliers with energy and environmental management certifications, such as ISO 50001 and ISO
14001, are given preference to reinforce our commitment to sustainability. Our purchasing
department is responsible for collecting supplier data, evaluating supplier performance and risk,
and conducing suppliers surveys by questionnaire and on-site visits, etc., to prioritise the
suppliers that actively fulfil their environmental and social responsibilities and comply with
relevant laws and regulations regarding anti-bribery, anti-corruption and other unethical business
practices.
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--- page 315 ---
In order to maintain the quality of the suppliers, we conduct annual supplier evaluation.
Specific employees will be assigned to conduct site visits to the suppliers during the evaluation
process. Suppliers that do not meet the standards for cooperation will be eliminated from the
listed of qualified suppliers. Training will be provided to the employees who are responsible for
supply chain evaluation to ensure they have adequate knowledge to accurately audit the
suppliers. In 2021, 2022, 2023 and 9M2024, our suppliers amounted to 1,055, 990, 941 and 943
respectively.
Suppliers 2021 2022 2023 9M2024
Eastern China 993 932 894 903
Southern China 30 29 23 19
Southwest China 4321
Central China 12 17 12 8
Northwest China 5101
Northern China 9867
Northeast China 2044
Expenditure of ESG Issues
It is vital for us to keep track of its expenditure and projected costs of tackling ESG and
climate related issues aroused from our business operations, and of abiding by
environmental-related laws and regulations. During the Track Record Period, the cost of
managing environmental issues was shown as below:
Expenditure 2021 2022 2023 9M2024
RMB 1,253,000 750,000 1,276,822 359,100
In future, we have estimated approximately RMB1,030,000 and RMB1,130,000 as the
annual budget in years of 2025 and 2026 respectively for managing environmental issues. We
shall continue to review the environmental expenditure and budget for environmental compliance
and develop well-spent environmental strategies, so as to enhance our environmental
performance and operate in a sustainable way.
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PROPERTIES
Self-used land and property
As at the Latest Practicable Date, our Group owned the following properties:
Location Owner
Gross floor area
(sq.m.) Usage Period of use
Land Buildings
Xiezhuang Village, Shaobo
Town, Jiangdu District,
Y angzhou (Ь
ᕄᑽ୿Ӏ )
Company 34,960.03 11,741.63 Commercial
use/storage
Until 20 December
2054
No. 2, Gongnong Road, Fairy
Town, Jiangdu District,
Y angzhou ( ౮ψ̹Ϫேਜ̀ɾ
ᕄʈ༵༩ 2໮)
(Note)
Hongxin
Trading
6,246 2,033.2 Wholesale retail/
commercial
services
Until 16 July 2042
No. 2, Gongnong Road, Fairy
Town, Jiangdu District,
Y angzhou ( ౮ψ̹Ϫேਜ̀ɾ
ᕄʈ༵༩ 2໮)
(Note)
Hongxin
Trading
6,246 2,780.63 Accommodation
and F&B/
commercial
services
Until 16 July 2042
Block 1, No. 2, Gongnong
Road, Fairy Town, Jiangdu
District, Y angzhou ( ౮ψ̹Ϫ
ேਜ̀ɾᕄʈ༵༩ 2໮1
ᄸ)
(Note)
Hongxin
Trading
6,246 2,684.12 Wholesale retail/
commercial
services
Until 16 July 2042
No. 2, Gongnong Road, Fairy
Town, Jiangdu District,
Y angzhou ( ౮ψ̹Ϫேਜ̀ɾ
ᕄʈ༵༩ 2໮)
(Note)
Hongxin
Trading
6,246 976.18 Wholesale retail/
commercial
services
Until 16 July 2042
No. 2, Gongnong Road, Fairy
Town, Jiangdu District,
Y angzhou ( ౮ψ̹Ϫேਜ̀ɾ
ᕄʈ༵༩ 2໮)
(Note)
Hongxin
Trading
6,246 948.99 Wholesale retail/
commercial
services
Until 16 July 2042
No. 2, Gongnong Road, Fairy
Town, Jiangdu District,
Y angzhou ( ౮ψ̹Ϫேਜ̀ɾ
ᕄʈ༵༩ 2໮)
(Note)
Hongxin
Trading
6,246 641.08 Wholesale retail/
commercial
services
Until 16 July 2042
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--- page 317 ---
Location Owner
Gross floor area
(sq.m.) Usage Period of use
Land Buildings
No. 2, Gongnong Road, Fairy
Town, Jiangdu District,
Y angzhou ( ౮ψ̹Ϫேਜ̀ɾ
ᕄʈ༵༩ 2໮)
(Note)
Hongxin
Trading
6,246 1,201.5 Wholesale retail/
commercial
services
Until 16 July 2042
No. 2, Gongnong Road, Fairy
Town, Jiangdu District,
Y angzhou ( ౮ψ̹Ϫேਜ̀ɾ
ᕄʈ༵༩ 2໮)
(Note)
Hongxin
Trading
6,246 2,144 Wholesale retail/
commercial
services
Until 16 July 2042
No. 2, Gongnong Road, Fairy
Town, Jiangdu District,
Y angzhou ( ౮ψ̹Ϫேਜ̀ɾ
ᕄʈ༵༩ 2໮)
(Note)
Hongxin
Trading
6,246 3,936.48 Wholesale retail/
commercial
services
Until 16 July 2042
No. 2, Gongnong Road, Fairy
Town, Jiangdu District,
Y angzhou ( ౮ψ̹Ϫேਜ̀ɾ
ᕄʈ༵༩ 2໮)
(Note)
Hongxin
Trading
6,246 974.03 Wholesale retail/
others
Until 16 July 2042
No. 2, Gongnong Road, Fairy
Town, Jiangdu District,
Y angzhou ( ౮ψ̹Ϫேਜ̀ɾ
ᕄʈ༵༩ 2໮)
(Note)
Hongxin
Trading
6,246 3,803.76 Accommodation
and F&B/
commercial
services
Until 16 July 2042
No. 2, Gongnong Road, Fairy
Town, Jiangdu District,
Y angzhou ( ౮ψ̹Ϫேਜ̀ɾ
ᕄʈ༵༩ 2໮)
(Note)
Hongxin
Trading
6,246 2,665.05 Accommodation
and F&B/
commercial
services
Until 16 July 2042
Building 1, No. 2, Gongnong
Road, Hongwei Bridge
Neighborhood Committee,
Jiangdu District, Y angzhou
(։ึ
ʈ༵༩ 2໮1ᄸ)
(Note)
Hongxin
Trading
6,246 1,788.52 Wholesale retail/
others
Until 16 July 2042
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--- page 318 ---
Location Owner
Gross floor area
(sq.m.) Usage Period of use
Land Buildings
Building 1, No. 2, Gongnong
Road, Hongwei Bridge
Neighborhood Committee,
Jiangdu District, Y angzhou
(։ึ
ʈ༵༩ 2໮1ᄸ)
(Note)
Hongxin
Trading
6,246 1,072 Wholesale retail/
others
Until 16 July 2042
No. 2, Gongnong Road, Fairy
Town, Jiangdu District,
Y angzhou ( ౮ψ̹Ϫேਜ̀ɾ
ᕄʈ༵༩ 2໮)
(Note)
Hongxin
Trading
6,246 1,948.05 Wholesale retail/
others
Until 16 July 2042
No. 2, Gongnong Road,
Hongwei Bridge
Neighborhood Committee,
Jiangdu District, Y angzhou
(։ึ
ʈ༵༩ 2໮)
(Note)
Hongxin
Trading
6,246 1,082.56 Wholesale retail/
others
Until 16 July 2042
No. 12 Huaiyang Road, Jiangdu
Town, Y angzhou ( ౮ψ̹Ϫே
ᕄଊ౮༩ 12໮)
Hongxin
Trading
851.9 N/A Commercial Until 24 June 2036
Buildings 3 and 4, No. 19,
Jianghuai Road, Huaiyang
Neighborhood Committee,
Jiangdu District, Y angzhou
City (։
ึϪଊ༩ 19໮3ᄸe4ᄸ)
Hongxin
Trading
N/A 1,640.07 Non-residential N/A
Note: These properties are located on the same parcel of land.
The foregoing properties are used by us for non-property activities as defined under
Rule 5.01(2) of the Listing Rules. As at 30 September 2024, we had no single property interest
with a carrying amount of 15% or more of our total assets. Therefore, according to Chapter 5 of
the Listing Rules and section 6(2) of the Companies (Exemption of Companies and Prospectuses
from Compliance with Provisions) Notice (Cap. 32L of the Laws of Hong Kong), this prospectus
is exempted from compliance with the requirements of section 342(1)(b) of the Companies
(Winding Up and Miscellaneous Provisions) Ordinance in relation to paragraph 34(2) of the
Third Schedule to the Companies (Winding Up and Miscellaneous Provisions) Ordinance which
requires a valuation report with respect to all of our interests in land or buildings.
BUSINESS
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Apart from the abovementioned properties, as at the Latest Practicable Date, we had not
obtained the land use right certificates for self-owned land with a total site area of
approximately 45,300 sq.m. and property ownership certificates for self-owned properties with a
gross floor area of approximately 26,000 sq.m.. Furthermore, certain self-owned properties were
constructed without completing the requisite administrative procedures and/or obtain the
requisite permits at various stages of construction, including land use permit, construction work
land permit, construction work planning permits and construction work commencement permits.
For further details, please refer to the paragraph headed “Non-compliance” below in this section.
Leased properties
Lessee
As at the Latest Practicable Date, our Group had entered into a total of 173 lease
agreements which are mainly used as our Retail Stores, Mall and warehouses, with total gross
floor area of approximately 107,500 sq.m. covering 157 Retail Stores in Jiangsu Province. All
properties were leased by our Group from Independent Third Parties.
The following table shows the expiry dates of the lease agreements that we have entered
into as at the Latest Practicable Date in relation to the Retail Stores operated and leased by us:
Expiry dates
Number of Retail
Stores as at the Latest
Practicable Date
On or before 31 December 2025 33
1 January 2026 to 31 December 2026 22
1 January 2027 to 31 December 2027 34
On or after 1 January 2028 68
As at the Latest Practicable Date, 172 lease agreements had not been registered with the
relevant housing authorities. Under the relevant PRC laws and regulations, the parties to a lease
agreement have the obligation to register and file the executed lease agreement. As advised by
our PRC Legal Advisers, the validity and enforceability of the lease agreements are not affected
by the failure to register or file the lease agreements with the relevant government authorities.
According to the relevant PRC regulations, we may be ordered by the relevant government
authorities to register the relevant lease agreements within a prescribed period, failing which we
may be subject to a fine ranging from RMB1,000 to RMB10,000 for each unregistered lease.
Therefore, according to our PRC Legal Advisers, we have the right to use the relevant properties
in accordance with the lease agreements, but if the lease registration has not been completed
upon the requests of relevant government authorities, we may be subject to the risk of penalties.
As at the Latest Practicable Date, we have not received any order from the relevant government
authorities requiring us to register these lease agreements, and no administrative penalty was
imposed on us for non-registration of these lease agreements.
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Lessor
As at the Latest Practicable Date, we entered into 77 lease agreements for leasing our
properties to our lessees, with a total gross floor area of approximately 55,000 sq.m.. All lessees
are Independent Third Parties. Under the relevant PRC laws and regulations, the parties to a
lease agreement have the obligation to register and file the executed lease agreement. As advised
by our PRC Legal Advisers, the validity and enforceability of the lease agreements are not
affected by the failure to register or file the lease agreements with the relevant government
authorities. According to the relevant PRC regulations, we may be ordered by the relevant
government authorities to register the relevant lease agreements within a prescribed period,
failing which we may be subject to a fine ranging from RMB1,000 to RMB10,000 for each
unregistered lease. Therefore, according to our PRC Legal Advisers, we have the right to use the
relevant properties in accordance with the lease agreements, but if the lease registration has not
been completed upon the requests of relevant government authorities, we may be subject to the
risk of penalties. As at the Latest Practicable Date, we have not received any order from the
relevant government authorities requiring us to register these lease agreements, and no
administrative penalty was imposed on us for non-registration of these lease agreements.
INSURANCE
Our Directors consider that our insurance coverage is adequate and consistent with the
industry norm having regard to our current operations and the prevailing industry practice.
We maintain various types of insurance policies to cover our business operations, including
property all risks insurance and public liability insurance. We are obliged to provide and have
provided social insurance for our employees as required by the relevant PRC laws and
regulations. However, our Group does not maintain insurance to cover all risks associated with
our operations for various reasons, such as some risks which are not generally covered by
insurers in their standard insurance policy, the impact of which is minimal or not commercially
justifiable having considered the amount of insurance premium. We do not maintain any product
liability insurance to cover the associated risk, which we believe is in line with retail industry
practice.
To mitigate the risks that we are exposed to the product liability claims from the end
consumers, we have applied a set of stringent criteria in selection of our suppliers and inspect
the products sourced from our suppliers upon delivery to ensure the products supplied to us are
of high quality and standard. We also require our suppliers to reimburse us on any loss in
relation to any defective products supplied by our suppliers.
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EMPLOYEES
As at the Latest Practicable Date, we had 1,507 employees, all of them are based in Jiangsu
Province. A breakdown of our employees by function is set forth below:
No. of
employees
Management 13
Administrative 90
Financial and Information Technology 43
Marketing 22
Procurement 25
Logistics 73
Operational 1,241
Total 1,507
We make contributions for our employees towards five categories of social insurance,
including pension, medical insurance, work-related injury insurance, unemployment insurance
and maternity insurance in accordance with the PRC social insurance system, as well as housing
provident fund in compliance with the relevant PRC laws and regulations.
We enter into separate labour contracts with each of our employees, the terms and
conditions of which are in full compliance with the relevant PRC labour laws and employment
decrees. The remuneration of our employees consists of basic salary and quarterly and annual
discretionary bonuses. The bonus amount is based on the employee’s performance. In addition,
we provide our employees with various insurance policies and housing pensions as required by
relevant PRC labour laws. As disclosed in the paragraph headed “Non-compliance” in this
section, our PRC operating subsidiaries did not pay social insurance contributions and housing
provident fund contributions in full for all of the employees. During the Track Record Period
and up to the Latest Practicable Date, no administrative actions, fines or penalties have been
imposed by the relevant PRC government authorities with respect to such non-compliance, nor
has any order been received by our operating entities to settle the outstanding amount of social
insurance contributions and housing provident fund contributions.
Recruitment policies
We generally recruit our employees from the open market through placing recruitment
advertisements. We endeavour to attract and retain appropriate and suitable personnel to serve
our Group. We assess the available human resources on a continuous basis and will determine
whether additional personnel are required to cope with the business development of our Group.
BUSINESS
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Training
Our human resources department will introduce our standards and culture to our new staff
and prepare a series of compulsory trainings for them focusing on hard skills such as company
introduction and working procedures. Our store managers will also train up our newly recruited
staff to cater for the needs of our Retail Stores and Malls.
We also offer regular and tailor-made trainings to our management and front-line personnel
and identify suitable and promising candidates for future promotion to store managers. We
believe our internal training programmes not only increase our staff retention rates as a result of
the upward mobility prospect, but also produce the right kind of candidates as our management
personnel we need for our business expansion.
We have labour unions. Our Directors confirmed that we have not experienced any labour
strikes or material labour disputes during the Track Record Period and have not experienced any
significant difficulties in recruiting or retaining qualified staff.
INTELLECTUAL PROPERTY RIGHTS
We believe that trademarks are important to our business as these trademarks enable
customers to differentiate our business from our competitors. At the Latest Practicable Date, we
had 12 registered trademarks in the PRC and one registered trademark in Hong Kong which are
material to the business of our Group.
As at the Latest Practicable Date, we owned one domain name which is material in relation
to our business.
For further information on intellectual property rights which are material to our business,
please refer to the paragraph headed “Statutory and General Information – 2. Further
Information about our Business – B. Our Material Intellectual Property Rights” in Appendix VI
to this prospectus.
As at the Latest Practicable Date, we were not involved in any proceedings with regard to
infringement of any intellectual property rights, and we have not received notice of any claims
of or made any claims of infringement of any intellectual property rights.
BUSINESS
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MARKET AND COMPETITION
According to the Industry Report, competitions in the PRC markets of supermarket retail,
convenience store, department store and prepared food such as ready meals, pre-cooked or
semi-cooked foods are fierce despite that the levels and extents of market concentration in the
respective markets are different. While the market concentration in the supermarket retail
industry is relatively high, there are many brands or companies in the markets of convenience
store, department store and prepared food, resulting in a relatively low market concentration.
The grains and oil wholesale industry in China has shown a trend of centralization to a certain
extent. As of June 2024, there were a total of 317,600 grains and oil wholesale enterprises in
China. Among these, Jiangsu Province accounted for approximately 5.1%, totaling 16,100
enterprises. Within Jiangsu Province, central region of Jiangsu Province accounted for the
approximately 15.3%. We ranked (i) in the supermarket retail industry, the second in Y angzhou
with a market share of approximately 9.1%, the fifth in the central region of Jiangsu Province
with a market share of approximately 2.3%, and around the twentieth among supermarket
operators in Jiangsu province in terms of sales in 2023 with a market share of approximately
0.4%; (ii) in the convenience store market, the fourth in Y angzhou with a market share of
approximately 6.1%; (iii) in the department store market, the fifth in Y angzhou with a market
share of approximately 6.2%; (iv) in the prepared food market, the fourth in Y angzhou with a
market share of approximately 1.21%, in terms of sales in the respective markets in 2023. Please
refer to the section headed “Industry Overview” in this prospectus and the paragraph headed
“Business – Market and competition” in this section for further details on the competitive
landscape, analysis on market barriers, market opportunities and challenges of the supermarket
retail industry, convenience store market, department store market, prepared meals and grains
and oil wholesale markets.
LEGAL PROCEEDINGS AND LITIGATION
To the best knowledge of our Directors, during the Track Record Period and up to the
Latest Practicable Date, none of the members of our Group was engaged in any litigation,
arbitration or claim of material importance, and our Directors were not aware of any pending or
threatened litigation, arbitration or claim of material importance against our Group which, in the
opinion of our Directors, would have a material adverse effect on our financial condition or
results of operation.
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NON-COMPLIANCE
To the best knowledge of our Directors, during the Track Record Period and up to the
Latest Practicable Date, save as disclosed in this section, our Group did not have any
non-compliance which resulted in material impact on our normal operation.
(1) Failure to obtain certain land use right certificates and property ownership certificates
Failure to obtain certain land use right certificates
As at the Latest Practicable Date, we had not obtained the land use right certificates
with an aggregate site area of approximately 68 mu (equivalent to approximately 45,300
sq.m.) in the land owned by us (the “ Defective Land ”).
The Defective Land formed part of the land acquired by our Group, with an aggregate
site area of approximately 120 mu (equivalent to approximately 80,000 sq.m.) (the “ Project
Land ”), pursuant to an agreement (the “ Requisition and Transfer Agreement ”) with the
People’s Government of Shaobo Town, Jiangdu* (ִ݁the “ Shaobo
Town People’s Government ”), entered into around July 2010, in accordance with the
government’s policy of attracting investments. Pursuant to the Requisition and Transfer
Agreement, the Shaobo Town People’s Government shall be responsible for assisting us in
obtaining the land use right certificates for 30 mu (equivalent to approximately 20,000
sq.m.) of the Project Land within one year (the “ Guaranteed Land Portion ”), while
actively securing land quotas for the remaining Project Land.
In January 2014, we signed a land use right grant contract with Jiangdu Land and
Resources Bureau* ( Ϫேਜ਷ɺ༟๕҅ ), which stipulated the transfer of a land area of
34,976 sq.m. (equivalent to approximately 52 mu). As at the Latest Practicable Date, our
Group holds the land use right certificate for the said 34,976 sq.m. (equivalent to
approximately 52 mu) of the Project Land (which included the Guaranteed Land Portion),
out of which approximately 12,000 sq.m. (equivalent to approximately 18 mu) was in actual
use.
Land use right certificates for the remaining portion of the Project Land with a total
site area of approximately 68 mu (equivalent to approximately 45,300 sq.m.) stipulated in
the Requisition and Transfer Agreement (i.e., the Defective Land) could not be obtained. As
advised by our PRC Legal Advisers and according to the Requisition and Transfer
Agreement, since we have already obtained the land use right certificate for the Guaranteed
Land Portion, the Shaobo Town People’s Government’s legal obligation as to the Defective
Land under the Requisition and Transfer Agreement was to secure land use certificates for
the Defective Land on a best-effort basis only. So far as our Directors are aware, this was
due to subsequent adjustments in government policies prioritising land use quotas for real
estate enterprises in response to the expansion in the real estate sector. Consequently, the
allocation of land use quotas for townships was reduced, resulting in the inability to
process the land use right certificates for the Defective Land in a timely manner. The
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Company had maintained regular discussions with the Shaobo Town People’s Government
to explore the feasibility of securing land use quotas and obtaining the relevant land use
right certificate(s) for the Defective Land, but no substantive progress had been reached as
at the Latest Practicable Date.
Situated on the Defective Land are the Xiezhuang Village Defective Properties (as
defined below).
Failure to obtain certain property ownership certificates
As at the Latest Practicable Date, we had not obtained the property ownership
certificates for properties with an aggregate gross floor area of approximately 26,000 sq.m.
(the “ Defective Properties ”). The Defective Properties comprise: (a) certain buildings of
our Company located at Xiezhuang Village, Shaobo Town, Jiangdu District, Y angzhou City,
covering a gross floor area of approximately 23,500 sq.m., with these buildings occupying
a site area of approximately 21,855 sq.m. of land (equivalent to approximately 33 mu) (the
“Xiezhuang Village Defective Properties ”); and (b) certain areas within a building of
Hongxin Trading located at No. 2 Gongnong Road, Xiannu Town, Jiangdu District,
Y angzhou City (the “ Gongnong Road Building ”), covering a gross floor area of
approximately 2,500 sq.m. (the “ Gongnong Road Defective Parts ”). While the Jiangdu
Mall is situated within the Gongnong Road Building, the Jiangdu Mall possesses relevant
property ownership certificates save for certain area overlapping with the Gongnong Road
Defective Parts.
Set out below is a breakdown of the number and respective usage of the buildings
comprising the Defective Properties as at the Latest Practicable Date:
Defective Properties Usage
Number of
buildings involved
Xiezhuang Village
Defective Properties
Muyuan Central Kitchen 1
Offices 2
Not in use 2
Gongnong Road Defective
Parts
Storage 1
As at the Latest Practicable Date, the Xiezhuang Village Defective Properties
comprised the central kitchen, which serves as the Muyuan Central Kitchen for the
processing and distribution centre for meals, operated by Muyuan Supply Chain and
offices, which are situated on the Defective Land. The failure to obtain property ownership
certificates for the Xiezhuang Village Defective Properties is due to the absence of relevant
land use right certificates of the Defective Land, (see “– Non-compliance – (1) Failure to
obtain certain land use right certificates and property ownership certificates – Failure to
obtain certain land use right certificates” in this section above for reasons for the absence
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of relevant land use right certificates) making it impossible to obtain the relevant property
ownership certificates.
The Gongnong Road Defective Parts which are situated on land for which our Group
has obtained land use right certificates. As at the Latest Practicable Date, the Gongnong
Road Defective Parts were used as storage, which are expected to be relocated to the part
of the Gongnong Road Building possessing property ownership certificates prior to the
Listing, upon which, the Gongnong Road Defective Parts will become idle properties upon
the Listing. As at the Latest Practicable Date, approximately 77% of the Gongnong Road
Defective Parts in terms of floor area had already ceased to be in use. The Gongnong Road
Defective Parts involved temporary structures that were added to address insufficient
storage space at the time. So far as these temporary structures are concerned, a substantial
part in terms of floor area existed prior to the taking over of the building by Hongxin
Trading, which was injected into Hongxin Trading and contributed as registered capital by
Jiangdu Supply and Marketing Building* ( ϪேԶቖɽข ), a shareholder of Hongxin
Trading at the time of its establishment in 1994. For the remainder, which formed a
non-substantial part of these temporary structures, our Group engaged a third-party
construction company for their design and construction in or around 2002, where the
construction started in or around April 2002. Relying on the expertise of the construction
company, our Group assumed that, as an entity routinely entrusted with such projects, the
construction company would proactively identify and fulfil all necessary approval
requirements for the temporary structures. However, the construction company neither
advised our Group of the specific approval requirements nor initiated the requisite
procedures to obtain the necessary approvals, which our Group became aware of such
deficiency at the completion of the construction in or around May 2002 when relevant
construction project final acceptance filing (ጘʈ೻ംʈ᜕ϗ ) could not be obtained. At
the time, the then Directors understood that relevant approvals, such as construction
permits which require construction planning, to be approved by the relevant authorities
before construction begins. In the absence of these approvals being applied for by the
construction company, the only way to achieve compliance was to demolish the
construction and reapply for the necessary approvals before rebuilding. Therefore, the then
Directors believed that (i) these approvals could not be obtained retrospectively once
construction was completed; and (ii) based on the successful completion of the construction
project final acceptance filing (ጘʈ೻ംʈ᜕ϗ ) in 2003 for the addition of Phase III of
the Gongnong Road Building in or around 2002 (as further discussed in the section headed
“Non-compliance – (3) Failure to complete Fire Safety Approvals” below), if the relevant
approvals were obtained prior to commencement of the construction, the related
construction permits, planning, and completion acceptance procedures could be obtained.
As advised by our PRC Legal Advisers, structure additions, such as the temporary
structures comprising the Gongnong Road Defective Parts, may potentially obtain the
requisite construction permits, planning approvals, completion acceptance procedures, and
property ownership certificates, provided that the appropriate procedures are duly followed
at the time of the construction. As a result, the failure to obtain property ownership
certificates for the Gongnong Road Defective Parts is due to the lack of related
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construction permits, planning, and completion acceptance procedures, making it
impossible to obtain the relevant property ownership certificates.
Having considered that:
(i) as disclosed below, we have obtained confirmation letters from the Jiangdu
Branch of Y angzhou City Natural Resources and Planning Bureau* ( ౮ψ̹І್
༟๕ձ஝ྌ҅Ϫேʱ҅ ) and the Housing and Urban-Rural Development Bureau
of Jiangdu District, Y angzhou City* (ண҅ ), each
being a competent authority as advised by our PRC Legal Advisers, confirming,
among others, that the bureaus agreed that Hongxin Trading may continue to use
the Gongnong Road Defective Parts, as currently situated and in their current
condition on a long-term basis, that the bureaus will not take any administrative
measures or penalties against Hongxin Trading for the non-compliance incident,
which does not constitute material illegal or regulatory violations, and that the
bureaus will not confiscate the income generated from the production and
operations of Hongxin Trading on the Gongnong Road Defective Parts;
(ii) the Gongnong Road Defective Parts are used as storage without access by our
customers or the public, and will become idle properties upon Listing;
(iii) the Gongnong Road Defective Parts were constructed over 20 years ago and have
been used or occupied for over 20 years without receiving any penalty, objection,
inquiry or investigation from competent authorities with respect to the lack of
relevant permits or certificates, nor any notice from competent authorities
requiring us to demolish the Gongnong Road Defective Parts, nor any claim of
right from third parties, nor being involved in any disputes with third parties; and
(iv) such construction permits, planning, and completion acceptance procedures shall
be obtained at the time of construction, which took place in more than 20 years
ago, and the relevant competent authorities have not requested for the
reapplication of such permits and acceptance procedures,
our Directors are of the view that (i) it is impracticable to pursue the reapplication process
for construction permits, planning, and completion acceptance procedures; and (ii) the lack
of such permits and acceptance procedures does not pose a material adverse effect on our
business operations.
The revenue of our Group attributable to the Muyuan Central Kitchen represents the
revenue from supply and sales of meals, accounting for approximately 0.5%, 1.3%, 1.1%
and 0.5% of the total revenue of our Group for each of the three financial years ended 31
December 2023 and the nine months ended 30 September 2024, respectively.
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Legal consequences and maximum penalty
Article 64 of the “Urban and Rural Planning Law of the People’s Republic of China”
( ) stipulates that if construction proceeds without obtaining a
construction project planning permit or not in accordance with the stipulations of the
planning permit, the urban and rural planning authorities of the local People’s Government
at the county level or above shall order the construction to halt. If it is possible to take
corrective measures to eliminate the impact on the planning implementation, these must be
taken within a specified time, and a fine ranging from 5% to 10% of the construction
project cost may be imposed. If it is not possible to take corrective measures to eliminate
the impact, demolition must be carried out within a specified time. If demolition is not
feasible, the physical objects or illegal income shall be confiscated, and a fine of up to 10%
of the construction project cost may also be imposed.
According to Article 12 of the “Administrative Measures for the Permit of
Construction Works” ( ), any construction project commenced
without obtaining a construction permit, or any project subdivided to evade the permit
application, shall be ordered by the competent issuing authority to cease construction and
rectify within a specified period. The construction entity shall be fined between 1% and 2%
of the contract value of the project.
In accordance with Article 58 of the “Regulations on the Quality Management of
Construction Projects” (ணʈ೻ሯඎ၍ଣૢԷ), any construction project delivered for
use without an organised completion acceptance shall be ordered by the relevant authority
to rectify and shall be fined between 2% and 4% of the contract value of the project. If any
loss is caused, the construction entity shall bear the liability for compensation in
accordance with the law.
Based on the stipulations as listed above provided by our PRC Legal Advisers, our
Directors estimate that the aggregate maximum penalties that may be imposed on our
Group in relation to the Defective Land and Defective Properties are expected to be
approximately RMB0.8 million.
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Current status and remedies
We have obtained confirmation letters dated 7 January 2025, respectively, both jointly
issued by the Jiangdu Branch of Y angzhou City Natural Resources and Planning Bureau*
(౮ψ̹І್༟๕ձ஝ྌ҅Ϫேʱ҅ ) and the Housing and Urban-Rural Development
Bureau of Jiangdu District, Y angzhou City* (ண҅ ), each being
a competent authority as advised by our PRC Legal Advisers, that:
(i) our Company and Hongxin Trading are subject to the jurisdiction of the aforesaid
bureaus;
(ii) the bureaus were aware of and acknowledged the Defective Land and the
Defective Properties used by our Company and Hongxin Trading;
(iii) the bureaus agreed that our Company and Hongxin Trading may continue to use
the Defective Land and the Defective Properties, and the buildings thereon, as
currently situated and in their current condition on a long-term basis;
(iv) the bureaus will not take any administrative measures or penalties against our
Company or Hongxin Trading for the non-compliance incident, which does not
constitute material illegal or regulatory violations;
(v) the bureaus will not confiscate the income generated from the production and
operations of our Company and Hongxin Trading on the Defective Land and the
Defective Properties, and the buildings thereon;
(vi) there were no orders for rectification or penalties from bureaus concerning our
Company or Hongxin Trading due to issues related to land, real estate, and
building construction; and
(vii) there were also no potential, existing, or ongoing disputes or conflicts between
the bureaus on the one hand, and our Company or Hongxin Trading on the other
hand, regarding these Defective Land and Defective Properties, and the buildings
thereon, nor were there any complaints, reports, or other claims made by any
third parties against them.
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As confirmed by our PRC Legal Advisers, and according to the aforementioned
confirmation letters, each of our Company and Hongxin Trading has not received any
administrative penalties related to land, real estate, and construction of buildings. As
advised by our PRC Legal Advisers, based on the aforesaid reasons and according to the
aforementioned confirmation letters, our Group’s failure to obtain certain land use right
certificates and property ownership certificates did not constitute a material
non-compliance, and the relevant authorities may not impose any administrative penalties
on us.
As confirmed by the Shaobo Town People’s Government, being a competent authority
as advised by our PRC Legal Advisers, in an interview conducted on 29 September 2024,
(i) the Defective Land involves collectively-owned land; (ii) however, as lease agreements
were entered into between the government and the villagers before the Requisition and
Transfer Agreement, the relevant villagers do not have the right to request for
compensation from our Group in respect of the Defective Land; (iii) in the event that the
villagers raise any claims in respect of the Defective Land, the government will assist our
Group in resolving such matters; and (iv) the government acknowledged the current status
of the Defective Land, and accordingly, no rectifications are needed on the part of our
Group concerning the current use of the Defective Land, and our Group could continue its
long-term use of the Defective Land (together with the properties and buildings thereon as
they currently stand), and no administrative enforcement measures or penalties will be
imposed.
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Regarding the Muyuan Central Kitchen, which occupies a gross floor area of
approximately 3,940 sq.m. at the Xiezhuang Village Defective Properties on the Defective
Land, with a view to ensuring that the operations of the Muyuan Central Kitchen will not
be materially affected in the unlikely event of a forced relocation or mandated vacation
from the relevant land and properties, we have formulated a relocation plan for the Muyuan
Central Kitchen (the “ Central Kitchen Relocation Plan ”). Under the Central Kitchen
Relocation Plan, Muyuan Supply Chain has entered into a rental agreement with an
Independent Third Party to lease a replacement facility for the Muyuan Central Kitchen for
a term of five years from the date of handover of the facility (where handover occurs when
the relocation is completed). The relocation will be conducted in phases, such as planning
and design, interior decoration, construction of sterile workshops, and relocation of
machines and equipment, to minimise any potential disruption to the operations of the
Muyuan Central Kitchen. The estimated time frame required for the replacement central
kitchen to come into full operations is approximately nine to twelve months, subject to
obtaining approvals including, where necessary, the Fire Safety Approval, whereas the
actual relocation of machines and equipment from the existing central kitchen to the
replacement central kitchen that will affect the operation of the Muyuan Central Kitchen is
expected to take approximately one month. The expected completion timeline of the Central
Kitchen Relocation Plan is set forth below:
Time Stage/activities to be completed
First quarter of 2025 – Finalise the selection of manufacturers and
procurement of machinery and equipment and fire
safety equipment;
– Carry out wall and ceiling finishing which includes
painting, tiling and other decorative works;
– Install equipment for the replacement central
kitchen;
– Install all necessary lighting and electrical outlets;
– Conduct testing and adjustments on the installed
equipment;
– Carry out thorough cleaning to ensure that hygiene
standards are met before operation; and
– Arrange inspections by relevant authorities and
address and rectify any issues identified during the
inspections promptly (if any).
Second quarter of 2025 – Relocate Muyuan Central Kitchen
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As at the Latest Practicable Date, basic renovation and preparatory work, along with
the installation of embedded electrical conduits and fundamental electrical wiring had been
completed, while the selection of manufacturers and procurement of machinery and
equipment were being finalised.
As at the Latest Practicable Date, it is expected that the estimated cost for relocation
and loss of revenue as a result of the Central Kitchen Relocation Plan will be in the range
of RMB2 million to RMB3 million. Our Directors are of the view that, save for the
aforesaid relocation cost and loss of revenue, the Central Kitchen Relocation Plan would
not have a material effect on our Group’s business operations and financial position.
Our Directors are of the view that the land and properties with defective titles are not
crucial to our operation, and that the lack of relevant land use right certificates and
property ownership certificates for the Defective Land and the Defective Properties,
respectively, would not, individually or in the aggregate, have a material adverse effect on
our business operations, because, in addition to the reasons stated above:
(i) during the Track Record Period and up to the Latest Practicable Date, we have
not received any material penalty, objection, inquiry or investigation from
competent authorities with respect to the lack of relevant certificates on these
land and properties;
(ii) we have used or occupied the Xiezhuang Village Defective Properties for over 10
years and the Gongnong Road Defective Parts for over 20 years, and during all
the years of our use and occupation of the land and properties and up to the
Latest Practicable Date, we have not received any claim of right from third
parties or been involved in any disputes with third parties;
(iii) we have not received any notice from competent authorities requiring us to
relocate or demolish the relevant properties as a result of the lack of relevant
certificates on these land and properties as at the Latest Practicable Date; and
(iv) our Directors are of the view that such Defective Land and Defective Properties
are safe for occupation since (i) during the Track Record Period and up to the
Latest Practicable Date, we have not received any material penalty, objection,
inquiry or investigation from competent authorities over safety conditions in
respect of the Defective Land and the Defective Properties; and (ii) according to
the Fire Safety Consultant, the overall risk related to fire safety is considered
low, and it is unlikely to affect the safety of customers and employees at the
Defective Properties.
As a result, no provision has been made in our consolidated financial statements.
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Internal control measures
Our Group has established the “Property and Land Acquisition Management
Measures” (the “ Acquisition Management Measures ”) to standardise the management of
land and property acquisitions. This includes procedures for selecting and applying for land
acquisitions, obtaining and maintaining relevant permits and certificates. The Acquisition
Management Measures clearly emphasises that the State-owned Land Use Certificate ( ਷Ϟ
ɺήԴ͜ᗇ ) is a necessary document in the land acquisition process. Only upon obtaining
this certificate can our Group acquire the Building Project Planning Permit (ጘʈ೻஝ྌ
஢̙ᗇ ), the Construction Project Construction Permit (ʈ஢̙ᗇ ), the
Construction Completion Approval (ࡘand the Property Ownership Certificate
(Ϟᛆᗇ ) for buildings erected on the land.
According to the requirements of the Acquisition Management Measures, our Group
must assess the actual environment of the land and the qualifications of the land seller
before signing the acquisition contract. This ensures that the land’s actual environment
meets our Group’s needs and that the seller can provide the State-owned Land Use
Certificate issued by the relevant government departments. If our Board decides to acquire
or lease the land after discussing the assessment results, our Group should sign the
acquisition contract with the landowner, provided that the State-owned Land Use Certificate
issued by the relevant government departments is obtained.
If there are infrastructure projects on the acquired land, our Group must register the
construction project with the relevant government agencies as it approaches completion to
obtain the Construction Completion Approval and the Property Ownership Certificate. Upon
receiving the above-mentioned certificates, the construction team can proceed with the final
inspection of the construction project, and our Group can officially use the corresponding
buildings.
(2) Title defects and non-registration of our leased properties
As at the Latest Practicable Date, we entered into 173 leased agreements, with a total gross
floor area of approximately 107,500 sq.m. according to the lease agreements.
Title defects
As at the Latest Practicable Date, 44 of our leased properties had title defects that
may adversely affect our ability to continue to use them in the future, which account for
approximately 25.4% of our total number of leased properties. Among the 44 leased
properties with title defects, a majority are outlets of supermarkets and convenience stores
of our Group. The aggregate leased area of these defective properties is approximately
41,400 sq.m.
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The existence of title defects is mainly due to the following reasons: (1) certain
lessors failed to provide property ownership certificates or other relevant certificates
regarding their legal right to lease such properties, and (2) the intended purposes contained
in the property ownership certificates are inconsistent with the actual use of property.
Set out below is a breakdown of the 44 leased properties by reasons for the title
defects:
Reason(s) for title defects
Number of leased
properties involved
(i) Solely due to the lessor’s inability to provide property
ownership certificates or other relevant certificates
regarding their legal right to lease such properties
33
(ii) Solely due to inconsistency between the intended
purposes contained in the property ownership certificates
and the actual use of such properties
7
(iii) Due to the reasons stated in (i) and (ii) above 4
As at the Latest Practicable Date, we are not aware of any challenge being made by a
third party or government authority on the titles of any of these leased properties that might
have a material adverse effect on our current leases.
According to relevant laws and regulations and as confirmed by our PRC Legal
Advisers, the lessors shall be responsible for the circumstances that the intended purposes
stated in the property ownership certificates are inconsistent with the actual use of property,
and there are no rules or regulations requiring the lessee to obtain the ownership certificate
or imposing regulatory punishment on the lessee for not doing so. Accordingly, our PRC
Legal Advisers are of the view that we are not subject to any material administrative
penalty for any of the title defects in the leased properties.
Moreover, according to relevant PRC laws and regulations, the lessee has the right to
claim compensation if the lease agreement is invalid due to the lessor’s fault. If our ability
to continue leasing such properties is affected by a third-party objection, we may seek
indemnity from the lessor and are entitled to request the lessors to reduce or waive the
rents in accordance with relevant PRC laws and regulations.
As at the Latest Practicable Date, we have obtained indemnity undertakings from the
lessors of these 44 leased properties. The related lessors have agreed that should our Group
be required by any third party or government authorities to cease occupancy and use of the
premises due to the aforementioned issues, and/or if it becomes necessary to select a new
location, relocate, and/or if any fines or compensations are demanded, the lessors will
indemnify all such losses and compensate our Group.
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Based on our regularly updated list of comparable properties available for lease in the
vicinity of our outlets with title defects (which are similar in terms of size, location, and
operational suitability), we believe there are sufficient comparable alternative properties in
proximity. Therefore, we do not expect to incur significant time and cost for identifying
alternatives and relocating our operations in the less likely event that we were required to
do so.
Depending on the size, location, facilities and current usage of the concerned leased
property, we expect that it generally takes 25 to 40 days to complete the relocation with
expenses (including renovation expenses) ranging from RMB250,000 to RMB700,000 per
property or outlet.
Our Directors believe that relocation will not have a material adverse effect on our
business, results of operations and financial condition. Based on the foregoing, our
Directors are of the view that the aforesaid title defects will not have a material adverse
effect on our business, results of operations and financial condition. As a result, no
provision has been made in our consolidated financial statements.
Non-registration
As at the Latest Practicable Date, 172 lease agreements of our leased properties had
not been registered and filed with relevant land and real estate management departments in
the PRC.
Under the relevant PRC laws and regulations, the parties to a lease agreement have
the obligation to register and file the executed lease agreement. As advised by our PRC
Legal Advisers, the validity and enforceability of the lease agreements are not affected by
the failure to register or file the lease agreements with the relevant government authorities.
According to the relevant PRC regulations, we may be ordered by the relevant government
authorities to register the relevant lease agreements within a prescribed period, failing
which we may be subject to a fine ranging from RMB1,000 to RMB10,000 for each
unregistered lease. Therefore, according to our PRC Legal Advisers, we have the right to
use the relevant properties in accordance with the lease agreements, but if the lease
registration has not been completed upon the requests of relevant government authorities,
we may be subject to the risk of penalties.
As at the Latest Practicable Date, we have not received any order from the relevant
government authorities requiring us to register these lease agreements, and no
administrative penalty was imposed on us for non-registration of these lease agreements.
We undertake to cooperate fully to facilitate the registration of lease agreements once we
receive any requirements from relevant government authorities.
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Based on the foregoing, our Directors are of the view that the aforesaid
non-registration will not have a material adverse effect on our business, results of
operations and financial condition. As a result, no provision has been made in our
consolidated financial statements.
Internal control measures
Our Group has established the “Property Leasing Management Measures” (the
“Leasing Management Measures ”) to standardise the management of leased properties.
This includes the approval process for leasing properties, leasing standards and
requirements, and lease contract management. The system specifies our Group’s basic
requirements for leasing properties by various units: (1) the lessor must possess the
property ownership certificate and the lease permit, or have the sublease permission from
the property owner and the building completion certificate. The intended use stated in the
ownership certificate should match the actual use of the property; (2) the lessor must
cooperate with our Group in completing the lease registration procedures and obtain the
property owner’s consent to ensure property compliance; (3) the property should meet
general infrastructure requirements.
According to the Leasing Management Measures, before signing the lease agreement,
the handling unit of our Group must, in principle, obtain the lessor’s ownership certificate,
original fire safety record, and original drainage permit as qualification review conditions.
In special cases, approval must be reported and obtained, and necessary documents should
be promptly supplemented.
Additionally, the Leasing Management Measures require our Group’s administration
department to promptly register the leasing status of each unit and compile the certificate
information after the lease contract is signed. Relevant handling personnel of our Group
should visit the real estate management departments of provincial, municipal, and county
governments to complete the registration procedures. Contract management staff must
assign and register the reported lease contracts from each unit.
(3) Failure to complete Fire Safety Approvals
As at the Latest Practicable Date, our Group operated an aggregate of 162 outlets including
Retail Stores and Malls, among which (i) 17 Retail Stores (approximately 10.5% in terms of the
total number of outlets) (the “ Relevant Retail Stores ”) did not obtain the required “Fire Safety
Inspection Certificate before the Use or Business Operation of Public V enues” (ה
ᗇ ) or a “Fire Safety Inspection Opinion before the Use
or Business Operation of Public V enues” (จԈ
) (collectively, the “ Fire Safety Inspection Certificate(s) ”) pursuant to relevant PRC laws
and regulations; and (ii) Jiangdu Mall, one of our Malls, did not obtain the Fire Safety
Inspection Certificate, despite the atrium of Jiangdu Mall has completed Fire Safety Review (as
defined below) (collectively, the “ Relevant Outlets ”).
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Among the Relevant Outlets, two outlets are owned properties of our Group (the “ Relevant
Owned Outlets ”), whereas 16 outlets are leased properties of our Group (the “ Relevant Leased
Outlets ”). The failure to obtain the Fire Safety Inspection Certificates for the two Relevant
Owned Outlets, comprising the Jiangdu Mall and a Retail Store situated therein, was, as
confirmed by Y angzhou Jiangdu Fire Rescue Brigade* ( ౮ψ̹Ϫேਜऊԣહ౪ɽඟ ), being a
competent authority as advised by our PRC Legal Advisers, due to the absence of the necessary
property ownership certificates for the part of the Jiangdu Mall that overlaps with the Gongnong
Road Defective Parts and the fact that such properties, save for the atrium of Jiangdu Mall, did
not complete the Fire Safety Review (as defined below). The failure to obtain the Fire Safety
Inspection Certificates for the Relevant Leased Outlets was because the lessors have failed to
provide the requisite documentation for the filing application.
During the Track Record Period and up to the Latest Practicable Date, a portion of the
Xiezhuang Village Defective Properties and the Gongnong Road Building (save for the atrium of
the Jiangdu Mall), which includes the two Relevant Owned Outlets (together, the “ Relevant
Properties ”), had not undergone fire safety design reviews and/or had not completed
construction project final fire safety acceptance or filing procedures (the “ Fire Safety
Review(s) ”, together with the Fire Safety Inspection Certificate(s), the “ Fire Safety
Approval(s) ”). The failure to undergo these requisite procedures was because (i) for such
portion of the Xiezhuang Village Defective Properties, no relevant property ownership
certificates were available; and (ii) for the Gongnong Road Building (save for the atrium of the
Jiangdu Mall), such properties were built before the establishment of relevant fire safety
regulations, whereas retrospective fire safety certifications could not be obtained despite
subsequent modifications to comply with these regulations. In particular, phase I of the
Gongnong Road Building was initially constructed in or around 1989, with phase II added in or
around 1993 by Jiangdu Supply and Marketing Building* ( ϪேԶቖɽข ), prior to the taking
over of the building by Hongxin Trading in 1994. So far as our Directors are aware, phases I and
II of the Gongnong Road Building, when constructed and prior to Hongxin Trading’s taking over
of ownership in 1994, was in compliance with the then-applicable building standards. In or
around 2002, Hongxin Trading undertook the construction of phase III of the Gongnong Road
Building, through engagements of a design institute and a construction company. Despite the
successful completion of the construction project final acceptance filing (ጘʈ೻ംʈ᜕ϗ )i n
2003, phase III was unable to complete the Fire Safety Review notwithstanding our Group’s
efforts to enhance the fire safety measures of the Gongnong Road Building as a whole.
Based on a confirmation letter issued by the Housing and Urban-Rural Development Bureau
of Jiangdu District, Y angzhou City* (ண҅ ), being a competent
authority as advised by our PRC Legal Advisers, it was confirmed that (i) phases I and II of the
Gongnong Road Building were constructed and put into use before the promulgation of the
relevant fire safety laws in 1998 and are therefore not required to complete the Fire Safety
Review; and (ii) the inability of phase III of the Gongnong Road Building to complete the Fire
Safety Review was due to the absence of Fire Safety Review for phases I and II.
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The revenue contribution by the Relevant Retail Stores represents approximately 13.9%,
12.6%, 12.4% and 10.9% of our total revenue for each of FY2021, FY2022, FY2023 and
9M2024, respectively.
Regarding Jiangdu Mall, although its atrium area has successfully completed the Fire
Safety Review, the peripheral and remaining portions have not yet obtained the necessary Fire
Safety Approvals. The revenue generated from these non-compliant areas is not readily
quantifiable, as it is integrated with the overall revenue of Jiangdu Mall. Overall, the entire
Jiangdu Mall contributed an aggregate of approximately 13.4%, 7.9%, 9.9%, and 9.9% to our
total revenue for each of FY2021, FY2022, FY2023 and 9M2024, respectively.
Apart from the Relevant Outlets, during the Track Record Period, there were two outlets
(the “ Two Deregistered Outlets ”) of our Group which also did not obtain the Fire Safety
Inspection Certificates. As we did not successfully obtain the regulatory confirmation from the
relevant authority for the fire safety conditions of the premises, to demonstrate our commitment
to adhere to high degree of compliance, we ceased the operations by May 2024 and completed
the deregistration procedures by August 2024 for the Two Deregistered Outlets. One of the Two
Deregistered Outlets was the sole business operated by Tianchang Hongxinlong, and hence,
Tianchang Hongxinlong was also deregistered. For further details, please refer to the paragraph
headed “History and Development – Disposal and Deregistration during and subsequent to the
Track Record Period” in this prospectus. The revenue contribution by the Two Deregistered
Outlets represents approximately 0.1%, 0.1%, 0.1% and 0.1% of our total revenue for each of
FY2021, FY2022, FY2023 and 9M2024, respectively. No gains or losses were recorded upon the
deregistration of the Two Deregistered Outlets.
Legal consequences and maximum penalty
In accordance with “Fire Prevention Law of the People’s Republic of China” ( ʕശɛ
) (the “ Fire Prevention Law ”), it is mandated that public venues must
not commence operations or open to the public without passing a fire safety inspection, or
if found non-compliant with fire safety standards upon inspection. Should such regulations
be disregarded, the competent housing and urban-rural development authorities, along with
fire rescue departments, are authorised to enforce a cessation of construction activities,
discontinue usage, or suspend operations. A fine in the range of RMB30,000 to
RMB300,000 will also be imposed.
As detailed in the “Guidance on the Discretionary Administration of Penalties for
Certain Fire Safety Violations (Yingjixiao [2019] No. 172)” (Б
ኬจԈ (ऊ [2019]172 ໮)) (the “ Fire Safety Violations
Guidance ”) issued by the Fire Rescue Bureau of the Ministry of Emergency Management
(܃on 10 July 2019, fire safety infractions are classified into
three levels: severe, general, and minor, based on the nature and extent of the violation,
potential hazards, and the specific use of the premises involved. Specifically, violations that
pose significant fire risks are considered severe; unauthorised use or operations
post-inspection failures, or continuation of unauthorised activities once identified, are
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classified as general; and other non-compliant operations initiated without inspection are
deemed minor. Violations that are minor and rectified swiftly, with no resultant harm, will
not incur penalties.
Pursuant to Article 58 of the Fire Prevention Law, construction projects that are
statutorily required to undergo fire safety design review or fire safety checks, and which
proceed without compliance or fail these reviews or checks, are subject to enforcement
actions by the competent housing and urban-rural development authorities or fire rescue
institutions, within their respective jurisdictions. These include orders to halt construction
and operations, or to close down entirely. Furthermore, a fine ranging from RMB30,000 to
RMB300,000 will be imposed. If the construction entity fails to file with the competent
housing and urban-rural development authorities after acceptance inspection as required by
the Fire Prevention Law, the authorities shall order corrections and impose a fine of up to
RMB5,000.
Based on the stipulations as listed above provided by our PRC Legal Advisers, our
Directors estimate that the aggregate maximum penalties that may be imposed on our
Group in relation to the Relevant Outlets, the Two Deregistered Outlets and the Relevant
Properties that did not obtain the required Fire Safety Approvals are expected to be
approximately RMB6.6 million.
Current status and remedies
As at the Latest Practicable Date, for the Relevant Outlets and the Relevant
Properties, we obtained confirmation letters from the Y angzhou Jiangdu Fire Rescue
Brigade* ( ౮ψ̹Ϫேਜऊԣહ౪ɽඟ ), the Y angzhou Ecological Science and Technology
Xincheng Fire Rescue Brigade* (ऊԣહ౪ɽඟ ), the Gaoyou Fire
Rescue Brigade* ( ৷ඉ̹ऊԣહ౪ɽඟ ) and the Taizhou Hailing Fire Rescue Brigade* ( इ
ψ̹ऎ௒ਜऊԣહ౪ɽඟ ), each being the competent authority as advised by our PRC
Legal Advisers, confirming, in respect of the Relevant Outlets and the Relevant Properties
located within their respective jurisdictions, that:
(a) the Relevant Outlets and the Relevant Properties (i) were not found to be in
violation of any relevant fire safety laws, administrative regulations,
departmental rules, or normative documents; (ii) were not subjected to any
actions by the respective authorities for violating any relevant fire safety laws,
administrative regulations, departmental rules, or normative documents; and (iii)
had not been penalised by the respective authorities nor had received any reports
or complaints against them;
(b) considering our Group has conducted fire safety assessments for the Relevant
Outlets that have not passed the fire safety inspections (i.e., the fire safety
assessments conducted by the Fire Safety Consultant as further particularised
below), all assessments concluded with a “Good” fire safety rating, and
moreover, there have been no fire safety incidents within our Group;
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(c) considering both our Company and Hongxin Trading, which are the only entities
within our Group that own or lease outlets and/or self-owned properties, have
undergone fire safety assessments with a “Good” fire safety rating and no fire
safety incidents have occurred, despite the Relevant Properties have not
undergone the relevant Fire Safety Reviews;
(d) in accordance with the Fire Safety Violations Guidance, the situations described
above are classified as general or minor, and do not constitute major illegal or
non-compliant actions;
(e) the income generated from the operations of the Relevant Outlets and the
Relevant Properties will not be confiscated, and our Group may continue to the
Relevant Outlets and the Relevant Properties as is and in their current condition;
and
(f) the relevant competent authorities will not impose any compulsory measures or
impose penalties on our Group concerning the aforementioned situations.
Our Company and Hongxin Trading also obtained confirmation letters from the
Jiangdu Branch of Y angzhou City Natural Resources and Planning Bureau*
(౮ψ̹І್༟๕ձ஝ྌ҅Ϫேʱ҅ ) and Housing and Urban-Rural Development Bureau of
Jiangdu District, Y angzhou City* (ண҅ ), each being a
competent authority as advised by our PRC Legal Advisers, confirming that: (i) our
Company and Hongxin Trading are enterprises under the jurisdiction of the bureaus; (ii) the
bureaus are aware of and agree to the continued long-term use by our Company and
Hongxin Trading of the Relevant Properties, as they currently stand; (iii) the bureaus will
not impose any administrative enforcement measures or penalties on our Company and
Hongxin Trading concerning the above-mentioned matters, as these do not constitute major
violations or irregularities, and the bureaus will not confiscate any income generated by our
Company and Hongxin Trading from their production and operations on the Relevant
Properties; (iv) our Company and Hongxin Trading have not been ordered to make
corrections or been penalised by the bureaus concerning matters related to land, property,
and building construction of the Relevant Properties; and (v) there are no potential,
existing, or ongoing disputes or conflicts between the bureaus on the one hand, and our
Company and Hongxin Trading on the other hand, regarding the said land, properties, and
buildings of the Relevant Properties, nor have the bureaus received any reports or
complaints from third parties against them.
To ensure that the Relevant Outlets and the Relevant Properties are free from material
fire safety hazards for our customers and employees, our Group engaged Jiangsu Yilun
Construction and Installation Engineering Co., Ltd.* (ʮ̡ )
(the “ Fire Safety Consultant ”) to conduct fire safety assessments for the Relevant Outlets
and the Relevant Properties (together, the “ Reviewed Premises ”). The Fire Safety
Consultant specialises in fire safety inspection, maintenance, and evaluation. The inspection
team of the Fire Safety Consultant consists of engineers, including certified fire safety
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engineers, fire safety facility operation engineers and building firefighters, who have
extensive experience in fire safety evaluation works.
According to reports issued by the Fire Safety Consultant in June 2024 and September
2024, respectively, no fire hazards or fire safety issues were identified at these Reviewed
Premises. As confirmed by the Fire Safety Consultant in its report:
(i) the fire safety ratings for these Reviewed Premises were uniformly assessed as
“Good”;
(ii) the Reviewed Premises comply with fire safety laws and regulations, have no
substantial fire safety issues, and meet the requirements for the Fire Safety
Approvals needed prior to the commencement of use for public venues, business
operations, and other related business activities such as supermarkets,
convenience stores and commercial services;
(iii) following the submission of required documents, these Reviewed Premises would
not have substantial obstacles for obtaining the Fire Safety Approvals;
(iv) each of these Reviewed Premises is equipped with necessary fire safety facilities
and has implemented relevant fire safety protocols; and
(v) the overall risk related to fire safety is considered low, and it is unlikely to affect
the safety of customers and employees at these Reviewed Premises.
Our Group has further engaged Shanghai Biaogu Construction Engineering Testing
Technology Co., Ltd.* (ʮ̡ ) (the “ Construction
Expert ”), which is a company specialising in testing and certification and an Independent
Third Party, in August 2024 to assess the construction safety of the Relevant Outlets which
lack the requisite Fire Safety Inspection Certificates through on-site inspections and testing.
According to the report issued by the Construction Expert, the Construction Expert
confirmed that:
(i) out of the Relevant Outlets, only eight of the Relevant Retail Stores and part of
Jiangdu Mall (the “ Outlets with Structural Steel Structure ”), were identified
with structural steel structures, while the others were built with concrete or
bricks; and
(ii) as structural steel structures are more prone to safety hazards, the Construction
Expert conducted detailed assessment on the Outlets with Structural Steel
Structure and concluded that: (a) the steel structure of the Outlets with Structural
Steel Structure comprises a non-lightweight steel framework with fire-resistant
roofing and wall materials, and no sandwich panels with foam cores (੹
ؐwere found in the construction materials; (b) the structural configuration
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and building materials, including their strength specifications and fire-resistance
ratings, comply with the relevant regulatory requirements for operating as
supermarkets and shopping centres; and (c) the Outlets with Structural Steel
Structure do not have any structural issues nor do they have any material
structural safety risks.
In addition, the Company has engaged a second fire safety consultant, namely,
Shanghai Y uanning Fire Technology Co., Ltd.* (ʮ̡ ) (the “ Second
Fire Safety Consultant ”), which is a firm specialising in fire safety system design and
installation, fire safety consulting, and maintenance and inspection of fire safety equipment,
in September 2024 to conduct a separate review over the Outlets with Structural Steel
Structure through on-site inspections, testing and evaluation of key fire safety aspects. The
Second Fire Safety Consultant did not identify any material fire safety hazards with Outlets
with Structural Steel Structure.
No deficiencies were identified by the Fire Safety Consultant or the Second Fire
Safety Consultant in relation to the fire safety of the relevant premises, nor by the
Construction Expert in relation to the structural safety of the relevant premises, that
requires rectification measures be implemented by our Group.
Our Company and Hongxin Trading also obtained confirmation letters from the
Housing and Urban-Rural Development Bureau of Jiangdu District, Y angzhou City* ( ౮ψ
ண҅ ) and Housing and Urban-Rural Development Bureau of Hailing
District, Taizhou City* (ண҅ ), each being a competent
authority as advised by our PRC Legal Advisers, where the aforesaid bureaus acknowledged
and agreed with the conclusions of the report issued by the Construction Expert in relation
to the Outlets with Structural Steel Structure, confirmed that the continued use of such
outlets is permitted, and confirmed that no administrative enforcement actions or penalties
will be imposed on our Company and Hongxin Trading in this regard.
As advised by our PRC Legal Advisers, up to the Latest Practicable Date, there were
no administrative penalties imposed on our Group’s operational stores for failing to obtain
a Fire Safety Inspection Certificate. Additionally, there were no instances of administrative
penalties being imposed on our Company and Hongxin Trade due to issues related to Fire
Safety Reviews.
As advised by our PRC Legal Advisers, according to the above confirmation letters
issued by relevant authorities and the report issued by the Fire Safety Consultant, the
failure to complete the requisite Fire Safety Approvals for the Relevant Outlets and the
Relevant Properties did not constitute a material non-compliance for our Group, and the
relevant authorities may not impose any administrative penalties on us.
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Our Directors are of the view that the failure to complete the requisite Fire Safety
Approvals for the Relevant Outlets and the Relevant Properties would not, individually or
in the aggregate, have a material adverse effect on our business, results of operations or
financial condition, because, in addition to the reasons stated above:
(i) in respect of the Relevant Properties, we had been implementing the Central
Kitchen Relocation Plan as at the Latest Practicable Date;
(ii) we had taken various measures to ensure the fire safety of these Relevant Outlets
and Relevant Properties, including the equipment of the necessary fire safety
facilities and the implementation of relevant fire safety protocols, which our
Directors are of the view that these measures are adequate and effective to
mitigate risks associated with fire safety; and
(iii) we have enhanced our internal control measures and procedures as recommended
by our Internal Control Consultant.
As a result, no provision has been made in our consolidated financial statements.
Internal control measures
Our Group has established the “Licence Management Measures” (the “ Licence
Management Measures ”) to standardise the management of various licences and
qualification documents. This includes the processes for handling, safekeeping, borrowing,
supervising, and cancelling licences, as well as the related approval procedures. The system
clearly requires that all stores of our Group can only officially open after completing the
fire safety inspection or filing.
According to the Licence Management Measures, our Group’s construction department
must obtain various permits and related licences before a store opens, including the
business licence, environmental impact assessment record, public health licence, fire safety
record, lease record, drainage permit, and other necessary permits as specified in the
business scope. These permits and licences must be completed before the store officially
opens. Post-opening, stores are responsible for handling subsequent permits, with assistance
from our Group’s administration department when necessary. Additionally, our Group will
regularly train employees on drainage and fire safety procedures, clarifying the processes
for obtaining drainage permits and completing fire safety inspections or filings to enhance
safety management awareness.
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For leased stores, the Leasing Management Measures specifies that properties must
meet general infrastructure requirements, including complete water and sewage systems,
electricity, heating, fire safety, ventilation, as well as furnished public restrooms and
elevator areas. Before signing the lease agreement, the handling unit of our Group must, in
principle, obtain the lessor’s ownership certificate, original fire safety record, and original
drainage permit as qualification review conditions. In special cases, approval must be
reported and obtained, and necessary documents should be promptly supplemented.
(4) Non-compliance with social insurance and housing provident fund contributions
Pursuant to the relevant PRC laws and regulations, employers are obligated to contribute to
the social insurance and housing provident funds for their employees. During the Track Record
Period, we did not make adequate social insurances and housing provident fund contributions for
certain employees, where (i) the outstanding social insurance contributions was approximately
RMB0.5 million, RMB0.7 million, RMB0.5 million and RMB0.8 million for each of FY2021,
FY2022, FY2023 and 9M2024, respectively, and (ii) the outstanding housing provident fund
contributions was approximately RMB0.8 million, RMB1.0 million, RMB0.7 million and
RMB0.2 million for each of FY2021, FY2022, FY2023 and 9M2024, respectively.
Our non-compliance was primarily due to (1) some employees were rehired retirees, for
whom contribute for their social insurance and housing provident funds was not required; (2)
some employees were new hires then undergoing enrolment processes for social insurance and/or
housing provident fund contributions; (3) some employees were having their social insurance or
housing provident funds paid by previous employers, making it impossible for our Group to
make contributions for them; (4) some employees had requested for the calculation of their
social insurance and/or housing provident fund contributions on a non-full amount basis for
personal reasons; (5) some employees had independently paid for basic urban medical insurance,
flexible employment medical insurance, new rural cooperative medical insurance, or had
voluntarily opted out of contributions for other reasons. Our Group provided subsidies for
pension and medical insurance based on the actual circumstances of the employees.
Legal consequences and maximum penalty
As advised by our PRC Legal Advisers, orders to make full contributions within a
prescribed time period may be imposed on an employer for not making full social insurance
contributions for employees in a timely manner. If any of the relevant social insurance
authorities is of the view that the social insurance contributions we made for our employees
do not comply with the requirements under the relevant PRC laws and regulations, it may
order us to pay the outstanding balance within a prescribed time period plus a late fee of
0.05% of the total outstanding balance per day. If we fail to do so within the prescribed
period as requested by the relevant social insurance authorities, we may be subject to a fine
ranging between one to three times of the total outstanding balance. In addition, if we fail
to register and establish an account for social insurance contributions for our employees,
the relevant social insurance authority may order us to do so within a prescribed time limit.
If we fail to do so within the prescribed period as requested by the relevant social
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insurance authorities, we may be subject to a fine ranging between one to three times of the
total outstanding balance.
If our Group fails to make such payment within the prescribed time limit, the relevant
authority may impose a maximum fine of three times of the abovementioned outstanding
social insurance balance.
As advised by our PRC Legal Advisers, if any of the relevant housing provident fund
authorities is of the view that our contributions to the housing provident fund do not satisfy
the requirements under the relevant PRC laws and regulations, it may order us to pay the
outstanding balance within a prescribed period. If we fail to do so within the prescribed
period, the relevant housing provident fund authority may apply to a PRC court for an
order of mandatory payment. In addition, if we fail to register and establish an account for
housing provident fund contributions for our employees, the relevant housing provident
fund authority may order us to do so within a prescribed time limit. If we fail to do so
within the prescribed period as requested by the relevant house reserve fund authorities, we
may be subject to a fine ranging from RMB10,000 to RMB50,000.
Current status and remedies
During the Track Record Period and up to the Latest Practicable Date, no
administrative action, fine or penalty had been imposed by the relevant regulatory
authorities with respect to our social insurance or housing provident fund contributions, nor
had we received any order to settle the outstanding amount of such contributions. In
addition, we did not receive any notice from judicial or administrative authorities on any
claim from our current and former employees regarding any inadequate contributions.
As advised by our PRC Legal Advisers, in the absence of any employee claims and
significant changes in regulatory requirements regarding social insurance and housing
provident fund contributions, the likelihood that we would be required by relevant
authorities to pay the shortfalls and late charge for social insurance and housing provident
fund contributions and/or be subject to material administrative penalties due to failure to
make full contributions is remote, based on (1) the written confirmations obtained from the
competent authorities (Note) from the regions covering substantially all of our subsidiaries,
(2) the interviews with Y angzhou Jiangdu Human Resources and Social Security Bureau*
(ღ҅ ) on 20 September 2024 and Y angzhou Medical
Insurance Bureau Jiangdu Branch* (ღ҅Ϫேʱ҅ ) on 21 September 2024,
and the written confirmations from Y angzhou Housing Provident Fund Management Centre
Jiangdu Branch* (၍ଣʕːϪேʱʕː ) on 20 September 2024, where
these competent authorities have jurisdiction over approximately 77.5% of the shortfall in
social insurance and housing provident fund contributions, with the remainder of the
shortfall falls under the jurisdiction of authorities in six other areas, which confirmed that
they were fully aware of the aforesaid non-compliances and that no penalties will be
imposed on our Group, and (3) their understanding of the “Urgent Notice on Enforcing the
Requirement of the General Meeting of the State Council and Stabilisation the Levy of
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Social Insurance Payment” (൬ᅄϗ
) issued by Ministry of Human Resources and Social Security of the PRC
(ღ௅ ), which seeks to promote the reduction in the
amount of social insurance contributions by companies to avoid overburdening enterprises
and prohibits local authorities from requiring enterprises to make up for historically
underpaid or unpaid social insurance contributions in a lump sum. As advised by our PRC
Legal Advisers, the relevant local governmental authorities are competent to provide such
confirmations.
Note: Set out below are the dates of and the identities of the competent authority issuing the latest written
confirmations obtained:
Date of written confirmation Identity of the relevant authority
19 June 2024 Y angzhou Guangling Social Insurance Comprehensive Service Centre*
(ਕʕː )
25 June 2024 Baoying Social Insurance Fund Management Service Centre* (ٟ
ਕʕː )
26 August 2024 Y ancheng Social Labor Insurance Centre* (ᎈʕː )
30 December 2024 Y angzhou Social Insurance Fund Management Centre* (ᎈ
၍ଣʕː )
2 January 2025 Baoying Medical Insurance Fund Management Centre* (ᎈ
၍ଣʕː ), Y angzhou Housing Provident Fund Management Centre
Jiangdu Branch* (၍ଣʕːϪேʱʕː ), Y angzhou
Housing Provident Fund Management Centre Baoying Branch* ( ౮ψ̹
၍ଣʕːᘒᏐʱʕː ) and Y angzhou Social Insurance Fund
Management Centre* (၍ଣʕː )
3 January 2025 Y angzhou Medical Insurance Fund Management Centre Guangling
Branch* (၍ଣʕːᄿ௒ʱʕː ), Yizheng Medical
Security Bureau* (ღ҅ ), Gaoyou Human Resources and
Social Security Bureau* (ღ҅ ), Gaoyou
Medical Security Bureau* (ღ҅ ), Y angzhou Housing
Provident Fund Management Centre* (၍ଣʕː ),
Y angzhou Housing Provident Fund Centre Gaoyou Branch* (ג
ʕː৷ඉʱʕː ), Y angzhou Social Insurance Fund Management
Centre* (၍ଣʕː ) and Y angzhou Housing
Provident Fund Management Centre Yizheng Branch* (ʮጐ
၍ଣʕːᄃᅄʱʕː )
6 January 2025 Yizheng Human Resources and Social Security Bureau* ( ᄃᅄ̹ɛɢ༟
ღ҅ ), Taizhou Medical Insurance Management Centre,
Hailing Branch Centre* (ᎈ၍ଣʕːऎ௒ʱʕː ) and
Taizhou Housing Provident Fund Management Centre* (ʮጐ
၍ଣʕː )
7 January 2025 Taizhou Hailing Human Resources and Social Security Bureau* ( इψ̹
ღ҅ )
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Date of written confirmation Identity of the relevant authority
9 January 2025 State Administration of Taxation Y ancheng City Tax Bureau Third
Taxation Branch* (̹೼ਕ҅ୋɧ೼ਕʱ҅ ), Y ancheng
City Medical Insurance Fund Management Centre Tinghu Branch* (۬
ಳʱʕː ) and Y ancheng Housing Provident
Fund Tinghu Management Office* (ಳ၍ଣ௅ )
16 January 2025 Y angzhou Jiangdu Human Resources and Social Security Bureau* ( ౮ψ
ღ҅ )
20 January 2025 Y angzhou Medical Bureau Jiangdu Branch* (ღ҅Ϫேʱ
҅)
We undertake that in the event that the competent regulatory authorities require us to
make up for any shortfall in our contributions and/or pay any late charge, we would seek
timely compliance. Moreover, we have been liaising with relevant regulatory authorities in
different localities to adjust the payment base for our social insurance and housing
provident fund contributions, the procedure and timing of which may vary based on local
rules and policies, such that we can make full contribution in compliance with the
applicable laws and regulations as soon as practicable.
Our Directors believe that the above non-compliance incidents would not have a
material adverse effect on our business, results of operations or financial condition,
considering that:
(i) we had not been subject to any material administrative penalties during the Track
Record Period and up to the Latest Practicable Date;
(ii) we had not received any notifications from the relevant PRC authorities requiring
us to pay the shortfalls or the penalties with respect to social insurance and/or
housing provident funds as at the Latest Practicable Date;
(iii) we were neither aware of any material employee complaints nor were involved in
any material labour disputes with our employees with respect to social insurance
and/or housing provident funds;
(iv) we undertake to pay any shortfall within a prescribed time period upon request
by the relevant government authorities or upon the complaint by any affected
employee;
(v) starting from April 2024, we have duly made social insurance contributions and
housing provident funds in full for all our eligible employees in accordance with
applicable PRC laws and regulations, except for those employees who are not
willing to make payments for social insurance contributions and housing
provident funds for (1) having already participated and made contribution to the
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New Rural Social Insurance Scheme (ᎈ ) or New Rural
Cooperative Medical System (༵ӀΥЪᔼᐕ ); or (2) being registered
elsewhere with other enterprises;
(vi) we have adopted robust internal control measures as discussed below; and
(vii) the advice from our PRC Legal Advisers discussed above.
As a result, no provision has been made in our consolidated financial statements.
Internal control measures
Our Group has established the “Human Resources Management Policy”, the “Social
Insurance and Housing Provident Fund Management Measures”, and the “Employee Welfare
Measures” to standardise the accounting, payment, and other related processes for social
insurance and housing provident funds. The management of social insurance and housing
provident funds is handled by our human resources department of each unit, with
department staff responsible for calculating and paying our Group’s contributions to the
“five insurances and one fund” and for withholding and remitting the employees’
contributions.
According to the “Human Resources Management Policy”, the preparation, approval,
statistics, and summary of payroll detail sheets and total payroll sheets are the
responsibilities of the payroll staff. The payroll detail sheet will list the employees’ basic
salaries, attendance, social insurance and housing provident fund amounts, and the total
amount paid by our Group. These are to be submitted to the human resources manager and
the Chairman for approval at the beginning of the following month, and then forwarded to
the finance department for the subsequent monthly payroll disbursement. When disbursing
salaries, the cashier will attach a detailed explanation of the salary components and
deduction items. If employees believe there is an error in their salary calculation, they can
consult the finance department.
Additionally, our Group will provide targeted training for employees at all levels to
enhance their business capabilities and professional skills. The human resources department
will also regularly conduct compliance training on national and local government insurance
regulations and policy updates. If any personnel-related policy documents are issued, the
human resources department will calculate the contribution bases for existing measures and
policies according to the new regulations and policies. If updates or adjustments are
needed, the designated personnel of human resources department should submit an
adjustment request, which will be reviewed by the human resources manager and approved
by the Chairman before implementing the unified adjustment of social insurance and
housing provident fund contribution bases for all employees.
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Indemnity given by our Controlling Shareholders
In the event that the relevant competent authorities impose any fines or penalties on
us in relation to (i) our Group’s failure to obtain the relevant land use right certificates and
property ownership certificates, (ii) the title defects and non-registration of our leased
properties, (iii) our Group’s failure to complete the Fire Safety Approvals and (iv) our
non-compliance with social insurance and housing provident fund contributions, each as
particularised above, our Controlling Shareholders agree, pursuant to the Deed of
Indemnity, to indemnify us for all claims, actions, demands, proceedings, judgments,
losses, liabilities, damages, costs, charges, fees, expenses and fines suffered or incurred by
us due to such non-compliance.
RISK MANAGEMENT AND INTERNAL CONTROL
We are exposed to various risks during our operations. For more information, please refer
to the section headed “Risk Factors” in this prospectus. We have established risk management
systems consisting of relevant policies and procedures that we believe are appropriate for our
business operations, including the sale of our products, administration of daily operations,
financial reporting and recording, fund management, procurement, and compliance with
applicable laws and regulations on environment protection, production safety and anti-bribery.
Our Board oversees and manages the overall risks associated with our operations. We have
established an audit committee to review our financial reporting policies and internal control
system. The audit committee consists of five members, namely Mr. Lam Ka Tak, Mr. Zheng
Manjun, Mr. Zheng Y u, Ms. Wei Y an, and Mr. Zhu Bo. For the qualifications and experience of
these committee members, please refer to the section headed “Directors, Supervisors and Senior
Management” in this prospectus.
In order to improve our corporate governance and to prevent the recurrence of
non-compliance incidents in the future, we have adopted, or expect to adopt before Listing, a
series of internal control policies, procedures and programs designed to provide reasonable
assurance for achieving objectives such as effective and efficient operations, reliable financial
reporting and compliance with applicable laws and regulations. Highlights of our internal control
system include the following:
 Our Directors, supervisors and senior management attended a training session on 6
June 2024 in relation to the relevant requirements of the Listing Rules and duties of
directors of companies listed in Hong Kong.
 We have adopted various policies to ensure compliance with the Listing Rules,
including those in relation to continuing connected transactions and information
disclosure.
 We have implemented internal control policies in relation to financial management.
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 We have implemented a series of internal rules and regulations in relation to our
business operations, including those in relation to the management of our quality
control, occupational health and safety and procurement.
We have also established the following internal control measures to ensure compliance with
all applicable laws and regulations after Listing:
 Our management and employees will consult with an external legal counsel
concerning legal risks and compliance matters.
 Our administrative and human resources department established a regular consultation
mechanism to identify, prevent and rectify any potential non-compliance matter in the
future, including but not limited to, food and product.
 Our Board will ensure that relevant land use right certificates and property ownership
certificates are obtained, which will be supervised by the audit committee.
We have engaged our Internal Control Consultant to review our internal control policies
including entity-level controls, compliance monitoring controls, financial and accounting
procedures, sales procedures and recovery of trade receivables, cash management procedures,
procurement procedures, inventory management procedures, information system control
management, human resources management procedures, fixed asset management procedures, tax
management procedures and other general control measures. Our Internal Control Consultant
performed the work and put forward recommendations based on the review of our internal
control policies.
We have implemented rectification and improvement measures, as the case may be, in
response to the findings and recommendations by our Internal Control Consultant; our Internal
Control Consultant has also completed procedures to follow up on the actions we took in
relation to our internal control system.
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Our Internal Control Consultant conducted a follow-up review in June 2024 of the remedial
actions taken by us to address the findings of the internal control review process, and noted that
we had considered their recommendations and also taken the necessary remedial actions to
address our internal control deficiencies and weaknesses. After the follow-up review, our
Internal Control Consultant was satisfied that there is no material deficiencies in the adequacy
and effectiveness of our Group’s risk management and internal control systems. In addition, our
Directors confirm that our Company will periodically evaluate the effectiveness of, and ensure
the compliance with the risk management and internal control policies and procedures, in
particular, to make sure our employees will adhere to such policies and procedures. Our
Directors are not aware of any significant deficiencies in the internal control design or material
impediment for our employees to comply with the enhanced risk management and internal
control policies and procedures. We did not receive any additional recommendations from our
Internal Control Consultant as at the Latest Practicable Date. Based on above, our Directors are
of the view that our Group’s risk management and internal control policies and procedures are
effective.
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OVERVIEW
Upon Listing, our Board will consist of 12 members, including seven executive Directors,
one non-executive Director and four independent non-executive Directors. All Directors are
elected at the Shareholders’ meetings and shall be subject to re-election upon retirement.
Our Supervisory Committee consists of three Supervisors, including two shareholder
Supervisors and one employee Supervisor. The shareholder Supervisors are elected at the
Shareholders’ meetings, while the employee Supervisor is elected by our employees.
Our senior management consists of four members who are responsible for our day-to-day
management and operation.
DIRECTORS
The following table sets out certain information regarding our current Directors:
Name Age Position
Date of joining
our Group
Date of
appointment as
Director Responsibilities
Mr. Gao Feng
(΋͛ )
65 Chairman and executive
Director
26 June 1994 19 October 2005 Presiding over our Board
and being responsible for
the overall management
of business operation,
strategy and corporate
development of our
Group
Mr. Y uan Y uan
(΋͛ )
62 Vice chairman of our
Board and executive
Director
26 June 1994 12 May 2010 Being responsible for
fundraising and financing
activities, participating in
major business matters of
our Group, and assisting
the Chairman in his
duties
Mr. Zhang Jiaan
(ੵԳτ΋͛ )
(with a former
name as Zhang
Jiaan (τ ))
54 Executive Director and
general manager
26 June 1994 3 September 2007 Overseeing the overall
business operation and
participating in key
business and operational
decision-making of our
Group
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Name Age Position
Date of joining
our Group
Date of
appointment as
Director Responsibilities
Mr. Y ao Jun
(ᒺ΋͛ )
46 Executive Director and
deputy general
manager
1 October 2005 30 June 2018 Overseeing the overall
operation of our Group’s
supermarket stores
Ms. Shen Zhigen
(ӏқЌɾɻ )
(with a former
name as Qian
Wen ( ፺ත))
53 Executive Director,
deputy general
manager and financial
controller
1 January 1997 30 June 2018 Participating in key
business and operational
decision-making of our
Group and overseeing our
Group’s financial and
information technology
operations
Ms. Nai Jingjing
(᣼౺౺ɾɻ )
37 Executive Director 10 May 2024 10 May 2024 Participating in
decision-making in
respect of major matters
such as corporate and
business strategies
Mr. Wang Fei
(΋͛ )
36 Executive Director 2 December 2022 2 December 2022 Participating in
decision-making in
respect of major matters
such as corporate and
business strategies
Ms. Wei Y an
(ዲɾɻ )
31 Non-executive Director 10 May 2024 10 May 2024 Providing strategic advice
and recommendations on
business development and
planning of our Group
Mr. Lam Ka Tak
(ྗᅃ΋͛ )
43 Independent
non-executive
Director
Listing Date 10 May 2024
(effective from
the Listing
Date)
Supervising and providing
independent judgment to
our Board
Mr. Zheng Manjun
(΋͛ )
61 Independent
non-executive
Director
Listing Date 10 May 2024
(effective from
the Listing
Date)
Supervising and providing
independent judgment to
our Board
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Name Age Position
Date of joining
our Group
Date of
appointment as
Director Responsibilities
Mr. Zheng Y u
(ቍρ΋͛ )
46 Independent
non-executive
Director
Listing Date 10 May 2024
(effective from
the Listing
Date)
Supervising and providing
independent judgment to
our Board
Mr. Zhu Bo
(΋͛ )
62 Independent
non-executive
Director
Listing Date 10 May 2024
(effective from
the Listing
Date)
Supervising and providing
independent judgment to
our Board
Executive Directors
Mr. Gao Feng (΋͛ ), aged 65, is the Chairman and an executive Director, and is
mainly responsible for presiding over our Board and being responsible for the overall
management of business operation, strategy and corporate development of our Group. Mr. Gao
jointed our Group in June 1994 and was appointed as an executive Director in October 2005,
and was further appointed as the Chairman in September 2007. Mr. Gao is also a director of
Hongxinlong Agricultural Products.
Mr. Gao has over 40 years of experience in the supermarket and supply chain businesses.
Prior to joining our Group, Mr. Gao worked at Jiangdu City Supply and Marketing Cooperative*
(ٟcurrently known as Y angzhou City Jiangdu Supply and Marketing
Cooperative* (ٟwhich was principally engaged in rural commodity
distribution, from March 1979 to March 1992, with his last position as a deputy director ( ਓ˴
΂). From March 1992 to June 1994, Mr. Gao joined Jiangdu Supply and Marketing Building*
(ϪேԶቖɽข ) (the predecessor of Hongxin Trading) as a deputy general manager, and later
promoted to the role of general manager, where he was responsible for overseeing the
management and operations of the enterprise.
In June 1994, Mr. Gao joined our Group and served as the general manager of Hongxin
Trading until June 2011, and was further appointed as the chairman of the board of directors of
Hongxin Trading from November 2001 to June 2011, where he was responsible for the
decision-making, management and operations of Hongxin Trading. Mr. Gao later joined our
Company as an executive Director since October 2005, and was later appointed as the general
manager during September 2007 to December 2010, and was further appointed as the Chairman
since September 2007.
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Mr. Gao completed the business enterprise management major at Jiangsu Radio and
Television University (currently known as Jiangsu Open University) in July 1986. In June 2001,
Mr. Gao completed a graduate student training programme in economics and management at
Nanjing Normal University. In August 2005, Mr. Gao completed an advanced training
programme in business administration for the retail industry organised by the School of
Continuing Education, Tsinghua University. Mr. Gao pursued a master’s degree programme
offered by Tsinghua University in collaboration with The Australian National University, and
was awarded a master’s degree in management by The Australian National University in July
2011.
Mr. Gao was recognised as Model Working Class of the National Supply and Marketing
Cooperative System (ӻ୕௶ਗᅼᇍ ) by the Ministry of Personnel of the PRC
(ʕശɛ͏΍ձ਷ɛԫ௅ ) and the All China Federation of Supply and Marketing Cooperatives
(ٟin May 1997. Mr. Gao was awarded the qualification of senior
economist (ࢪby Jiangsu Provincial Department of Human Resources* (ɛԫ
ᝂ) in November 2000.
Mr. Yuan Yuan (΋͛ ), aged 62, is the vice chairman of our Board and an executive
Director, and is mainly responsible for fundraising and financing activities, and participating in
major business matters of our Group, assisting the Chairman in his duties. Mr. Y uan joined our
Group in June 1994 and was appointed as a Director in May 2010, and was further appointed as
the vice chairman of our Board and an executive Director in March 2014 and May 2024,
respectively.
Mr. Y uan has over 40 years of experience in the supermarket and supply chain businesses.
Prior to joining our Group, Mr. Y uan worked at Jiangdu Zhanggang Supply and Marketing
Cooperative* (ٟcurrently known as Y angzhou Jiangdu Zhanggang
Supply and Marketing Cooperative* (ٟfrom January 1983 to
September 1989, with his last position as audit officer. From October 1989 to June 1994, Mr.
Y uan served at the finance and audit department of Jiangdu Supply and Marketing Building* ( Ϫ
ேԶቖɽข ) (the predecessor of Hongxin Trading), with his last position as the manager of the
department, where he was responsible for financial management and accounting matters.
In June 1994, Mr. Y uan joined our Group and served as the manager of the finance and
audit department of Hongxin Trading until March 1998. Mr. Y uan was appointed as the assistant
general manager and the manager of the finance department of Hongxin Trading from March
1998 to August 2001, where he was primarily responsible for assisting the general manager in
his duties and handling financial accounting work and securities financing. In August 2001, Mr.
Y uan was promoted to a deputy general manager and the manager of the finance department of
Hongxin Trading. Until November 2004, Mr. Y uan oversaw financial operations, formulated
financial strategy, and prepared financial forecasts and budgets of Hongxin Trading. From
November 2004 to September 2007, Mr. Y uan served as the vice chairman of the board of
directors, deputy general manager, and the head of finance department of Hongxin Trading,
where he was primarily responsible for managing the finances of Hongxin Trading and assisting
the chairman of the board of directors and the general manager.
DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT
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During September 2007 to May 2010, Mr. Y uan served as the chairman of the Supervisory
Committee of our Company, overseeing the daily operations of our Supervisory Committee. In
May 2010, Mr. Y uan was appointed as a Director, and was further appointed as the vice
chairman of our Board of our Company in March 2014.
Mr. Y uan completed the adult higher education programme in accounting at the Jiangsu
Provincial Cadre Management Academy for Government Agencies* (ॴዚᗫ၍ଣ฀௅ኪ
৫) in January 2007. In June 2008, Mr. Y uan passed the undergraduate self-taught examination in
financial management organised by Y angzhou University Higher Education Institution and
Jiangsu Provincial Higher Education Self-Taught Examinations Committee. Mr. Y uan further
completed the master’s degree in business administration at the University of Wales in May
2014.
Mr. Y uan was awarded the qualification of senior economist (ࢪby Jiangsu
Provincial Department of Human Resources* (ɛԫᝂ ) in November 2006.
Mr. Zhang Jiaan ( ੵԳτ΋͛ ) (with a former name as Zhang Jiaan (τ )), aged 54, is
an executive Director and the general manager of our Company, and is mainly responsible for
overseeing the overall business operation and participating in key business and operational
decision-making of our Group. Mr. Zhang joined our Group in June 1994 and was appointed as a
Director in September 2007, and was further appointed as the general manager of our Company
and an executive Director in March 2008 and May 2024, respectively. Mr. Zhang is also a
director of Muyuan Supply Chain, Hongxin Pharmacy, Tianchang Hongxinlong and Xintongyuan
Trading.
Mr. Zhang has over 30 years of experience in the supermarket and supply chain businesses.
Prior to joining our Group, Mr. Zhang was an accountant clerk and an assistant manager of the
first-floor department store of Jiangdu Supply and Marketing Building* ( ϪேԶቖɽข ) (the
predecessor of Hongxin Trading) from September 1990 to June 1994.
In June 1994, Mr. Zhang joined our Group and continued his role as an assistant manager
of the first-floor department store of Hongxin Trading until March 1997, where he was
responsible for the operation management. From March 1997 to February 1998, Mr. Zhang
assumed the role of deputy manager in the finance department at Hongxin Trading, where he
was primarily responsible for managing accounts. From February 1998 to March 1999, Mr.
Zhang became the deputy manager of supermarket store of Hongxin Trading, focusing on the
operation management of the supermarket stores. Mr. Zhang later served as the deputy manager
of the footwear and headwear department store at Hongxin Trading from March 1999 to
December 2001, where he was mainly responsible for the operation management of the footwear
and headwear department. From December 2001 to December 2002, Mr. Zhang served as the
manager of the non-staple food market at Hongxin Trading, overseeing its operations and
management. Mr. Zhang then served as the supermarket manager at Hongxin Trading from
January 2003 to October 2005.
DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT
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From October 2005 to March 2006, Mr. Zhang became the manager of our Company, and
later served as the assistant general manager and the purchasing director from March 2006 to
March 2007, overseeing management and procurement of supermarket stores. From March 2007
to March 2008, Mr. Zhang was promoted to deputy general manager of our Company, where he
was in charge of the operations and management of our Company. Since September 2007 and
March 2008, Mr. Zhang was appointed as the Director and the general manager of our Company
respectively.
Mr. Zhang studied management (technology and innovation management) at Tsinghua
University in a programme jointly held with The Australian National University, and obtained a
master’s degree in management in December 2014.
Mr. Y ao Jun (ᒺ΋͛ ), aged 46, is an executive Director and a deputy general manager
of our Company, and is mainly responsible for overseeing the overall operation of our Group’s
supermarket stores. Mr. Y ao joined our Group in October 2005 and was appointed as a Director
in June 2018, and was further appointed as a deputy general manager of our Company and an
executive Director in June 2018 and May 2024, respectively.
Mr. Y ao has over 15 years of experience in the supermarket chain management.
In October 2005, Mr. Y ao joined our Group as the store manager at our Shaobo store of our
Company until March 2007, where he was primarily responsible for the initial setup and
preparation of the opening of the Shaobo store, as well as the management and operation of the
store. From March 2007 to March 2008, Mr. Y ao served as the sales department manager of our
Company, where he was responsible for overseeing the operations of supermarket stores. From
March 2008 to March 2009, Mr. Y ao assumed the position of manager of the department of
convenience stores’ operations of our Company, where he was responsible for the operations of
convenience stores of our Group. In March 2009, Mr. Y ao became the manager of the store
expansion department at our Company, and until March 2012, Mr. Y ao was primarily responsible
for managing the expansion of new stores of our Group. From March 2012 to March 2017, Mr.
Y ao served as the assistant general manager and fresh food department manager of our Company.
During the said period, Mr. Y ao was primarily responsible for the management and operation of
the store’s fresh food operations.
From March 2017 to June 2018, Mr. Y ao served as the assistant general manager and the
manager of the supermarket operation management department of our Company, where he was
primarily responsible for managing the day-to-day operations of supermarket stores of our
Group. Since June 2018, Mr. Y ao has been serving as the deputy general manager and a Director
of our Company.
Mr. Y ao completed an associate degree programme in administration management at China
Central Radio and TV University ( ʕ̯ᄿᅧཥൖɽኪ ) (currently known as The Open University
of China (ɽኪ )) in July 2010.
DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT
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Ms. Shen Zhigen ( ӏқЌɾɻ ) (with a former name as Qian Wen ( ፺ත)), aged 53, is an
executive Director, a deputy general manager and financial controller of our Company, and is
mainly responsible for participating in key business and operational decision-making of our
Group and overseeing our Group’s financial and information technology operations. Ms. Shen
joined our Group in January 1997 and was appointed as a Director in June 2018, and was further
appointed as a deputy general manager of our Company and an executive Director in March
2022 and May 2024, respectively.
Ms. Shen has over 25 years of experience in finance and accounting management related to
supermarket operations. Ms. Shen worked in Hongxin Trading as a clerk in the human resources
department from January 1997 to June 1997, a computer operator in the finance audit department
from June 1997 to June 1999, an accountant in the finance department from June 1999 to June
2004, and an assistant manager in the finance department from June 2004 to October 2005.
Since October 2005, Ms. Shen worked in our Company as an assistant manager in the
finance department until March 2006, a deputy manager of the finance department from March
2006 to March 2008, the manager of the finance department from March 2008 to March 2018, a
deputy finance director from March 2012 to March 2018, and the finance director from March
2018 to March 2022, where Ms. Shen was responsible for overseeing the finance department.
Since June 2018 and March 2022, Ms. Shen has been serving as a Director and a deputy
general manager of our Company, respectively.
Ms. Shen completed a part-time study in the financial accounting programme at the Water
Conservancy College of Y angzhou University ( ౮ψɽኪ ) in July 1996.
Ms. Nai Jingjing ( ᣼౺౺ɾɻ ), aged 37, is an executive Director, and is mainly
responsible for participating in decision-making in respect of major matters such as corporate
and business strategies. Ms. Nai was appointed as a Director in April 2024, and was further
appointed as an executive Director in May 2024.
Ms. Nai has approximately seven years of experience in financial investment management.
Prior to joining our Group, Ms. Nai served at Y angzhou Longchuan Holding Group Co., Ltd.*
(ப΂ʮ̡ ), which was principally engaged in financial services and
financing, from October 2016 to September 2021, with her last position as the director of the
funds settlement centre. Since October 2021, Ms. Nai has been serving at Y angzhou Longchuan
Holding Financial Investment Co., Ltd.* (ʮ̡ ), a company
principally engaged in financial investment, with her current position as the general manager.
Ms. Nai graduated from Jiangsu Institute of Technology* ( Ϫᘽʈุኪ৫ ) (currently known
as Changzhou University ( ੬ψɽኪ )) with a bachelor’s degree in management in June 2009.
DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT
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Mr. Wang Fei (΋͛ ), aged 36, is an executive Director, and is mainly responsible for
participating in decision-making in respect of major matters such as corporate and business
strategies. Mr. Wang was appointed as a Director in December 2022, and was further appointed
as an executive Director in May 2024.
Mr. Wang has over 10 years of experience in investment management. Prior to joining our
Group, Mr. Wang served as a client manager of Qilu Securities Co., Ltd.* (ʮ̡ )
from July 2010 to August 2011, where he was primarily responsible for securities brokerage and
investment-related business. From August 2011 to May 2016, Mr. Wang served as a channel
manager at the Wuhu Limin West Road branch of China Galaxy Securities Co., Ltd.* (ئ
ʮ̡ ), where he was primarily responsible for securities investment-related and
financial advisory business. From May 2016 to October 2016, Mr. Wang served as an investment
manager at Jiangsu Suning Loan Financial Information Service Co., Ltd.* (ڦ
ʮ̡ ) (currently known as Jiangsu Suning Financial Information Service Co., Ltd.*
(ʮ̡ )), a company principally engaged in the provision of financial
information and corporate management consultation services, where he was mainly responsible
for asset management and investment management. From November 2016 to June 2018, Mr.
Wang served as the director of capital operations and the secretary of the board of directors at
Anhui Huida Communication Network Technology Co., Ltd.* (ࠢ
ʮ̡), a company principally engaged in research and development of communication network
technology, where he was mainly responsible for day-to-day works of the company’s board of
directors and project investment activities. Since September 2018, Mr. Wang has been serving at
Jiangsu New Supply and Marketing Fund Management Co., Ltd.* (ʮ
̡), a company principally engaged in investment management and related consulting services,
with his current position as the chief investment officer, where he was mainly responsible for
investment management.
Mr. Wang graduated from Anhui Normal University (ᇍɽኪ ) with a bachelor’s
degree in sociology in July 2010.
Non-executive Director
Ms. Wei Y an (ዲɾɻ ), aged 31, is a non-executive Director, and is mainly responsible
for providing strategic advice and recommendations business development and planning of our
Group. Ms. Wei was appointed as a non-executive Director in May 2024.
Ms. Wei has over five years of experience in investment management. Ms. Wei has been
the executive president of Jiangsu Dongding Investment Fund Management Co., Ltd.* (ཻ
ʮ̡ ), which is primarily engaged in fund and investment management, since
August 2017, where she has been mainly responsible for the company’s operational strategy.
Since April 2020, Ms. Wei has also been serving as the legal representative and general manager
of Jiangsu Jinyan Private Fund Management Co., Ltd.* (ʮ̡ ),
which is primarily engaged in the provision of private equity investment and venture capital
fund management services, where Ms. Wei has been responsible for the asset allocation and
investment strategy. Since January 2023, Ms. Wei has been an executive director of Dongtai
DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT
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--- page 360 ---
Capital Limited (ʮ̡ ), which is primarily engaged in investment management and
corporate management consulting in Hong Kong, where she has been responsible for overseeing
the company’s operations and management.
Since January 2024, Ms. Wei has been serving as the director of administration and
business development at King International Investment Limited (ʮ̡ )
(formerly known as Life Healthcare Group Limited (ʮ̡ ), Tack Fiori
International Group Limited (ʮ̡ ) and Tack Fat Group International Limited
(ʮ̡ )), a company listed on the Main Board of the Stock Exchange (stock
code: 928), where she is primarily responsible for the management and the investment operations
of funds established in the PRC.
Ms. Wei graduated from Nanjing University (ԯɽኪ ) with a bachelor’s degree in
business administration in June 2022.
Independent Non-executive Directors
Mr. Lam Ka Tak (ྗᅃ΋͛ ), aged 43, is an independent non-executive Director, and is
mainly responsible for supervising and providing independent judgment to our Board. Mr. Lam
was appointed as an independent non-executive Director in May 2024, with his appointment
taking effect from the Listing Date.
Mr. Lam has over 20 years of experience in accounting and financial management. From
May 2003 to March 2006, Mr. Lam was employed by RSM Nelson Wheeler (currently known as
RSM Hong Kong), an accounting and consulting firm in Hong Kong, with his last position as
senior accountant. From April 2006 to September 2010, Mr. Lam worked at KPMG, an
accounting and consulting firm in Hong Kong, with his last position as manager. Mr. Lam has
served different roles in various listed companies as follows:
Period
Company name, stock code and
venue of listing Position
Since September 2010 Beijing Health (Holdings) Limited ( ̏ԯ
਄ੰ(ٰ)ʮ̡ ) (formerly known
as Beijing Enterprises Medical and
Health Industry Group Limited ( ̏છ
ʮ̡ ), Genvon
Group Limited (ʮ̡ )
and Wang Sing International Holdings
Group Limited (ණྠϞ
ʮ̡ )) (stock code: 2389), a
company listed on the Main Board of
the Stock Exchange
Company secretary
and authorised
representative
Since March 2015 Chief financial officer
DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT
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Period
Company name, stock code and
venue of listing Position
Since December 2015 Beijing Sports and Entertainment
Industry Group Limited ( ̏ԯ᜗ԃ˖
ʮ̡ ) (formerly
known as ASR Logistics Holdings
Limited (ʮ̡ ) and
ASR Holdings Limited (ࠢ
ʮ̡)) (stock code: 1803), a company
listed on the Main Board of the Stock
Exchange
Executive director
Since October 2016 Net-a-Go Technology Company Limited
(ʮ̡ ) (formerly known
as U Banquet Group Holding Limited
(ʮ̡ )) (stock code:
1483), a company listed on the Main
Board of the Stock Exchange
Independent
non-executive
director and the
chairperson of the
audit committee
Mr. Lam graduated from The Hong Kong Polytechnic University with a bachelor’s degree
in accountancy in November 2003. Mr. Lam also obtained a master’s degree in business
administration from The University of Hong Kong in November 2013.
Mr. Lam has been a member of the Hong Kong Institute of Certified Public Accountants
since January 2010 and became a fellow since September 2024.
Mr. Zheng Manjun (΋͛ ), aged 61, is an independent non-executive Director, and
is mainly responsible for supervising and providing independent judgment to our Board. Mr.
Zheng was appointed as an independent non-executive Director in May 2024, with his
appointment taking effect from the Listing Date.
Mr. Zheng has over 20 years of experience in engineering. Mr. Zheng served at Gezhouba
Hydroelectric Power Plant* (ᜠ˥ɢ೯ཥᅀ )( “ Gezhouba Hydroelectric Power Plant ”)
from July 1986 to September 2002, where Mr. Zheng was awarded the qualification of senior
engineer* (ࢪby the review committee of Gezhouba Hydroelectric Power Plant in
January 1998. Mr. Zheng served at the Y angtze Three Gorges Technology & Economic
Development Co., Ltd.* (ʮ̡ ) of China Y angtze Three Gorges
Corporation Limited* (ණྠʮ̡ )( “ Three Gorges Corporation ”) from September
2002 to June 2019, where Mr. Zheng was awarded the qualification of senior engineer at the
professor level* (ࢪby the human resources department of Three Gorges
Corporation in December 2014. From July 2019 to October 2021, Mr. Zheng served as both the
manager and an executive director at the Y angtze Ecological Environmental Protection Group
Co., Ltd.* (ʮ̡ ) of Three Gorges Corporation. From December 2019 to
June 2022, Mr. Zheng served as a director of Taizhou Three Gorges Ecological Environmental
DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT
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Protection Co., Ltd* (ʮ̡ ) (currently known as Taizhou Chengtou
Ecological Environmental Protection Co., Ltd.* (ʮ̡ )).
Mr. Zheng graduated from Shaanxi Mechanical Institute* ( ৯Гዚ૛ኪ৫ ) (currently known
as Xi’an University of Technology ( Гτଣʈɽኪ )) with a bachelor’s degree in hydraulic and
hydropower engineering* ( ˥л˥ཥਗɢʈ೻ਖ਼ุ ) in July 1986.
Mr. Zheng Yu ( ቍρ΋͛ ), aged 46, is an independent non-executive Director, and is
mainly responsible for supervising and providing independent judgment to our Board. Mr. Zheng
was appointed as an independent non-executive Director in May 2024, with his appointment
taking effect from the Listing Date.
Mr. Zheng has over 20 years of experience in the legal profession. Mr. Zheng has been a
practising lawyer in the PRC since October 2003 and is currently holding the position of senior
partner at Lantai Partners ( ̏ԯ̹ᚆ̨ (ԯ)הMr. Zheng was appointed as an
independent non-executive director of Diwang Industrial Holdings Limited (ࠢ
ʮ̡) (formerly known as Sunlight Technology Holdings Limited (ʮ̡ )), a
company listed on the Main Board of the Stock Exchange (stock code: 1950), from January 2022
to January 2024. From March 2024 to September 2024, Mr. Zheng served as an independent
non-executive director of King International Investment Limited (ʮ̡ )
(previously known as Life Healthcare Group Limited (ʮ̡ ), Tack Fiori
International Group Limited (ʮ̡ ) and Tack Fat Group International Limited
(ʮ̡ )) (stock code: 928), a company listed on the Main Board of the Stock
Exchange.
Mr. Zheng graduated from Nanjing University with a bachelor’s degree in law in June
2004, and further completed a distance-learning programme in finance at the Nanjing University
in July 2021.
Mr. Zheng obtained the Legal Professional Qualification Certificate of the People’s
Republic of China in September 2002. Mr. Zheng was accredited as an intermediate-level
lawyer* (ࢪܛby Nanjing Professional Title (Professional Qualification) Leading Group
Office* (ԯ̹ᔖ၈ (ࣸ) ܃in December 2016. Mr. Zheng has also
become an arbitrator of the Taizhou Arbitration Commission, Nanjing Arbitration
Commission/JiangSu (Nanjing) International Commercial Arbitration Centre and Suining
Arbitration Commission since September 2022, March 2023 and July 2023, respectively.
DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT
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Mr. Zhu Bo (΋͛ ), aged 62, is an independent non-executive Director, and is mainly
responsible for supervising and providing independent judgment to our Board. Mr. Zhu was
appointed as an independent non-executive Director in May 2024, with his appointment taking
effect from the Listing Date.
Mr. Zhu has over 25 years of experience in the law enforcement services, and over 15 years
of experience in business administration and management. During the period from November
1980 to December 2007, Mr. Zhu served several positions in the Chinese People’s Armed Police
Force, with his last position as detachment commander (ڗof the Huai’an Detachment in
the Jiangsu Corps* ( Ϫᘽᐼඟଊτ̹˕ඟ ). In 2003, Mr. Zhu was conferred the rank of senior
colonel (ᙆმ ).
Mr. Zhu served as the deputy general manager at Jiangsu Huiyuan Real Estate Development
Industrial Company* (ྼุʮ̡ ) (currently known as Jiangsu Huiyuan Real
Estate Development Co., Ltd.* (ப΂ʮ̡ )), which was principally
engaged in real estate development and management, from February 2008 to February 2009. Mr.
Zhu served as the general manager of Jiangsu Film Distribution and Exhibition Company* ( Ϫᘽ
ʮ̡ ) (currently known as Jiangsu Film Distribution and Exhibition Co., Ltd.*
(ʮ̡ )), which was principally engaged in film distribution, from April
2009 to March 2016. Since February 2016, Mr. Zhu has been serving as the vice chairman at
Jiangsu Qianbao Investment Group Co., Ltd.* (ʮ̡ ) (currently known as
Jiangsu Qianbao Technology Development Group Co., Ltd.* (ʮ̡ )),
which is principally engaged in architectural engineering, landscape engineering, greening
project design and construction, where Mr. Zhu is primarily responsible for managing the design
and construction of the company’s architectural projects, landscaping projects, and greening
projects. Since February 2016, Mr. Zhu has been serving at the Suzhou Taihu Lake Academy*
(৫ ), with his current position as the vice president since March 2018, where Mr.
Zhu is primarily responsible for the research and promotion of the company’s Taihu culture and
tea culture.
Mr. Zhu graduated from the People’s Liberation Army (PLA) Academy of Military
Economics* (ԫ຾᏶ኪ৫ ) with a bachelor’s degree in military logistics
management in June 1998. Mr. Zhu obtained a bachelor’s degree in laws in June 2005 at the
People’s Liberation Army (PLA) Nanjing Political College* (ኪ৫ ),
and further obtained a postgraduate research degree in Marxist theory and ideological and
political education at the same institution in July 2005.
DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT
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SUPERVISORS
The following table sets out certain information regarding our current Supervisors:
Name Age Position
Date of joining
our Group
Date of
appointment as
Supervisor Responsibilities
Ms. Zhan Mingyu
(͗ɾɻ )
(with a former
name as Zhan
Mingyu (͗ ))
62 Chairman of our
Supervisory Committee,
shareholder Supervisor
26 June 1994 30 June 2018 Supervising our Board and
management; and
responsible for overseeing
our Company’s labour
union, and supervising
matters relating to
administration, distribution
centre, and central kitchen
of our Group
Mr. Xia Zhonglin
(΋͛ )
61 Shareholder Supervisor and
group purchase
department manager
26 June 1994 20 November
2012
Supervising our Board and
management; and
responsible for managing
matters related to group
purchase
Ms. Zhu Aizhen
(ɾɻ )
50 Employee Supervisor and
store manager of Jianying
store
6 June 1997 21 December
2010
Supervising our Board and
management; and
responsible for overseeing
the operation and
management of Jianying
store
Ms. Zhan Mingyu (͗ɾɻ ) (with a former name as Zhan Mingyu (͗ )), aged 62,
is the chairman of our Supervisory Committee and a shareholder Supervisor, and is mainly
responsible for supervising our Board and management; and responsible for overseeing our
Company’s labour union, and supervising matters relating to administration, distribution centre,
and central kitchen of our Group. Ms. Zhan joined our Group in June 1994, and was appointed
as a Supervisor and the chairman of our Supervisory Committee in June 2018.
Ms. Zhan has over 40 years of experience in accounting and finance management related to
supermarket operations. Prior to joining our Group, Ms. Zhan was a cashier at an entity
currently known as Y angzhou City Jiangdu Agricultural Production Materials Co., Ltd.* ( ౮ψ̹
ʮ̡ ) from October 1979 to July 1983. From July 1983 to September
1989, Ms. Zhan was an account clerk at Jiangdu City Supply and Marketing Cooperative* ( Ϫே
ٟcurrently known as Y angzhou Jiangdu Supply and Marketing Cooperative* ( ౮
DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT
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--- page 365 ---
ٟFrom September 1989 to June 1994, Ms. Zhan was an accountant at
Jiangdu Supply and Marketing Building* ( ϪேԶቖɽข ) (the predecessor of Hongxin Trading).
In June 1994, Ms. Zhan joined our Group and worked in Hongxin Trading as an accountant
from June 1994 to February 1995, and an assistant manager in the finance department from
February 1995 to March 1997. Ms. Zhan was mainly responsible for physical inventory
accounting and managing account receivables and payables during the respective periods.
From March 1997 to February 1998, Ms. Zhan served as the deputy manager of the
needlework and yarn department store at Hongxin Trading, later served as the deputy manager of
the footwear and headwear department store at Hongxin Trading from February 1998 to March
1999, and further served as the deputy manager of the children’s department store at Hongxin
Trading from March 1999 to August 2002, during such periods she was mainly responsible for
store management.
From August 2002 to October 2005, Ms. Zhan was the manager of the finance department
at Y angzhou Hongcheng Electrical Appliances Co., Ltd.* (ʮ̡ ), a company
principally engaged in the wholesale and retail of household electrical appliances, where she was
mainly responsible for overseeing the finance-related affairs.
In October 2005, Ms. Zhan returned to our Group and worked at our Company as the
manager of the finance department from October 2005 to March 2007, as the purchasing director
from March 2007 to March 2011, where she was primarily responsible for overseeing purchasing
and distribution operations of our Group, and further as a Director from September 2007 to May
2010, participating in key business and operational decision-making of our Group. Since March
2011, Mr. Zhan had been serving as the purchasing director of our Company until March 2015
and a deputy general manager of our Company until March 2018, where she was mainly
responsible for the purchasing and distribution operations of our Group.
Since March 2018 and June 2018, Ms. Zhan has been serving as the chairman of the trade
union of our Company and the chairman of our Supervisory Committee, respectively.
Ms. Zhan completed a higher education programme in administrative management at The
Chinese Communist Party Y angzhou Party School* (ࣧin July 2001. Ms. Zhan
was awarded the qualification of intermediate-level accountant* (ࢪࠇby Ministry of
Finance of the People’s Republic of China (௅ ) in May 2006.
Mr. Xia Zhonglin (΋͛ ), aged 61, is a shareholder Supervisor and group purchase
department manager of our Group, and is mainly responsible for supervising our Board and
management; and responsible for managing matters related to group purchase. Mr. Xia joined
our Group in June 1994, and was appointed as a Supervisor in November 2012.
Mr. Xia has over 40 years of experience in procurement management. Prior to joining our
Group, from March 1984 to December 1989, Mr. Xia was a counter manager at Jiangdu City
Supply and Marketing Cooperative* (ٟcurrently known as Y angzhou
DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT
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--- page 366 ---
Jiangdu Supply and Marketing Cooperative* (ٟIn December 1989,
Mr. Xia joined Jiangdu Supply and Marketing Building* ( ϪேԶቖɽข ) (the predecessor of
Hongxin Trading) and worked as a sales clerk until February 1993, as the manager of the
wholesale department from February 1993 to February 1994, and further as a deputy manager of
the furniture city from February 1994 to June 1994, where he was mainly responsible for
furniture sales.
In June 1994, Mr. Xia joined our Group and worked at Hongxin Trading continuing his role
as a deputy manager of the furniture city until July 1997, as the manager of the Zhenwu store
from July 1997 to March 1999, as deputy manager of the third-floor department store from
March 1999 to December 2002, as a deputy manager of the small home appliances department
store from January 2003 to March 2006, during which he was mainly responsible for store
management and operations.
In March 2006, Mr. Xia worked at our Company as the store manager of the Longchuan
store until March 2007, as the store manager of the Jiangdu Shopping Mall store from March
2007 to March 2009, as the manager of the Y angzhou branch, where he was responsible for
branch management and operations from March 2009 to March 2015. From March 2015 to
March 2017, he was the manager of the logistics management department of our Company,
where he was mainly responsible for the maintenance of equipment and safety management.
Since November 2012 and March 2017, Mr. Xia has been serving as a Supervisor and the
group purchase department manager of our Group, respectively.
Ms. Zhu Aizhen (ɾɻ ), aged 50, is an employee Supervisor and store manager of
Jianying store, and is mainly responsible for supervising our Board and management; and
responsible for overseeing the operation and management of Jianying store. Ms. Zhu joined our
Group in June 1997, and was appointed as a Supervisor in December 2010.
Ms. Zhu has over 25 years of experience in the supermarket chain management. Ms. Zhu
joined our Group in June 1997 and worked at Hongxin Trading as a computer operator in the
finance audit department until June 2004, and later as a deputy manager of the information
department from June 2004 to March 2008, where she was primarily responsible for information
technology-related tasks.
In March 2008, Ms. Zhu worked at our Company and served as a deputy manager of the
human resources department until March 2010, and later as the manager of the human resources
department from March 2010 to March 2021, during both periods she was primarily responsible
for our Group’s human resources management and employee training.
Since December 2010 and March 2021, Ms. Zhu has been serving as a Supervisor and the
store manager of the Jianying store of our Company, respectively.
Ms. Zhu completed a higher education programme in pharmacy from China Central Radio
and TV University (currently known as The Open University of China) in July 2014.
DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT
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--- page 367 ---
SENIOR MANAGEMENT
The following table sets out certain information regarding our current senior management:
Name Age Position
Date of joining
our Group Responsibilities
Mr. Zhang Jiaan
(ੵԳτ΋͛ )
(with a former name as
Zhang Jiaan (τ ))
54 Executive Director
and general
manager
26 June 1994 Overseeing the overall business
operation and participating in
key business and operational
decision-making of our
Group
Mr. Y ao Jun
(ᒺ΋͛ )
46 Executive Director
and deputy general
manager
1 October 2005 Overseeing the overall
operation of our Group’s
supermarket stores
Ms. Shen Zhigen
(ӏқЌɾɻ )
(with a former name as
Qian Wen ( ፺ත))
53 Executive Director,
deputy general
manager and
financial controller
1 January 1997 Participating in key business
and operational
decision-making of our
Group and overseeing our
Group’s financial and
information technology
operations
Mr. Xiao Zhiping
(ӽқ̻΋͛ )
49 Deputy general
manager and head
of fresh food
operations
1 January 2020 Overseeing the procurement of
fresh food products of our
Group and supervising its
operation
Mr. Zhang Jiaan ( ੵԳτ΋͛ ) (with a former name as Zhang Jiaan (τ )), aged 54, is
an executive Director and the general manager of our Company. For the biography of Mr. Zhang,
see “Directors – Executive Directors” in this section above.
Mr. Y ao Jun (ᒺ΋͛ ), aged 46, is an executive Director and a deputy general manager
of our Company. For the biography of Mr. Y ao, see “Directors – Executive Directors” in this
section above.
Ms. Shen Zhigen ( ӏқЌɾɻ ) (with a former name as Qian Wen ( ፺ත)), aged 53, is an
executive Director, a deputy general manager and financial controller of our Company. For the
biography of Ms. Shen, see “Directors – Executive Directors” in this section above.
DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT
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--- page 368 ---
Mr. Xiao Zhiping ( ӽқ̻΋͛ ), aged 49, is a deputy general manager and head of fresh
food operations of our Company, and is mainly responsible for overseeing the procurement of
fresh food products of our Group and supervising its operation. Mr. Xiao joined our Group and
was appointed as a deputy general manager and head of fresh food operations in January 2020.
Mr. Xiao has over 10 years of experience in fresh food operation management. Prior to
joining our Group, Mr. Xiao was the manager at Chongqing Y onghui Superstores Co., Ltd.*ᅅ
ʮ̡ , a company operating a supermarket chain, from August 2008 to April 2012,
where he was primarily responsible for the fresh food operations. From April 2013 to April
2018, Mr. Xiao was the project manager at Beijing Zhongxian Network Technology Co., Ltd.*
ʮ̡ , where he was primarily responsible for training in fresh food
operations and procurement. From April 2018 to December 2019, Mr. Xiao was the fresh food
director of Inner Mongolia Weilehui Supermarket Co., Ltd.* (ʮ̡ ), a
company operating a supermarket chain, where he was primarily responsible for fresh food
operations and procurement. Since January 2020, Mr. Xiao joined our Group and has been
serving as the deputy general manager and the head of fresh food operations of our Group.
DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT
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--- page 369 ---
DISCLOSURE REQUIRED UNDER RULE 13.51(2) OF THE LISTING RULES
Mr. Gao Feng was a director of the following companies prior to their dissolutions. Mr.
Gao confirmed that each of the following companies was solvent and inactive, and had no
outstanding claims or liabilities at the time of their dissolutions, that there was no wrongful act
on his part leading to the dissolutions and that he is not aware of any actual or potential claim
which has been or will be made against him as a result of the dissolutions of the companies. Mr.
Gao also confirmed that the companies had no material non-compliance prior to their
dissolutions. The following are the details of the aforementioned dissolved companies:
Name of company
Place of
incorporation
Principal business
activity prior to
cessation of business
Date of
dissolution
Reason for
dissolution
Means of
dissolution
Hongxinlong (Beijing)
Technology Co., Ltd.*
(Ꮂ (̏ԯ)ʮ̡ )
PRC Research and
development of
computer hardware
and software, system
integration,
providing technical
consulting services,
technical services,
technology transfer,
and software
technology training
3 February 2015 Cessation of
business
Deregistration
Y angzhou Hongxinlong
Logistics Co., Ltd.*
(ʮ̡ )
PRC Cargo transportation,
warehousing
services, and sales of
fresh agricultural
products
22 November
2019
Cessation of
business
Deregistration
Hongxinlong (Jiangsu) Software
Technology Co., Ltd.*
(Ꮂ (Ϫᘽ)ࠢ
ʮ̡)
PRC Software technology
development,
technology transfer,
technical consulting,
and technical
services
7 December
2012
Cessation of
business
Deregistration
DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT
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--- page 370 ---
Mr. Y uan Y uan was a director of the following companies prior to their dissolutions. Mr.
Y uan confirmed that each of the following companies was solvent and inactive, and had no
outstanding claims or liabilities at the time of their dissolutions, that there was no wrongful act
on his part leading to the dissolutions and that he is not aware of any actual or potential claim
which has been or will be made against him as a result of the dissolutions of the companies. Mr.
Y uan also confirmed that the companies had no material non-compliance prior to their
dissolutions. The following are the details of the aforementioned dissolved companies:
Name of company
Place of
incorporation
Principal business
activity prior to
cessation of business
Date of
dissolution
Reason for
dissolution
Means of
dissolution
Hongxinlong (Jiangsu) Software
Technology Co., Ltd.*
(Ꮂ (Ϫᘽ)ࠢ
ʮ̡)
PRC Software technology
development,
technology transfer,
technical consulting,
and technical
services
7 December
2012
Cessation of
business
Deregistration
Hongxinlong (Beijing)
Technology Co., Ltd.*
(Ꮂ (̏ԯ)ʮ̡ )
PRC Research and
development of
computer hardware
and software, system
integration,
providing technical
consulting services,
technical services,
technology transfer,
and software
technology training
3 February 2015 Cessation of
business
Deregistration
DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT
– 360 –


--- page 371 ---
Mr. Zhang Jiaan (with a former name as Zhang Jiaan (τ )) was a director of the
following companies prior to their dissolutions. Mr. Zhang confirmed that each of the following
companies was solvent and inactive, and had no outstanding claims or liabilities at the time of
their dissolutions, that there was no wrongful act on his part leading to the dissolutions and that
he is not aware of any actual or potential claim which has been or will be made against him as a
result of the dissolutions of the companies. Mr. Zhang also confirmed that the companies had no
material non-compliance prior to their dissolutions. The following are the details of the
aforementioned dissolved companies:
Name of company
Place of
incorporation
Principal business
activity prior to
cessation of business
Date of
dissolution
Reason for
dissolution
Means of
dissolution
Jiangsu Hongxin
E-Commerce Co., Ltd.*
(ʮ̡ )
PRC Online sales of general
merchandise,
clothing, daily
necessities, office
supplies, household
appliances,
vegetables, fruits,
aquatic products,
fresh agricultural
products, fresh meat,
and e-commerce
operation and
maintenance
outsourcing
2 February 2016 Cessation of
business
Deregistration
Y angzhou Hongxinlong
Logistics Co., Ltd.*
(ʮ̡ )
PRC Cargo transportation,
warehousing
services, and sales of
fresh agricultural
products
22 November
2019
Cessation of
business
Deregistration
Hongxinlong (Jiangsu) Software
Technology Co., Ltd.*
(Ꮂ (Ϫᘽ)ࠢ
ʮ̡)
PRC Software technology
development,
technology transfer,
technical consulting,
and technical
services
7 December
2012
Cessation of
business
Deregistration
DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT
– 361 –


--- page 372 ---
Name of company
Place of
incorporation
Principal business
activity prior to
cessation of business
Date of
dissolution
Reason for
dissolution
Means of
dissolution
Hongxinlong (Beijing)
Technology Co., Ltd.*
(Ꮂ (̏ԯ)ʮ̡ )
PRC Research and
development of
computer hardware
and software, system
integration,
providing technical
consulting, technical
services, technology
transfer, and
software technology
training
3 February 2015 Cessation of
business
Deregistration
Mr. Lam Ka Tak was a director of the following company prior to its dissolution. Mr. Lam
confirmed that the following company was solvent and inactive, and had no outstanding claims
or liabilities at the time of its dissolution, that there was no wrongful act on his part leading to
the dissolution and that he is not aware of any actual or potential claim which has been or will
be made against him as a result of the dissolution of the company. Mr. Lam also confirmed that
the company had no material non-compliance prior to its dissolution. The following are the
details of the aforementioned dissolved company:
Name of company
Place of
incorporation
Principal business
activity prior to
cessation of business
Date of
dissolution
Reason for
dissolution
Means of
dissolution
BE Fortune Capital Limited
(formerly known as
BE Fortune (Cayman)
Investment Management
Limited)
Cayman Islands Investment
management
30 April 2024 Cessation of
operation
Strike off
DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT
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--- page 373 ---
Mr. Zheng Manjun was a director of the following company prior to its dissolution. Mr.
Zheng Manjun confirmed that the following company was solvent and inactive, and had no
outstanding claims or liabilities at the time of its dissolution, that there was no wrongful act on
his part leading to the dissolution and that he is not aware of any actual or potential claim which
has been or will be made against him as a result of the dissolution of the company. Mr. Zheng
Manjun also confirmed that the company had no material non-compliance prior to its
dissolution. The following are the details of the aforementioned dissolved company:
Name of company
Place of
incorporation
Principal business
activity prior to
cessation of business
Date of
dissolution
Reason for
dissolution
Means of
dissolution
Changjiang Eco-Environmental
Protection Group Jiangsu
Region Co., Ltd.*
(ණྠϪᘽਜਹ
ʮ̡ )
PRC Planning, design,
investment,
construction and
operation related to
ecology,
environmental
protection, energy
saving, and clean
energy
23 June 2022 Cessation of
business
Deregistration
DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT
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--- page 374 ---
Mr. Zhu Bo was a director of the following companies prior to their dissolutions. Mr. Zhu
confirmed that each of the following companies was solvent and inactive, and had no
outstanding claims or liabilities at the time of their dissolutions, that there was no wrongful act
on his part leading to the dissolutions and that he is not aware of any actual or potential claim
which has been or will be made against him as a result of the dissolutions of the companies. Mr.
Zhu also confirmed that the companies had no material non-compliance prior to their
dissolutions. The following are the details of the aforementioned dissolved companies:
Name of company
Place of
incorporation
Principal business
activity prior to
cessation of business
Date of
dissolution
Reason for
dissolution
Means of
dissolution
Jiangsu Xingrui Investment
Development Co., Ltd.*
(ʮ̡ )
PRC Investment and
investment
management, digital
electronic product
rental, home
audio-visual
equipment rental,
property leasing,
conference services,
translation services,
prop modelling,
computer graphics
and design, computer
software and
hardware design,
photography
services,
organisation of
cultural exchanges,
corporate image
planning, and
economic
information
consulting
17 October 2016 Cessation of
business
Deregistration
DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT
– 364 –


--- page 375 ---
Name of company
Place of
incorporation
Principal business
activity prior to
cessation of business
Date of
dissolution
Reason for
dissolution
Means of
dissolution
Huai’an Guoxin Digital
Cinema Co., Ltd.*
(ʮ̡ )
PRC Rental of cinema
equipment, cinema
design, and
decoration, venue
rental, building
construction and
engineering, etc.
25 September
2014
Cessation of
business
Deregistration
Jiangsu Huade Sports and
Education Development
Co., Ltd.*
(ࠢ
ʮ̡)
PRC Operation of sports
facility venues
(excluding high-risk
sports), poultry
farming, food
business operations,
advertising
(broadcasting
stations, TV stations,
newspaper
publishing units),
catering services,
real estate
development and
operation,
organisation of
sports competitions,
project planning and
public relations
services, sports
intermediary agency
services, sports agent
services, etc.
25 February
2022
Cessation of
business
Deregistration
DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT
– 365 –


--- page 376 ---
Ms. Zhan Mingyu (with a former name as Zhan Mingyu (͗ )) was a director of the
following company prior to its dissolution. Ms. Zhan confirmed that the following company was
solvent and inactive, and had no outstanding claims or liabilities at the time of its dissolution,
that there was no wrongful act on her part leading to the dissolution and that she is not aware of
any actual or potential claim which has been or will be made against her as a result of the
dissolution of the company. Ms. Zhan also confirmed that the company had no material
non-compliance prior to its dissolution. The following are the details of the aforementioned
dissolved company:
Name of company
Place of
incorporation
Principal business
activity prior to
cessation of business
Date of
dissolution
Reason for
dissolution
Means of
dissolution
Y angzhou Hongxinlong
Logistics Co., Ltd.*
(ʮ̡ )
PRC Cargo transportation,
warehousing
services, and sales of
fresh agricultural
products
22 November
2019
Cessation of
business
Deregistration
Ms. Zhu Aizhen was a director of the following companies prior to their dissolutions. Ms.
Zhu confirmed that each of the following companies was solvent and inactive, and had no
outstanding claims or liabilities at the time of their dissolutions, that there was no wrongful act
on her part leading to the dissolutions and that she is not aware of any actual or potential claim
which has been or will be made against her as a result of the dissolutions of the companies. Ms.
Zhu also confirmed that the companies had no material non-compliance prior to their
dissolutions. The following are the details of the aforementioned dissolved companies:
Name of company
Place of
incorporation
Principal business
activity prior to
cessation of business
Date of
dissolution
Reason for
dissolution
Means of
dissolution
Y angzhou Qiangqin
Trading Co., Ltd.*
(ʮ̡ )
PRC Sales of pre-packaged
food and daily
necessities, retail
sale of cigarettes and
cigars
18 March 2020 Cessation of
business
Deregistration
Jiangdu Guochang
Liquor Company*
(ৢุਠБ )
PRC Retail of pre-packaged
food, primarily
engaged in the
manufacturing of
alcohol, beverages,
and refined tea
26 November
2014
Cessation of
business
Deregistration
DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT
– 366 –


--- page 377 ---
GENERAL
Save as disclosed above and in “Substantial Shareholders” and “Statutory and General
Information – 4. Disclosure of Interests” in Appendix VI, each of our Directors and Supervisors
confirms with respect to him/her that:
(i) does not hold other positions in our Company or other members of our Group as at the
Latest Practicable Date;
(ii) did not hold other long positions or short positions in the Shares, underlying Shares,
debentures of our Company or any associated corporation (within the meaning of Part
XV of the SFO) as at the Latest Practicable Date;
(iii) had no other relationship with any Directors, Supervisors, senior management or
substantial shareholders or Controlling Shareholders of our Company as at the Latest
Practicable Date;
(iv) did not hold any other directorships in the three years prior to the Latest Practicable
Date in any public companies of which the securities are listed on any securities
market in Hong Kong and/or overseas;
(v) does not have any interest in any business which competes or is likely to compete,
directly or indirectly, with our Group, which is disclosable under the Listing Rules;
(vi) to the best knowledge, information and belief of our Directors and Supervisors, having
made all reasonable enquiries, there are no other matters concerning our Director’s
and Supervisors’ appointment that need to be brought to the attention of our
Shareholders and the Stock Exchange or shall be disclosed pursuant to Rules 13.51(2)
of the Listing Rules as at the Latest Practicable Date; and
(vii) to the best of the knowledge, information and belief of our Directors and Supervisors,
having made all reasonable enquiries, there are no other matters with respect to the
appointment of our Directors and Supervisors that needs to be brought to the attention
of our Shareholders.
Each of our Directors confirmed that he or she (i) obtained the legal advice referred to
under Rule 3.09D of the Listing Rules on 5 June 2024; and (ii) understood his or her obligations
as a director of a listed issuer under the Listing Rules.
Each of our independent non-executive Directors confirmed (i) his independence as regards
each of the factors referred to in Rule 3.13(1) to (8) of the Listing Rules; (ii) that he had no past
or present financial or other interest in the business of our Company or our subsidiaries or any
connection with any core connected person of our Company under the Listing Rules as at the
Latest Practicable Date; and (iii) that there are no other factors that may affect his independence
at the time of his appointment.
DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT
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JOINT COMPANY SECRETARIES
Ms. Xu Chunling (ɾɻ ), aged 45, has been appointed as one of our joint company
secretaries.
Ms. Xu has more than 20 years of experience in administration management related to
supermarket operations. Ms. Xu joined our Group in December 2002 and is currently the
secretary to the Board, a position she held since May 2024. Ms. Xu served as a clerk of Hongxin
Trading from December 2002 until March 2014, and has been serving as the manager of our
Company since March 2014, during both periods she was mainly responsible for managing the
corporate affairs of our Group, managing the archives and qualification certificates, drafting and
preparing legal and other documents and managing their receipt and dispatch.
Ms. Xu completed the undergraduate programme majoring in administration management at
China Central Radio and TV University ( ʕ̯ᄿᅧཥൖɽኪ ) (currently known as The Open
University of China (ɽኪ )) in January 2015. Ms. Xu was awarded the Certificate of
Secretary for the Board of Directors (׼from the Shanghai Stock Exchange
(ה׸in May 2019.
Mr. Hui Hung Kwan ( ஢ᒿ໊΋͛ ), aged 53, has been appointed as one of our joint
company secretaries.
Mr. Hui has more than 25 years of experience in accounting and financial management.
After graduating with a bachelor’s degree in business administration from the Chinese
University of Hong Kong in Hong Kong in December 1994, Mr. Hui has held various positions,
including audit manager at Li, Tang, Chen & Co. (הfrom June 1994 to June
2004. Mr. Hui was the chief financial officer of Premiere Eastern Energy Pte. Limited (ᆗঐ๕
ʮ̡ ) from November 2010 to December 2012.
DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT
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Mr. Hui has served different roles in various listed companies as follows:
Period
Company name, stock code and
venue of listing Position
June 2004 to
October 2010
C&G Environmental Protection
Holdings Limited (ࠢ
ʮ̡) (stock code: D79), a company
previously listed on the main board of
the Singapore Exchange Limited until
20 December 2019
Chief financial officer
July 2009 to
June 2015
Titan Invo Technology Limited
(formerly known as TUS International
Limited (ʮ̡ ) and
Jinheng Automotive Safety
Technology Holdings Limited ( ᎀ㛬ӛ
ʮ̡ )) (stock
code: 872), a company previously
listed on the Main Board of the Stock
Exchange until 17 May 2024
Independent
non-executive
director
June 2013 to
July 2020
China Creative Global Holdings Limited
(ʮ̡ ) (formerly
known as China Creative Home
Group Limited (ණྠϞ
ʮ̡ ) and China Allen Holdings
Limited (ʮ̡ ))
(stock code: 1678), a company
previously listed on the Main Board
of the Stock Exchange until 25 July
2022
Chief financial officer
Since December 2018 Shanghai Kindly Medical Instruments
Co., Ltd.* (΅
ʮ̡ ) (currently known as
Shanghai INT Medical Instruments
Co., Ltd.* (΅Ϟ
ʮ̡ )) (stock code: 1501), a
company listed on the Main Board of
the Stock Exchange
Independent
non-executive
director
DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT
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Period
Company name, stock code and
venue of listing Position
May 2023 to
August 2024
Wuxi Life International Holdings Group
Limited (ࠢ
ʮ̡) (formerly known as Aurum
Pacific (China) Group Limited ( ෳ䇐
ʮ̡ ), S&D
International Development Group
Limited (ʮ
̡) and SJTU Sunway Software
Industry Limited ( ʹɽთइழ΁ྼุ
ʮ̡ )) (stock code: 8148), a
company listed on GEM of the Stock
Exchange
Company secretary
Since August 2023 Life Concepts Holdings Limited (฿
ʮ̡ ) (formerly known as
Dining Concepts Holdings Limited
(ʮ̡ )) (stock code:
8056), a company listed on GEM of
the Stock Exchange
Independent
non-executive
director
August 2023 to
March 2024
King International Investment Limited
(ʮ̡ ) (previously
known as Life Healthcare Group
Limited (ʮ
̡), Tack Fiori International Group
Limited (ʮ̡ ) and
Tack Fat Group International Limited
(ʮ̡ )) (stock code:
928), a company listed on the Main
Board of the Stock Exchange
Company secretary
Mr. Hui has been an associate of the Hong Kong Institute of Certified Public Accountants
(formerly known as the Hong Kong Society of Accountants) and a fellow of the Association of
Chartered Certified Accountants since September 1997 and October 2002, respectively.
DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT
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BOARD COMMITTEES
Our Board delegates certain responsibilities to various dedicated committees in accordance
with relevant PRC laws, regulations, the Articles and the Listing Rules, namely, the Audit
Committee, the Nomination Committee, and the Remuneration Committee.
The Audit Committee
Upon Listing, the Audit Committee will consist of five Directors, namely, Mr. Lam Ka Tak,
Mr. Zheng Manjun, Mr. Zheng Y u, Mr. Zhu Bo and Ms. Wei Y an. Mr. Lam Ka Tak will serve as
the chairperson of the committee. The primary duties of the Audit Committee are to review and
supervise the financial reporting process, internal control and risk management system of our
Group.
The Nomination Committee
Upon Listing, the Nomination Committee will consist of five Directors, namely, Mr. Lam
Ka Tak, Mr. Zheng Manjun, Mr. Zheng Y u, Mr. Zhu Bo and Ms. Wei Y an. Mr. Zheng Manjun
will serve as the chairperson of the committee. The primary duties of the Nomination Committee
are to make recommendations to our Board regarding the appointment of Directors and senior
management.
The Remuneration Committee
The Remuneration Committee consists of five Directors, namely, Mr. Lam Ka Tak, Mr.
Zheng Manjun, Mr. Zheng Y u, Mr. Zhu Bo and Ms. Wei Y an. Mr. Zheng Y u will serve as the
chairperson of the committee. The primary duties of the Remuneration Committee are to review
and make recommendations to our Board regarding the terms of remuneration packages, bonuses
and other compensation payable to our Directors and senior management.
CORPORATE GOVERNANCE
Our Company is committed to achieving high standards of corporate governance with a
view to safeguarding the interests of our Shareholders. To accomplish this, our Company intends
to comply with the Corporate Governance Code set out in Appendix C1 (formerly Appendix 14)
to the Listing Rules (the “ CG Code ”) and the Model Code for Securities Transactions by
Directors of Listed Issuers set out in Appendix C3 (formerly Appendix 10) to the Listing Rules
after the Listing.
Our Directors will review our corporate governance policies and compliance with the CG
Code each financial year and comply with the “comply or explain” principle in our corporate
governance report which will be included in our annual reports upon the Listing.
DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT
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BOARD DIVERSITY
We have adopted the board diversity policy (the “ Board Diversity Policy ”) which sets out
the objective and approach to achieve and maintain a high level of diversity on our Board in
order to enhance the effectiveness of our Board. The Board Diversity Policy provides that our
Company should endeavour to ensure that our Board members have the appropriate balance of
skills, experience, and diversity of perspectives that are required to support the execution of its
business strategy. Pursuant to the Board Diversity Policy, a number of factors will be taken into
account in determining the board composition to achieve board diversity, including but not
limited to professional experience, skills, knowledge, age, gender, education, cultural
background and length of service. Our Nomination Committee is delegated by our Board to be
responsible for compliance with relevant code governing board diversity under the CG Code.
Our Board has a balanced mix of knowledge, skills and experience. They completed studies
in various majors including but without limitation to business management, accountancy,
finance, engineering and legal studies. We have four independent non-executive Directors who
have different industry backgrounds. Furthermore, our Directors are of a wide range of age, from
31 to 64 years old. Pursuant to the Board Diversity Policy, we aim to maintain at least 10%
female representation in the Board. Taking into account our business model and specific needs
as well as the presence of three female Directors out of a total of 12 Board members, we
consider that the composition of our Board satisfies our Board Diversity Policy.
We recognise the particular importance of gender diversity on our Board. We have taken
and will continue to take steps to promote and enhance gender diversity at all levels of our
Company, including but without limitation at our Board and senior management levels. Our
Board Diversity Policy provides that our Board shall take opportunities when selecting and
making recommendations on suitable candidates for Board appointments with the aim of
increasing the proportion of female members over time after Listing. In particular, taking into
account the business needs of our Group and changing circumstances that may affect our
business plans, we will actively identify and select several female individuals with a diverse
range of skills, experience and knowledge in different fields from time to time, and maintain a
list of such female individuals who possess qualities to become our Board members, which will
be periodically reviewed by our Nomination Committee in order to develop a pipeline of
potential successors to our Board and promote gender diversity. We will also ensure that there is
gender diversity when recruiting staff at the mid- to senior-levels so that we have a pipeline of
female senior management and potential successors to our Board going forward. It is our
objective to maintain an appropriate balance of gender diversity with reference to the
stakeholders’ expectations and international and local recommended best practices.
The Nomination Committee will review the Board Diversity Policy from time to time to
ensure its continued effectiveness by assessing annually on the board’s diversity profile
including gender balance and making recommendation on suitable candidates for Board
appointments and we will disclose in our corporate governance report about the implementation
of the Board Diversity Policy on an annual basis.
DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT
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COMPLIANCE ADVISER
Our Company has appointed Red Solar Capital Limited, in accordance with Rule 3A.19 of
the Listing Rules, as our compliance adviser for the period commencing on the Listing Date and
ending on the date on which our Company complies with Rule 13.46 of the Listing Rules in
respect of its financial results for the first full financial year commencing after the Listing Date.
Pursuant to Rule 3A.23 of the Listing Rules, our compliance adviser will provide advice to us in
the following circumstances:
(i) before the publication of any regulatory announcement, circular or financial report;
(ii) where a transaction, which might be a notification or connected transaction, is
contemplated, including share issues and share repurchases;
(iii) where we propose to use the proceeds from the Global Offering in a manner different
from that detailed in this prospectus or if our business activities, developments or
results deviate from any forecast, estimate or other information in this prospectus; and
(iv) where the Stock Exchange makes any inquiry to us regarding unusual movements in
the price or trading volume of our Shares.
REMUNERATION OF DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT
Our Directors, Supervisors and senior management receive compensation in the form of
fees, salaries, allowances, discretionary bonuses, pension-defined contribution plans and other
benefits in kind with reference to those paid by comparable companies, time commitment and
the performance of our Company. Our Company also reimburses our Directors, Supervisors and
senior management for expenses which are necessarily and reasonably incurred for the provision
of services to our Company or executing their functions in relation to the operation of our
Company.
For FY2021, FY2022, FY2023 and 9M2024, the total emoluments of our Directors,
including fees, salaries, allowances and benefits in kind, discretionary bonuses and retirement
scheme contributions, were amounted to approximately RMB2.1 million, RMB2.0 million,
RMB2.0 million and RMB0.5 million, respectively.
For FY2021, FY2022, FY2023 and 9M2024, the total emoluments of our Supervisors,
including fees, salaries, allowances and benefits in kind, discretionary bonuses and retirement
scheme contributions, were amounted to approximately RMB0.4 million, RMB0.3 million,
RMB0.3 million and RMB0.2 million, respectively.
Under the arrangements currently in force, our Directors and Supervisors are estimated to
receive total fixed remuneration (before tax), for the year ending 31 December 2025, of
approximately RMB0.9 million.
DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT
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--- page 384 ---
The remuneration of Directors and Supervisors consists of fees, salaries, allowances,
discretionary bonuses, pension-defined contribution plans and other benefits in kind, which are
determined based on the evaluation of each of our Directors’ and Supervisors’ individual
performance and the internal remuneration management of our Group in 2024. The actual
remuneration of Directors and Supervisors in 2024 may be different from the expected
remuneration.
For FY2021, FY2022, FY2023 and 9M2024, there was three, three, three and three
Directors among the five highest paid individuals, respectively. The total emoluments, including
fees, salaries, allowances and benefits in kind, discretionary bonuses and retirement scheme
contributions, of the top five highest paid individuals (excluding Directors and Supervisors) for
FY2021, FY2022, FY2023 and 9M2024 were RMB0.9 million, RMB0.9 million, RMB0.8
million and RMB0.2 million, respectively.
For FY2021, FY2022, FY2023 and 9M2024, no payment was made by us to any of our
Directors, past director, Supervisors or the five highest paid individuals as an inducement to join
us or as compensation for loss of office. None of our Directors or Supervisors waived their
remuneration during the relevant periods.
The remuneration of Directors, Supervisors and senior management is determined with
reference to factors including the salaries paid by comparable companies, time commitment and
responsibilities of our Directors, Supervisors and senior management, employment conditions of
other positions in our Company and the desirability of performance-based remuneration.
DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT
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--- page 385 ---
OUR CONTROLLING SHAREHOLDERS
Pursuant to the Acting-in-concert Confirmation, Mr. Gao, Ruichuanda Investment (which is
in turn wholly-owned by Mr. Gao), Mr. Y uan and Mr. Zhang confirm that they have been acting
in concert in the management and operation of our Group since January 2019, and they have
agreed to continue to act in concert and reach consensus on any proposal related to the daily
management and operation of our Group presented to the general meeting of the Shareholders of
our Company for voting. For details, please refer to the paragraph headed “History and
Development – Acting-in-concert Confirmation” in this prospectus.
As at the Latest Practicable Date, Mr. Gao is able to exercise approximately 29.68% of the
voting rights in our Company through (i) his personal capacity as to approximately 16.36%; and
(ii) Ruichuanda Investment as to approximately 13.32%. Mr. Y uan is able to exercise
approximately 6.95% voting rights in our Company through his personal capacity. Mr. Zhang is
able to exercise approximately 4.85% voting rights in our Company through his personal
capacity. As such, as at the Latest Practicable Date, the Concert Parties are able to exercise
voting rights of approximately 41.48% of the total issued shares of our Company.
Immediately following the completion of the Global Offering (assuming that the
Over-allotment Option is not exercised), the Concert Parties will be entitled to exercise voting
rights of approximately 31.11% of the total issued shares of our Company, and are considered as
our Controlling Shareholders upon Listing.
COMPETING INTEREST OF OUR CONTROLLING SHAREHOLDERS AND
DIRECTORS
As at the Latest Practicable Date, apart from our Group’s business, none of our Controlling
Shareholders, Directors and their respective close associates was engaged or had interest in any
business which, directly or indirectly, competes or may compete with our Group’s principal
business, which would require disclosure under Rule 8.10 of the Listing Rules.
RELATIONSHIP WITH CONTROLLING SHAREHOLDERS
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--- page 386 ---
DEED OF NON-COMPETITION
Each of our Controlling Shareholders (the “ Covenantors ”) has entered into a deed of
non-competition (the “ Deed of Non-competition ”) in favour of our Company (for itself and as
trustee for our subsidiaries) on 12 March 2025. Subject to the terms and conditions of the Deed
of Non-competition, the Covenantors irrevocably and unconditionally undertake to and covenant
with our Company (for itself and as trustee for our subsidiaries) that, during the period in which
the Covenantors are subject to the provisions of the Deed of Non-competition:
(i) it will not, and will procure its close associates and/or the companies controlled by it
(other than members of our Group) not to, directly or indirectly, either on its own
account or in conjunction with or on behalf of any person, firm or company, among
other things, carry on, participate or be engaged in, invest in, acquire, hold or provide
any form of assistance to any person, firm or company (except members of our Group)
to conduct (in each case whether as a shareholder, director, partner, agent, employee
or otherwise and whether for interest, return or otherwise) any business which is or
may be similar to or in competition with the business carried on or contemplated to be
carried on by any member of our Group from time to time, including but not limited
to supermarket and convenience store chain-related business and wholesale business of
grains and oil, food products, garment, household appliances and wooden products
(the “ Restricted Business ”);
(ii) if it and/or any of its close associates has received, is offered or has identified any
business investment or other business opportunity that competes or may compete,
directly or indirectly, with the Restricted Business (the “ New Business
Opportunity ”), it and/or any of its close associates shall (a) immediately give a
notice in writing to our Company in respect of such New Business Opportunity,
setting out all reasonably necessary information for our Group to make an informed
assessment; and (b) use its best efforts to assist our Company in acquiring such New
Business Opportunity at terms and conditions no less favourable than those available
to it and/or its close associates;
(iii) neither it nor any of its close associates, directly or indirectly, carries out, participates
or is engaged in, invests in, acquires or holds (in each case whether as a shareholder,
director, partner, agent, employee or otherwise and whether for interest, return or
otherwise) or is otherwise involved (other than through our Group) in the Restricted
Business;
(iv) it will provide all necessary information for our Directors (including our independent
non-executive Directors) to review its compliance with and implementation of the
Deed of Non-competition on an annual basis and, if necessary, make annual statements
in respect of its compliance with and implementation of the Deed of Non-competition
in the annual reports of our Company;
RELATIONSHIP WITH CONTROLLING SHAREHOLDERS
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--- page 387 ---
(v) it will allow our Directors, their respective representatives and auditors to have full
access to its records and/or will procure its close associates to use their best efforts to
allow our Directors, their respective representatives and auditors to have full access to
their records, in order for him/her/it to meet the terms and conditions of the Deed of
Non-competition; and
(vi) for so long as it or any of its close associates, either alone or as a whole, remains the
Controlling Shareholders of our Company (within the meaning of the Listing Rules) or
a Director:
(1) it will not participate in, carry on or invest in any project or business opportunity
that competes or may compete, directly or indirectly, with the business conducted
by our Group from time to time;
(2) it will, in accordance with the Articles of Association and the Listing Rules,
declare its interests and, where required, abstain from voting at any board
meeting and/or general meeting of our Company and not be counted as quorum
where required, if there is any actual or potential conflict of interests;
(3) it and its close associates (other than our Group) will not solicit any existing or
then existing employee of our Group;
(4) without the consent of our Company, it will not use any information pertaining to
the business of our Group which may have come to its knowledge in its capacity
as the Controlling Shareholders of our Company and/or a Director for any
purposes; and
(5) it will procure its close associates (other than our Group) not to participate in,
carry on or invest in any project or New Business Opportunity mentioned above
(except pursuant to paragraph (a) below).
The non-competition undertakings made by each of the Covenantors do not apply in the
following circumstances:
(a) if the information on the principal terms of the Restricted Business, project or New
Business Opportunity has been made available to our Group and our Directors, the
principal terms in accordance with which the relevant Covenantor(s) or its/their close
associates participate in carry on or invest in such Restricted Business, project or New
Business Opportunity are approximately the same or are no more favourable than
these offered to our Company, and our Company has confirmed that it, after review by
our Directors (including our independent non-executive Directors, provided that the
resolution shall be approved by the majority of our independent non-executive
Directors at a meeting in the absence of Directors who have beneficial interest in the
project or business relating to such project or business), will refuse to operate,
participate in or carry on such Restricted Business relating to such New Business
RELATIONSHIP WITH CONTROLLING SHAREHOLDERS
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--- page 388 ---
Opportunity, then any close associate of the Covenantors (other than our Group) has
the right to participate in, carry on or invest in any Restricted Business relating to
such New Business Opportunity that has previously been offered to our Group,
irrespective of the value of such business. Subject to the foregoing, if the Covenantors
or any of its close associates has decided to directly or indirectly participate in, carry
on or invest in any Restricted Business relating to such New Business Opportunity,
it/they shall be subject to any conditions imposed by our independent non-executive
Directors and shall disclose to our Company the terms under which it/they operate,
participate or carry on such Restricted Business as soon as practicable; and
(b) without prejudice to the principle of (a) above, the undertakings made by the
Covenantors do not apply to any of the following:
(i) holding of shares or other securities issued by our Company or our subsidiaries;
and
(ii) where a company is a company listed on any stock exchange recognised by
national laws and holds the shares or securities in any company participating in
any Restricted Business, the total interest (within the meaning of Part XV of the
SFO) held by each of the Covenantors and its close associates is less than 5% of
the share capital of such company.
The non-competition undertakings given by each of our Controlling Shareholders of our
Company will take effect from the date on which dealings in our H Shares first commence on
the Stock Exchange and will cease to have any effect upon the earlier of the date on which:
(a) any of our Controlling Shareholders and its/their close associates and/or successor,
individually and/or collectively, cease to own 30% (or such percentage as may from
time to time be specified in the Takeovers Code as being the level for triggering a
mandatory general offer) or more of the then issued share capital of our Company
directly or indirectly or cease to be deemed as Controlling Shareholders of our
Company; or
(b) our H Shares cease to be listed on the Stock Exchange (except for temporary
suspension of our H Shares due to any reason).
The decision-making process in relation to the Deed of Non-competition will be governed
and monitored as follows:
• Our independent non-executive Directors will be responsible for deciding whether or
not to take up a New Business Opportunity referred to us under the terms of the Deed
of Non-competition and may invite senior management of our Company to assist them
or provide any relevant information.
RELATIONSHIP WITH CONTROLLING SHAREHOLDERS
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--- page 389 ---
• Our independent non-executive Directors may employ an independent financial adviser
and/or competent person as they consider necessary to advise them on the terms of
any such New Business Opportunity.
• Our Controlling Shareholders will undertake to keep us informed of New Business
Opportunity and to provide all information reasonably required by the independent
non-executive Directors to assist them in their consideration of any New Business
Opportunity.
• Our independent non-executive Directors will also review, on an annual basis, any
decisions in relation to New Business Opportunity referred to us, and state their views
with basis and reasons in our annual report.
INDEPENDENCE FROM OUR CONTROLLING SHAREHOLDERS
Having considered the following factors, our Directors are satisfied that we are capable of
carrying out our business independently from our Controlling Shareholders and their respective
close associates (other than our Group) after Listing:
Management Independence
Upon Listing, our Board will comprise seven executive Directors, one non-executive
Director and four independent non-executive Directors. Mr. Gao is our Chairman and an
executive Director, Mr. Y uan is the vice chairman of our Board and an executive Director,
and Mr. Zhang is an executive Director and the general manager of our Company, whereas
each of them is one of our Controlling Shareholders. The day-to-day management of our
business rests with our Board and senior management team in a collective manner. The
balance of power and authority is ensured by the operation of our senior management team
and our Board. For details of the background of Mr. Gao, Mr. Y uan and Mr. Zhang, please
refer to the section headed “Directors, Supervisors and Senior Management” in this
prospectus.
Each of our Directors is aware of his/her fiduciary duties as a Director which require,
among others, that he/she must act for the benefit of and in the best interests of our
Company and not allow any conflict between his/her duties as a Director and his/her
personal interests. Further, we believe our independent non-executive Directors bring
independent judgment to the decision-making process of our Board. In addition, our
Directors shall not vote in any Board resolution approving any contract or arrangement or
any other proposal in which he/she or any of his/her close associates has a material interest
and shall not be counted in the quorum present at the particular Board meeting.
Based on the above, our Directors are satisfied that our Board as a whole together
with our senior management team is able to perform the management role in our Group
independently.
RELATIONSHIP WITH CONTROLLING SHAREHOLDERS
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Operational Independence
We have established our own organisational structure, with each department assigned
to specific areas of responsibilities which have been in operation and are expected to
continue to operate independently from our Controlling Shareholders and their respective
close associates (other than our Group). We have independent access to suppliers and
customers. We are also in possession of all relevant assets, licences, trademarks and other
intellectual property necessary to carry on and operate our business and we have sufficient
operational capacity in terms of capital and employees to operate independently.
Based on the above, our Directors are of the view that there is no operational
dependence by us on our Controlling Shareholders and their respective close associates
(other than our Group) and our Group is able to operate independently from our Controlling
Shareholders and their respective close associates (other than our Group) after Listing.
Financial Independence
We have our own independent financial system, internal control and accounting
systems. We make financial decisions and determine our use of funds according to our own
business needs. We have opened accounts with banks independently and do not share any
bank account with our Controlling Shareholders and their respective close associates (other
than our Group). We have made tax filings and paid tax independently of our Controlling
Shareholders and their respective close associates (other than our Group) pursuant to
applicable laws and regulations. We have established an independent finance department
and implemented sound and independent audit, accounting and financial management
systems. We have adequate financial resources and credit facilities to support our daily
operation. We expect that we will not rely on our Controlling Shareholders or any of their
respective close associates (other than our Group) for financing after the Listing, taking
into consideration of our financial condition and financial resources, including cash and
bank balances, anticipated cash flows from operations, facilities and borrowings from banks
and financial institutions and estimated net proceeds from the Global Offering.
During the Track Record Period, certain of our Group’s bank loans and other
borrowings were guaranteed by our Controlling Shareholders and/or their respective close
associates. As at 30 September 2024, the amount of bank loans and other borrowings
guaranteed by our Controlling Shareholders and/or their respective close associates were
approximately RMB262.5 million, which will be released or replaced by our Company’s
corporate guarantee upon the Listing.
Save as disclosed above, as at the Latest Practicable Date, no financial assistance
including amounts due to, and loans, guarantees or securities were provided by our
Controlling Shareholders and/or their respective close associates (other than our Group) to
our Group.
RELATIONSHIP WITH CONTROLLING SHAREHOLDERS
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--- page 391 ---
Based on the above, our Directors consider that our operations are financially
independent from our Controlling Shareholders and their respective close associates (other
than our Group) after the Listing.
CORPORATE GOVERNANCE
Our Company will comply with the provisions of the Corporate Governance Code set out in
Appendix C1 to the Listing Rules, which sets out principles of good corporate governance in
relation to, among other matters, directors, the chairperson and chief executive officer, board
composition, the appointment, re-election and removal of directors, their responsibilities and
remuneration and communications with shareholders.
Our Directors recognise the importance of good corporate governance in protecting the
interests of our Shareholders. We have adopted the following corporate governance measures to
safeguard good corporate governance standards and to avoid potential conflict of interests
between our Group and our Controlling Shareholders:
(i) our Company has established internal control mechanisms to identify connected
transactions. Upon Listing, if our Company enters into connected transactions with our
Controlling Shareholders and/or their respective close associates (other than our
Group), our Company will comply with the applicable Listing Rules;
(ii) where a Shareholders meeting is to be held for considering proposed transactions in
which our Controlling Shareholders and/or their respective close associates (other than
our Group) have any material interest, our Controlling Shareholders and/or their
respective close associates (as applicable) will not vote on the resolutions and shall
not be counted in the quorum for the voting;
(iii) our Board consists of a balanced composition of executive, non-executive and
independent non-executive Directors, with not less than one-third of independent
non-executive Directors to ensure that our Board is able to effectively exercise
independent judgment in its decision-making process and provide independent advice
to our Shareholders. Our independent non-executive Directors, details of whom are set
out in “Directors, Supervisors and Senior Management”, individually and collectively
possess the requisite knowledge and experience to perform their roles. They will
review whether there is any conflict of interests between our Group and our
Controlling Shareholders and provide impartial and professional advice to protect the
interest of our minority Shareholders;
(iv) where the advice from an independent professional, such as that from a financial or
legal adviser, is reasonably requested by our Directors (including the independent
non-executive Directors), the appointment of such an independent professional will be
made at our Company’s expenses; and
RELATIONSHIP WITH CONTROLLING SHAREHOLDERS
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(v) we have appointed Red Solar Capital Limited as our compliance advisor, which will
provide advice and guidance to us in respect of compliance with the applicable Hong
Kong laws.
Based on the above, our Directors are satisfied that sufficient corporate governance
measures have been put in place to manage conflicts of interest between our Group and our
Controlling Shareholders, and to protect minority Shareholders’ rights after Listing.
RELATIONSHIP WITH CONTROLLING SHAREHOLDERS
– 382 –


--- page 393 ---
SHARE CAPITAL OF OUR COMPANY
As at the Latest Practicable Date, the registered share capital of our Company was
RMB160,684,910, comprising 160,684,910 Shares (all being Domestic Unlisted Shares) with a
nominal value of RMB1.00 each.
Immediately after the Global Offering (assuming that the Over-allotment Option is not
exercised) and the Conversion of Domestic Unlisted Shares into H Shares, the share capital of
our Company will be as follows.
Description of Shares
Number of
Shares
Approximate
%o ft h e
Enlarged
Issued Share
Capital after
the Global
Offering
Domestic Unlisted Shares in issue – –%
H Shares converted from Domestic Unlisted Shares 160,684,910 75.00%
H Shares to be issued pursuant to the Global Offering 53,562,000 25.00%
Total 214,246,910 100.00%
Immediately after the Global Offering (assuming that the Over-allotment Option is fully
exercised) and the Conversion of Domestic Unlisted Shares into H Shares, the share capital of
our Company will be as follows:
Description of Shares
Number of
Shares
Approximate
%o ft h e
Enlarged
Issued Share
Capital after
the Global
Offering
Domestic Unlisted Shares in issue – –%
H Shares converted from Domestic Unlisted Shares 160,684,910 72.29%
H Shares to be issued pursuant to the Global Offering 61,596,000 27.71%
Total 222,280,910 100.00%
SHARE CAPITAL
– 383 –


--- page 394 ---
PUBLIC FLOAT REQUIREMENTS
Rules 8.08(1)(a) and (b) of the Listing Rules provides that there must be an open market in
the securities for which listing is sought. It normally means that the minimum public float of a
listed issuer must at all times be at least 25% of the issuer’s total issued share capital.
Upon completion of the Global Offering, the Shares held by certain Shareholders who are
our core connected persons will not be counted towards the public float for the purpose of the
Listing Rules. Details of these Shareholders are set out below:
Shareholders who are our core
connected persons Number of Shares held
Shareholding
percentage of the issued
share capital of the
Company immediately
upon the completion of
the Global Offering
(1)
The Concert Parties 66,674,976 31.11%
– Mr. Gao 26,292,302 12.27%
– Ruichuanda Investment 21,410,776 9.99%
– Mr. Y uan 11,171,898 5.21%
– Mr. Zhang 7,800,000 3.64%
Jiequan Fund 21,558,441 10.07%
Xu Shihe ( ஢˰ձ )
(2) 10,870,051 5.07%
Yin Qin ( Ιා)(2) 9,060,000 4.23%
12 individuals (3) 20,980,000 9.79%
Notes:
(1) Assuming that the Over-allotment Option is not exercised.
(2) Xu Shihe ( ஢˰ձ ) is a supervisor of Hongxin Trading, and Yin Qin ( Ιා) is a director of Hongxin
Trading.
(3) Each of such individuals will be interested in less than 5% equity interest in our Company.
Save as provided above, (1) no other Shareholders will be a core connected person of the
Company upon Listing and therefore the Shares held by all the other existing Shareholders will
count towards the public float; and (2) upon the completion of the Global Offering (assuming
that the Over-allotment Option is not exercised), all the other Shareholders will collectively hold
85,103,442 Shares (representing approximately 39.72% of the issued share capital of the
Company) which will be counted towards the public float for the purpose of the Listing Rules.
SHARE CAPITAL
– 384 –


--- page 395 ---
Based on the information in the above tables, our Company will meet the public float
requirement under the Listing Rules after the completion of the Global Offering (whether or not
the Over-allotment Option is exercised in full). We will make appropriate disclosure of our
public float and confirm the sufficiency of our public float in successive annual reports after the
Listing.
OUR SHARES
The H Shares in issue following the completion of the Global Offering and the Domestic
Unlisted Shares are ordinary Shares in the share capital of our Company, and are considered as
one class of Shares. However, apart from certain qualified domestic institutional investors in the
PRC, qualified PRC investors under the Shanghai-Hong Kong stock exchanges connectivity
mechanism (“ Shanghai-Hong Kong Stock Connect ”) and the Shenzhen-Hong Kong stock
exchanges connectivity mechanism (“ Shenzhen-Hong Kong Stock Connect ”) and other persons
entitled to hold H Shares pursuant to the relevant PRC laws and regulations or upon approval or
filing with any competent authorities, including our existing Shareholders who may convert their
Domestic Unlisted Shares into H shares upon completion of filing with the CSRC, H Shares
generally may not be subscribed for by, or traded between, legal or natural persons of the PRC.
RANKING
Domestic Unlisted Shares and H Shares are regarded as one class of Shares under our
Articles of Association and will rank pari passu with each other in all other respects and, in
particular, will rank equally for all dividends or distributions declared, paid or made after the
date of this prospectus. Dividends in respect of our Shares may be paid by us in Hong Kong
dollars or Renminbi. In addition to cash, dividends may be distributed in the form of Shares.
CONVERSION OF DOMESTIC UNLISTED SHARES INTO H SHARES
On 28 June 2024, our Company has filed for a “full circulation” of all the existing
160,684,910 Domestic Unlisted Shares into H Shares on a one-for-one basis, and submitted the
application reports, authorisation documents of the shareholders of Domestic Unlisted Shares for
which an H-share “full circulation” are applied, explanation about the compliance of share
acquisition and other documents in accordance with the requirements of the CSRC.
The relevant filings of the conversion of the existing 160,684,910 Domestic Unlisted
Shares held by the existing Shareholders into H Shares on a one-for-one basis have been
completed on 20 February 2025.
Upon completion of the Global Offering, if any of our Shares are not listed or traded on
any stock exchange, the holders of our Domestic Unlisted Shares may convert their Shares into
H Shares provided such conversion shall have gone through any requisite internal approval
process and complied with the regulations prescribed by the securities regulatory authorities of
the State Council and the regulations, requirements and procedures prescribed by the overseas
stock exchange(s) and have completed the required filing with the securities regulatory
SHARE CAPITAL
– 385 –


--- page 396 ---
authorities of the State Council, including the CSRC. The listing of such converted Shares on
the Stock Exchange will also require the approval of the Stock Exchange.
Based on the procedures for the conversion of our Domestic Unlisted Shares into H Shares
as disclosed in this section, we can apply for the listing of all or any portion of our Domestic
Unlisted Shares on the Stock Exchange as H Shares in advance of any proposed conversion to
ensure that the conversion process can be completed promptly upon notice to the Stock
Exchange and delivery of Shares for entry on the H Share register. As any listing of additional
Shares after our initial listing on the Stock Exchange is ordinarily considered by the Stock
Exchange to be a purely administrative matter, it will not require such prior application for
listing at the time of our initial listing in Hong Kong.
No class Shareholder voting is required for the listing and trading of the converted Shares
on the Stock Exchange. Any application for listing of the converted Shares on the Stock
Exchange after our initial listing is subject to prior notification by way of announcement to
inform Shareholders and the public of such proposed conversion.
After all the requisite approvals have been obtained, the following procedures will need to
be completed: the relevant Domestic Unlisted Shares will be withdrawn from the Share register
and we will re-register such Shares on our H Share register maintained in Hong Kong and
instruct the H Share Registrar to issue H Share certificates. Registration on our H Share register
will be on the condition that (a) our H Share Registrar lodges with the Stock Exchange a letter
confirming the proper entry of the relevant H Shares on the H Share register of members and the
due dispatch of H Share certificates and (b) the admission of the H Shares to trade on the Stock
Exchange will comply with the Listing Rules and the General Rules of HKSCC and the HKSCC
Operational Procedures in force from time to time. Until the converted Shares are re-registered
on our H Share register, such Shares would not be listed as H Shares.
REGISTRATION OF SHARES NOT LISTED ON AN OVERSEAS STOCK EXCHANGE
According to the Guidelines for the “Full Circulation” Programme for Domestic Unlisted
Shares of H-share Listed Companies (H΅͡ሗ “ஷ ”ˏ )
announced by the CSRC and latest amended on 10 August 2024, the shareholders of Domestic
Unlisted Shares shall handle share transfer registration business in accordance with the relevant
business rules of the China Securities Depository and Clearing Corporation Limited ( ʕ਷ᗇՎ೮
ப΂ʮ̡ ) (the “ CSDCC ”). Further, H-share companies should submit the relevant
status reports to the CSRC within 15 days after the transfer registration with the CSDCC of the
shares involved in the application is completed.
SHARE CAPITAL
– 386 –


--- page 397 ---
SHAREHOLDERS’ APPROV AL FOR THE GLOBAL OFFERING
Approval from holders of the Shares is required for our Company to issue H Shares and
seek the listing of H Shares on the Stock Exchange. Our Company has obtained such approval at
the Shareholders’ general meeting held on 10 May 2024. For more details on circumstances
under which our Shareholders’ general meeting is required, please refer to “Appendix V –
Summary of the Articles of Association” to this prospectus.
LOCK-UP PERIODS
In accordance with the PRC Company Law, the shares issued prior to any public offering of
shares by a company cannot be transferred within one year from the date on which such publicly
offered shares are listed and traded on the relevant stock exchange. As such, the Shares issued
by our Company prior to the issue of H Shares will be subject to such statutory restriction on
transfer within a period of one year from the Listing Date. Our Directors, Supervisors and
members of the senior management of our Company shall declare their shareholdings in our
Company and any changes in their shareholdings. Shares transferred by our Directors,
Supervisors and such members of the senior management each year during their term of office
shall not exceed 25% of their total respective shareholdings in our Company. The Shares that the
aforementioned persons held in our Company cannot be transferred within one year from the
date on which the shares are listed and traded, nor within half a year after they leave their
positions in our Company. The Articles of Association may contain other restrictions or
conditions on the transfer of the Shares held by our Directors, Supervisors, members of senior
management of our Company and other Shareholders. For more details, please refer to
“Appendix V – Summary of the Articles of Association” to this prospectus.
CONVENING OF GENERAL MEETINGS
Please refer to “Appendix V – Summary of the Articles of Association” to this prospectus
for details of the circumstances under which general meetings of our Company are required.
SHARE CAPITAL
– 387 –


--- page 398 ---
So far as our Directors are aware, immediately following the completion of the Global
Offering without taking into account any Shares which may be issued pursuant to the exercise of
the Over-allotment Option, the following persons will have an interest or a short position in our
Shares or underlying Shares which will be required to be disclosed to our Company and the
Stock Exchange pursuant to the provisions of Division 2 and 3 of Part XV of the SFO or will be,
directly or indirectly, interested in 10% or more of the nominal value of any class of share
capital carrying rights to vote in all circumstances at general meetings of our Company or any of
our subsidiaries:
As at the
Latest Practicable Date
Immediately following the
completion of the Global
Offering (assuming the
Over-allotment Option
is not exercised) (2)
Name of Shareholder Nature of Interest
Number of
Shares (1)
Approximate
percentage
of interest
in our
Company
Number of
Shares (1),(3)
Approximate
percentage
of interest
in our
Company
(%) (%)
Mr. Gao (4) Beneficial owner,
interest in controlled
corporation, interest
of concert parties
66,674,976 41.48 66,674,976 31.11
Ruichuanda
Investment
(4)
Beneficial owner,
interest of concert
parties
66,674,976 41.48 66,674,976 31.11
Ms. Leng Y uemei
(и˜ૠɾɻ )
(“Ms. Leng ”)
(5)
Interest of spouse 66,674,976 41.48 66,674,976 31.11
Mr. Y uan(6) Beneficial owner,
interest of concert
parties
66,674,976 41.48 66,674,976 31.11
Ms. Gu Xia
(̚ᒳɾɻ )
(“Ms. Gu ”)
(7)
Interest of spouse 66,674,976 41.48 66,674,976 31.11
Mr. Zhang (8) Beneficial owner,
interest of concert
parties
66,674,976 41.48 66,674,976 31.11
SUBSTANTIAL SHAREHOLDERS
– 388 –


--- page 399 ---
As at the
Latest Practicable Date
Immediately following the
completion of the Global
Offering (assuming the
Over-allotment Option
is not exercised) (2)
Name of Shareholder Nature of Interest
Number of
Shares (1)
Approximate
percentage
of interest
in our
Company
Number of
Shares (1),(3)
Approximate
percentage
of interest
in our
Company
(%) (%)
Ms. Wang Xia
(ˮᒳɾɻ )
(“Ms. Wang ”)(9)
Interest of spouse 66,674,976 41.48 66,674,976 31.11
Jiequan Fund (10) Beneficial owner 21,558,441 13.42 21,558,441 10.07
NSM Fund (10) Interest in controlled
corporation
21,558,441 13.42 21,558,441 10.07
NSM Industry
Development (10)
Interest in controlled
corporation
21,558,441 13.42 21,558,441 10.07
China S&M (10) Interest in controlled
corporation
21,558,441 13.42 21,558,441 10.07
Suhe Digital (10) Interest in controlled
corporation
21,558,441 13.42 21,558,441 10.07
Houji PE (10) Interest in controlled
corporation
21,558,441 13.42 21,558,441 10.07
Houji Investment (10) Interest in controlled
corporation
21,558,441 13.42 21,558,441 10.07
Wang Xiaoming (10) Interest in controlled
corporation
21,558,441 13.42 21,558,441 10.07
Jiangsu Equity
Investment (10)
Interest in controlled
corporation
21,558,441 13.42 21,558,441 10.07
NSM Enterprise
Management (10)
Interest in controlled
corporation
21,558,441 13.42 21,558,441 10.07
SUBSTANTIAL SHAREHOLDERS
– 389 –


--- page 400 ---
As at the
Latest Practicable Date
Immediately following the
completion of the Global
Offering (assuming the
Over-allotment Option
is not exercised) (2)
Name of Shareholder Nature of Interest
Number of
Shares (1)
Approximate
percentage
of interest
in our
Company
Number of
Shares (1),(3)
Approximate
percentage
of interest
in our
Company
(%) (%)
Suhe Investment (10) Interest in controlled
corporation
21,558,441 13.42 21,558,441 10.07
Beijing Zhonghe (10) Interest in controlled
corporation
21,558,441 13.42 21,558,441 10.07
Jiangdu Fund (11) Beneficial owner 16,393,442 10.20 16,393,442 7.65
Cinda Capital (11) Interest in controlled
corporation
16,393,442 10.20 16,393,442 7.65
Mr. Xu Shihe
(஢˰ձ΋͛ )
(“Mr. Xu ”)
Beneficial owner 10,870,051 6.77 10,870,051 5.07
Ms. Y u Qin
(ೞɾɻ )
(“Ms. Yu ”)(12)
Interest of spouse 10,870,051 6.76 10,870,051 5.07
Notes:
1. All interests stated are long positions.
2. The calculation is based on the total number of 214,246,910 Shares in issue immediately following the
completion of the Global Offering and without taking into account any Shares which may be issued
pursuant to the exercise of the Over-allotment Option.
3. For the avoidance of doubt, both Domestic Unlisted Shares and H Shares are ordinary Shares in the share
capital of our Company, and are considered as one class of Shares.
4. As at the Latest Practicable Date, Mr. Gao directly holds 26,292,302 Shares in our Company. Ruichuanda
Investment, a company directly wholly-owned by Mr. Gao, directly holds 21,410,776 Shares in our
Company. Under the SFO, the deemed interest of Mr. Gao consists of (i) 47,703,078 Shares in our
Company held directly and beneficially, and through Ruichuanda Investment, and (ii) Shares held by other
Concert Parties as they are parties acting in concert.
SUBSTANTIAL SHAREHOLDERS
– 390 –


--- page 401 ---
5. Ms. Leng is the spouse of Mr. Gao. By virtue of the SFO, Ms. Leng is deemed to be interested in the
equity interests held by Mr. Gao.
6. As at the Latest Practicable Date, Mr. Y uan directly holds 11,171,898 Shares in our Company. Under the
SFO, the deemed interest of Mr. Y uan consists of (i) 11,171,898 Shares in our Company held directly and
beneficially, and (ii) Shares held by other Concert Parties as they are parties acting in concert.
7. Ms. Gu is the spouse of Mr. Y uan. By virtue of the SFO, Ms. Gu is deemed to be interested in the equity
interests held by Mr. Y uan.
8. As at the Latest Practicable Date, Mr. Zhang directly holds 7,800,000 Shares in our Company. Under the
SFO, the deemed interest of Mr. Zhang consists of (i) 7,800,000 Shares in our Company held directly and
beneficially, and (ii) Shares held by other Concert Parties as they are parties acting in concert.
9. Ms. Wang is the spouse of Mr. Zhang. By virtue of the SFO, Ms. Wang is deemed to be interested in the
equity interests held by Mr. Zhang.
10. Jiequan Fund is a limited partnership established in the PRC. The general partners of Jiequan Fund are
Jiangsu New Supply and Marketing Fund Management Co., Ltd.* (ʮ̡ )( “ NSM
Fund ”), which held 0.74% partnership interest in Jiequan Fund, and Jiangsu Houji Private Equity Fund
Management Co., Ltd.* (ʮ̡ )( “ Houji PE ”), which held 0.26% partnership
interest in Jiequan Fund and is also the fund manager of Jiequan Fund. The limited partner of Jiequan
Fund who contributed more than one third of the capital to the limited partnership is Nanjing New Supply
and Marketing Enterprise Management Co., Ltd.* (ʮ̡ )( “ NSM Enterprise
Management ”), holding approximately 49.60% of the partnership interest in Jiequan Fund.
NSM Fund is owned as to 51% by New Supply and Marketing Industry Development Fund Management
Co., Ltd.* (ப΂ʮ̡ )( “ NSM Industry Development ”), 34% by Jiangsu
Suhe Digital Economy Integrated Management Co., Ltd.* (ʮ̡ )( “ Suhe
Digital ”) and another shareholder holding less than one-third of shareholding in NSM Fund. NSM Industry
Development is owned as to approximately 80.2% by China Supply and Marketing Group Co., Ltd.* ( ʕ਷
ʮ̡ )( “ China S&M ”), and other 13 shareholders each holding less than one-third of
shareholding in NSM Industry Development. China S&M is wholly-owned by All China Federation of
Supply and Marketing Cooperatives* (ٟSuhe Digital is indirectly wholly-owned by
Jiangsu Federation of Supply and Marketing Cooperatives* (ٟ“() Jiangsu S&M ”).
Houji PE is owned as to 65% by Jiangsu Houji Investment Management Co., Ltd.* (ጐҳ༟၍ଣϞ
ʮ̡ )( “ Houji Investment ”) and 35% by Jiangsu Province Equity Investment Centre Co., Ltd. (޲
ʮ̡ )( “ Jiangsu Equity Investment ”). Houji Investment is in turn owned by Wang
Xiaoming (׼as to 40% and two other shareholders each holding less than one-third of its equity
interest. Jiangsu Equity Investment is ultimately wholly-owned by the Department of Finance of Jiangsu
Province (ᝂ ).
NSM Enterprise Management is owned as to approximately 40.2% by Jiangsu Suhe Investment and
Operation Group Co., Ltd.* (ʮ̡ )( “ Suhe Investment ”), 39.8% by Beijing
Zhonghe Guoneng Investment Management Partnership (Limited Partnership)* ( ̏ԯʕΥ਷ঐҳ༟၍ଣΥ
͹Άุ (Υ͹ )) (“ Beijing Zhonghe ”), and two other shareholders holding less than one-third of
shareholding in NSM Enterprise Management. Suhe Investment is directly wholly-owned by Jiangsu S&M.
Beijing Zhonghe is a limited partnership established in the PRC, with NSM Industry Development as its
general partner, holding approximately 99.3% of partnership interest in Beijing Zhonghe.
As such, under the SFO, NSM Fund, NSM Industry Development, China S&M, Suhe Digital, Houji PE,
Houji Investment, Wang Xiaoming, Jiangsu Equity Investment, NSM Enterprise Management, Suhe
Investment and Beijing Zhonghe are deemed to be interested in the equity interests held by Jiequan Fund.
SUBSTANTIAL SHAREHOLDERS
– 391 –


--- page 402 ---
11. Jiangdu Fund is owned as to approximately 99.9% by Wuhu Xinning Investment Partnership Enterprise
(Limited Partnership)* (ྐྵҳ༟ΥྫΆุ (Υྫ )) (“ Wuhu Xinning ”) and another shareholding
holding less than one-third of shareholding in Jiangdu Fund. Wuhu Xinning is a limited partnership
established in the PRC, whose general partner is Cinda Capital Management Co., Ltd.* (ࠢ
ʮ̡)( “ Cinda Capital ”), holding approximately 0.17% of the partnership interest in Wuhu Xinning. The
limited partner of Wuhu Xinning who contributed more than one third of the capital to the limited
partnership is China Cinda Asset Management Co., Ltd. (ʮ̡ ) (whose shares
are listed on the Stock Exchange (stock code: 1359)) (“ China Cinda ”), holding approximately 69.75% of
the partnership interest in Wuhu Xinning. Cinda Capital is indirectly wholly-owned by China Cinda.
As such, under the SFO, Cinda Capital is deemed to be interested in the equity interests held by Jiangdu
Fund.
12. Ms. Y u is the spouse of Mr. Xu. By virtue of the SFO, Ms. Y u is deemed to be interested in the equity
interests held by Mr. Xu.
Save as disclosed above, our Directors are not aware of any person who will, immediately
following the completion of the Global Offering and assuming that the Over-allotment Option is
not exercised, have an interest or a short position in the Shares or underlying Shares which will
be required to be disclosed to our Company and the Stock Exchange under the provisions of
Divisions 2 and 3 of Part XV of the SFO or will be, directly or indirectly, interested in 10% or
more of the nominal value of any class of share capital carrying rights to vote in all
circumstances at general meetings of any other member of our Group.
SUBSTANTIAL SHAREHOLDERS
– 392 –


--- page 403 ---
You should read this section in conjunction with our audited consolidated financial
statements as at and for the years ended 31 December 2021, 31 December 2022 and 31
December 2023 and the nine months ended 30 September 2024 as set out in the Accountants’
Report, together with the accompanying notes. The Accountants’ Report has been prepared in
accordance with IFRS. You should read the Accountants’ Report in its entirety and not merely
rely on the information contained in this section.
The following discussion and analysis contain forward-looking statements that involve
risks and uncertainties. These statements are based on assumptions and analysis made by us
in light of our experience and perception of historical trends, current conditions and expected
future developments, as well as other factors that we believe are appropriate under the
circumstances. However , whether the actual outcome and developments will meet our
expectations and predictions depends on a number of risks and uncertainties over which we
do not have control. Please also refer to the sections headed “Risk Factors” and
“Forward-looking Statements” in this prospectus.
OVERVIEW
We are a wholesaler of grains and oil headquartered in Y angzhou, with retail operations of
supermarket and convenience stores focusing on the central region of Jiangsu Province under our
brand “Ꮂ ” (Hongxinlong*). Apart from supermarkets and convenience stores, we also
operate two Malls located in Y angzhou, namely Jiangdu Mall* (۬and Hongxinlong
Mall* (ʕː ).
For our wholesale operations, we sell grains and oil, food products and other products to
resellers and other retail operators including other operators of supermarkets and convenience
stores as well as catering business operators. As at the Latest Practicable Date, we have secured
our district distribution rights with 15 suppliers in respect of products of 29 brands or series of
brands, including renowned brands of dairy products, oil and liquors, out of which six for
distribution in Jiangdu District, Y angzhou, six for distribution in Y ancheng City, one for Tinghu
Town of Y ancheng City, one for Y angzhou City and one for distribution of liquor of a renowned
brand in designated store in Jiangdu District, Y angzhou. As at the Latest Practicable Date, we
had successfully renewed the district distribution agreements with ten suppliers and we were
attending to the renewal of the district distribution agreements with five suppliers, which
continued to supply products of the authorised brands to us. Our Directors confirm that there is
no impediments to the renewal of the district distribution agreements of these five suppliers. We
also sell garment and wooden products to overseas customers and household appliances to
distributors and retailers.
FINANCIAL INFORMATION
– 393 –


--- page 404 ---
For our retail operations, we receive sales proceeds from (i) general sales to consumers at
our Retail Stores and Malls; and (ii) bulk sales to customers including corporate and government
entities. We also receive sales amounts for concessionaire sales at our Retail Stores and Malls
and charge the concessionaires certain percentage of gross sale amounts or the agreed sales
target, whichever is the higher, as commissions. Ancillary to our retail operations, we lease some
shop floor area or shop premises in our Retail Stores and Malls to other retail operators like
restaurants, hotels and pharmacies, etc and receive rental income.
Leveraging our ability to source and supply quality and fresh food ingredients, we also
operate a central kitchen to produce meals and deliver to local corporates, schools or
government entities.
For details of our business model, please refer to the section headed “Business” in this
prospectus.
For FY2021, FY2022, FY2023 and 9M2024, the revenue generated from our wholesale
operations amounted to approximately RMB525.3 million, RMB512.3 million, RMB686.5
million and RMB572.4 million, representing approximately 36.7%, 38.6%, 49.0% and 56.9%,
respectively. For the same years/period, the revenue generated from our retail operations
amounted to approximately RMB888.5 million, RMB787.9 million, RMB688.6 million and
RMB417.8 million, representing approximately 62.0%, 59.3%, 49.1% and 41.5% of our total
revenue, respectively.
In terms of revenue contribution, our retail operations was our major revenue contributor
for FY2021 and FY2022, but our wholesale operations caught up to level with our retail
operations for FY2023 and overtook our retail operations for 9M2024. Such change in revenue
mix was mainly attributable to the impact of COVID-19 pandemic and cessation of sales of
tobacco products on our retail operations and the change in food consumption behaviour of
consumer and that we gradually focused more on our wholesale operations.
Our revenue decreased from approximately RMB1,432.2 million for FY2021 to
approximately RMB1,328.7 million for FY2022 and then increased to approximately
RMB1,402.0 million for FY2023. For 9M2024, our revenue amounted to approximately
RMB1,005.8 million, representing an increase of approximately RMB18.0 million from
approximately RMB987.8 million for 9M2023. Our profit for the year increased significantly
from approximately RMB35.1 million for FY2021 to approximately RMB51.1 million for
FY2022, and further increased to approximately RMB51.6 million for FY2023. For 9M2024, our
profit for the period amounted to approximately RMB24.1 million, representing a decrease of
approximately RMB6.4 million from approximately RMB30.5 million for 9M2023, which was
mainly due to the impact of Listing expenses. For detailed analysis of our financial performance
during the Track Record Period, please refer to the paragraph headed “Principal components of
the consolidated statements of profit or loss” in this section.
FINANCIAL INFORMATION
– 394 –


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BASIS OF PRESENTATION
Our Company was established in the PRC on 19 October 2005 as a limited liability
company.
The historical financial information has been prepared in accordance with IFRSs. These
principles have been consistently applied throughout the Track Record Period except for any
new standards or interpretations that are not yet effective for the accounting period beginning on
1 January 2024. The revised and new accounting standards and interpretations issued but not yet
effective are set out in Note 31 to the Accountants’ Report.
The historical financial information has been prepared under the historical cost conversion,
except for financial assets at fair value through other comprehensive income, which have been
measured at fair value.
SIGNIFICANT FACTORS AFFECTING OUR RESULTS OF OPERATIONS AND
FINANCIAL CONDITION OF CONTINUING OPERATIONS
Our results of operations, financial condition and future prospects have been, and will
continue to be, affected by a number of factors, which primarily include the following:
We derive significant amount of revenue from Jiangsu Province
We are a supermarket and convenience store chain store operator headquartered in
Y angzhou, with retail operations focusing on the central region of Jiangsu Province under
our brand “Ꮂ ” (Hongxinlong*) and wholesale operations. As at the Latest Practicable
Date, we operated 51 supermarkets and 109 convenience stores in Jiangsu Province, out of
which 49 supermarkets and 108 convenience stores are located in Y angzhou in Jiangsu
Province, and two supermarkets and one convenience store are located in Taizhou. During
the Track Record Period, a significant amount of our revenue was generated from Jiangsu
Province, particularly Y angzhou. Our profitability thus is dependent on the sustainability of
the economic vigorousness and growth of Jiangsu Province. Since our main income source
is derived from Jiangsu Province, our operation results will highly depend on the social and
economic conditions and whether the region can continue to sustain the historical growth
rate. Our revenue and profitability might be adversely affected by any unfavourable change
in the business environment of Jiangsu province, such as change in government policies,
natural disasters, occurrence of epidemics, and imposition of new legal restrictions, which
may lead to a decline in our sales or increase in our operating costs.
Product mix and pricing
Through our wholesale and retail operations, we offer a full range of merchandise
products to our customers. We strive to provide the best value for money for our customers
and respond to the needs and demands of our customers by optimising the range of
products we offer. Changes in the mix of products we sell could impact our sales and
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operating profit as the gross profit margins may vary across different categories of
products. Our Directors are of the view that such margins may vary for a number of
reasons, including supply and demand factors, inflation, competition and purchase cost. Our
gross profit margin is affected by the adjustments to product mix that we make to meet the
changing needs of our customers. For our pricing policy, please refer to the paragraph
headed “Business – Pricing policy” in this prospectus. Based on the above factors, any
adjustment to prices of our products will directly impact our revenue, profitability and
results of operations.
Seasonality
The performance of our wholesale and retail operations are typically affected by
seasonality such as strong sales usually recorded during long public holidays such as
Chinese New Y ear. We have experienced and expect to continue to be affected by
seasonality and the associated holiday shopping habits and patterns commonly seen in the
PRC. In view of the seasonality factors, we usually review and adjust our inventory level in
advance in order to accommodate the anticipated increase in demand and needs of our
products to avoid supply shortage and our loss of profits.
Operational expenses and costs
Our operating costs of Retail Stores and Malls generally include, among others, staff
costs, rental expenses, utilities, maintenance and advertising expenses. These costs and
expenses fluctuate and differ from shop to shop depending on a variety of factors and are
affected by inflation. Inflation increases our operating costs, which in turn may adversely
affect our results of operations. In addition, the increase in fixed operating costs arising
from the opening of new Retail Stores could have a material adverse effect on our
operating margin. In addition, we may carry out redecorations and renovations of our Retail
Stores and Malls from time to time, which we believe are important in maintaining and
enhancing the image of our brand and in attracting customers. In our experience, Retail
Stores and Malls after redecorations and renovations generally experience increases in
turnover. However, during redecorations and renovations, we may incur significant
expenses and may also experience disruptions to our normal operations which may affect
our turnover.
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MATERIAL ACCOUNTING POLICIES
We have identified certain accounting policies which are material to the preparation of the
financial information in accordance with IFRS. The determination of these accounting policies is
fundamental to our financial positions and results of operations, and requires us to make
significant judgments and estimation, further information on which is set forth in the paragraphs
headed “Accounting judgments and estimates” in this section. The following sets forth certain
material accounting policies extracted from the Accountants’ Report, please refer to Note 2 to
the Accountants’ Report set out in Appendix I to this prospectus for full set of our material
accounting policies.
Revenue
Income is classified by our Group as revenue when it arises from the sale of goods, the
provision of services or the use by others of our assets under leases in the ordinary course of our
business.
Revenue is recognised when control over a product or service is transferred to the
customer, or the lessee has the right to use the asset, at the amount of promised consideration to
which our 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.
Further details of our revenue recognition policies are as follows:
(i) Sale of goods from general sales, bulk sales and wholesales
For the sale of goods from general sales, revenue is recognised when control passes to
the retail customers, being the point the retail customers purchase the goods at the Retail
Stores and Malls. Payment of transaction price is due immediately at the point the retail
customers purchase the goods. The payment is usually settled in cash or by means of
electronic payment.
Revenue from bulk sales of goods to retail customers is recognised when control of
products has transferred, being when the products are delivered and there is no unfulfilled
obligation that could affect them to accept the products. The retail customers make
payments in advance of products delivery or according to the agreed credit terms normally
for a period of 0–90 days from the invoice date. Collected payments before product
delivery is recognised as contract liabilities.
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Our Retail Stores and Malls operate customer loyalty programs where points can be
earned by customers, which can be used to reduce the cost of future purchases. Our Group
allocates a portion of the consideration received to loyalty points based on the estimated
relative stand-alone selling prices. The amount allocated to the loyalty program is deferred,
and is recognised as revenue when loyalty points are redeemed or expired. The deferred
revenue is included in contract liabilities.
Revenue from sales of goods to wholesale customers is recognised when control over
a product or service is transferred to the customer at the amount of promised consideration
to which our Group is expected to be entitled, excluding those amounts collected on behalf
of third parties such as value added tax or other sales taxes. The wholesale customers make
payments upon products delivery or according to the agreed credit terms normally for a
period of 0–90 days from the invoice date. Collected payments before product delivery is
recognised as contract liabilities.
Our Group is the principal for the sales of goods to retail customers and wholesale
customers in respect of grains and oil, food products and other miscellaneous products and
recognises revenue on a gross basis. In determining whether our Group acts as a principal
or as an agent, it considers whether it obtains control of the products before they are
transferred to the customers. Control refers to our ability to direct the use of and obtain
substantially all of the remaining benefits from the products.
(ii) Commission income from concessionaire sales
Our Group grants concessionaires the right to operate business within our Retail
Stores and Malls under concession. Our Group recognises commission income from
concessionaire sales upon sales of goods by concessionaires. The concessionaires will pay
to our Group commission income at the higher of the minimum guaranteed commission and
certain percentage of their sales in accordance with the terms of contracts. Our Group
receives the entire sales proceeds from customers on behalf of the concessionaires and
reimburses the sales proceeds to the concessionaires after deducting our share of the
commission income.
(iii) Commission income from supply of goods
Our Group charges commission fees to customers from supply of goods, where our
Group generally is acting as an agent and does not control the specified products provided
before they are transferred to the customers. Our Group recognises revenue in the amount
of any fee or commission to which it expects to be entitled in exchange for arranging for
the specified products to be provided. The commission income from supply of goods is
recognised on a net basis at the point of acceptance of products.
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(iv) Supply and sales of meals
Our Group operates a central kitchen to produce meals and deliver to customers like
local corporates or schools. Revenue is recognised when control passes to the customers,
being the point when the meals have been delivered. The customers make payments upon
the meal delivery or according to the agreed credit terms normally for a period of 0–90
days from the invoice date. Collected payments before product delivery is recognised as
contract liabilities.
(v) Rental income from operating lease
Rental income receivable under operating leases is recognised in profit or loss in
equal instalments over the periods covered by the lease term, except where an alternative
basis is more representative of the pattern of benefits to be derived from the use of the
leased asset. Lease incentives granted are recognised in profit or loss as an integral part of
the aggregate net lease payments receivable.
Property, plant and equipment
The following items of property, plant and equipment are stated at cost, which includes
capitalised borrowing costs, less accumulated depreciation and any accumulated impairment
losses:
– right-of-use assets arising from leases over freehold or leasehold properties where our
Group is not the registered owner of the property interest; and
– items of plant and equipment, including right-of-use assets arising from leases of
underlying plant and equipment.
If significant parts of an item of property, plant and equipment have different useful lives,
then they are accounted for as separate items (major components).
Any gain or loss on disposal of an item of property, plant and equipment is recognised in
profit or loss.
Depreciation is calculated to write off the cost or valuation of items of property, plant and
equipment less their estimated residual values, if any, using the straight-line method over their
estimated useful lives, and is generally recognised in profit or loss.
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The estimated useful lives for the current and comparative periods are as follows:
Estimated useful life
Plant and buildings 20 – 30 years
Machinery and equipment 5 – 10 years
Office and other equipment 3 – 10 years
Motor vehicles 5 years
Leasehold improvements The shorter of the unexpired term of lease and the
estimated useful lives
Right-of-use assets Over the unexpired term of lease
Depreciation methods, useful lives and residual values are reviewed at each reporting date
and adjusted if appropriate.
Construction in progress represents properties under construction and machinery and
equipment pending installation and is stated at cost less impairment losses. Cost comprises the
purchase costs of the asset and the related construction and installation costs.
Construction in progress is transferred to property, plant and equipment when the asset is
substantially ready for its intended use and depreciation will be provided at the appropriate rates
in accordance with the depreciation polices specified above.
No depreciation is provided in respect of construction in progress.
Leased assets
At inception of a contract, our Group assesses whether the contract is, or contains, a lease.
This is the case if the contract conveys the right to control the use of an identified asset for a
period of time in exchange for consideration. Control is conveyed where the customer has both
the right to direct the use of the identified asset and to obtain substantially all of the economic
benefits from that use.
(i) As a lessee
Where the contract contains lease component(s) and non-lease component(s), our Group has
elected not to separate non-lease components and accounts for each lease component and any
associated non-lease components as a single lease component for all leases.
At the lease commencement date, our Group recognises a right-of-use asset and a lease
liability, except for leases that have a short lease term of 12 months or less, and leases of
low-value items such as laptops and office furniture. When our Group enters into a lease in
respect of a low-value item, our Group decides whether to capitalise the lease on a
lease-by-lease basis. If not capitalised, the associated lease payments are recognised in profit or
loss on a systematic basis over the lease term.
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Where the lease is capitalised, the lease liability is initially recognised at the present value
of the lease payments payable over the lease term, discounted using the interest rate implicit in
the lease or, if that rate cannot be readily determined, using a relevant incremental borrowing
rate. After initial recognition, the lease liability is measured at amortised cost and interest
expense is recognised using the effective interest method. V ariable lease payments that do not
depend on an index or rate are not included in the measurement of the lease liability, and are
charged to profit or loss as incurred.
The right-of-use asset recognised when a lease is capitalised is initially measured at cost,
which comprises the initial amount of the lease liability adjusted for any lease payments made at
or before the commencement date, plus any initial direct costs incurred and an estimate of costs
to dismantle and remove the underlying asset or to restore the underlying asset or the site on
which it is located, less any lease incentives received. The right-of-use asset is subsequently
stated at cost less accumulated depreciation and impairment losses.
Refundable rental deposits are accounted for separately from the right-of-use assets in
accordance with the accounting policy applicable to investments in non-equity securities carried
at amortised cost. Any excess of the nominal value over the initial fair value of the deposits is
accounted for as additional lease payments made and is included in the cost of right-of-use
assets.
The lease liability is remeasured when there is a change in future lease payments arising
from a change in an index or rate, if there is a change in our estimate of the amount expected to
be payable under a residual value guarantee, or if our Group changes its assessment of whether
it will exercise a purchase, extension or termination option. When the lease liability is
remeasured in this way, a corresponding adjustment is made to the carrying amount of the
right-of-use asset, or is recorded in profit or loss if the carrying amount of the right-of-use asset
has been reduced to zero.
The lease liability is also remeasured when there is a lease modification, which means a
change in the scope of a lease or the consideration for a lease that is not originally provided for
in the lease contract, if such modification is not accounted for as a separate lease. In this case,
the lease liability is remeasured based on the revised lease payments and lease term using a
revised discount rate at the effective date of the modification. The only exceptions are rent
concessions that occurred as a direct consequence of the COVID-19 pandemic and met the
conditions set out in paragraph 46B of IFRS 16 Leases. In such cases, our Group has taken
advantage of the practical expedient not to assess whether the rent concessions are lease
modifications, and recognised the change in consideration as negative variable lease payments in
profit or loss in the period in which the event or condition that triggers the rent concessions
occurred.
In the consolidated statement of financial position, the current portion of long-term lease
liabilities is determined as the present value of contractual payments that are due to be settled
within twelve months after the reporting period.
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(ii) As a lessor
Our Group determines at lease inception whether each lease is a finance lease or an
operating lease. A lease is classified as a finance lease if it transfers substantially all the risks
and rewards incidental to the ownership of an underlying assets to the lessee. Otherwise, the
lease is classified as an operating lease.
When a contract contains lease and non-lease components, our Group allocates the
consideration in the contract to each component on a relative stand-alone selling price basis.
Investments in securities
Investments in securities are recognised/derecognised on the date our Group commits to
purchase/sell the investment. The investments are initially stated at fair value plus directly
attributable transaction costs, except for those investments measured at fair value through profit
or loss (“ FVPL ”) for which transaction costs are recognised directly in profit or loss. These
investments are subsequently accounted for as follows, depending on their classification.
(i) Non-equity investments
Non-equity investments are classified into one of the following measurement categories:
– amortised cost, if the investment is held for the collection of contractual cash flows
which represent solely payments of principal and interest. Expected credit losses,
interest income calculated using the effective interest method, foreign exchange gains
and losses are recognised in profit or loss. Any gain or loss on derecognition is
recognised in profit or loss.
– fair value through other comprehensive income (“ FVOCI ”) – recycling, if the
contractual cash flows of the investment comprise solely payments of principal and
interest and the investment is held within a business model whose objective is
achieved by both the collection of contractual cash flows and sale. Expected credit
losses, interest income (calculated using the effective interest method) and foreign
exchange gains and losses are recognised in profit or loss and computed in the same
manner as if the financial asset was measured at amortised cost. The difference
between the fair value and the amortised cost is recognised in other comprehensive
income. When the investment is derecognised, the amount accumulated in other
comprehensive income is recycled from equity to profit or loss.
– FVPL if the investment does not meet the criteria for being measured at amortised
cost or FVOCI (recycling). Changes in the fair value of the investment (including
interest) are recognised in profit or loss.
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(ii) Equity investments
An investment in equity securities is classified as FVPL, unless the investment is not held
for trading purposes and on initial recognition our Group makes an irrevocable election to
designate the investment at FVOCI (non-recycling) such that subsequent changes in fair value
are recognised in OCI. Such elections are made on an instrument-by-instrument basis, but may
only be made if the investment meets the definition of equity from the issuer’s perspective. If
such election is made for a particular investment, at the time of disposal, the amount
accumulated in the fair value reserve (non-recycling) is transferred to retained earnings and not
recycled through profit or loss. Dividends from an investment in equity securities, irrespective
of whether classified as at FVPL or FVOCI, are recognised in profit or loss as other income.
Inventories
Inventories are measured at the lower of cost and net realisable value.
Cost is calculated using the first-in first-out method formula and comprises all costs of
purchase, costs of conversion and other costs incurred in bringing the inventories to their present
location and condition.
Net realisable value is the estimated selling price in the ordinary course of business less the
estimated costs of completion and the estimated costs necessary to make the sale.
Trade and other receivables
A receivable is recognised when our Group has an unconditional right to receive
consideration and only the passage of time is required before payment of that consideration is
due.
Trade receivables that do not contain a significant financing component are initially
measured at their transaction price. Trade receivables that contain a significant financing
component and other receivables are initially measured at fair value plus transaction costs. All
receivables are subsequently stated at amortised cost.
Credit losses and impairment of assets
(i) Credit losses from financial instruments
Our Group recognises a loss allowance for expected credit losses (“ ECLs ”) on financial
assets measured at amortised cost (including cash and cash equivalents, trade receivables and
other receivables).
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Measurement of ECLs
ECLs are a probability-weighted estimate of credit losses. Generally, credit losses are
measured as the present value of all expected cash shortfalls between the contractual and
expected amounts.
The expected cash shortfalls are discounted using the following discount rates where
the effect of discounting is material:
– fixed-rate financial assets, trade and other receivables and contract assets:
effective interest rate determined at initial recognition or an approximation
thereof; and
– variable-rate financial assets: current effective interest rate.
The maximum period considered when estimating ECLs is the maximum contractual
period over which our Group is exposed to credit risk.
ECLs are measured on either of the following bases:
– 12-month ECLs: these are the portion of ECLs that result from default events
that are possible within the 12 months after the reporting date (or a shorter
period if the expected life of the instrument is less than 12 months); and
– lifetime ECLs: these are the ECLs that result from all possible default events
over the expected lives of the items to which the ECL model applies.
Our Group measures loss allowances at an amount equal to lifetime ECLs, except for
the following, which are measured at 12-months ECLs:
– financial instruments that are determined to have low credit risk at the reporting
date; and
– other financial instruments (including loan commitments issued) for which credit
risk (i.e. the risk of default occurring over the expected life of the financial
instrument) has not increased significantly since initial recognition.
Loss allowances for trade receivables and contract assets are always measured at an
amount equal to lifetime ECLs.
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Significant increases in credit risk
When determining whether the credit risk of a financial instrument has increased
significantly since initial recognition and when measuring ECLs, our Group considers
reasonable and supportable information that is relevant and available without undue cost or
effort. This includes both quantitative and qualitative information and analysis, based on
our historical experience and informed credit assessment, that includes forward-looking
information.
Our Group assumes that the credit risk on a financial asset has increased significantly
if it is more than 3 months past due.
Our Group considers a financial asset to be in default when:
– the debtor is unlikely to pay its credit obligations to our Group in full, without
recourse by our Group to actions such as realising security (if any is held); or
– the financial asset is 12 months past due.
ECLs are remeasured at each reporting date to reflect changes in the financial
instrument’s credit risk since initial recognition. Any change in the ECL amount is
recognised as an impairment gain or loss in profit or loss. Our Group recognises an
impairment gain or loss for all financial instruments with a corresponding adjustment to
their carrying amount through a loss allowance account.
Credit-impaired financial assets
At each reporting date, our Group assesses whether a financial asset is
credit-impaired. A financial asset is credit-impaired when one or more events that have a
detrimental impact on the estimated future cash flows of the financial asset have occurred.
Evidence that a financial asset is credit-impaired includes the following observable
events:
– significant financial difficulties of the debtor;
– a breach of contract, such as a default or being more than 12 months past due;
– the restructuring of a loan or advance by our Group on terms that our Group
would not consider otherwise;
– it is probable that the debtor will enter bankruptcy or other financial
reorganisation; or
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– the disappearance of an active market for a security because of financial
difficulties of the issuer.
Write-off policy
The gross carrying amount of a financial asset, lease receivable or contract asset is
written off to the extent that there is no realistic prospect of recovery. This is generally the
case when our Group otherwise determines that the debtor does not have assets or sources
of income that could generate sufficient cash flows to repay the amounts subject to the
write-off. Subsequent recoveries of an asset that was previously written off are recognised
as a reversal of impairment in profit or loss in the period in which the recovery occurs.
(ii) Impairment of other non-current assets
At each reporting date, our Group reviews the carrying amounts of its non-financial assets
(other than property carried at revalued amounts, investment property, inventories and other
contract costs, contract assets and deferred tax assets) to determine whether there is any
indication of impairment. If any such indication exists, then the asset’s recoverable amount is
estimated.
For impairment testing, assets are grouped together into the smallest group of assets that
generates cash inflows from continuing use that are largely independent of the cash inflows of
other assets or cash-generating units (“ CGUs ”).
The recoverable amount of an asset or CGU is the greater of its value in use and its fair
value less costs of disposal. V alue in use based on the estimated future cash flows, discounted to
their present value using a pre-tax discount rate that reflects current market assessments of the
time value of money and the risks specific to the asset or CGU.
An impairment loss is recognised if the carrying amount of an asset or CGU exceeds its
recoverable amount.
Impairment losses are recognised in profit or loss. They are allocated first to reduce the
carrying amount of any goodwill allocated to the CGU, and then to reduce the carrying amounts
of the other assets in the CGU on a pro rata basis.
For other assets, an impairment loss is reversed only to the extent that the resulting
carrying amount does not exceed the carrying amount that would have been determined, net of
depreciation or amortisation, if no impairment loss had been recognised.
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Contract liabilities
A contract liability is recognised when the customer pays non-refundable consideration
before our Group recognises the related revenue. A contract liability is also recognised if our
Group has an unconditional right to receive non-refundable consideration before our Group
recognises the related revenue. In such latter cases, a corresponding receivable is also
recognised.
Trade and other payables (other than refund liabilities)
Trade and other payables are initially recognised at fair value. Subsequent to initial
recognition, trade and other payables are stated at amortised cost unless the effect of discounting
would be immaterial, in which case they are stated at invoice amounts.
ACCOUNTING JUDGMENTS AND ESTIMATES
The preparation of our financial information requires our management to make judgments,
estimates and assumptions that affect the reported amounts of revenue, expenses, assets and
liabilities, and the disclosure of contingent liabilities, at the end of each reporting period.
However, uncertainty about these assumptions and estimates could result in outcomes that could
require a material adjustment to the carrying amounts of the assets or liabilities affected in the
future. For details of our accounting judgements and estimates, please refer to Note 3 to the
Accountants’ Report set out in Appendix I to this prospectus.
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RESULTS OF OPERATIONS
The consolidated statements of profit or loss during the Track Record Period are
summarised below, which are extracted from the Accountants’ Report:
FY2021 FY2022 FY2023 9M2023 9M2024
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(unaudited)
Revenue 1,432,193 1,328,685 1,401,972 987,833 1,005,810
Cost of sales (1,149,508) (1,026,547) (1,100,596) (777,952) (797,376)
Gross profit 282,685 302,138 301,376 209,881 208,434
Other revenue 3,875 5,982 5,355 4,576 4,884
Other net gain 18 225 1,244 2,919 1,116
Selling and distribution costs (158,759) (165,357) (162,119) (115,482) (115,961)
Administrative and other
operating expenses (50,544) (51,983) (52,614) (38,019) (41,064)
Impairment loss on trade and
other receivables (10,148) (1,387) (3,214) (7,031) (6,133)
Profit from operations 67,127 89,618 90,028 56,844 51,276
Finance income 228 480 1,573 944 1,396
Finance costs (18,954) (21,611) (21,543) (15,992) (17,570)
Net finance costs (18,726) (21,131) (19,970) (15,048) (16,174)
Share of losses of an
associate (705) ––––
Profit before taxation 47,696 68,487 70,058 41,796 35,102
Income tax (12,616) (17,422) (18,456) (11,268) (11,024)
Profit for the year/period 35,080 51,065 51,602 30,528 24,078
Non-IFRS financial measure
To supplement our consolidated financial statements which are presented in accordance
with IFRSs, we also presented the adjusted net profit (Non-IFRS measure) and adjusted net
profit margin (Non-IFRS measure) as additional financial measures, which are not required by,
or presented in accordance with IFRSs. We believe that the presentation of non-IFRS financial
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measures when shown in conjunction with the corresponding IFRS financial measures provides
useful information to potential investors and management in facilitating a comparison of our
operating performance from period to period. Such non-IFRS financial measures allow investors
to consider matrices used by our management in evaluating our performance.
The use of non-IFRS financial measures has limitations as an analytical tool, and investors
should not consider these in isolation from, or as a substitute for, or superior to, analysis of our
results of operations or financial conditions as reported in accordance with IFRSs. In addition,
the non-IFRS financial measures may be defined differently from similar terms used by other
companies.
We adjusted for certain items as our non-IFRS financial measures, in order to provide
potential investors with an overall and fair understanding of our operating results and financial
performance, especially in making period-to-period comparisons of, and assessing the profile of,
our operating and financial performance. Listing expenses are mainly expenses related to the
Listing and are added back because they were incurred only for the purposes of the Listing.
Adjusted net profit (Non-IFRS measure)
We defined adjusted net profit (Non-IFRS measure) as net profit for the year adjusted by
adding back Listing expenses. The table below sets forth the adjusted net profit (Non-IFRS
measure) and the adjusted net profit margin (Non-IFRS measure) for each respective year/period
during the Track Record Period:
FY2021 FY2022 FY2023 9M2023 9M2024
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(unaudited)
Profit for the year/period 35,080 51,065 51,602 30,528 24,078
Adjusted:
Listing expenses – 1,747 3,449 3,125 7,276
Adjusted net profit
(Non-IFRS measure) for
the year/period 35,080 52,812 55,051 33,653 31,354
Adjusted net profit margin
(Non-IFRS measure) 2.4% 4.0% 3.9% 3.4% 3.1%
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PRINCIPAL COMPONENTS OF THE CONSOLIDATED STATEMENTS OF PROFIT OR
LOSS
Revenue
During the Track Record Period, we generated revenue from our wholesale operations,
retail operations, supply and sales of meals and rental income from operating lease. In respect of
our wholesale operations, our revenue include wholesales (which is recognised on gross basis)
and commission income from sales of goods (which is recognised on net basis). In respect of our
retail operations, our revenue include general sales and bulk sales (which are recognised on
gross basis) and commission income from concessionaire sales (which is recognised on net
basis).
The following table sets forth the breakdown of our total revenue by operations for the
years/periods indicated:
FY2021 FY2022 FY2023 9M2023 9M2024
RMB’000 % RMB’000 % RMB’000 % RMB’000 % RMB’000 %
(unaudited)
Wholesale operations:
– Sale of goods
 Wholesales
(Note 1) 515,654 36.0 495,056 37.3 679,641 48.5 434,820 44.0 568,338 56.5
– Commission income
from sales and supply
of goods 9,639 0.7 17,283 1.3 6,860 0.5 6,405 0.6 4,073 0.4
Sub-total 525,293 36.7 512,339 38.6 686,501 49.0 441,225 44.6 572,411 56.9
Retail operations:
– Sale of goods
(Note 2)
 General sales 751,615 52.5 613,209 46.2 616,813 44.0 472,480 47.8 362,049 36.0
 Bulk sales 104,176 7.2 143,930 10.8 38,883 2.8 30,145 3.1 34,963 3.5
– Commission income
from concessionaire
sales 32,718 2.3 30,748 2.3 32,894 2.3 21,795 2.2 20,752 2.1
Sub-total 888,509 62.0 787,887 59.3 688,590 49.1 524,420 53.1 417,764 41.6
Rental income from
operating lease 10,668 0.8 10,573 0.8 11,566 0.8 9,585 1.0 10,910 1.1
Supply and sales of meals 7,723 0.5 17,886 1.3 15,315 1.1 12,603 1.3 4,725 0.4
Total revenue 1,432,193 100 1,328,685 100 1,401,972 100 987,833 100 1,005,810 100
FINANCIAL INFORMATION
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Notes:
1. Wholesales include the sale of grains and oil, food products and other products.
2. The revenue generated from our mini programmes and e-commerce platforms for Retail Stores and Malls
amounted to approximately RMB14.6 million, RMB6.6 million, RMB22.7 million and RMB22.8 million
for FY2021, FY2022, FY2023 and 9M2024, respectively.
3. Included in our total revenue was the insignificant amount of approximately RMB7.1 million, RMB1.3
million, RMB0.3 million and nil for FY2021, FY2022, FY2023 and 9M2024, respectively, attributable to
our sales to our franchisees and franchise fee. We have terminated the franchise scheme in 2023.
In terms of revenue by operations, during the Track Record Period our total revenue was
substantially generated from our wholesale operations and retail operations.
The following table sets forth the breakdown of our revenue from sales of goods which was
recognised on gross basis for the years/periods indicated:
FY2021 FY2022 FY2023 9M2023 9M2024
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(unaudited)
Wholesale Operations
Wholesales:
Non-food products 48,257 71,379 56,377 29,029 39,064
Food 467,397 423,677 623,264 405,791 529,274
Oil 348,887 310,971 436,086 293,345 387,592
Grains 15,282 24,697 33,425 15,662 39,202
Alcoholic beverages 56,550 50,237 97,661 51,976 60,063
Milk 42,976 33,111 34,314 26,374 26,900
Others 3,702 4,661 21,778 18,434 15,517
Sub-total 515,654 495,056 679,641 434,820 568,338
Retail Operations
Retail Stores and bulk
sales:
Food
(Note 1) 525,228 491,901 384,236 297,524 253,733
Non-food products 75,735 64,945 81,813 58,177 46,874
Tobacco products 67,708 99,158 54,788 54,788 –
Discount and coupon
deduction (4,455) (4,316) (4,514) (3,566) (3,406)
664,216 651,688 516,323 406,923 297,201
FINANCIAL INFORMATION
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FY2021 FY2022 FY2023 9M2023 9M2024
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(unaudited)
Malls:
Electronic appliances 49,463 35,422 72,928 45,516 49,579
Fashion, apparel and
children’s wear 57,602 16,904 16,104 11,146 11,430
Gold, jewellery and
accessories 61,619 43,751 43,732 34,226 35,357
Others
(Note 2) 25,501 10,874 9,652 6,535 5,331
Discount and coupon
deduction (2,610) (1,500) (3,043) (1,721) (1,886)
191,575 105,451 139,373 95,702 99,811
Sub-total 855,791 757,139 655,696 502,625 397,012
Aggregate revenue from
wholesales, general sales
and bulk sales 1,371,445 1,252,195 1,335,337 937,445 965,350
Notes:
1. Food under our retail operations mainly include raw and fresh food, grains, oil and non-staple food.
2 Others include cosmetics, beauty products, stationeries and other groceries.
During the Track Record Period, all of our revenue was generated in the PRC.
Revenue from wholesale operations
Our revenue from wholesale operations mainly comprise revenue from sales to resellers and
other retail operators. Our commission income from supply of goods to our wholesale customers
only constituted approximately 0.7%, 1.3%, 0.5%, 0.6% and 0.4% of our total revenue for
FY2021, FY2022, FY2023, 9M2023 and 9M2024, respectively.
Our revenue from wholesales decreased slightly from approximately RMB515.7 million for
FY2021 to approximately RMB495.1 million FY2022, which was mainly due to (i) the decrease
in revenue contributed by Suzhou Qingsui Food Co. Ltd.* (ʮ̡ ), being our
largest customer for FY2021 but ceased to be our customer for FY2022 as Suzhou Qingsui Food
Co., Ltd. has decided to collaborate with other suppliers that it believed could offer a more
competitive price advantage; offset by (ii) the increase in revenue attributable to Jiangsu
Fukangyuan Grain and Oil Co., Ltd.* (ʮ̡ ), being our largest customer for
FINANCIAL INFORMATION
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FY2022; and (iii) the revenue contributed by Wuxi Kaifu Supply Chain Management Co., Ltd.*
(ʮ̡ ), being our second largest customer for FY2022.
Our revenue from wholesales increased significantly from approximately RMB495.1
million for FY2022 to approximately RMB679.6 million for FY2023, and further increased from
approximately RMB434.8 million for 9M2023 to approximately RMB568.3 million for 9M2024.
Such increases were mainly contributed by the increase in revenue from sales of food.
Our revenue from sales of food under our wholesale operations increased significantly from
approximately RMB423.7 million for FY2022 to approximately RMB623.3 million for FY2023
and also increased significantly from approximately RMB405.8 million for 9M2023 to
approximately RMB529.3 million for 9M2024. As advised by the Industry Consultant, the
increase in wholesale of food in the PRC in 2023 and 2024, particularly as a result of recovery
from COVID-19 pandemic, was driven by a combination of economic recovery and pent-up
demand. In particular, as COVID-19 restrictions were lifted, businesses resumed normal
operations, including resellers, retail operators such as operators of supermarkets and
convenience stores as well as catering business operators. This resurgence in economic activity
led to increased demand for wholesale food supplies as food service establishments sought to
replenish stock. In addition, during the lockdowns, businesses in the PRC tended to postpone
many purchases particularly in the food sector. As restrictions eased, there was a tendency to
purchase food supplies to meet the needs of retail operators and catering business operators,
thereby driving up wholesale sales. Furthermore, our increase in revenue from sales of food
under our wholesale operations for 9M2024 as a result a change in food consumption behaviour
which in turn led to an increase in the demand for food ingredients (such as grains and oil) at
the wholesale level. As advised by the Industry Consultant, in 2024, there has been a notable
increase in the number of individuals dining out at restaurants, which was mainly driven by
several key factors including, (1) the gradual recovery of the general economy in Y angzhou and
the PRC has resulted in increased disposable income for consumers, enabling greater spending
on dining out; (2) restaurants are proactively seeking to attract customers in order to recover
from business losses incurred during the lockdowns; and (3) many people appreciate the social
aspect of dining out, which fosters gatherings with friends and family in a lively atmosphere. As
a result of the increasing number of individuals dining out at restaurants, consumers have
reduced their spending on food purchased from supermarkets at the retail level, while at the
same time the demand for food ingredients (such as grains and oil) at the wholesale level
increased.
Revenue from retail operations
Our revenue from retail operations decreased from approximately RMB888.5 million for
FY2021 to approximately RMB787.9 million for FY2022. Such decrease was mainly driven by
the decrease in revenue from general sales from approximately RMB751.6 million for FY2021 to
approximately RMB613.2 million for FY2022, and was offset by the increase in revenue from
bulk sales from approximately RMB104.2 million for FY2021 to approximately RMB143.9
million for FY2022.
FINANCIAL INFORMATION
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Our revenue from retail operations decreased from approximately RMB787.9 million for
FY2022 to approximately RMB688.6 million for FY2023. Such decrease was mainly driven by
the decrease in revenue from bulk sales from approximately RMB143.9 million for FY2022 to
approximately RMB38.9 million for FY2023, while our revenue from general sales remained
stable at approximately RMB613.2 million and RMB616.8 million for FY2022 and FY2023,
respectively.
Our revenue from retail operations decreased from approximately RMB524.4 million for
9M2023 to approximately RMB417.8 million for 9M2024. Such decrease was mainly driven by
the decrease in revenue from general sales from approximately RMB472.5 million for 9M2023
to approximately RMB362.0 million for 9M2024, while our revenue from bulk sales increased
from approximately RMB30.1 million for 9M2023 to approximately RMB35.0 million for
9M2024.
In respect of our retail operations, food was the most significant type of goods in terms of
revenue contribution during the Track Record Period. For FY2021, FY2022, FY2023 and
9M2024, the percentage of revenue from sales of food to revenue from Retail Stores and bulk
sales was approximately 79.1%, 75.5%, 74.4% and 85.4%, respectively. The increase in such
percentage for 9M2024 was mainly driven by the nil revenue contribution from sales of tobacco
products for 9M2024 as a result of our cessation of sales of tobacco products. On 31 December
2023, our Group ceased the sales of tobacco products. For details of such cessation, please refer
to the paragraphs headed “History and Development – Cessation of sales of tobacco products
and disposal of tobacco product inventory assets” and “Business – Our product portfolio –
Cessation of sales of tobacco products and disposal of tobacco product inventory assets” in this
prospectus.
Our revenue from sales of food under our retail operations decreased from approximately
RMB525.2 million for FY2021 to approximately RMB491.9 million for FY2022, which was
mainly driven by the negative impact brought by the epidemic measures/lockdown for
COVID-19 in Y angzhou during 2022 in which our Retail Stores were required to shorten our
operating hours. Our revenue from sales of food under our retail operations further decreased to
approximately RMB384.2 million for FY2023, which was mainly driven by the negative impact
of change in shopping habits on our bulk sales following the restrictions were lifted with
COVID-19 pandemic largely behind in the PRC. For 9M2024, our revenue from sales of food
under our retail operations decreased to approximately RMB253.7 million from approximately
RMB297.5 million for 9M2023. Such decrease was mainly driven by the abovementioned change
in food consumption behaviour of consumer.
Driven by the decrease in revenue from sales of food and our cessation of sales of tobacco
products as disclosed above, our revenue from sales of goods (which was recognised on gross
basis) under our retail operations decreased from approximately RMB502.6 million for 9M2023
to approximately RMB397.0 million for 9M2024.
FINANCIAL INFORMATION
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(i) General sales
The following table sets forth the breakdown of our revenue from general sales by Retail
Stores and Malls for the years/periods indicated:
FY2021 FY2022 FY2023 9M2023 9M2024
RMB’000 % RMB’000 % RMB’000 % RMB’000 % RMB’000 %
(unaudited)
Retail Stores: 560,040 74.5 507,758 82.8 477,440 77.4 376,778 79.8 262,238 72.4
– Supermarkets 446,875 59.5 390,094 63.6 383,592 62.2 306,482 64.9 222,588 61.5
– Convenience stores 113,165 15.0 117,664 19.2 93,848 15.2 70,296 14.9 39,650 10.9
Malls 191,575 25.5 105,451 17.2 139,373 22.6 95,702 20.2 99,811 27.6
Revenue from general sales 751,615 100 613,209 100 616,813 100 472,480 100 362,049 100
During 2022, due to the epidemic measures/lockdown for COVID-19 in Y angzhou, our
Retail Stores were required to shorten our operating hours and our Malls were required to close
from time to time. In particular, the sales of our Retail Stores and Malls during our high-season
period such as Chinese New Y ear period and the period around National Day were generally
affected. As a result, our revenue generated from general sales in Retail Stores and Malls
decreased from approximately RMB751.6 million for FY2021 to approximately RMB613.2
million for FY2022.
In particular, the significant decrease in our revenue from general sales in Malls from
approximately RMB191.6 million for FY2021 to approximately RMB105.5 million for FY2022
was mainly driven by the decrease in revenue from sales of fashion, apparel and children’s wear
and gold, jewellery and accessories. Our revenue from sales of fashion, apparel and children’s
wear and gold, jewellery and accessories decreased significantly from approximately RMB57.6
million and RMB61.6 million for FY2021, respectively, to approximately RMB16.9 million and
RMB43.8 million for FY2022, respectively. As advised by the Industry Consultant, the impact of
lock-downs in the PRC had led to a decline in the sales of fashion, apparel and children’s wear
and gold, jewellery and accessories in the PRC, primarily due to the priority of consumers in the
PRC to focus their spending on essentials as well as the closing down of physical retail and
department stores. In particular, (i) the need to stay at home and the unavailability of fitting
rooms had hindered the sales of fashion, apparel and children’s wear; and (ii) consumers tended
to purchase luxury goods such as gold and jewellery physically in store, and were more cautious
in buying luxury items in view of the uncertainty on the economic recovery after COVID-19
pandemic.
Benefited from the lifting of the epidemic measures in the PRC in 2023, our revenue
generated from general sales in Malls recovered during FY2023 and 9M2024, which increased
from approximately RMB105.5 million for FY2022 to approximately RMB139.4 million for
FY2023 and increased from approximately RMB95.7 million for 9M2023 to approximately
FINANCIAL INFORMATION
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--- page 426 ---
RMB99.8 million for 9M2024. For the same reason, the contraction in revenue generated from
general sales in Retail Stores decelerated for FY2023, however, owing to our cessation of sales
of tobacco products (the details of which are set out in the paragraph headed “History and
Development – Cessation of sales of tobacco products and disposal of tobacco product inventory
assets” in this prospectus), our revenue generated from general sales in Retail Stores deceased
slightly by approximately 6.0% from approximately RMB507.8 million for FY2022 to
approximately RMB477.4 million for FY2023. For 9M2024, our revenue generated from general
sales in Retail Stores decreased to approximately RMB262.2 million from approximately
RMB376.8 million for 9M2023. Such decrease was mainly due to (i) our cessation of sales of
tobacco products; (ii) the decrease in revenue from sales of food as disclosed above; and (iii) the
bad weather in Y angzhou in late June 2024 which hindered the performance of our 2024
half-year promotional sales as compared to our 2023 half-year promotional sales.
For FY2023 and 9M2024, our revenue from general sales in Malls picked up, which
increased from approximately RMB105.5 million for FY2022 to approximately RMB139.4
million for FY2023, and increased from approximately RMB95.7 million for 9M2023 to
approximately RMB99.8 million for 9M2024. Such increases were mainly contributed by the
revenue from sales of electronic appliances. In particular, our revenue from sales of electronic
appliances increased significantly from approximately RMB35.4 million for FY2022 to
approximately RMB72.9 million for FY2023, and increased from approximately RMB45.5
million for 9M2023 to approximately RMB49.6 million for 9M2024. As advised by the Industry
Consultant, as the restrictions were lifted with COVID-19 pandemic largely behind in the PRC,
consumers in the PRC were eager to spend on electronic appliances, leading to a surge in sales
as people sought to upgrade or replace older devices, and in particular, with more time spent at
home during lockdowns, many consumers in the PRC tended to take on home improvement
projects.
(ii) Bulk sales
Our revenue from bulk sales increased from approximately RMB104.2 million for FY2021
to approximately RMB143.9 million for FY2022. As advised by the Industry Consultant, during
the lock-downs in the PRC, driven by uncertainty about future availability and the desire to
minimise shopping trips, consumers in the PRC exhibited a stock piling behaviour as they
tended to rush to stockpile essentials such as rice, oil, canned foods and hygiene products, which
contributed to the increase in bulk sales in the PRC market.
Our revenue from bulk sales decreased significantly from approximately RMB143.9 million
for FY2022 to approximately RMB38.9 million for FY2023. As advised by the Industry
Consultant, as the restrictions were lifted with COVID-19 pandemic largely behind in the PRC,
consumers in the PRC returned to more regular shopping habits, which led to the decrease in
bulk sales in the PRC. For 9M2024, our revenue from bulk sales amounted to approximately
RMB35.0 million, which did not recover to the same level during the COVID-19 pandemic era.
FINANCIAL INFORMATION
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For FY2022, approximately RMB41.7 million of our revenue from bulk sales was
contributed by Customer G, which is a local government authority. Sales to Customer G did not
recur for FY2023 and 9M2024, which was mainly because Customer G bulk primarily made bulk
purchases from us during COVID-19 pandemic for emergency measures.
(iii) Commission income from concessionaire sales
Our commission income from concessionaire sales remained relatively stable at
approximate RMB32.7 million, RMB30.7 million and RMB32.9 million for FY2021, FY2022
and FY2023, respectively. Our commission income from concessionaire sales continued to
remain stable at approximately RMB21.8 million and RMB20.8 million for 9M2023 and
9M2024, respectively.
The following table illustrates the gross sales amount (exclusive of value added tax) and
our commission from concessionaire sales for the years/periods indicated:
FY2021 FY2022 FY2023 9M2023 9M2024
(unaudited)
Gross sale amount (exclusive
of value added tax) from
concessionaire sales
(RMB’000) 219,669 187,609 183,106 129,639 113,890
Commission income from
concessionaire sales
(RMB’000) 32,718 30,748 32,894 21,795 20,752
Commissions as a percentage
of concessionaire sales 14.9% 16.4% 18.0% 16.8% 18.2%
During the Track Record Period, our commissions as a percentage of concessionaire sales
increased from approximately 14.9% for FY2021 to approximately 16.4% for FY2022, and
further increased to approximately 18.0% and 18.2% for FY2023 and 9M2024, respectively. The
increasing commissions as a percentage of concessionaire sales was due to the combined effect
of (i) the decreasing gross sale amounts from concessionaire sales, in particular from FY2021 to
FY2022 mainly due to COVID-19 pandemic; and (ii) the stable trend of our commission income
mainly due to the profit guarantee by the concessionaires.
Supply and sales of meals
Our revenue from supply and sales of meals increased from approximately RMB7.7 million
for FY2021 to approximately RMB17.9 million, which was mainly due to the timing of our
commencement of this operation. Our revenue from supply and sales of meals remained
relatively stable at approximately RMB17.9 million and RMB15.3 million for FY2022 and
FY2023, respectively.
FINANCIAL INFORMATION
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Our revenue from supply and sales of meals decreased from approximately RMB12.6
million for 9M2023 to approximately RMB4.7 million for 9M2024. Such decrease was mainly
due to the decrease in the number of contracts.
Rental income
Our rental income from operating lease remained stable at approximately RMB10.7 million,
RMB10.6 million and RMB11.6 million for FY2021, FY2022 and FY2023, respectively. Our
rental income from operating lease increased from approximately RMB9.6 million for 9M2023
to approximately RMB10.9 million for 9M2024, which was mainly because we leased out our
counters to earn additional rental income during 9M2024 following our cessation of sales of
tobacco products.
Cost of sales
For FY2021, FY2022, FY2023, 9M2023 and 9M2024, our cost of sales amounted to
approximately RMB1,149.5 million, RMB1,026.5 million, RMB1,100.6 million, RMB778.0
million and RMB797.4 million, respectively. The following table sets forth the breakdown of our
cost of sales for the years/periods indicated:
FY2021 FY2022 FY2023 9M2023 9M2024
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(unaudited)
Carrying amount of
inventories sold (Note 1) 1,135,837 1,015,532 1,087,759 767,418 788,847
Taxes and V A T 5,911 3,877 4,373 3,628 3,591
Transportation 2,351 2,641 2,234 1,667 1,708
Provision for/(reversal of)
write-down of inventories 1,432 (308) 1,545 2,926 880
Others
(Note 2) 3,977 4,805 4,685 2,313 2,350
Total cost of sales 1,149,508 1,026,547 1,100,596 777,952 797,376
Notes:
1. Included in the carrying amount of inventories sold was inventories loss on fresh food, which amounted to
approximately RMB10.8 million, RMB10.9 million, RMB9.2 million, RMB7.0 million and RMB6.4
million for FY2021, FY2022, FY2023, 9M2023 and 9M2024, respectively.
2. Others mainly include staff cost and depreciation and amortisation of Muyuan Central Kitchen.
FINANCIAL INFORMATION
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--- page 429 ---
FY2021 FY2022 FY2023 9M2023 9M2024
(unaudited)
Aggregated revenue from
wholesales, general sales
and bulk sales (recognised
on gross basis) (RMB’000) 1,371,445 1,252,195 1,335,337 937,445 965,350
Percentage of cost of sales to
aggregated revenue from
wholesales, general sales
and bulk sales
(Note) 83.8% 82.0% 82.4% 83.0% 82.6%
Note: Calculated by dividing cost of sales by the aggregated revenue from wholesales, general sales and bulk
sales.
Gross profit and gross profit margin
Our overall gross profit increased from approximately RMB282.7 million for FY2021 to
approximately RMB302.1 million for FY2022, and remained stable at approximately RMB301.4
million for FY2023. Our overall gross profit remained relatively stable at approximately
RMB209.9 million and RMB208.4 million for 9M2023 and 9M2024, respectively.
Our overall gross profit margin increased from approximately 19.7% for FY2021 to
approximately 22.7% for FY2022, and remained relatively stable at approximately 21.5% for
FY2023. Our overall gross profit margin remained relatively stable at approximately 21.3% and
20.7% for 9M2023 and 9M2024, respectively.
FINANCIAL INFORMATION
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The following table sets for the gross profit and gross profit margin for sales of goods in
respect of our revenue from sales of goods which was recognised on gross basis for the
years/periods indicated:
FY2021 FY2022 FY2023 9M2023 9M2024
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(unaudited)
Revenue from sales of
goods:
– Wholesales 515,654 495,056 679,641 434,820 568,338
– General sales 751,615 613,209 616,813 472,480 362,049
– Bulk sales 104,176 143,930 38,883 30,145 34,963
1,371,445 1,252,195 1,335,337 937,445 965,350
Less: cost of sales
(Note) (1,140,541) (1,013,390) (1,089,370) (768,212) (793,209)
Gross profit from sales of
goods 230,904 238,805 245,967 169,233 172,141
Gross profit margin from
sales of goods 16.8% 19.1% 18.4% 18.1% 17.8%
Note: This excludes the cost of sales in respect of supply and sales of meals.
In respect of our sales of goods the revenue from which was recognised on gross basis, for
FY2021, FY2022 and FY2023, our gross profit from sales of goods remained relatively stable at
approximately RMB230.9 million, RMB238.8 million and RMB246.0 million, respectively, and
the gross profit margin from sales of goods also remained relatively stable at approximately
16.8%, 19.1% and 18.4%, respectively.
In respect of our sales of goods the revenue from which was recognised on gross basis, for
9M2023 and 9M2024, our gross profit from sales of goods remained relatively stable at
approximately RMB169.2 million and RMB172.1 million, respectively, and the gross profit
margin from sales of goods also remained relatively stable at approximately 18.1% and 17.8%,
respectively.
FINANCIAL INFORMATION
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The following table sets forth the gross profit and gross profit margin of our general sales,
bulk sales and wholesales business segments (for which revenue is recognised on gross basis)
for the years/periods indicated:
FY2021 FY2022 FY2023 9M2023 9M2024
Gross
profit
Gross
profit
margin
Gross
profit
Gross
profit
margin
Gross
profit
Gross
profit
margin
Gross
profit
Gross
profit
margin
Gross
profit
Gross
profit
margin
RMB’000 % RMB’000 % RMB’000 % RMB’000 % RMB’000 %
(unaudited)
Wholesales 64,407 12.5 61,774 12.5 99,752 14.7 49,401 11.4 80,403 14.1
General sales: 145,048 19.3 130,255 21.2 138,102 22.4 113,630 24.0 83,578 23.1
– Supermarkets 106,278 23.8 96,539 24.7 99,012 25.8 84,946 27.7 58,298 26.2
– Convenience stores 15,862 14.0 16,556 14.1 15,145 16.1 11,730 16.7 8,603 21.7
– Malls 22,908 12.0 17,160 16.3 23,945 17.2 16,954 17.7 16,677 16.7
Bulk sales 21,449 20.6 46,776 32.5 8,113 20.9 6,202 20.6 8,160 23.3
Total 230,904 16.8 238,805 19.1 245,967 18.4 169,233 18.1 172,141 17.8
Our gross profit margin for wholesales was approximately 12.5%, 12.5%, 14.7% for
FY2021, FY2022 and FY2023, respectively, and increased from approximately 11.4% for
9M2023 to approximately 14.1% for 9M2024 which was mainly attributable to our sales of
liquor in which we lowered our gross profit margin during 9M2023 to drive our sales with a
view to facilitate the realisation of older inventory of liquor in our inventory.
Our gross profit margin for general sales in supermarkets remained relatively stable at
approximately 23.8%, 24.7% and 25.8% for FY2021, FY2022 and FY2023, respectively, and
remained relatively stable approximately 27.7% and 26.2% for 9M2023 and 9M2024,
respectively.
Our gross profit margin for general sales in convenience stores remained relatively stable at
approximately 14.0%, 14.1% and 16.1% for FY2021, FY2022 and FY2023, respectively. Our
gross profit margin for general sales in convenience stores increased sharply from approximately
16.7% for 9M2023 to approximately 21.7% for 9M2024 mainly driven by our cessation of sales
of tobacco products during 9M2024 which generally had a lower gross profit margin.
Our gross profit margin for general sales in Malls increased from approximately 12.0% for
FY2021 to approximately 16.3% for FY2022 mainly because we lowered our gross profit margin
during FY2021 to drive our sales in view of the initial low sentiment under COVID-19
pandemic, and thereafter remained stable at approximately 17.2%, 17.7% and 16.7% for FY2023,
9M2023 and 9M2024, respectively.
FINANCIAL INFORMATION
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Our gross profit margin for bulk sales was approximately 20.6%, 32.5% and 20.9% for
FY2021, FY2022 and FY2023, respectively. The higher gross profit margin for FY2022 was
mainly attributable to our bulk sales of fresh food to Customer G during COVID-19 pandemic in
FY2022 for emergency measures in which we were required to fulfil our orders under short
notice. Our gross profit margin for bulk sales increased from approximately 20.6% for 9M2023
to approximately 23.3% for 9M2024, which was mainly contributed by the increase in our gross
profit margin from bulk sales of fresh food as we reduced inventory losses through enhanced
fresh food inventory management.
Other revenue
The following table sets forth the breakdown of our other revenue for the years/periods
indicated:
FY2021 FY2022 FY2023 9M2023 9M2024
RMB’000 % RMB’000 % RMB’000 % RMB’000 % RMB’000 %
(unaudited)
Service income 2,495 64.4 3,939 65.8 3,998 74.7 3,423 74.8 4,520 92.5
Government grants 1,222 31.5 1,817 30.4 1,110 20.7 906 19.8 71 1.5
Dividends income 158 4.1 226 3.8 247 4.6 247 5.4 293 6.0
Total other revenue 3,875 100 5,982 100 5,355 100 4,576 100 4,884 100
Our other revenue primarily comprised service income, government grants and dividend
income. Our other revenue for FY2021, FY2022, FY2023, 9M2023 and 9M2024 amounted to
approximately RMB3.9 million, RMB6.0 million, RMB5.4 million, RMB4.6 million and RMB4.9
million, respectively.
The service income recognised for FY2021 mainly represented our service income from a
guesthouse we operated in Y angzhou in which we ceased operation in 2021. The service income
recognised for FY2022 and FY2023 mainly represented our service income for processing meals
for two catering business operators in Y angzhou.
During FY2021, FY2022, FY2023, 9M2023 and 9M2024, we received unconditional
government grants of approximately RMB1.2 million, RMB1.8 million, RMB1.1 million,
RMB0.9 million and RMB0.1 million, respectively, mainly as rewards of our contribution to
secure employment for regional employees and special funds for industrial development.
We recorded dividends income from our investments in listed and unlisted equity securities,
amounting to approximately RMB0.2 million, RMB0.2 million, RMB0.2 million, RMB0.2
million and RMB0.3 million for FY2021, FY2022, FY2023, 9M2023 and 9M2024, respectively.
FINANCIAL INFORMATION
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Other net gain
The following table sets forth the breakdown of our other net gain by nature for the
years/periods indicated:
FY2021 FY2022 FY2023 9M2023 9M2024
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(unaudited)
Compensation received from
early termination of lease
agreement – – 2,300 2,300 –
Impairment losses of
property, plant and
equipment – – (1,490) – –
Net realised gain on
structured deposits and
wealth management
products 372 363 260 167 207
Net loss on disposal of an
associate (577) ––––
Net (loss)/gain on disposal of
disposal of property, plant
and equipment (4) – 28 (50) (390)
Net foreign exchange
(loss)/gain (112) (155) 10 404 1,404
Others 339 17 136 98 (105)
Total other net gain 18 225 1,244 2,919 1,116
Our other net gain primarily comprised compensation received from early termination of
lease agreement, impairment losses of property, plant and equipment, net realised gain on
structured deposits and wealth management products, net loss on disposal of an associate, net
gain/(loss) on disposal of disposal of property, plant and equipment and net foreign exchange
gain/(loss). For FY2021, FY2022, FY2023, 9M2023 and 9M2024, our other net gain amounted
to approximately RMB18,000, RMB0.2 million, RMB1.2 million, RMB2.9 million and RMB1.1
million, respectively.
Net realised gain on structured deposits and wealth management products represented gain
from our short-term investments in structured deposits and wealth management products.
According to our Group’s short-term investment policies, the short-term investments are to
better utilise our temporary surplus funds by investing in low-risk financial products including
structured deposits and wealth management products without affecting the funds needed for our
normal business operations. In terms of the financial products, our Group chose fixed-income
FINANCIAL INFORMATION
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capital-preserving financial products that can be redeemed daily, and the returns from those
financial products need to be higher than the interest from bank deposits. Mr. Y uan Y uan, the
vice chairman of our Board and our executive Director, is responsible for overseeing our
short-term investments. For Mr. Y uan’s biographical details, please refer to the paragraph headed
“Directors, Supervisors and Senior Management – Executive Directors” in this prospectus. After
the Listing, our Group plans to continue to invest in low-risk financial products as and when
appropriate provided that such investments adhere to our short-term investment policies as
disclosed above.
Net loss on disposal of an associate represented the disposal of our interest in an associate,
namely 25% equity interest in Y angzhou City Jiangdu District Binjiang Rural Microfinance Co.,
Ltd.* (ʮ̡ ) during FY2021. For details of the
disposal, please refer to the paragraph headed “History and Development – Disposal of equity
interest in Y angzhou City Jiangdu District Binjiang Rural Microfinance Co., Ltd.* ( ౮ψ̹Ϫே
ʮ̡ )” in this prospectus.
Selling and distribution costs
Our selling and distribution costs mainly comprised staff costs and depreciation and
amortisation expenses, which in aggregate constituted over 80% of our selling and distribution
costs during the Track Record Period. The following table sets forth the breakdown of our
selling and distribution costs by nature for the years/periods indicated:
FY2021 FY2022 FY2023 9M2023 9M2024
RMB’000 % RMB’000 % RMB’000 % RMB’000 % RMB’000 %
(unaudited)
Staff costs 85,587 53.9 86,104 52.1 79,569 49.1 59,466 51.5 55,608 48.0
Depreciation and amortisation
expenses 47,950 30.2 54,051 32.7 58,538 36.1 40,230 34.8 43,675 37.7
Utility expenses 6,148 3.9 6,718 4.1 6,989 4.3 4,727 4.1 4,655 4.0
Marketing expenses 7,318 4.6 5,816 3.5 6,323 3.9 5,053 4.4 5,706 4.9
Service expenses 2,837 1.8 2,402 1.5 1,937 1.2 1,577 1.4 1,548 1.3
Promotion materials expenses 2,831 1.8 2,690 1.6 1,760 1.1 1,362 1.2 1,342 1.1
Handling expenses 1,738 1.1 1,552 0.9 1,589 1.0 1,186 1.0 1,478 1.3
Motor vehicles expenses 1,206 0.7 1,509 0.9 1,262 0.8 827 0.7 657 0.6
Others 3,144 2.0 4,515 2.7 4,152 2.5 1,054 0.9 1,292 1.1
Total selling and distribution
costs 158,759 100 165,357 100 162,119 100 115,482 100 115,961 100
FINANCIAL INFORMATION
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Administrative and other operating expenses
Our administrative and other operating expenses mainly comprised staff costs and
depreciation and amortisation expenses, which in aggregate constituted over 50% of our
administrative and other operating expenses during the Track Record Period. The following table
sets forth the breakdown of our administrative and other operating expenses by nature for the
years/periods indicated:
FY2021 FY2022 FY2023 9M2023 9M2024
RMB’000 % RMB’000 % RMB’000 % RMB’000 % RMB’000 %
(unaudited)
Staff costs 26,946 53.3 24,793 47.7 24,704 47.0 17,066 44.9 16,861 41.0
Depreciation and amortisation
expenses 7,614 15.1 7,558 14.5 7,245 13.8 5,415 14.2 5,565 13.6
Entertainment expenses 2,421 4.8 3,172 6.1 3,697 7.0 2,895 7.6 2,193 5.3
Repair and maintenance
expenses 3,362 6.7 2,674 5.1 2,288 4.3 1,785 4.7 1,879 4.6
Administrative materials
expenses 3,174 6.3 2,882 5.6 2,884 5.5 1,908 5.0 2,200 5.4
Utility expenses 1,535 3.0 2,302 4.4 2,437 4.6 2,131 5.6 2,070 5.0
Services expenses 3,153 6.2 4,352 8.4 3,366 6.4 2,322 2.3 1,395 1.1
Listing expenses – – 1,747 3.4 3,449 6.6 3,125 12.1 7,276 20.0
Others 2,339 4.6 2,503 4.8 2,544 4.8 1,372 3.6 1,625 4.0
Total administrative and
other operating expenses 50,544 100 51,983 100 52,614 100 38,019 100 41,064 100
FINANCIAL INFORMATION
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Impairment loss on trade and other receivables
Impairment loss represented the changes in loss allowance in respect of our trade
receivables and other receivables. The following table sets forth the breakdown of impairment
loss/(reversal of impairment loss) on trade receivables and other receivables for the
years/periods indicated:
FY2021 FY2022 FY2023 9M2023 9M2024
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(unaudited)
Trade receivables 8,299 2,046 3,167 6,967 6,014
Other receivables 1,849 (659) 47 64 119
Total impairment loss on
trade and other
receivables 10,148 1,387 3,214 7,031 6,133
The following tables set forth the movement in loss allowance for our trade receivables and
other receivables during the Track Record Period:
As at 31 December
As at
30 September
20242021 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000
Loss allowance at beginning of the
year/period 2,787 12,935 14,322 17,536
Loss allowance recognised during
the year/period 10,148 1,387 3,214 6,133
Loss allowance for trade receivables
and other receivables at end of
the year/period 12,935 14,322 17,536 23,669
FINANCIAL INFORMATION
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Net finance costs
The following table sets forth the breakdown of our net finance costs by nature for the
years/periods indicated:
FY2021 FY2022 FY2023 9M2023 9M2024
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(unaudited)
Interest income from bank
deposits (228) (480) (1,573) (944) (1,396)
Finance income (228) (480) (1,573) (944) (1,396)
Interest expenses on bank
loans and other borrowings 13,964 16,679 17,058 12,631 14,240
Interest expenses on lease
liabilities 4,990 4,932 4,485 3,361 3,330
Finance costs 18,954 21,611 21,543 15,992 17,570
Total net finance costs 18,726 21,131 19,970 15,048 16,174
For FY2021, FY2022, FY2023, 9M2023 and 9M2024, our net finance costs amounted to
approximately RMB18.7 million, RMB21.1 million, RMB20.0 million, RMB15.0 million and
RMB16.2 million, respectively.
Income tax
The following table sets forth the breakdown of our income tax for the years/periods
indicated:
FY2021 FY2022 FY2023 9M2023 9M2024
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(unaudited)
Current tax 17,133 17,655 20,210 13,483 14,141
Deferred tax (4,517) (233) (1,754) (2,215) (3,117)
Total income tax 12,616 17,422 18,456 11,268 11,024
FINANCIAL INFORMATION
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Our income tax mainly included provision made for PRC enterprise income tax and
movement of deferred tax assets/liabilities. Under the PRC enterprise income tax law and its
implementing rules, our PRC operating subsidiaries are subject to the tax rate of 25%. For
FY2021, FY2022, FY2023, 9M2023 and 9M2024, our effective tax rate, which is calculated by
dividing income tax expense by profit before taxation, was approximately 26.5%, 25.4%, 26.3%,
27.0% and 31.4%, respectively. The increase in our effective tax rate for 9M2024 was mainly
driven by the increase in Listing expenses which were non-deductible for tax.
REVIEW OF RESULTS OF OPERATIONS
FY2021 compared with FY2022
Revenue
Our revenue decreased by approximately RMB103.5 million or 7.2% from approximately
RMB1,432.2 million for FY2021 to approximately RMB1,328.7 million for FY2022. Such
decrease was mainly driven by the decrease in our revenue from retail operations, which was in
turn driven by the decrease in our revenue from general sales. For detailed analysis, please refer
to the paragraph headed “Principal components of the consolidated statements of profit or loss –
Revenue” in this section.
Cost of sales
Our cost of sales decreased by approximately RMB123.0 million or 10.7% from
approximately RMB1,149.5 million for FY2021 to approximately RMB1,026.5 million for
FY2022. Such decrease was in line with the decrease in our aggregated revenue from general
sales, bulk sales and wholesales.
Gross profit and gross profit margin
Our overall gross profit increased by approximately RMB19.5 million from approximately
RMB282.7 million for FY2021 to approximately RMB302.1 million for FY2022. In respect of
our sales of goods the revenue from which was recognised on gross basis, our gross profit from
sales of goods remained relatively stable at approximately RMB230.9 million and RMB238.8
million for FY2021 and FY2022, respectively.
Our overall gross profit margin increased from approximately 19.7% for FY2021 to
approximately 22.7% for FY2022. In respect of our sales of goods the revenue from which was
recognised on gross basis, our gross profit margin from sales of goods remained relatively stable
at approximately 16.8% and 19.1% for FY2021 and FY2022, respectively.
FINANCIAL INFORMATION
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Other revenue
Our other revenue increased from approximately RMB3.9 million for FY2021 to
approximately RMB6.0 million for FY2022, which was mainly driven by the increase in our
service income, which was mainly driven by the service income for processing meals for a hotel
operator.
Selling and distribution costs
Our selling and distribution costs increased by approximately RMB6.6 million or 4.2%
from approximately RMB158.8 million for FY2021 to approximately RMB165.4 million for
FY2022. Such increase was mainly attributable to the increase in our depreciation and
amortisation expenses from approximately RMB48.0 million for FY2021 to approximately
RMB54.1 million for FY2022 which was mainly driven by the additions of property, plant and
equipment during FY2022, while our staff cost, being the most material component of our
selling and distribution costs, remained stable at approximately RMB85.6 million and RMB86.1
million for FY2021 and FY2022, respectively.
Administrative and other operating expenses
Our administrative and other operating expenses remained stable at approximately
RMB50.5 million and RMB52.0 million for FY2021 and FY2022, respectively. In particular, the
slight decrease in our staff cost, being the most material component of our administrative and
other operating expenses, from approximately RMB26.9 million for FY2021 to approximately
RMB24.8 million for FY2022 was offset by the recognition of Listing expenses of
approximately RMB1.7 million.
Impairment loss on trade and other receivables
Our impairment loss on trade and other receivables amounted to approximately RMB10.1
million and RMB1.4 million for FY2021 and FY2022, respectively. For details, please refer to
the paragraph headed “Principal components of the consolidated statements of profit or loss –
Impairment loss on trade and other receivables” in this section.
Net finance costs
Our net finance costs increased by approximately RMB2.4 million from approximately
RMB18.7 million for FY2021 to approximately RMB21.1 million for FY2022. Such increase
was mainly attributable to the increase in interest expenses on bank loans and other borrowings.
FINANCIAL INFORMATION
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Income tax
Our income tax increased by approximately RMB4.8 million from approximately RMB12.6
million for FY2021 to approximately RMB17.4 million for FY2022. Such increase was in line
with the increase our profit before taxation. Our effective tax rate was relatively stable at
approximately 26.5% and 25.4% for FY2021 and FY2022, respectively.
Profit for the year
For the forgoing reasons, our profit for the year increased significantly by approximately
RMB16.0 million from approximately RMB35.1 million for FY2021 to approximately RMB51.1
million for FY2022. Our net profit margin increased from approximately 2.4% for FY2021 to
approximately 3.8% for FY2022.
FY2022 compared with FY2023
Revenue
Our revenue increased by approximately RMB73.3 million or 5.5% from approximately
from approximately RMB1,328.7 million for FY2022 to approximately RMB1,402.0 million for
FY2023. Such increase was mainly driven by the increase in revenue from our wholesale
operations, which was in turn driven by the increase in revenue from our wholesales, offset by
the decrease in revenue from retail operations, which was in turn driven by the decrease in our
revenue from bulk sales. For detailed analysis, please refer to the paragraph headed “Principal
components of the consolidated statements of profit or loss – Revenue” in this section.
Cost of sales
Our cost of sales increased by approximately RMB74.0 million or 7.2% from approximately
RMB1,026.5 million for FY2022 to approximately RMB1,100.6 million for FY2023. Such
increase was in line with the increase in our aggregated revenue from general sales, bulk sales
and wholesales.
Gross profit and gross profit margin
Our overall gross profit remained stable at approximately RMB302.1 million and
RMB301.4 million for FY2022 and FY2023, respectively. In respect of our sales of goods the
revenue from which was recognised on gross basis, our gross profit from sales of goods
remained relatively stable at approximately RMB238.8 million and RMB250.0 million for
FY2022 and FY2023, respectively.
Our overall gross profit margin remained relatively stable at approximately 22.7% and
21.5% for FY2022 and FY2023, respectively. In respect of our sales of goods the revenue from
which was recognised on gross basis, our gross profit margin from sales of goods remained
relatively stable at approximately 19.1% and 18.4% for FY2022 and FY2023, respectively.
FINANCIAL INFORMATION
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Other revenue
Our other revenue decreased slightly from approximately RMB6.0 million for FY2022 to
approximately RMB5.4 million for FY2023, which was mainly driven by the decrease in our
government grants received.
Selling and distribution costs
Our selling and distribution costs decreased by approximately RMB3.2 million or 2.0%
from approximately RMB165.4 million for FY2022 to approximately RMB162.1 million for
FY2023. Such decrease was mainly driven by the decrease in our staff cost, being the most
material component of our selling and distribution costs, from approximately RMB86.1 million
for FY2022 to RMB79.6 million for FY2023 which was mainly due to decrease in number of
staff, offset by the increase in our depreciation and amortisation expenses from approximately
RMB54.1 million for FY2022 to approximately RMB58.5 million for FY2023 which was mainly
driven by the additions of property, plant and equipment during FY2023.
Administrative and other operating expenses
Our administrative and other operating expenses remained stable at approximately
RMB52.0 million and RMB52.6 million for FY2022 and FY2023, respectively. In particular, our
staff cost, being the most material component of our administrative and other operating
expenses, remained stable at approximately RMB24.8 million and RMB24.7 million for FY2022
and FY2023, respectively.
Impairment loss on trade and other receivables
Our impairment loss on trade and other receivables amounted to approximately RMB1.4
million and RMB3.2 million for FY2022 and FY2023, respectively. For details, please refer to
the paragraph headed “Principal components of the consolidated statements of profit or loss –
Impairment loss on trade and other receivables” in this section.
Net finance costs
Our net finance cost remained relatively stable at approximately RMB21.1 million and
RMB20.0 million for FY2022 and FY2023, respectively.
Income tax
Our income tax remained stable at approximately RMB17.4 million and RMB18.5 million
for FY2022 and FY2023, respectively. Our effective tax rate was stable at approximately 25.4%
and 26.3% for FY2022 and FY2023, respectively.
FINANCIAL INFORMATION
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Profit for the year
For the forgoing reasons, our profit for the year remained stable at approximately RMB51.1
million and RMB51.6 million for FY2022 and FY2023, respectively. Our net profit margin
decreased from approximately 3.8% for FY2022 to approximately 3.7% for FY2023.
9M2023 compared with 9M2024
Revenue
Our revenue increased by approximately RMB18.0 million or 1.8% from approximately
RMB987.8 million for 9M2023 to approximately RMB1,005.8 million for 9M2024. Such
increase was mainly driven by the increase in our revenue from wholesale operations, which was
in turn driven by the increase in our revenue from wholesales, offset by the decrease in revenue
from retail operations, which was in turn driven by the decrease in our revenue from general
sales. For detailed analysis, please refer to the paragraph headed “Principal components of the
consolidated statements of profit or loss – Revenue” in this section.
Cost of sales
Our cost of sales increased by approximately RMB19.4 million or 2.5% from approximately
RMB778.0 million for 9M2023 to approximately RMB797.4 million for 9M2024. Such increase
was in line with the increase in our aggregated revenue from general sales, bulk sales and
wholesales.
Gross profit and gross profit margin
Our overall gross profit remained stable at approximately RMB209.9 million and
RMB208.4 million for 9M2023 and 9M2024, respectively. In respect of our sales of goods the
revenue from which was recognised on gross basis, for 9M2023 and 9M2024, our gross profit
from sales of goods remained relatively stable at approximately RMB169.2 million and
RMB172.1 million, respectively.
Our overall gross profit margin remained relatively stable at approximately 21.3% and
20.7% for 9M2023 and 9M2024, respectively. In respect of our sales of goods the revenue from
which was recognised on gross basis, our gross profit margin from sales of goods also remained
relatively stable at approximately 18.1% and 17.8%, respectively.
Other revenue
Our other revenue increased slightly from approximately RMB4.6 million for 9M2023 to
approximately RMB4.9 million for 9M2024, which was mainly driven by the increase in service
income for processing meals for a hotel operator, offset by the decrease in government grants
received.
FINANCIAL INFORMATION
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Selling and distribution costs
Our selling and distribution costs remained relatively stable at approximately RMB115.5
million and RMB116.0 million for 9M2023 and 9M2024, respectively. In particular, the decrease
in our staff cost, being the most material component of our selling and distribution costs, from
approximately RMB59.5 million for 9M2023 to approximately RMB55.6 million for 9M2024
was outweighed by the increase in our depreciation and amortisation expenses from
approximately RMB40.2 million for 9M2023 to approximately RMB43.7 million for 9M2024.
The decrease in our staff cost was mainly due to decrease in number of staff, whereas the
increase in our depreciation and amortisation expenses was mainly driven by the additions of
property, plant and equipment during 9M2024.
Administrative and other operating expenses
Our administrative and other operating expenses increased by approximately RMB3.0
million or 8.0% from approximately RMB38.0 million for 9M2023 to approximately RMB41.1
million for 9M2024. Such increase was mainly driven by the increase in our Listing expenses
from approximately RMB3.1 million for 9M2023 to approximately RMB7.3 million for 9M2024.
Impairment loss on trade and other receivables
Our impairment loss on trade and other receivables amounted to approximately RMB7.0
million and RMB6.1 million for 9M2023 and 9M2024, respectively. For details, please refer to
the paragraph headed “Principal components of the consolidated statements of profit or loss –
Impairment loss on trade and other receivables” in this section.
Net finance costs
Our net finance costs remained relatively stable at approximately RMB15.0 million and
RMB16.2 million for 9M2023 and 9M2024, respectively.
Income tax
Our income tax decreased from approximately RMB11.3 million for 9M2023 to
approximately RMB11.0 million for 9M2024, which was mainly driven by the decrease in profit
before taxation. Our effective tax rate increased from approximately 27.0% for 9M2023 to
approximately 31.4% for 9M2024, which was mainly driven by the increase in Listing expenses
which were non-deductible for tax.
Profit for the period
For the forgoing reasons, our profit for the period decreased from approximately RMB30.5
million for 9M2023 to approximately RMB24.1 million for 9M2024. Our net profit margin
decreased from approximately 3.1% for 9M2023 to approximately 2.4% for 9M2024.
FINANCIAL INFORMATION
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LIQUIDITY AND CAPITAL RESOURCES
Working capital
During the Track Record Period, we financed our operations by cash generated from
operating activities and bank loans and other borrowings. As at 30 September 2024, we had cash
and cash equivalents of approximately RMB147.8 million. Going forward, we intend to finance
our operations by cash generated from operating activities, bank borrowings and proceeds from
the Global Offering.
We monitor our cash flows and cash balance on a regular basis and strive to maintain an
optimum liquidity that can meet our working capital needs while supporting a viable business
scale and future plans. As at 30 September 2024, we had unutilised banking facilities of
approximately RMB75.1 million.
Taking into account the financial resources available to us, including our existing cash and
cash equivalents, availability of banking facilities, estimated net proceeds to be received by us
from the Global Offering and cash flows from our operations, our Directors are of the view that,
after due and careful inquiry, we have sufficient working capital for at least the next 12 months
commencing from the date of this prospectus.
FINANCIAL INFORMATION
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Cash flows
The following table sets forth a summary of our cash flows for the years/periods indicated:
FY2021 FY2022 FY2023 9M2023 9M2024
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(unaudited)
Operating profit before
changes in working capital 136,890 153,365 163,623 117,466 109,855
Changes in working capital (164,601) (72,463) (75,001) (111,558) (105,735)
Cash (used in)/generated
from operations (27,711) 80,902 88,622 5,908 4,120
Income tax paid (18,116) (10,867) (19,403) (17,051) (14,745)
Net cash (used in)/generated
from operating activities (45,827) 70,035 69,219 (11,143) (10,625)
Net cash used in investing
activities (24,749) (25,813) (34,536) (32,127) (26,680)
Net cash generated
from/(used in) financing
activities 78,375 (65,498) 35,729 (6,375) (50,681)
Net increase/(decrease) in
cash and cash equivalents 7,799 (21,276) 70,412 (49,645) (87,986)
Effect of foreign exchange
rate changes (1,565) 2,377 327 (214) (448)
Cash and cash equivalents at
beginning of year/period 178,152 184,386 165,487 165,487 236,226
Cash and cash equivalents at
end of year/period 184,386 165,487 236,226 115,628 147,792
For FY2021, FY2022, FY2023, 9M2023 and 9M2024, we generated revenue of
approximately RMB1,432.2 million, RMB1,328.7 million and RMB1,402.0 million, RMB987.8
million and RMB1,005.8 million, respectively. Owing to our business nature (i.e. wholesale and
retail), cost of inventories constituted a significant portion of our cost of sales and at the same
time we had to incur selling and distribution costs and administrative and other operating
expenses to support our operations, we had thin profit margins during the Track Record Period.
Our net profit margin was approximately 2.4%, 3.8%, 3.7% and 2.4% for FY2021, FY2022,
FY2023 and 9M2024, respectively. For the associated risk, please refer to the paragraph headed
“Risk Factors – We have thin profit margins and we may not be able to sustain our historical
FINANCIAL INFORMATION
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profitability and working capital position” in this prospectus. With a thin profit margin, we
would record net cash used in operating activities when we have negative movement in our
working capital (including inventories, trade and bills receivables and trade and bills payables)
outweighing our operating profit. We recorded net cash used in operating activities for FY2021,
9M2023 and 9M2024. Our net cash used in operating activities for FY2021, 9M2023 and
9M2024 was mainly due to a combination of (i) the lower amount of profit before taxation as
compared to FY2022 and FY2023; and (ii) a shorter payment cycle for our trade payables as
compared to the collection cycle for our trade receivables. Additionally, for FY2021 and
9M2024, it was further due to the increase in our inventories. For the associated risk, please
refer to the paragraph headed “Risk Factors – We had net cash used in operating activities for
FY2021, 9M2023 and 9M2024 and we may have difficulty meeting our payment obligations if
we continue to record net cash used in operating activities in the future.” in this prospectus.
Going forward, our Group plans to improve our net operating cash outflow position by
implementing a more stringent collection strategy (including reminding customers for settlement
in advance of the expiry of credit period and strictly reinforcing our credit period granted to
customers) and inventory management (including regularly reviewing our inventories to identify
slow moving items and to adjust our purchase accordingly). On the other hand, we recorded net
cash used in investing activities for all years/periods presented, and net cash generated from
financing activities for FY2021 and FY2023.
Our cash and cash equivalent amounted to approximately RMB147.8 million as at 30
September 2024, representing a decrease of approximately RMB88.4 million from as at 31
December 2023. Such decrease was mainly because we recorded net cash used in both operating,
investing and financing activities.
Our cash and cash equivalents amounted to approximately RMB236.2 million as at 31
December 2023, representing an increase of approximately RMB70.7 million from as at 31
December 2022. Such increase was mainly because the net cash generated from operating and
financing activities outweighed the net cash used in investing activities.
Our cash and cash equivalents amounted to approximately RMB184.4 million and
RMB165.5 million as at 31 December 2021 and 31 December 2022, respectively, representing a
decrease of approximately RMB18.9 million. Such decrease was mainly because the net cash
used in investing and financing activities outweighed the net cash generated from operating
activities.
Net cash (used in)/generated from operating activities
For FY2021, we had net cash used in operating activities of approximately RMB45.8
million, primarily reflecting: (i) profit before taxation of approximately RMB47.7 million; (ii)
positive adjustments before change in working capital of approximately RMB89.2 million, which
primarily reflected depreciation of owned property, plant and equipment of approximately
RMB32.9 million, depreciation of right-of-use assets of approximately RMB25.9 million and
finance costs of approximately RMB19.0 million; and (iii) negative movements in change in
working capital of approximately RMB164.6 million, which primarily reflected an increase in
FINANCIAL INFORMATION
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inventories of approximately RMB84.4 million, a decrease in contract liabilities of
approximately RMB57.0 million and increase in trade and other receivables of approximately
RMB32.0 million, offset by an increase in trade and other payables of approximately RMB9.6
million.
For FY2022, we had net cash generated from operating activities of approximately
RMB70.0 million, primarily reflecting: (i) profit before taxation of approximately RMB68.5
million; (ii) positive adjustments before change in working capital of approximately RMB84.9
million, which primarily reflected depreciation of owned property, plant and equipment of
approximately RMB36.4 million, depreciation of right-of-use assets of approximately RMB29.0
million and finance costs of approximately RMB21.6 million; and (iii) negative movements in
change in working capital of approximately RMB72.5 million, which primarily reflected an
increase in trade and other receivables of approximately RMB153.1 million, offset by an
increase in trade and other payables of approximately RMB97.9 million.
For FY2023, we had net cash generated from operating activities of approximately
RMB69.2 million, primarily reflecting: (i) profit before taxation of approximately RMB70.1
million; (ii) positive adjustments before change in working capital of approximately RMB93.6
million, which primarily reflected depreciation of owned property, plant and equipment of
approximately RMB41.7 million, depreciation of right-of-use assets of approximately RMB28.0
million and finance costs of approximately RMB21.5 million; and (iii) negative movements in
change in working capital of approximately RMB75.0 million, which primarily reflected an
increase in trade and other receivables of approximately RMB86.0 million, decrease in trade and
other payables of approximately RMB28.6 million, decrease in contract liabilities of
approximately RMB18.1 million, offset by a decrease in inventories of approximately RMB57.8
million.
For 9M2024, we had net cash used in operating activities of approximately RMB10.6
million, primarily reflecting: (i) profit before taxation of approximately RMB35.1 million; (ii)
positive adjustments before change in working capital of approximately RMB74.8 million, which
primarily reflected depreciation of owned property, plant and equipment of approximately
RMB31.3 million, depreciation of right-of-use assets of approximately RMB20.8 million and
finance costs of approximately RMB17.6 million; and (iii) negative movements in change in
working capital of approximately RMB105.7 million, which primarily reflected an increase in
trade and other receivables of approximately RMB37.9 million, decrease in trade and other
payables of approximately RMB18.7 million and increase in inventories of approximately
RMB51.3 million.
FINANCIAL INFORMATION
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Net cash used in investing activities
For FY2021, our net cash used in investing activities amounted to approximately RMB24.7
million, which was mainly contributed by (i) payment for purchases of structured deposits and
wealth management products of approximately RMB538.3 million; and (ii) payment for
acquisition of property, plant and equipment of approximately RMB50.6 million, offset by the
proceeds from disposal of structured deposits and wealth management products of approximately
RMB538.7 million and proceeds from disposal of interests in an associate of approximately
RMB25.0 million.
For FY2022, our net cash used in investing activities amounted to approximately RMB25.8
million, which was mainly contributed by (i) payment for purchases of structured deposits and
wealth management products of approximately RMB435.7 million; and (ii) payment for
acquisition of property, plant and equipment of approximately RMB26.9 million, offset by the
proceeds from disposal of structured deposits and wealth management products of approximately
RMB436.1 million.
For FY2023, our net cash used in investing activities amounted to approximately RMB34.5
million, which was mainly contributed by (i) payment for purchases of structured deposits and
wealth management products of approximately RMB205.0 million; and (ii) payment for
acquisition of property, plant and equipment of approximately RMB40.7 million, offset by the
proceeds from disposal of structured deposits and wealth management products of approximately
RMB205.3 million.
For 9M2024, our net cash used in investing activities amounted to approximately RMB26.7
million, which was mainly contributed by (i) payment for purchases of structured deposits and
wealth management products of approximately RMB506.0 million; and (ii) payment for the
acquisition of property, plant and equipment of approximately RMB29.1 million, offset by the
proceeds from disposal of structured deposits and wealth management products of approximately
RMB506.2 million.
Net cash generated from/(used in) financing activities
For FY2021, our net cash generated from financing activities amounted to approximately
RMB78.4 million, which was mainly contributed by the proceeds from bank loans and other
borrowings of approximately RMB482.8 million, offset by the repayment from bank loans and
other borrowings of approximately RMB368.4 million.
For FY2022, our net cash used in financing activities amounted to approximately RMB65.5
million, which was mainly contributed by the repayment of bank loans and other borrowings of
approximately RMB593.1 million, offset by the proceeds from bank loans and other borrowings
of approximately RMB573.4 million.
FINANCIAL INFORMATION
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For FY2023, our net cash generated from financing activities amounted to approximately
RMB35.7 million, which was mainly contributed by the proceeds from bank loans and other
borrowings of approximately RMB595.6 million, offset by the repayment of bank loans and
other borrowings of approximately RMB513.0 million.
For 9M2024, our net cash used in financing activities amounted to approximately RMB50.7
million, which was mainly contributed by repayment of bank loans and other borrowings of
approximately RMB409.0 million and lease rental paid of approximately RMB18.4 million in
aggregate, offset by the proceeds from bank loans and other borrowings of approximately
RMB389.5 million.
Net current assets
As at 31 December
As at
30 September
2024
As at
31 January
20252021 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(unaudited)
Current assets
Inventories 286,376 324,018 266,267 317,589 335,155
Trade and bills receivables 121,191 199,930 213,779 257,649 165,839
Prepayments, deposits and other
receivables 171,140 244,114 313,092 301,001 424,007
Pledged deposits 1,571 – – 1,600 1,600
Cash and cash equivalents 184,386 165,487 236,226 147,792 156,237
764,664 933,549 1,029,364 1,025,631 1,082,838
Current liabilities
Bank loans and other borrowings 385,306 372,357 462,799 425,068 425,151
Lease liabilities 21,538 24,530 23,561 23,420 25,080
Trade and bills payables 112,587 190,619 160,721 105,581 112,423
Other payables and accruals 45,577 64,484 45,755 60,756 86,113
Contract liabilities 111,435 130,204 112,120 115,958 129,451
Taxation payable 7,432 14,220 15,027 14,423 20,442
683,875 796,414 819,983 745,206 798,660
Net current assets 80,789 137,135 209,381 280,425 284,178
FINANCIAL INFORMATION
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Our net current assets increased significantly during the Track Record Period, mainly
driven by our net profit and net cash generated from operating activities which contributed to
the overall increase in our total current assets.
Our net current assets increased from approximately RMB80.8 million as at 31 December
2021 to approximately RMB137.1 million as at 31 December 2022, in which the increase in our
current assets outweighed the increase in our current liabilities during FY2022. In terms of our
current assets, the increase during FY2022 was mainly attributable to (i) the increase in our
inventories; (ii) the increase in our trade receivables; and (iii) the increase in our prepayments.
In terms of our current liabilities, the increase during FY2022 was mainly driven by (i) the
increase in our trade and bills payables; and (ii) the increase in our contract liabilities, which
was mainly driven the increase in advance receipts from customers.
Our net current assets increased significantly from approximately RMB137.1 million as at
31 December 2022 to approximately RMB209.4 million as at 31 December 2023, in which the
increase in our current assets outweighed the increase in our current liabilities during FY2023.
In terms of our current assets, the increase during FY2023 was mainly attributable to (i) the
increase in our cash and cash equivalents, which was mainly due to net cash generated from
operating and financing activities; and (ii) the increase in our prepayments, offset by (iii) the
decrease in our inventories. In terms of our current liabilities, the decrease during FY2023 was
mainly driven by (i) the decrease in our trade and bills payables; and (ii) the decrease in our
contract liabilities, which was mainly driven by the decrease in advance receipts from customers,
partially offset by the increase in our bank loans and other borrowings, which was mainly due to
our net drawdowns.
Our net current assets increased from approximately RMB209.4 million as at 31 December
2023 to approximately RMB280.4 million as at 30 September 2024, in which the decrease in our
current liabilities outweighed the decrease in our current assets during 9M2024. In terms of our
current assets, the decrease during 9M2024 was mainly attributable to the decrease in our cash
and cash equivalents. In terms of current liabilities, the decrease during 9M2024 was mainly
driven by (i) the decrease in bank loans and other borrowings; and (ii) the decrease in trade and
bills payables.
Our net current assets increased from approximately RMB280.4 million as at 30 September
2024 to approximately RMB284.2 million as at 31 January 2025, in which the increase in our
current assets outweighed the increase in our current liabilities during the period. In terms of our
current assets, the increase during the period was mainly driven by the increase in our
prepayments, deposits and other receivables and cash and cash equivalents, offset by the
decrease in our trade and bills receivables. In terms of our current liabilities, the increase during
the period was mainly driven by the increase in our other payables and accruals and contract
liabilities. Our current ratio, which is calculated by dividing total current assets by total current
liabilities, remained stable at approximately 1.4 and 1.4 as at 30 September 2024 and 31 January
2025, respectively.
FINANCIAL INFORMATION
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CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
The following table sets forth our consolidated statements of financial position as at the
dates indicated, which are extracted from the Accountants’ Report:
As at 31 December
As at
30 September
20242021 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000
Non-current assets
Property, plant and equipment 371,456 359,490 344,227 336,343
Financial assets at fair value through
other comprehensive income 37,570 35,175 28,454 29,862
Deferred tax assets 3,310 3,325 5,091 8,138
412,336 397,990 377,772 374,343
Current assets
Inventories 286,376 324,018 266,267 317,589
Trade receivables 121,191 199,930 213,779 257,649
Prepayments, deposits and other
receivables 171,140 244,114 313,092 301,001
Restricted deposits 1,571 – – 1,600
Cash and cash equivalents 184,386 165,487 236,226 147,792
764,664 933,549 1,029,364 1,025,631
Current liabilities
Bank loans and other borrowings 385,306 372,357 462,799 425,068
Lease liabilities 21,538 24,530 23,561 23,420
Trade and bills payables 112,587 190,619 160,721 105,581
Other payables and accruals 45,577 64,484 45,755 60,756
Contract liabilities 111,435 130,204 112,120 115,958
Taxation payable 7,432 14,220 15,027 14,423
683,875 796,414 819,983 745,206
Net current assets 80,789 137,135 209,381 280,425
Total assets less current liabilities 493,125 535,125 587,153 654,768
FINANCIAL INFORMATION
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As at 31 December
As at
30 September
20242021 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000
Non-current liabilities
Bank loans and other borrowings 5,675 – 12,552 53,691
Lease liabilities 82,727 81,950 76,533 77,593
Deferred tax liabilities 7,212 6,395 4,727 5,009
95,614 88,345 93,812 136,293
Net assets 397,511 446,780 493,341 518,475
Capital and reserves
Share capital 160,685 160,685 160,685 160,685
Reserves 224,624 271,678 316,943 341,620
Total equity attributable to equity
shareholders of the Company 385,309 432,363 477,628 502,305
Non-controlling interests 12,202 14,417 15,713 16,170
Total equity 397,511 446,780 493,341 518,475
FINANCIAL INFORMATION
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--- page 453 ---
DESCRIPTION OF CERTAIN LINE ITEMS IN THE CONSOLIDATED STATEMENTS OF
FINANCIAL POSITION
Property, plant and equipment
Our property, plant and equipment comprised (i) plant and building; (ii) machinery and
equipment; (iii) office and other equipment; (iv) motor vehicles; (v) leasehold improvements;
(vi) construction in progress; and (vii) right of use assets in land use rights and other properties.
The following table sets forth the breakdown of our property, plant and equipment by type as at
the dates indicated:
As at 31 December
As at
30 September
20242021 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000
Plant and buildings 109,989 107,967 108,601 102,843
Machinery and equipment 10,627 11,340 10,046 8,240
Office and other equipment 21,376 18,172 14,794 11,908
Motor vehicles 3,828 4,246 3,301 2,440
Leasehold improvements 70,978 65,064 76,103 76,923
Construction in progress 8,100 8,550 – 7,790
Right-of-use assets in land use rights 31,579 30,452 29,325 28,480
Right-of-use assets in other properties 114,979 113,699 102,057 97,719
Total property, plant and equipment 371,456 359,490 344,227 336,343
The carrying amount of our property, plant and equipment decreased by approximately
RMB12.0 million from approximately RMB371.5 million as at 31 December 2021 to
approximately RMB359.5 million as at 31 December 2022. Such decrease was mainly driven by
the depreciation of our office and other equipment, leasehold improvements and right-of-use
assets.
The carrying amount of our property, plant and equipment decreased by approximately
RMB15.3 million from approximately RMB359.5 million as at 31 December 2022 to
approximately RMB344.2 million as at 31 December 2023. Such decrease was mainly driven by
the depreciation of our office and other equipment and right-of-use assets, offset of the addition
of our leasehold improvement.
The carrying amount of our property, plant and equipment decreased by approximately
RMB7.9 million from approximately RMB344.2 million as at 31 December 2023 to
approximately RMB336.3 million as at 30 September 2024. Such decrease was mainly driven by
depreciation charged during the period.
FINANCIAL INFORMATION
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As at 31 December 2021, 31 December 2022, 31 December 2023 and 30 September 2024,
property certificates of certain properties and land use rights with an aggregate net book value of
approximately RMB73.7 million, RMB74.6 million, RMB78.1 million and RMB73.9 million,
respectively, is yet to be obtained. For further details, please refer to the paragraph headed
“Business – Non-compliance – (1) Failure to obtain certain land use right certificates and
property ownership certificates” in this prospectus.
Financial assets at fair value through other comprehensive income
Our financial assets at fair value through other comprehensive income represented our
investments in unlisted and listed equity securities. The following table sets forth the breakdown
of our financial assets at fair value through other comprehensive income as at the dates
indicated:
As at 31 December
As at
30 September
20242021 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000
Unlisted equity securities 36,590 33,950 27,329 28,450
Equity securities listed in the PRC 980 1,225 1,125 1,412
Total financial assets at fair value
through other comprehensive
income 37,570 35,175 28,454 29,862
FINANCIAL INFORMATION
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--- page 455 ---
For unlisted equity securities, they represented our investment in unlisted equity interest in
Jiangsu Jiangdu Rural Commercial Bank Co., Ltd.* (ʮ̡ ),
which is a bank which is principally engaged in offering banking services to individuals and
enterprises. Our Directors confirm that our Group invested in this unlisted equity interest as part
of our treasury functions to better utilise our funds. We measured the fair value of our
investment in unlisted equity interest at the end of each reporting period using valuation
multiples, adjusted for changing trend of medium market multiples of comparable companies.
For details, please refer to Note 27(e) to the Accountants’ Report. The movement of the carrying
amount in our investment in unlisted equity securities during the Track Record Period was
mainly driven by the fair value movement. The following table sets forth the movement in
carrying amount of our investment in unlisted equity securities (i.e. fair value measurement in
Level 3 for the fair value hierarchy) during the Track Record Period:
Carrying
amount of
investment
in unlisted
equity
securities
RMB’000
As at 1 January 2021 34,390
Net unrealised gain recognised in other comprehensive income 2,200
As at 31 December 2021 and 1 January 2022 36,590
Net unrealised loss recognised in other comprehensive income (2,640)
As at 31 December 2022 and 1 January 2023 33,950
Net unrealised loss recognised in other comprehensive income (6,621)
As at 31 December 2023 and 1 January 2024 27,329
Net unrealised gain recognised in other comprehensive income 1,121
As at 30 September 2024 28,450
FINANCIAL INFORMATION
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--- page 456 ---
Inventories
Our inventories represented our trade merchandise. The following table sets forth the
breakdown of our inventories by major type as at the dates indicated:
As at 31 December
As at
30 September
20242021 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000
Wholesales
Food 123,248 174,812 159,326 173,441
Non-food products 18,606 21,716 10,522 11,100
Sub-total 141,854 196,528 169,848 184,541
Retail Stores
Food 88,871 60,714 43,309 74,455
Non-food products 14,627 23,268 21,618 16,976
Tobacco products 10,316 14,550 – –
Sub-total 113,814 98,532 64,927 91,431
Malls
Electronic appliances 9,946 11,411 11,197 11,970
Fashion, apparel and children’s wear 11,608 9,941 10,758 9,840
Gold, jewellery and accessories 15,489 14,008 17,470 28,535
Others
(note) 2,596 2,221 2,235 2,320
Sub-total 39,639 37,581 41,660 52,665
Total inventories, gross 295,307 332,641 276,435 328,637
Provision for write-down of inventories (8,931) (8,623) (10,168) (11,048)
Total inventories, net 286,376 324,018 266,267 317,589
Average inventories
(1) 244,169 305,197 295,143 291,928
Note: Others include cosmetics, beauty products, stationeries and other groceries.
FINANCIAL INFORMATION
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--- page 457 ---
FY2021 FY2022 FY2023 9M2024
Aggregated revenue from wholesales,
general sales and bulk sales
(recognised on gross basis)
(RMB’000) 1,371,445 1,252,195 1,335,337 965,350
Average inventories to revenue from
wholesales, general sales and bulk
sales
(2) 17.8% 24.4% 22.1% 22.7%
Notes:
(1) Average inventories represents the average of inventories as at 31 December of the previous year and 31
December of the current year. For average inventories as at 30 September 2024, it represents the average
of inventories as at 31 December 2023 and as at 30 September 2024.
(2) Average inventories to revenue from general sales, bulk sales and wholesales represents the average of
inventories divided by the aggregated revenue generated from general sales, bulk sales and wholesales for
the relevant year/period. For the purpose of illustration, the average of inventories to revenue from general
sales, bulk sales and wholesales for 9M2024 is calculated on an annualised basis, and may not represent
the ratio for the year ended 31 December 2024.
Our inventories amounted to approximately RMB286.4 million, RMB324.0 million,
RMB266.3 million and RMB317.6 million as at 31 December 2021, 31 December 2022, 31
December 2023 and 30 September 2024, respectively. The increase in the balance of our
inventories from as at 31 December 2021 to as at 31 December 2022 was mainly because a
higher proportion of our purchase was made during the fourth quarter of FY2022 and at the
same time our retail sales during the same period was affected by COVID-19. The increase in
the balance of our inventories from as at 31 December 2023 to as at 30 September 2024 was
mainly driven by (i) the increase in the balance for food, which was primarily because we
increased our purchase of food to accommodate the upcoming demand on food. According to the
Industry Consultant, with the COVID-19 pandemic receded in the PRC and the gradual return to
normalcy, consumers in the PRC generally were more willing to spend on purchasing food; and
(ii) the increase in the balance for gold, jewellery and accessories, which was primarily due to
the opening of a new shop in our Malls for selling gold, jewellery and accessories during
9M2024.
FINANCIAL INFORMATION
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The following table sets forth the movement of our provision for write-down of inventories
during the Track Record Period:
As at 31 December
As at
30 September
20242021 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000
Provision for write-down of inventories
at beginning of the year/period 7,499 8,931 8,623 10,168
Provision for/(reversal of) write-down
recognised during the year/period 1,432 (308) 1,545 880
Provision for write-down of
inventories at end of the year/period 8,931 8,623 10,168 11,048
The following table sets forth the ageing analysis of our inventories as at the dates
indicated:
As at 31 December
As at
30 September
20242021 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000
Within 180 days 221,366 224,643 94,129 154,878
Over 180 days but within 360 days 37,079 33,864 89,878 63,701
Over 360 days but within 720 days 18,671 49,582 52,690 65,138
Over 720 days 18,191 24,552 39,738 44,920
Total inventories, gross 295,307 332,641 276,435 328,637
Provision for write-down of inventories (8,931) (8,623) (10,168) (11,048)
Total inventories, net 286,376 324,018 266,267 317,589
FINANCIAL INFORMATION
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Our inventory balance mainly included alcoholic beverages, which constituted
approximately 41.1%, 52.6%, 56.3% and 54.4% of our total inventories balance as at 31
December 2021, 31 December 2022, 31 December 2023 and 30 September 2024. The following
table sets forth the ageing analysis of alcoholic beverages in our inventories as at the dates
indicated:
As at 31 December
As at
30 September
20242021 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000
Within 180 days 73,168 97,227 14,590 37,640
Over 180 days but within 360 days 22,843 19,584 61,770 46,734
Over 360 days but within 720 days 8,120 37,450 44,999 56,181
Over 720 days 15,491 19,975 34,338 38,914
Total inventories of alcoholic beverages,
gross 119,622 174,236 155,697 179,469
Provision for write-down of inventories (1,955) (3,870) (5,684) (6,701)
Total inventories of alcoholic
beverages, net 117,667 170,366 150,013 172,768
As at 31 December 2021, 31 December 2022, 31 December 2023 and 30 September 2024,
our balance of provision for write-down of inventories amounted to approximately RMB8.9
million, RMB8.6 million, RMB10.2 million and RMB11.0 million, respectively, representing
approximately 3.0%, 2.6%, 3.7% and 3.4% of our gross inventories balance as at the same dates.
In respect of our balance of provision for write-down of inventory, approximately 21.9%, 44.9%,
55.9% and 60.6% was in respect of our alcoholic beverages.
As at 31 December 2021, 31 December 2022, 31 December 2023 and 30 September 2024,
our inventories aged over 360 days were mainly alcoholic beverages and other Malls goods
which have a longer shelf-life. Considering that (i) our inventories aged over 360 days were not
fresh food and their shelf-life has not yet expired; and (ii) our average inventory turnover days
during the Track Record Period was below 120 days (i.e. less than 4 months) which were not
extensive, our Directors are of the view that there are no recoverability issues for our
inventories and that sufficient provision for write-down has been provided.
FINANCIAL INFORMATION
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The following table sets forth the average inventory turnover days for the years/period
indicated:
FY2021 FY2022 FY2023 9M2024
(days) (days) (days) (days)
Average inventory turnover days (1) 77.5 108.5 97.9 100.2
Note:
(1) Average inventory turnover days equal average inventories divided by cost of sales for the year and
multiplied by 365. Average inventories are calculated as inventories at the beginning of the year plus
inventories at the end of the year, divided by two. For the purpose of illustration, average inventory
turnover days for 9M2024 is calculated on an annualised basis, and may not represent the ratio for the year
ended 31 December 2024.
Our average inventory turnover days were approximately 77.5 days, 108.5 days and 97.9
days for FY2021, FY2022 and FY2023, respectively. The increase in our average turnover days
for FY2022 was mainly driven by a higher proportion of inventories for wholesale operations
which generally had a longer inventory turnover days. As disclosed above, our revenue from
wholesale began to pick up during FY2023 following the ease of COVID-19 and we were able to
achieve a decrease our average inventory turnover days to approximately 97.9 days for FY2023.
For 9M2024, our annualised average inventory turnover days was approximately 100.2 days.
As at 28 February 2025, approximately RMB271.6 million, or 82.7%, of our gross
inventories as at 30 September 2024 were subsequently consumed.
FINANCIAL INFORMATION
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Trade and bills receivables
The following table sets forth the breakdown of our trade and bills receivables as at the
dates indicated:
As at 31 December
As at
30 September
20242021 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000
Trade receivables, gross 131,485 212,270 229,286 257,096
Bills receivables, gross – – – 22,074
Sub-total 131,485 212,270 229,286 279,170
Less: loss allowance (10,294) (12,340) (15,507) (21,521)
Trade and bills receivables, net 121,191 199,930 213,779 257,649
Average trade and bills receivables (1) 83,364 160,561 206,855 235,714
Average trade and bills receivables to
total revenue (2) 5.8% 12.1% 14.8% 17.6%
Notes:
(1) Average trade and bills receivables represents the average of trade and bills receivables as at 31 December
of the previous year and 31 December of the current year. For average trade and bills receivables as at 30
September 2024, it represents the average of trade and bills receivables as at 31 December 2023 and as at
30 September 2024.
(2) Average trade and bills receivables to total revenue represents the average of trade and bills receivables
divided by total revenue for the relevant year/period. For the purpose of illustration, the average of trade
and bills receivables to total revenue for 9M2024 is calculated on an annualised basis, and may not
represent the ratio for the year ended 31 December 2024.
Our net trade and bills receivables amounted to approximately RMB121.2 million,
RMB199.9 million, RMB213.8 million and RMB257.6 million as at 31 December 2021, 31
December 2022, 31 December 2023 and 30 September 2024, respectively. The increase in the
balance of our trade and bills receivables as at 31 December 2021 to as at 31 December 2022
was mainly because a higher proportion of our wholesale was made during the fourth quarter of
FY2022.
Our trade receivables are due within 90 days from the date of billing. For our credit policy
and credit risk arising from trade receivables, please refer to Note 27(a) to the Accountants’
Report.
FINANCIAL INFORMATION
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--- page 462 ---
The following is an ageing analysis of our trade receivables as at the dates indicated, based
on the invoice date:
As at 31 December
As at
30 September
20242021 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000
Within 3 months 63,786 171,661 172,055 149,745
Over 3 months but within 6 months 52,400 21,658 30,000 61,208
Over 6 months but within 9 months 4,499 6,244 10,043 21,763
Over 9 months but within 12 months 353 356 1,601 2,752
Over 12 months 153 11 80 107
Total trade receivables, net 121,191 199,930 213,779 235,575
As at 31 December 2021, 31 December 2022, 31 December 2023 and 30 September 2024,
our balance of provision for loss allowance amounted to approximately RMB10.3 million,
RMB12.3 million, RMB15.5 million and RMB21.5 million, respectively, representing
approximately 7.8%, 5.8%, 6.8% and 7.7% of our gross trade receivables balances as at the same
dates, respectively.
FINANCIAL INFORMATION
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--- page 463 ---
In assessing provision for loss allowance, we estimated the expected loss rates with
reference to the provision matrix approach and historical actual credit losses. The expected loss
rates are based on actual loss experience over the past 3 years. These rates are adjusted to reflect
differences between economic conditions during the Track Record Period over which the historic
data has been collected, current conditions and our view of economic conditions over the
expected lives of the receivables. The following tables set forth the analysis of our expected
credit loss by time band based on due date:
As at 31 December 2021
Expected
loss rate
Gross carrying
amount
Loss
allowance
Net carrying
amount
% RMB’000 RMB’000 RMB’000
Current (not past due) 0.86% 64,338 552 63,786
Less than 3 month past due 3.63% 54,375 1,975 52,400
More than 3 months but less than
6 months past due 14.35% 5,253 754 4,499
More than 6 months but less than
9 months past due 66.64% 1,058 705 353
More than 9 months but less than
12 months past due 83.09% 905 752 153
More than 12 months past due 100.00% 5,556 5,556 –
131,485 10,294 121,191
As at 31 December 2022
Expected
loss rate
Gross carrying
amount
Loss
allowance
Net carrying
amount
% RMB’000 RMB’000 RMB’000
Current (not past due) 1.21% 173,771 2,110 171,661
Less than 3 month past due 6.61% 23,190 1,532 21,658
More than 3 months but less than
6 months past due 32.37% 9,232 2,988 6,244
More than 6 months but less than
9 months past due 69.23% 1,157 801 356
More than 9 months but less than
12 months past due 97.05% 373 362 11
More than 12 months past due 100.00% 4,547 4,547 –
212,270 12,340 199,930
FINANCIAL INFORMATION
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--- page 464 ---
As at 31 December 2023
Expected
loss rate
Gross carrying
amount
Loss
allowance
Net carrying
amount
% RMB’000 RMB’000 RMB’000
Current (not past due) 1.05% 173,878 1,823 172,055
Less than 3 month past due 5.90% 31,880 1,880 30,000
More than 3 months but less than
6 months past due 23.46% 13,121 3,078 10,043
More than 6 months but less than
9 months past due 58.25% 3,835 2,234 1,601
More than 9 months but less than
12 months past due 87.08% 619 539 80
More than 12 months past due 100.00% 5,953 5,953 –
229,286 15,507 213,779
As at 30 September 2024
Expected
loss rate
Gross carrying
amount
Loss
allowance
Net carrying
amount
% RMB’000 RMB’000 RMB’000
Current (not past due) 1.10% 151,403 1,658 149,745
Less than 3 month past due 6.14% 65,215 4,007 61,208
More than 3 months but less than
6 months past due 27.14% 29,869 8,106 21,763
More than 6 months but less than
9 months past due 60.11% 6,899 4,147 2,752
More than 9 months but less than
12 months past due 87.01% 824 717 107
More than 12 months past due 100.00% 2,886 2,886 –
257,096 21,521 235,575
Having considered the expected loss rate applied in calculating the loss allowance and that
a substantially higher expected loss rates were applied to longer past due trade receivables, our
Directors are of the view that there are not recoverability issue for our net trade receivables
balance.
FINANCIAL INFORMATION
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--- page 465 ---
The following table sets forth the average turnover days of trade and bills receivables for
the years/period indicated:
FY2021 FY2022 FY2023 9M2024
(days) (days) (days) (days)
Average turnover days of
trade and bills receivables (1) 21.3 44.1 53.9 64.2
Note:
(1) Average turnover days of trade and bills receivables equal average trade and bills receivables divided by
revenue for the year and multiplied by 365. Average trade and bills receivables are calculated as trade
receivables at the beginning of the year plus trade receivables at the end of the year, divided by two. For
the purpose of illustration, average turnover days of trade and bills receivables for 9M2024 is calculated
on an annualised basis, and may not represent the ratio for the year ended 31 December 2024.
Our average trade and bills receivables turnover days were approximately 21.3 days, 44.1
days and 53.9 days for FY2021, FY2022 and FY2023, respectively. The increase in our average
turnover days for FY2022 was mainly driven by the wholesales made near the year end in which
the trade receivables were not settled as at the year end. The increase in our average trade and
bills receivables turnover days for FY2023 was mainly driven by the sharp increase in our
wholesales revenue for FY2023 in which the relating trade receivables balances were generally
higher. For 9M2024, our annualised average turnover days of trade and bills receivables was
approximately 64.2 days.
As at 28 February 2025, approximately RMB237.3 million, or 85.0%, of our gross trade
and bills receivables as at 30 September 2024 were subsequently settled.
FINANCIAL INFORMATION
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--- page 466 ---
Prepayments, deposits and other receivables
The following table sets forth the breakdown of our prepayments, deposits and other
receivables as at the dates indicated:
As at 31 December
As at
30 September
20242021 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000
Prepayments 150,810 220,899 283,491 274,096
Other deposits and receivables 20,576 25,077 31,286 27,922
V alue-added tax recoverable 1,895 120 344 1,131
Amount due from a related party 50 0–––
173,781 246,096 315,121 303,149
Less: loss allowance (2,641) (1,982) (2,029) (2,148)
Total prepayments, deposits and
other receivables 171,140 244,114 313,092 301,001
Prepayments is the most significant component of our prepayments, deposits and other
receivables. Prepayments mainly represented the prepayment for our purchases. Our prepayments
increased from approximately RMB150.8 million as at 31 December 2021 to approximately
RMB220.9 million as at 31 December 2022. Such increase was mainly driven by (i) our
prepayment balance of approximately RMB38.6 million to Company Y , being our supplier, for
our purchase orders to it for fulfilling sales orders from our customers, namely, Company X and
Company W. Of which, (a) approximately RMB28.6 million was in respect of sales orders from
Company X for shampoo products and laptops; and (b) approximately RMB10.0 million was in
respect of sales orders from Company W for shampoo products. As Company Y delayed in the
shipment of goods which led to us not being able to promptly deliver the procurement orders to
Company X and Company W. During FY2023, Company X, Company Y and our Group entered
into a tripartite agreement, pursuant to which Company Y shall deliver the goods (i.e. shampoo
products) directly to Company X, and Company X’s advanced payment to us of approximately
RMB18.4 million and our prepayment to Company Y of approximately RMB18.0 million shall
be offset and be regarded as duly settled. As of July 2024, Company Y has delivered all the
relevant goods thereunder to Company X. During 9M2024, Company X, Company Y and our
Group further entered into a tripartite agreement, pursuant to which Company Y shall deliver the
goods (i.e. laptops) directly to Company X, and the advanced payments of approximately
RMB10.8 million we received from Company X and our prepayment of approximately RMB10.6
million to Company Y shall be offset and be regarded as duly settled. As of August 2024,
Company Y has delivered all the relevant goods thereunder to Company X. Furthermore, during
9M2024, Company W, Company Y and our Group entered into a tripartite agreement, pursuant to
which Company Y shall deliver the goods (i.e. shampoo products) directly to Company W, and
FINANCIAL INFORMATION
– 456 –


--- page 467 ---
Company W’s advanced payment to us of approximately RMB10.2 million and our prepayment
to Company Y of approximately RMB10.0 million shall be offset and be regarded as duly
settled. As of July 2024, Company Y has delivered all the relevant goods thereunder to Company
X. As such, all of our prepayment balances with Company Y were cleared as at 30 September
2024; and (ii) our prepayment balance of approximately RMB12.0 million to Supplier E, being
one of our top suppliers for FY2022 which required 100% advance payment. Our Group entered
into the abovementioned tripartite agreements having considering that (1) the delay by Company
Y led to us not being able to fulfil our sales orders to Company X and Company W, the entering
into of the tripartite agreements would relief our Group from the obligation to fulfil such orders;
(2) the tripartite agreements would not affect our Group’s economics as we are not required to
refund the advanced payments to Company X and Company W we received from them while
Company Y is not required to refund our prepayment to us; and (3) our Directors are of the view
that our Group is in a better position than Company X and Company W to negotiate more
favourable pricing and terms with Company Y as our Group bulk purchases from Company Y ,
Company X and Company W had no commercial reason to bypass our Group to deal with
Company Y directly. Our Directors confirm that, save for the abovementioned tripartite
agreements, our Group has not entered into similar tripartite arrangements with other customers
and supplier during the Track Record Period and up to the Latest Practicable Date.
Our prepayments increased from approximately RMB220.9 million as at 31 December 2022
to approximately RMB283.5 million as at 31 December 2023. Such increase was mainly driven
by (i) our prepayment balance of approximately RMB62.4 million to Yihai Kerry Food
Marketing Co. Ltd. Nanjing Branch* (ԯʱʮ̡ ), being our largest
supplier for FY2022 and FY2023; and (ii) the increase in our prepayment of approximately
RMB28.5 million to the supplier group of Y angzhou Qianbaijia Trading Co., Ltd.* ( ౮ψ̑ԺԳ
ʮ̡ ), Y angzhou Xinbaoli Trading Co., Ltd.* (ʮ̡ ) and Jiangsu
Y ouchu Technology Co., Ltd.* (ʮ̡ ), being our second largest supplier for
FY2022 and FY2023, and such increase was partially offset by the offsetting arrangement of our
prepayments of approximately RMB18.0 million to Company Y as disclosed above.
Our prepayments remained relatively stable at approximately RMB283.5 million and
RMB274.1 million as at 31 December 2023 and 30 September 2024, respectively.
As at 28 February 2025, approximately RMB217.1 million, or 79.2%, of our prepayments
as at 30 September 2024 were subsequently utilised.
Other deposits and receivables mainly represented deposits with our suppliers and the
receivables arising from year-end cutoff relating to clearance of our sales settled through
point-of-sale system.
FINANCIAL INFORMATION
– 457 –


--- page 468 ---
Restricted deposits
Our restricted deposits amounted to approximately RMB1.6 million, nil, nil and RMB1.6
million as at 31 December 2021, 31 December 2022, 31 December 2023 and 30 September 2024,
respectively. Our restricted deposits are released upon the settlement of the relevant bills
payables.
Bank loans and other borrowings
Bank loans and other borrowings are our principal component of our total liabilities,
constituting approximately 50.2%, 42.1%, 52.0% and 54.3% of our total liabilities as at 31
December 2021, 31 December 2022, 31 December 2023 and 30 September 2024, respectively.
The following table sets forth the breakdown of our bank loans and other borrowings by
current and non-current classification as at the dates indicated:
As at 31 December
As at
30 September
20242021 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000
Non-current 5,675 – 12,552 53,691
Current 385,306 372,357 462,799 425,068
Total bank loans and other
borrowings 390,981 372,357 475,351 478,759
Our interest-bearing bank loans and other borrowings are at fixed-rate and at variable rate.
As at 31 December 2021, 31 December 2022, 31 December 2023 and 30 September 2024, the
effective interest rate of our fixed-rate bank loans and other borrowings ranged from 2.5% to
5.2%, 2.5% to 5.1%, 3.5% to 8.0% and 3.2% to 8.3% per annum, respectively. As at 31
December 2021, 31 December 2022, 31 December 2023 and 30 September 2024, the effective
interest rate of our variable-rate bank loans and other borrowings ranged from one year loan
prime rate to one year loan prime rate plus 0.7175%, one year loan prime rate to one year loan
prime rate plus 0.7175%, one year loan prime rate to one year loan prime rate plus 0.7% and one
year loan prime rate to one year loan prime rate plus 0.6% per annum, respectively.
FINANCIAL INFORMATION
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--- page 469 ---
The following table sets forth the breakdown of our bank loans and other borrowings by
maturity as at the dates indicated:
As at 31 December
As at
30 September
20242021 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000
Within 1 year or on demand 385,306 372,357 462,799 425,068
After 1 year but within 2 years 5,675 – 11,371 43,680
After 2 years but within 5 years – – 1,181 10,011
Total bank loans and other
borrowings 390,981 372,357 475,351 478,759
During the Track Record Period, our bank loans and other borrowings included secured and
unsecured bank loans and other borrowings. The following table sets forth the breakdown of our
bank loans and other borrowings by secured and unsecured bank loans and other borrowings as
at the dates indicated:
As at 31 December
As at
30 September
20242021 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000
Secured 370,857 356,402 437,477 468,759
Unsecured 20,124 15,955 37,874 10,000
Total bank loans and other
borrowings 390,981 372,357 475,351 478,759
FINANCIAL INFORMATION
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--- page 470 ---
As at 31 December 2021, 31 December 2022, 31 December 2023 and 30 September 2024,
our certain assets were pledged as security for our bank loans and other borrowings, the
breakdown of which is as follows as at the dates indicated:
As at 31 December
As at
30 September
20242021 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000
Land use rights 31,579 30,452 29,325 28,480
Plants and buildings 38,920 36,012 33,045 30,864
Machinery and equipment,
office and other equipment
and motor vehicles – – 11,880 6,651
Total carrying amount of pledged
assets 70,499 66,464 74,250 65,995
Certain facilities granted to our Group were guaranteed by Mr. Gao Feng, the controlling
shareholder, and his spouse Ms. Leng Y uemei, Mr. Zhang Jiaan, the controlling shareholder, and
Ms. Yin Qin, the key management personnel. All the below mentioned guarantees will be
released upon Listing.
As at 31 December
As at
30 September
20242021 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000
Guarantees for granting bank loans and
other borrowings 252,400 266,000 290,533 304,389
Our bank loans and other borrowings decreased by approximately RMB18.6 million from
approximately RMB391.0 million as at 31 December 2021 to approximately RMB372.4 million
as at 31 December 2022. Such decrease was mainly due to our net repayments. Our bank loans
and other borrowings increased by approximately RMB103.0 million from approximately
RMB372.4 million as at 31 December 2022 to approximately RMB475.4 million as at 31
December 2023. Such increase was mainly due to our net drawdowns for expansion. Our bank
loans and other borrowings remained stable at approximately RMB475.4 million and RMB478.8
million as at 31 December 2023 and 30 September 2024, respectively.
FINANCIAL INFORMATION
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--- page 471 ---
Lease liabilities
The following table sets forth the breakdown of our lease liabilities by time band as at the
dates indicated:
As at 31 December
As at
30 September
20242021 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000
Current:
– Within 1 year 21,538 24,530 23,561 23,420
Non-current:
– after 1 year but within 2 years 17,313 16,960 21,199 21,613
– after 2 years but within 5 years 41,932 46,030 40,024 42,654
– after 5 years 23,482 18,960 15,310 13,326
82,727 81,950 76,533 77,593
Total lease liabilities 104,265 106,480 100,094 101,013
As at 31 December 2021, 31 December 2022, 31 December 2023 and 30 September 2024,
our total lease liabilities remained relatively stable at approximately RMB104.3 million,
RMB106.5 million, RMB100.1 million and RMB101.0 million, respectively.
FINANCIAL INFORMATION
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--- page 472 ---
Trade and bills payables
The following table sets forth the breakdown of our trade and bills payables as at the dates
indicated:
As at 31 December
As at
30 September
20242021 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000
Trade payables 112,537 175,819 160,721 105,581
Bills payables 50 14,800 – –
Total trade and bills payables 112,587 190,619 160,721 105,581
Average trade and bills payables (1) 107,898 151,603 175,670 133,151
Note:
(1) Average trade and bills payables represents the average of trade and bills payables as at 31 December of
the previous year and 31 December of the current year. For average trade and bills payables as at 30
September 2024, it represents the average of trade and bills payables as at 31 December 2023 and as at 30
September 2024.
Our trade and bills payables amounted to approximately RMB112.6 million, RMB190.6
million, RMB160.7 million and RMB105.6 million as at 31 December 2021, 31 December 2022,
31 December 2023 and 30 September 2024, respectively. The increase in the balance of our
trade and bills payables from as at 31 December 2021 to as at 31 December 2022 was mainly
because a higher proportion of our purchase was made during the fourth quarter of FY2022, and
the decrease in the balance of our trade and bills payables from as at 31 December 2022 to as at
31 December 2023 was mainly driven to the decrease in our purchase during FY2023 as we
consumed our merchandise carried forward from FY2022. The decrease in the balance of our
trade and bills payables from as at 31 December 2023 to as at 30 September 2024 was mainly
because we settled our trade payables more promptly during 9M2024. As advised by the Industry
Consultant, the COVID-19 pandemic has strained the cash flow of suppliers in the PRC,
compelling them to pursue faster payments to ensure liquidity and operational stability.
Furthermore, the economic uncertainties in the post-pandemic era have further intensified this
need, as suppliers are increasingly focused on strengthening their cash flow management to
mitigate risks and sustain their businesses in a volatile market environment.
FINANCIAL INFORMATION
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--- page 473 ---
The following is an ageing analysis of our trade and bills payables as at the dates indicated,
based on the invoice date:
As at 31 December
As at
30 September
20242021 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000
Within 3 months 82,412 141,860 116,819 82,307
Over 3 months but within
12 months 10,422 23,364 30,587 12,082
Over 12 months 19,753 25,395 13,315 11,192
Total trade and bills payables 112,587 190,619 160,721 105,581
All of our trade and bills payables are expected to be settled within one year or repayable
on demand.
The following table sets forth the average turnover dates of trade and bills payables for the
years indicated:
FY2021 FY2022 FY2023 9M2024
(days) (days) (days) (days)
Average turnover days of trade and bills
payables (1) 34.2 53.9 58.3 45.7
Note:
(1) Average turnover days of trade and bills payable equal average trade and bills payables divided by cost of
sales for the year and multiplied by 365. Average trade and bills payables are calculated as trade and bills
payables at the beginning of the year plus trade and bills payables at the end of the year, divided by two.
For the purpose of illustration, average turnover days of trade and bills payables for 9M2024 is calculated
on an annualised basis, and may not represent the ratio for the year ended 31 December 2024.
The increase in our average turnover days of trade and bills payables from approximately
34.2 days for FY2021 to approximately 53.9 days for FY2022 was mainly because we adjusted
our payment timeline slightly to manage our cash flow in light of COVID-19. During FY2023,
we continued with our practice and our average turnover days of trade and bills payable
increased slightly to approximately 58.3 days for FY2023. For 9M2024, our annualised average
turnover days of trade and bills payables was approximately 45.7 days.
As at 28 February 2025, approximately RMB86.6 million, or 82.1%, of our trade and bills
payables as at 30 September 2024 were subsequently settled.
FINANCIAL INFORMATION
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--- page 474 ---
Other payables and accruals
The following table sets forth the breakdown of our other payables and accruals by nature
as at the dates indicated:
As at 31 December
As at
30 September
20242021 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000
Payable for staff related costs 17,686 17,246 16,773 10,822
Deposits received 14,441 29,563 11,746 10,664
Other taxes payable 8,867 5,422 4,145 12,527
Others 4,583 12,253 13,091 26,743
Total other payables and accruals 45,577 64,484 45,755 60,756
Payable for staff related costs mainly represented salaries and bonus payables. As at 31
December 2021, 31 December 2022, 31 December 2023 and 30 September 2024, our payable for
staff related costs remained relatively stable at appropriately RMB17.7 million, RMB17.2
million, RMB16.8 million and RMB10.8 million, respectively. The decrease in the balance as at
30 September 2024 was mainly because the bonus accrued as at 31 December 2023 was paid
during 9M2024.
Deposits received mainly represented guaranteed deposits from suppliers and other
miscellaneous deposits received. Included in the balance as at 31 December 2022 was a balance
of approximately RMB18.4 million representing an advanced payment from a customer
(Company X) for a sales order. In an effort to fulfil such sales order, we placed purchase orders
to a supplier (Company Y) and made prepayment to Company Y . For details of our prepayment
to Company Y , please refer to the paragraph headed “Description of certain line items in the
consolidated statements of financial position – Prepayments, deposits and other receivables” in
this section. Subsequently, as Company Y delayed in the shipment of goods which led to us not
being able to promptly deliver the procurement orders to Company X, during FY2023 Company
X, Company Y and our Group entered into a tripartite agreement, pursuant to which Company
shall deliver the goods directly to Company X, and Company X’s advanced payment to us of
approximately RMB18.4 million and our prepayment to Company Y of approximately RMB18.0
million shall be offset and be regarded as duly settled. Our balance of deposits received
remained relatively stable at approximately RMB11.7 million and RMB10.7 million as at 31
December 2023 and 30 September 2024, respectively.
FINANCIAL INFORMATION
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--- page 475 ---
Other taxes payable mainly included value-added tax payable. The increase in our other
taxes payable from approximately RMB4.1 million as at 31 December 2023 to approximately
RMB12.5 million as at 30 September 2024 was mainly driven by the increase in value-added tax
payable, which was primarily due to the timing of our suppliers issuing their value-added tax
invoices.
As disclosed in the paragraphs headed “History and Development – Cessation of sales of
tobacco products and disposal of tobacco product inventory assets” and “Business – Our product
portfolio – Cessation of sales of tobacco products and disposal of tobacco product inventory
assets” in this prospectus, our Group ceased the sales of tobacco products on 31 December 2023.
The increase in others from approximately RMB13.1 million as at 31 December 2023 to
approximately RMB26.7 million as at 30 September 2024 was mainly driven by the increase in
the balance collected on behalf in respect of sales of tobacco products.
Contract liabilities
Our contract liabilities mainly comprised advance receipts from customers and prepaid
cards. The following table sets forth the breakdown of our contract liabilities as at the dates
indicated:
As at 31 December
As at
30 September
20242021 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000
Advance receipts from customers 43,696 62,236 47,273 46,676
Prepaid cards 63,703 64,271 62,042 66,499
Advance receipts from operating lease 2,555 2,635 1,742 1,795
Customer loyalty program points
liability 1,481 1,062 1,063 988
Total contract liabilities 111,435 130,204 112,120 115,958
Advanced receipts from customers
Our advance receipts from customers represented the amounts of consideration received in
advance as prepayments by customers which were short term as the respective revenue was
expected to be recognised within a few days when the goods are delivered to customers. As at
28 February 2025, approximately RMB39.0 million, or 83.6%, of advanced receipts from
customers as at 30 September 2024 were subsequently recognised as revenue.
FINANCIAL INFORMATION
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--- page 476 ---
Prepaid cards
Prepaid cards represented the consideration prepaid by the customers to the cards which
can be redeemed upon the customers purchasing our merchandise products. Our prepaid cards
are not subject to expiry dates and are transferrable. Revenue is recognised when customers
accept the products so revenue from prepaid cards is recognised when the prepaid cards are
redeemed by customers. Based on recent trends in redemption by customers of the prepaid cards,
it is expected that most of the prepaid cards will be redeemed within one year from purchase.
During the Track Record Period and up to the Latest Practicable Date, we did not make any
forfeiture in respect of prepaid cards.
Approximately RMB25.2 million or 39.6% of the balance as at 31 December 2021 was
subsequently recognised as revenue for FY2022; approximately RMB25.1 million or 39.0% of
the balance as at 31 December 2022 was subsequently recognised as revenue for FY2023; and
approximately RMB17.8 million or 28.7% of the balance as at 31 December 2023 was
subsequently recognised as revenue for 9M2024.
Customer loyalty program points liability
Our Group operates customer loyalty programs for sales to retail customers where points
can be earned by customers and to be used to reduce the cost of future purchases. The contract
liability in respect of unredeemed retail customer loyalty points will be recognised as revenue
when the points are redeemed by those customers or expire, which is expected to occur before
the end of the following year based on the expiry terms of the loyalty points. The balances as at
31 December 2021, 31 December 2022 and 31 December 2023 had been fully subsequently
recognised as revenue for FY2022, FY2023 and 9M2024, respectively.
The following table sets forth the movement of our contract liabilities during the Track
Record Period:
Advance
receipts from
customers Prepaid cards
Advance
receipts from
operating lease
Customer
loyalty program
points liability Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
As at 1 January 2021 106,289 59,675 1,249 1,255 168,468
Increase in contract liabilities excluding amounts
recognised as revenue during the year 43,696 28,623 2,555 1,481 76,355
Less: decrease in contract liabilities as a result of
recognising revenue during the period that was
included in the contract liabilities at the
beginning of the year (106,289) (24,595) (1,249) (1,255) (133,388)
FINANCIAL INFORMATION
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--- page 477 ---
Advance
receipts from
customers Prepaid cards
Advance
receipts from
operating lease
Customer
loyalty program
points liability Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
As at 31 December 2021 and
1 January 2022 43,696 63,703 2,555 1,481 111,435
Increase in contract liabilities excluding amounts
recognised as revenue during the year 62,236 25,744 2,635 1,062 91,707
Less: decrease in contract liabilities as a result of
recognising revenue during the period that was
included in the contract liabilities at the
beginning of the year (43,696) (25,206) (2,555) (1,481) (79,938)
As at 31 December 2022 and
1 January 2023 62,236 64,271 2,635 1,062 130,204
Increase in contract liabilities excluding amounts
recognised as revenue during the year 26,294 22,848 1,742 1,063 51,947
Less: decrease in contract liabilities as a result of
recognising revenue during the period that was
included in the contract liabilities at the
beginning of the year (41,257) (25,077) (2,635) (1,062) (70,031)
As at 31 December 2023 and 1 January 2024 47,273 62,042 1,742 1,063 112,120
Increase in contract liabilities excluding amounts
recognised as revenue during the period 46,676 22,243 1,795 988 71,702
Transferred to other payables and accruals (20,979) – – – (20,979)
Less: decrease in contract liabilities as a result of
recognising revenue during the period that was
included in the contract liabilities at the
beginning of the period (26,294) (17,786) (1,742) (1,063) (46,885)
As at 30 September 2024 46,676 66,499 1,795 988 115,958
As at 31 January 2025, approximately RMB49.2 million, or 42.4%, of our contract
liabilities as at 30 September 2024 were subsequently recognised as revenue.
FINANCIAL INFORMATION
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Taxation payable
As at 31 December 2021, 31 December 2022, 31 December 2023 and 30 September 2024,
our taxation payable amounted to approximately RMB7.4 million, RMB14.2 million, RMB15.0
million and RMB14.4 million, respectively. The following table sets forth the movement of our
taxation payable during the Track Record Period:
As at 31 December
As at
30 September
20242021 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000
Taxation payable – at beginning of the
year/period 8,415 7,432 14,220 15,027
Provision for income tax 17,133 17,655 20,210 14,141
Tax paid (18,116) (10,867) (19,403) (14,745)
Taxation payable – at end of the
year/period 7,432 14,220 15,027 14,423
SELECTED FINANCIAL RATIOS
The following tables set forth certain key financial ratios as at/for the years/period ended
31 December 2021, 31 December 2022, 31 December 2023 and 30 September 2024:
As at/For the years ended 31 December
As at/
For the
nine months
ended
30 September
20242021 2022 2023
Gross profit margin (1) 19.7% 22.7% 21.5% 20.7%
Net profit margin (2) 2.4% 3.8% 3.7% 2.4%
Return on equity (3) 8.8% 11.4% 10.5% 6.2%
Return on assets (4) 3.0% 3.8% 3.7% 2.3%
Current ratio (5) 1.1 1.2 1.3 1.4
Quick ratio (6) 0.7 0.8 0.9 1.0
Gearing ratio (7) 78.2% 70.1% 68.8% 83.3%
Interest coverage ratio (8) 3.6 4.2 4.5 3.2
Notes:
(1) Gross profit margin represents gross profit for the year/period divided by total revenue for the respective
year/period.
FINANCIAL INFORMATION
– 468 –


--- page 479 ---
(2) Net profit margin represents profit for the year/period divided by total revenue for the respective
year/period.
(3) Return on equity represents profit for the year/period divided by total equity as at the end of that
year/period. For the purpose of illustration, return on equity for 9M2024 is calculated on an annualised
basis, and may not represent the ratio for the year ended 31 December 2024.
(4) Return on assets represents profit for the year/period divided by total assets as at the end of that
year/period. For the purpose of illustration, return on assets for 9M2024 is calculated on an annualised
basis, and may not represent the ratio for the year ended 31 December 2024.
(5) Current ratio represents total current assets divided by total current liabilities as at the relevant year/period
end.
(6) Quick ratio represents total current assets less inventories divided by total current liabilities as at the
relevant year/period end.
(7) Gearing ratio represents total bank loans and other borrowings and lease liabilities, less cash and cash
equivalents, divided by total equity as at the relevant year/period end.
(8) Interest coverage ratio represents profit before net finance costs and taxation divided by net finance costs
for the relevant year/period.
Gross profit margin
Our gross profit margin was approximately 19.7%, 22.7%, 21.5% and 20.7% for FY2021,
FY2022, FY2023 and 9M2024, respectively. For analysis of our gross profit margin, please refer
to the paragraph headed “Principal components of the consolidated statements of profit or loss –
Gross profit and gross profit margin” in this section.
Net profit margin
Our net profit margin was approximately 2.4%, 3.8%, 3.7% and 2.4% for FY2021, FY2022,
FY2023 and 9M2024, respectively. Please refer to the paragraph headed “Review of results of
operations” in this section.
Return on equity
Our return on equity increased from approximately 8.8% for FY2021 to approximately
11.4% for FY2022. Such increase for FY2022 were mainly driven by the increase in our net
profit for FY2022.
Our return on equity remained relatively stable at approximately 11.4% and 10.5% for
FY2022 and FY2023, respectively.
For 9M2024, our annualised return on equity was approximately 6.2%.
FINANCIAL INFORMATION
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Return on assets
Our return on assets increased from approximately 3.0% for FY2021 to approximately 3.8%
for FY2022. Such increase for FY2022 were mainly driven by the increase in our net profit for
FY2022.
Our return on assets remained relatively stable at approximately 3.8% and 3.7% for
FY2022 and FY2023, respectively.
For 9M2024, our annualised return on assets was approximately 2.3%.
Current ratio
Our current ratio was approximately 1.1, 1.2, 1.3 and 1.4 as at 31 December 2021, 31
December 2022, 31 December 2023 and 30 September 2024, respectively. For analysis of our net
current assets, please refer to the paragraph headed “Liquidity and capital resources – Net
current assets” in this section.
Quick ratio
Our quick ratio was approximately 0.7, 0.8, 0.9 and 1.0 as at 31 December 2021, 31
December 2022, 31 December 2023 and 30 September 2024, respectively. Our quick ratio was
below 1.0 as inventories are our material assets, which constituted approximately 24.3%, 24.3%,
18.9% and 22.7% of our total assets as at 31 December 2021, 31 December 2022, 31 December
2023 and 30 September 2024, respectively. During the Track Record Period, we did not have
prolonged average inventory turnover days. For FY2021, FY2022 and FY2023, our average
inventory turnover days were approximately 77.5 days, 108.5 days and 97.9 days, respectively.
For 9M2024, our annualised average inventory turnover days was approximately 100.2 days.
Gearing ratio
Our gearing ratio decreased from approximately 78.2% as at 31 December 2021 to
approximately 70.1% as at 31 December 2022, mainly due to the slight decrease in our bank
loans and other borrowings. Our gearing ratio decreased from approximately 70.1% as at 31
December 2022 to approximately 68.8% as at 31 December 2023, mainly due to decrease in
bank loans and other borrowings. Our gearing ratio increased from approximately 68.8% as at 31
December 2023 to approximately 83.3% as at 30 September 2024, mainly due to the decrease in
our cash and cash equivalents as we recorded net cash used in operating, investing and financing
activities for 9M2024.
FINANCIAL INFORMATION
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Interest coverage ratio
Our interest coverage ratio increased from approximately 3.6 times for FY2021 to
approximately 4.2 times for FY2022, mainly due to the increase in profit before interest and
taxation. For FY2023, our interest coverage ratio remained stable at approximately 4.5 times.
Our interest coverage ratio decreased to approximately 3.2 times for 9M2024, mainly due to
decrease in our profit before taxation primarily driven by the increase in our Listing expenses
for 9M2024.
CAPITAL EXPENDITURES
Our capital expenditures primarily comprised expenditures for additions of property, plant
and equipment. Our additions of property, plant and equipment amounted to approximately
RMB78.7 million, RMB53.5 million, RMB60.1 million and RMB45.1 million for FY2021,
FY2022, FY2023 and 9M2024, respectively.
Our current plan with respect to future capital expenditures is subject to changes based on
the evolution of our business plan, market conditions and our outlook of future business
conditions. As we continue to expand, we may incur additional capital expenditures.
INDEBTEDNESS
During the Track Record Period and at the close of business on 31 January 2025, being the
latest practicable date on which such information was available to us, our Group did not have
any indebtedness except for those disclosed below.
During the Track Record Period and up to 31 January 2025, apart from intra-group
liabilities and those disclosed below, our Group did not have outstanding indebtedness or any
loan capital issued and outstanding or agreed to be issued, bank overdrafts, loans or other
similar indebtedness, liabilities under acceptances (other than normal trade bills) or acceptable
credits, debentures, mortgages, charges, finance leases or hire purchases commitments,
guarantees, material covenants, or other material contingent liabilities.
As at 31 January 2025, our unutilised banking facilities amounted to approximately
RMB69.4 million.
FINANCIAL INFORMATION
– 471 –


--- page 482 ---
Our indebtedness comprised bank borrowings and lease liabilities. The following table sets
forth our indebtedness as at the dates indicated:
As at 31 December
As at
30 September
2024
As at
31 January
20252021 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(unaudited)
Non-current liabilities
Bank loans and other borrowings 5,675 – 12,552 53,691 58,875
Lease liabilities 82,727 81,950 76,533 77,593 74,739
88,402 81,950 89,085 131,284 133,614
Current liabilities
Bank loans and other borrowings 385,306 372,357 462,799 425,068 425,151
Lease liabilities 21,538 24,530 23,561 23,420 25,080
406,844 396,887 486,360 448,488 450,231
Total 495,246 478,837 575,445 579,772 583,845
Our Directors confirmed that as at the Latest Practicable Date, the agreements under our
borrowings did not contain any material covenant that would have a material adverse effect on
our ability to make additional borrowings or issue debt or equity securities in the future. Our
Directors further confirmed that we had no defaults in bank and other borrowings, nor did we
breach any covenants (that were not waived) during the Track Record Period and up to the
Latest Practicable Date. Our Directors further confirmed that (i) during the Track Record Period
and up to the Latest Practicable Date, we did not experience any difficulty in obtaining bank
loans and other borrowings, default in payment of bank loans and other borrowings, or breach of
covenants; and (ii) there has been no material change in our Group’s indebtedness since 31
January 2025 and up to the date of this prospectus.
FINANCIAL INFORMATION
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--- page 483 ---
RELATED PARTY TRANSACTIONS
During the Track Record Period, other than guarantees for granting bank loans (the details
of which are disclosed in the paragraph headed “Description of certain line items in the
consolidated statements of financial position – Bank loans and other borrowings” in this section)
and remuneration of key management personnel of our Group, our major related party
transactions can be classified into the following categories: (i) sales of goods; and (ii) purchase
of property, plant and equipment.
For FY2021, FY2022, FY2023 and 9M2024, we recognised revenue for sales of goods of
approximately RMB71,000, RMB64,000, nil and nil from our related parties, respectively.
For FY2021, FY2022, FY2023 and 9M2024, we purchased property, plant and equipment of
approximately RMB647,000, nil, RMB89,000 and nil from our related parties, respectively.
For details of the related party transactions, please refer to Note 29 to the Accountants’
Report. Our Directors confirm that, all our related party transactions during the Track Record
Period were 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 Group and our Shareholders as a whole, and would not distort our results
of operations over the Track Record Period or make our historical results over the Track Record
Period not reflective of our expectations for our future performance.
CAPITAL COMMITMENTS
The following table sets forth our capital commitments as at the dates indicated which were
not provided in the consolidated financial statements:
As at 31 December
As at
30 September
20242021 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000
Authorised and contracted for 6,744 521 425 1,191
OFF-BALANCE SHEET ARRANGEMENTS
As at the Latest Practicable Date, we did not have any material off-balance sheet
arrangements.
CONTINGENT LIABILITIES
Our Directors confirm that, as at the Latest Practicable Date, we did not have any material
contingent liabilities or guarantees.
FINANCIAL INFORMATION
– 473 –


--- page 484 ---
FINANCIAL RISKS AND CAPITAL MANAGEMENT
Our Group is exposed to credit risk, liquidity risk, interest rate risk and currency risk in the
normal course of our business. For details of these risks and our financial risk management
policies and practices to manage these risks, please refer to Note 27 to the Accountants’ Report.
Our primary objectives when managing capital are to safeguard our ability to continue as a
going concern. We monitor our capital structure on the basis of an adjusted net debt-to-capital
ratio. For details, please refer to Note 26(e) to the Accountants’ Report.
DIVIDENDS
No dividend has been paid or declared by our Company during the Track Record Period
and up to the date of this prospectus.
Currently, we do not have a formal dividend policy or a pre-determined dividend
distribution ratio. Any dividends we pay will be determined at the absolute discretion of our
Board, taking into account of factors including our actual and expected results of operations,
cash flow and financial position, general business conditions and business strategies, expected
working capital requirements and future expansion plans, legal, regulatory and other contractual
restrictions, and other factors that our Board deems to be appropriate. Our Shareholders may
approve, in a general meeting, any declaration of dividends, which must not exceed the amount
recommended by our Board.
DISTRIBUTABLE RESERVES
As at 30 September 2024, our Company had retained profits of RMB90.3 million. The
retained profits are reserves available for distribution to our Shareholders.
UNAUDITED PRO FORMA ADJUSTED CONSOLIDATED NET TANGIBLE ASSETS
Please refer to the paragraph headed “A. Unaudited Pro Forma Statement of Adjusted
Consolidated Net Tangible Assets” set out in Appendix IIA to this prospectus.
FINANCIAL INFORMATION
– 474 –


--- page 485 ---
LISTING EXPENSES
The total amount of Listing expenses in connection with the Global Offering, including
underwriting commissions, is estimated to be approximately RMB38.9 million (equivalent to
approximately HK$42.2 million) (based on the mid-point of the indicative Offer Price range),
representing approximately 28.6% of our estimated gross proceeds from the Global Offering
(based on the mid-point of the indicative Offer Price range and assuming the Over-allotment
Option is not exercised). We estimate that our Listing expenses will comprise (i)
underwriting-related expenses, including underwriting commission, of approximately RMB8.1
million; and (ii) non underwriting-related expenses of approximately RMB30.8 million,
including (a) fees paid and payable to legal advisers and reporting accountant of approximately
RMB17.6 million; and (b) other fees and expenses including sponsor fee of approximately
RMB13.2 million. The Listing expenses of: (i) approximately RMB14.8 million (equivalent to
approximately HK$16.1 million) is directly attributable to the issue of the Offer Shares and is to
be accounted for as a deduction from equity in accordance with the relevant accounting
standard; and (ii) approximately RMB24.1 million (equivalent to approximately HK$26.1
million) has been or is to be charged to the consolidated statements of profit or loss, of which
(a) nil, approximately RMB1.7 million, RMB3.4 million and RMB7.3 million have been charged
for FY2021, FY2022, FY2023 and 9M2024, respectively; and (b) nil and approximately
RMB11.7 million is expected to be charged for the three months ended 31 December 2024 and
the three months ending 31 March 2025, respectively, prior to or upon Listing. Expenses in
relation to the Listing are non-recurring in nature.
DISCLOSURE REQUIRED UNDER THE LISTING RULES
Our Directors confirm that, as at the Latest Practicable Date, they were not aware of any
circumstances that would give rise to a disclosure requirements under Rules 13.13 to 13.19 of
the Listing Rules.
RECENT DEVELOPMENT AND NO MATERIAL ADVERSE CHANGE
Our business operation remained stable after the Track Record Period and up to the date of
this prospectus and there was no material adverse change to our business and its industry, market
or regulatory environment. Subsequent to the Track Record Period and up to the date of this
prospectus, wholesale and retail operations continued to be our main stream of revenue. In
addition, (i) as at the Latest Practicable Date, the number of our supermarkets remained stable at
51 and the number of our convenience stores increased two to 109, respectively; and (ii)
subsequent to the Track Record Period and up to the Latest Practicable Date, we had commenced
business relationship with not less than 30 wholesale customers and 10 suppliers.
Based on our unaudited financial information for the year ended 31 December 2024 as set
out in Appendix IIB to this prospectus, our Directors expect that, there will be a decrease in our
net profit for the year ended 31 December 2024 as compared to that for FY2023, which was
primarily attributable to (i) the decrease in our revenue from our retail operations mainly driven
by the decrease in revenue from sales of food as a result of the change in food consumption
FINANCIAL INFORMATION
– 475 –


--- page 486 ---
behaviour of consumer and our cessation of sales of tobacco products as disclosed above; and
(ii) the increase in Listing expenses, and was partially offset by the increase in our revenue from
our wholesale operations mainly driven by the increase in revenue from sales of food as a result
of the change in food consumption behaviour of consumer as disclosed above. For further
details, please refer to the section headed “Unaudited Preliminary Financial Information for the
year ended 31 December 2024” in Appendix IIB to this prospectus. The unaudited financial
information in respect of our consolidated statement of financial position as at 31 December
2024, our consolidated statement of profit or loss, our consolidated statement of profit or loss
and other comprehensive income and the related notes thereto for the year ended 31 December
2024 as set out in the section headed “Unaudited Preliminary Financial Information for the year
ended 31 December 2024” in Appendix IIB to this prospectus has been agreed by the Reporting
Accountants to the amounts set out in the Group’s unaudited consolidated financial statements
for the year ended 31 December 2024 following their work under Practice Note 730 “Guidance
for Auditors Regarding Preliminary Announcements of Annual Results” issued by the Hong
Kong Institute of Certified Public Accountants (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 unaudited
preliminary financial information.
Our Directors expect that there will be a decrease in our net profit for the year ending 31
December 2025 as compared to that for the year ended 31 December 2024, which is primarily
attributable to (i) the increase in Listing expenses; (ii) increase in professional service fee for
compliance following the Listing; and (iii) the increase in relocation expenses in respect of our
relocation plan in respect of Muyuan Central Kitchen (the details of which is disclosed in the
paragraph headed “Business – Non-compliance – (1) Failure to obtain certain land use right
certificates and property ownership certificates – current status and remedies” in this
prospectus).
After due and careful considerations, our Directors confirm that, save for the expenses in
connection with the Listing, up to the date of this prospectus, there has been no material adverse
change in our financial or trading position or prospects since 30 September 2024, and there had
been no events since 30 September 2024 which would materially affect the information shown in
our consolidated financial statements included in the Accountants’ Report set out in Appendix I.
FINANCIAL INFORMATION
– 476 –


--- page 487 ---
FUTURE PLANS
For a detailed description of our future plans, please refer to the paragraph headed
“Business – Our business strategies” in this prospectus.
REASONS FOR LISTING AND USE OF PROCEEDS
Our Company is seeking the Listing in order to (i) satisfy our genuine funding need for our
business expansion; (ii) enhance our corporate profile and competitiveness; (iii) enable us to
access an efficient and sustainable fund raising platform; and (iv) attract and retain talents.
As stated in our business strategies, we aim to further strengthen our market position,
increase our market share and capture the growth in the PRC retail industry. We intend to
achieve our business objective mainly through (i) expanding our presence and number of Retail
Stores; (ii) expanding our warehousing capacity by establishing a new distribution centre; (iii)
expanding our processing capacity of meals by establishing a new central kitchen; and (iv)
enhancing our ERP system and infrastructure systems to improve our operational efficiency. The
net proceeds from the Global Offering will strengthen our capital base and will provide funding
for achieving our business strategies and carrying out our future plans as set out in the
paragraph headed “Business – Our business strategies” in this prospectus.
We have genuine funding need for our business expansion
According to the Industry Report, the retail sales of chain supermarkets in the central
region of Jiangsu Province is forecasted to grow from approximately RMB20.6 billion in 2024 to
RMB22.5 billion in 2027 at a CAGR of approximately 3.1%. The retail sales of convenience
stores in the central region of Jiangsu Province is expected to grow from approximately
RMB7.85 billion in 2024 to RMB10.74 billion in 2027 at a CAGR of approximately 11.0%.
Driven by the strong economic growth momentum and increasing income and expenditure level,
the retail sales of chain supermarkets and convenience stores in the central region of Jiangsu
Province is expected to maintain a steady growth. The sales of prepared food in the central
region of Jiangsu Province is forecasted to grow from approximately RMB10.64 billion in 2024
to RMB19.78 billion in 2027 at a CAGR of approximately 22.96%. Our Directors believe that
there will be strong demand for prepared food in the central region of Jiangsu Province mainly
attributable to the fast-paced lifestyle of PRC citizens and increasing awareness on nutritional
value and safety of food.
In view of the said expected market growth and in line with our strategies to expand our
Retail Stores and meal business, our Directors believe that the proceeds from the Global
Offering will enable us to leverage the market growth and deepen our market penetration by
implementing our business strategies.
Our Directors consider that it is necessary to maintain a sufficient level of working capital
as our Group generally relied on cash inflows from customers to meet payment obligations to
our suppliers as well as to meet the expenses required in the daily operations of our Group
FUTURE PLANS AND USE OF PROCEEDS
– 477 –


--- page 488 ---
during the Track Record Period. Our Group in the past generally relied upon our internal
resources for the purposes of business expansion. However, our Directors consider that such
resources are only sufficient for our Group for expansion on a limited scale. Moreover, were our
Group to only utilise our internal resources, our Directors believe that our Group would not be
able to capitalise upon the growth opportunities in the chain supermarket and convenience store
market and prepared food market in the PRC and there is no guarantee that our Group’s internal
resources can continue to provide sufficient capital, or that our Group will be able to obtain
sufficient bank borrowings on favourable terms, prior to the full implementation of our Group’s
proposed and future business strategies.
A listing status would enhance our corporate profile and competitiveness
Our Directors believe that achieving a listed status is crucial to the long-term growth of our
Group and to compete with our competitors. We believe that the Listing could attract potential
customers and suppliers which are more willing to establish business relationships with listed
companies. It may also generate reassurance amongst our existing customers and suppliers and
can potentially lead to more business opportunities, such as obtaining distribution rights of more
products in the central region of Jiangsu Province from more well-established or upcoming
international and domestic brands. Our Directors consider a listing status would enhance our
competitiveness among our industry peers.
As such, apart from the proceeds from the Global Offering, our Directors consider that a
listing status would bring intangible benefits to our Group and fuel the future growth of our
Group.
A listing status would enable us to access an efficient and sustainable fund raising platform
The Listing will provide a broader shareholder base and a market for the trading of the
Shares to our Company. The Listing will allow institutional, professional and other investors in
Hong Kong to invest in our Company. In addition, our Directors are of the view that the Listing
will enable our Group to conduct secondary fund raising in the Hong Kong stock market, if
necessary, for our further expansion in the future. On the contrary, debt financing does not offer
such similar advantages.
Our Directors consider that the net proceeds from the Listing will also assist us in any
future debt financing, if necessary. Being a private company without listing status, our Directors
consider it would be difficult for us to obtain debt financing without guarantees or other
collaterals to be provided by our Controlling Shareholders. As there will be more stringent
financial reporting requirements under the Listing Rules for companies with a listing status,
banks will be able to evaluate our financial position more effectively, and hence, the approval
process for any future borrowings can be smoothened. We will have more flexibility in the
management of our cash flow as a result of the better accessibility to banking facilities.
FUTURE PLANS AND USE OF PROCEEDS
– 478 –


--- page 489 ---
We have to attract and retain talents
Our Directors believe that human resources are valuable assets for the long-term growth of
our business and consider that experienced and talented personnel may be more willing to work
at listed companies. We believe that a listing status would help attract more experienced staff
and talented people to join our management team in the future, as well as retaining our existing
staff. Our Directors are of the view that a listing status will also improve our existing staff’s
work morale, thereby improving the quality of our services which is beneficial to our long-term
development.
USE OF PROCEEDS
We estimate that the net proceeds we will receive from the Global Offering (after deducting
underwriting commissions, fees and anticipated expenses payable by us in connection with the
Global Offering) will be approximately HK$105.1 million, assuming an Offer Price of HK$2.75
per Share, being the mid-point of the Offer Price range stated in this prospectus and the
Over-allotment Option is not exercised.
We currently intend to apply these net proceeds for the following purposes:
 approximately RMB30.0 million (equivalent to approximately HK$32.5 million), or
approximately 30.9% of the net proceeds from the Global Offering will be used for
the opening of new Retail Stores, of which (i) approximately RMB9.0 million
(equivalent to approximately HK$9.7 million) will be used for store renovation; (ii)
approximately RMB8.7 million (equivalent to approximately HK$9.4 million) will be
used for purchase of shelves; (iii) approximately RMB8.1 million (equivalent to
approximately HK$8.8 million) will be used for purchase of cold storage facilities,
lightings, air-conditioning, CCTV surveillance system and POS system; and (iv)
approximately RMB4.2 million (equivalent to approximately HK$4.6 million) will be
used for installation of fire safety system. The total capital expenditure of the opening
of new Retail Stores is currently estimated to be approximately RMB32.4 million
(equivalent to approximately HK$35.1 million) of which, approximately RMB30.0
million (equivalent to approximately HK$32.5 million) will be financed with the net
proceeds from the Global Offering, and approximately RMB2.4 million (equivalent to
approximately HK$2.6 million) will be financed by our internal resources;
 approximately RMB40.0 million (equivalent to approximately HK$43.3 million), or
approximately 41.2% of the net proceeds from the Global Offering will be used for
establishing a new distribution centre (the “ New Distribution Centre ”), of which (i)
approximately RMB14.4 million (equivalent to approximately HK$15.6 million) will
be used to acquire a parcel of land located in Jiangdu District, Jiangsu Province, the
PRC with a total site area of approximately 13,000 sq. m. We plan to use 10,000 sq.m.
of the land for the construction of the New Distribution Centre; (ii) approximately
RMB17.7 million (equivalent to approximately HK$19.2 million) will be used for the
construction of the New Distribution Centre; and (iii) approximately RMB7.9 million
FUTURE PLANS AND USE OF PROCEEDS
– 479 –


--- page 490 ---
(equivalent to approximately HK$8.5 million) will be used for acquiring shelves,
lightings and ancillary facilities and installing fire safety system. The capital
expenditure for establishing the New Distribution Centre is currently estimated to be
approximately RMB45.5 million (equivalent to approximately HK$49.3 million), of
which RMB40.0 million (equivalent to approximately HK$43.3 million) will be
financed with the net proceeds from the Global Offering, and approximately RMB5.5
million (equivalent to approximately HK$6.0 million) will be financed by our internal
resources;
 approximately RMB26.0 million (equivalent to approximately HK$28.1 million), or
approximately 26.8% of the net proceeds from the Global Offering will be used for
establishing a new central kitchen (the “ New Central Kitchen ”) for meals, of which
(i) approximately RMB4.8 million (equivalent to approximately HK$5.2 million) will
be used for construction of the New Central Kitchen; (ii) approximately RMB9.7
million (equivalent to approximately HK$10.5 million) will be used for acquiring
machines and equipment; (iii) approximately RMB10.0 million (equivalent to
approximately HK$10.8 million) will be used for acquiring and installing fire safety
system, ventilation system, cold storage facilities, utilities, air-conditioning, CCTV
surveillance system and ancillary facilities; and (iv) approximately RMB1.5 million
(equivalent to approximately HK$1.6 million) will be used for acquiring additional
vehicles for the delivery of meals to our customers. The capital expenditure for
establishing the New Central Kitchen is currently estimated to be approximately
RMB29.3 million (equivalent to approximately HK$31.7 million), of which RMB26.0
million (equivalent to approximately HK$28.2 million) will be financed with the net
proceeds from the Global Offering, and approximately RMB3.3 million (equivalent to
approximately HK$3.5 million) will be financed by our internal resources; and
 approximately RMB1.1 million (equivalent to approximately HK$1.2 million), or
approximately 1.1% of the net proceeds from the Global Offering, will be used for
enhancing our ERP system and infrastructure systems to improve our operational
efficiency. The capital expenditure for the upgrade of our ERP system and
infrastructure systems is currently estimated to be approximately RMB8.5 million
(equivalent to approximately HK$9.3 million) in aggregate of which, approximately
RMB1.1 million (equivalent to approximately HK$1.2 million) will be financed with
the net proceeds from the Global Offering, and approximately RMB7.4 million
(equivalent to approximately HK$8.1 million) will be financed by our internal
resources.
Assuming the Over-allotment Option is not exercised at all, if the Offer Price is set at
HK$3.00 per Share (being the high end of the Offer Price range), the net proceeds from the
Global Offering will increase to approximately HK$117.7 million.
Assuming the Over-allotment Option is not exercised at all, if the Offer Price is set at
HK$2.50 per Share (being the low end of the Offer Price range), the net proceeds from the
Global Offering will decrease to approximately HK$92.5 million.
FUTURE PLANS AND USE OF PROCEEDS
– 480 –


--- page 491 ---
The above allocation of the net proceeds will be adjusted on a pro-rata basis in the event
that the Offer Price is fixed at a higher or lower level compared to the mid-point of the
estimated Offer Price range stated in this prospectus.
If the Over-allotment Option is exercised in full, we estimate that we would receive
additional net proceeds of approximately HK$20.8 million, assuming an Offer Price of HK$2.75
per Share, being the mid-point of the Offer Price range. The additional net proceeds received
from the exercise of the Over-allotment Option will be applied pro rata to the above mentioned
purposes. If the Over-allotment Option is exercised at the higher or lower end of the Offer Price
range, we will adjust our allocation of the net proceeds for the above mentioned purposes on a
pro-rata basis.
For the net proceeds of the Global Offering which are not immediately used in accordance
with the purposes described above, we will only deposit such proceeds into short-term
interest-bearing accounts at licensed commercial banks and/or other authorised financial
institutions (as defined under the Securities and Futures Ordinance or the applicable laws and
regulations in other jurisdiction).
FUTURE PLANS AND USE OF PROCEEDS
– 481 –


--- page 492 ---
Implementation plan
Purposes Implementation targets
Estimated investments
from net proceeds for
the year ending
31 December 2025
and the three months
ending 31 March 2026
1. Strengthen our market
position further by
expanding our presence
and number of Retail
Stores
(a) Store renovation Approximately RMB9.0
million (equivalent to
approximately HK$9.7
million)
(b) Purchase of shelves Approximately RMB8.7
million (equivalent to
approximately HK$9.4
million)
(c) Purchase of cold storage
facilities, lightings,
air-conditioning, CCTV
surveillance system and
POS system
Approximately RMB8.1
million (equivalent to
approximately HK$8.8
million)
(d) Installation of fire safety
system
Approximately RMB4.2
million (equivalent to
approximately HK$4.6
million)
(e) Recruitment of staff for
Retail Stores
Internal resources
FUTURE PLANS AND USE OF PROCEEDS
– 482 –


--- page 493 ---
Purposes Implementation targets
Estimated investments
from net proceeds for
the year ending
31 December 2025
and the three months
ending 31 March 2026
2. Expanding our
warehousing capacity by
establishing a new
distribution centre
(a) Acquire a parcel of land
located in Jiangdu
District, Jiangsu
Province, the PRC with a
total site area of
approximately 13,000
sq. m.
Approximately RMB14.4
million (equivalent to
approximately
HK$15.6 million)
(b) Construction of the New
Distribution Centre
Approximately RMB17.7
million (equivalent to
approximately
HK$19.2 million)
(c) Acquiring shelves,
lightings and ancillary
facilities and installing
fire safety system
Approximately RMB7.9
million (equivalent to
approximately HK$8.5
million)
(d) Recruitment of staff for
the new distribution
centre
Internal resources
FUTURE PLANS AND USE OF PROCEEDS
– 483 –


--- page 494 ---
Purposes Implementation targets
Estimated investments
from net proceeds for
the year ending
31 December 2025
and the three months
ending 31 March 2026
3. Expanding our
processing capacity of
meals by establishing a
new central kitchen
(a) Construction of the New
Central Kitchen
Approximately RMB4.8
million (equivalent to
approximately HK$5.2
million)
(b) Acquiring machines and
equipment
Approximately RMB9.7
million (equivalent to
approximately
HK$10.5 million)
(c) Acquiring and installing
fire safety system,
ventilation system, cold
storage facilities,
utilities, air-conditioning,
CCTV surveillance
system and ancillary
facilities
Approximately RMB10.0
million (equivalent to
approximately
HK$10.8 million)
(d) Acquiring additional
vehicles for the delivery
of meals to our
customers
Approximately RMB1.5
million (equivalent to
approximately HK$1.6
million)
(e) Recruitment of staff for
the new central kitchen
Internal resources
4. Enhancing our ERP
system and infrastructure
systems to improve our
operational efficiency
Capital expenditure for the
upgrade of our ERP system
and infrastructure systems
Approximately RMB1.1
million (equivalent to
approximately HK$1.2
million)
If there is any material change to the use of proceeds disclosed above after the Listing, we
will make appropriate announcement(s) in due course.
FUTURE PLANS AND USE OF PROCEEDS
– 484 –


--- page 495 ---
THE CORNERSTONE PLACING
We have entered into a cornerstone investment agreement (the “ Cornerstone Investment
Agreement ”) with a cornerstone investor set out below (the “ Cornerstone Investor ”), pursuant
to which the Cornerstone Investor has agreed, subject to certain conditions, to subscribe at the
Offer Price for such number of Offer Shares (rounded down to the nearest whole board lot of
1,000 H Shares) that may be purchased for a maximum amount of approximately US$5.0 million
(approximately HK$39.0 million) at the Offer Price (inclusive of the brokerage fee, the SFC
transaction levy, the AFRC transaction levy and the Stock Exchange trading fee) (the
“Cornerstone Placing ”).
Assuming an Offer Price of HK$2.50 (being the low-end of the indicative Offer Price range
stated in this prospectus), the maximum total number of Offer Shares to be subscribed for or
purchased by the Cornerstone Investor would be 15,444,000 H Shares, representing (a)
approximately 28.8% of the total number of the Offer Shares, assuming the Over-allotment
Option is not exercised; (b) approximately 25.1% of the total number of the Offer Shares,
assuming the Over-allotment Option is fully exercised; (c) approximately 7.2% of the total
Shares immediately upon the completion of the Global Offering, assuming the Over-allotment
Option is not exercised; and (d) approximately 7.0% of the total Shares immediately upon the
completion of the Global Offering, assuming the Over-allotment Option is fully exercised.
Assuming an Offer Price of HK$3.00 (being the high-end of the indicative Offer Price
range stated in this prospectus), the maximum total number of Offer Shares to be subscribed for
or purchased by the Cornerstone Investor would be 12,870,000 H Shares, representing (a)
approximately 24.0% of the total number of the Offer Shares, assuming the Over-allotment
Option is not exercised; (b) approximately 20.9% of the total number of the Offer Shares,
assuming the Over-allotment Option is fully exercised; (c) approximately 6.0% of the total
Shares immediately upon the completion of the Global Offering, assuming the Over-allotment
Option is not exercised; and (d) approximately 5.8% of the total Shares immediately upon the
completion of the Global Offering, assuming the Over-allotment Option is fully exercised.
Assuming an Offer Price of HK$2.75 (being the mid-point of the indicative Offer Price
range stated in this prospectus), the maximum total number of Offer Shares to be subscribed for
or purchased by the Cornerstone Investor would be 14,040,000 H Shares, representing (a)
approximately 26.2% of the total number of the Offer Shares, assuming the Over-allotment
Option is not exercised; (b) approximately 22.8% of the total number of the Offer Shares,
assuming the Over-allotment Option is fully exercised; (c) approximately 6.6% of the total
Shares immediately upon the completion of the Global Offering, assuming the Over-allotment
Option is not exercised; and (d) approximately 6.3% of the total Shares immediately upon the
completion of the Global Offering, assuming the Over-allotment Option is fully exercised.
CORNERSTONE INVESTOR
– 485 –


--- page 496 ---
We believe that the Cornerstone Placing will ensure a reasonable size of solid commitment
at the beginning of the marketing period of the Global Offering which will help raise the profile
of our Company. In addition, the Cornerstone Placing will signify confidence of the market in
our Company and our business prospects. We were directly approached by the Cornerstone
Investor for potential investment opportunities.
To the best knowledge of our Company, (i) the Cornerstone Investor is an Independent
Third Party and is not a connected person of our Company and its close associate; (ii) the
subscription of the Offer Shares by the Cornerstone Investor is not financed directly or
indirectly by our Company, Directors, Supervisors, chief executive of our Company, Controlling
Shareholders, substantial Shareholders or existing Shareholders, or any of its subsidiaries or
their respective close associates; and (iii) the Cornerstone Investor is not accustomed to take
instructions from our Company, Directors, Supervisors, chief executive, Controlling
Shareholders, substantial Shareholders or existing Shareholders or any of its subsidiaries or their
respective close associates in relation to the acquisition, disposal, voting or other disposition of
the Offer Shares registered in its name or otherwise held by it.
The Cornerstone Investor will not subscribe for any Offer Shares under the Global Offering
other than pursuant to the Cornerstone Investment Agreement, and the Cornerstone Placing will
form part of the International Offering. The Cornerstone Investor has agreed to pay for the
relevant Offer Shares that it has subscribed before dealings in the H Shares commence on the
Stock Exchange. The Offer Shares to be subscribed for by the Cornerstone Investor will rank
pari passu in all respects with the other fully paid Offer Shares in issue and will be counted
towards the public float of our Company under Rule 8.08 of the Listing Rules. Immediately
following the completion of the Global Offering, (i) the Cornerstone Investor will not have any
representation on our Board; (ii) the Cornerstone Investor will not become a substantial
Shareholder of our Company; or (iii) the H Shares in our Company being beneficially owned by
the three largest public Shareholders will be less than 50% of the Shares in public hands for the
purpose of Rule 8.08(3) of the Listing Rules.
As confirmed by the Cornerstone Investor, its subscription under the Cornerstone Placing
would be financed by the funds of its investors. There are no side agreements or arrangements
between our Company and the Cornerstone Investor or any benefit, direct or indirect, conferred
on the Cornerstone Investor by virtue of or in relation to the Cornerstone Placing or the Listing,
other than a guaranteed allocation of the relevant Offer Shares at the Offer Price. The
Cornerstone Investor has confirmed that all necessary approvals (including approvals from its
shareholders, if relevant) have been obtained with respect to the Cornerstone Placing and that no
specific approval from any stock exchange (if relevant) is required for the cornerstone
investment.
To the best knowledge of our Company, no preferential treatment has been granted by our
Company to the Cornerstone Investor other than the preferential treatment of assured entitlement
to the Cornerstone Investor following the principles as set out in Chapter 4.15 (Placing-related
Matters) of the Guide for New Listing Applicants. The Offer Shares to be subscribed for by the
Cornerstone Investor might be affected by the reallocation of the Offer Shares between the
CORNERSTONE INVESTOR
– 486 –


--- page 497 ---
International Offering and the Hong Kong Public Offering. If the total demand for Offer Shares
in the Hong Kong Public Offering falls within the circumstance as set out in the section headed
“Structure of the Global Offering – The Hong Kong Public Offering – Reallocation” in this
prospectus, the number of Offer Shares to be acquired by the Cornerstone Investor under the
International Offering may be deducted on a pro rata basis to satisfy the public demands under
the Hong Kong Public Offering. Further, the Joint Overall Coordinators and our Company can
adjust the allocation of the number of Offer Shares to be subscribed by the Cornerstone Investor
in their sole and absolute discretion for the purpose of satisfying Rule 8.08(3) of the Listing
Rules which provides that no more than 50% of the Shares in public hands on the Listing Date
can be beneficially owned by the three largest public shareholders. Details of the actual number
of Offer Shares to be allocated to the Cornerstone Investor will be disclosed in the allotment
results announcement of the Global Offering, which is expected to be published on or around 28
March 2025.
The Cornerstone Investor has agreed that the Joint Overall Coordinators may defer the
delivery of all or any part of the Offer Shares it has subscribed for to a date later than the
Listing Date. Despite having agreed to a potential delayed delivery arrangement, the Cornerstone
Investor has agreed that it shall pay for the relevant Offer Shares that it has subscribed before
the Listing Date, and there will be no delayed settlement of payment. The delayed delivery
arrangement is in place to facilitate the over-allocation in the International Offering. There will
be no delayed delivery if there is no over-allocation in the International Offering. For details of
the Over-allotment Option and the stabilisation action by the Stabilising Manager, please refer to
“Structure of the Global Offering – The International Offering – Over-allotment Option” and
“Structure of the Global Offering – Stabilisation” in this prospectus, respectively.
OUR CORNERSTONE INVESTOR
The information about our Cornerstone Investor set forth below has been provided to our
Company by the Cornerstone Investor in connection with the Cornerstone Placing:
Top Legend SPC (“Top Legend”) for and on behalf of Ocean One SP
Top Legend has agreed to subscribe for such number of H Shares (rounded down to
the nearest whole board lot of 1,000 H Shares) which may be subscribed with an aggregate
amount of US$5.0 million at the Offer Price (including brokerage, SFC transaction levy and
Stock Exchange trading fee).
Top Legend SPC is an exempted company incorporated with limited liability on 30
May 2022 and registered as a segregated portfolio company incorporated in the Cayman
Islands acting for and on behalf of one of its segregated portfolios, namely Ocean One SP
(being a fund incorporated in the Cayman Islands), in relation to the subscription of the
Offer Shares pursuant to the Cornerstone Placing.
CORNERSTONE INVESTOR
– 487 –


--- page 498 ---
As at the Latest Practicable Date, each of Mr. SIT, Hon (“ Mr. Sit ”) and Ms. TSANG,
Karen Ka Y an (“ Ms. Tsang ”) holds 50 management shares of Top Legend SPC,
representing the entire number of management shares of Top Legend SPC.
Ocean One SP is a segregated portfolio of Top Legend SPC and is not a legal entity.
Any action of Ocean One SP shall be taken by Top Legend SPC acting on behalf of and for
the account of Ocean One SP . Ocean One SP is managed by Top Legend Global Investment
Limited and EOD Holdings Limited in their capacity as the co-managers.
As at the Latest Practicable Date, Ocean Fusion Industry Group Co., Ltd, a company
incorporated in the British Virgin Islands wholly-owned by Zhang Xiaoyun, held 33% of
the participating shares of Ocean One SP . Save for the aforesaid, none of the investors are
interested in 30% or more of the participating shares of Ocean One SP .
Zhang Xiaoyun is the beneficial owner of the entire share capital of EOD Holdings
Limited and he has over 15 years of investment and entrepreneurial experience. He is
currently working in the robotic industry.
Top Legend Global Investment Limited is a company incorporated in the British
Virgin Islands with limited liability on 28 July 2023, and is owned as to 50% by Mr. Sit
and 50% by Ms. Tsang, respectively. Both Mr. Sit and Ms. Tsang are the directors of Top
Legend Global Investment Limited.
EOD Holdings Limited is a company incorporated in the British Virgin Islands with
limited liability on 8 August 2024, and is wholly owned by Mr. Zhang Xiaoyun. Mr. Zhang
Xiaoyun and Mr. Ma Lin are the directors of EOD Holdings Limited.
Mr. Sit invested in various types of financial assets such as private equity and stock
loan. Before that, Mr. Sit was the Chief Operating Officer of a trading company,
responsible for setting the strategy and overseeing business development for the luxury
watches retail and wholesale company.
Ms. Tsang focuses on both pre-IPO and IPO investments, as well as fund raising for
listed companies. Ms. Tsang is the founder of an investment firm, Legend Global Group
Limited, which was founded in March 2015. She has led a numerous of investments in
private equity, IPO, and secondary market.
CORNERSTONE INVESTOR
– 488 –


--- page 499 ---
The table below sets forth details of the Cornerstone Placing:
Based on an Offer Price of HK$2.50
(being the low-end of the indicative Offer Price range)
Assuming the Over-allotment
Option is not exercised
Assuming the Over-allotment
Option is fully exercised
Cornerstone Investor
Maximum gross
investment
amount (Note 1)
Maximum
number of
Offer
Shares (Note 2)
Approximate
% of the total
number of the
Offer Shares
Approximately
% of the total
Shares
immediately
upon the
completion of
the Global
Offering
Approximately
% of the total
number of the
Offer Shares
Approximately
% of the total
Shares
immediately
upon the
completion of
the Global
Offering
Top Legend US$5.0 million 15,444,000 28.83% 7.21% 25.07% 6.95%
Total US$5.0 million 15,444,000 28.83% 7.21% 25.07% 6.95%
Based on an Offer Price of HK$2.75
(being the mid-point of the indicative Offer Price range)
Assuming the Over-allotment
Option is not exercised
Assuming the Over-allotment
Option is fully exercised
Cornerstone Investor
Maximum gross
investment
amount (Note 1)
Maximum
number of
Offer
Shares (Note 2)
Approximate
% of the total
number of the
Offer Shares
Approximately
% of the total
Shares
immediately
upon the
completion of
the Global
Offering
Approximately
% of the total
number of the
Offer Shares
Approximately
% of the total
Shares
immediately
upon the
completion of
the Global
Offering
Top Legend US$5.0 million 14,040,000 26.21% 6.55% 22.79% 6.32%
Total US$5.0 million 14,040,000 26.21% 6.55% 22.79% 6.32%
CORNERSTONE INVESTOR
– 489 –


--- page 500 ---
Based on an Offer Price of HK$3.00
(being the high-end of the indicative Offer Price range)
Assuming the Over-allotment
Option is not exercised
Assuming the Over-allotment
Option is fully exercised
Cornerstone Investor
Maximum gross
investment
amount (Note 1)
Maximum
number of
Offer
Shares (Note 2)
Approximate
% of the total
number of the
Offer Shares
Approximately
% of the total
Shares
immediately
upon the
completion of
the Global
Offering
Approximately
% of the total
number of the
Offer Shares
Approximately
% of the total
Shares
immediately
upon the
completion of
the Global
Offering
Top Legend US$5.0 million 12,870,000 24.03% 6.01% 20.89% 5.79%
Total US$5.0 million 12,870,000 24.03% 6.01% 20.89% 5.79%
Notes:
1. The maximum gross investment amount is inclusive of the brokerage fee, the SFC transaction levy,
the AFRC transaction levy and the Stock Exchange trading fee.
2. Subject to rounding down to the nearest whole board lot of 1,000 H Shares.
CLOSING CONDITIONS PRECEDENTS
The subscription obligation of the Cornerstone Investor under the Cornerstone Investment
Agreement is subject to, among other things, the following closing conditions:
(a) the Hong Kong Underwriting Agreement and the International Underwriting
Agreement being entered into and having become effective and unconditional (in
accordance with their respective original terms or as subsequently waived or varied by
agreement of the parties thereto) by no later than the time and date as specified in the
Hong Kong Underwriting Agreement and the International Underwriting Agreement,
and neither of the Underwriting Agreements having been terminated;
(b) the Offer Price having been agreed upon among our Company and the Joint Overall
Coordinators (for themselves and on behalf of the Underwriters);
(c) the Stock Exchange having granted the approval for the listing of, and permission to
deal in, the H Shares (including the H Shares under the Cornerstone Placing) as well
as other applicable waivers and approvals and such approvals, permissions or waivers
having not been revoked prior to the commencement of dealings in the H Shares on
the Main Board of the Stock Exchange;
CORNERSTONE INVESTOR
– 490 –


--- page 501 ---
(d) no Laws (as defined in the Cornerstone Investment Agreement) shall have been
enacted or promulgated by any Governmental Authority (as defined in the Cornerstone
Investment Agreement) which prohibits the consummation of the transactions
contemplated in the Global Offering or the Cornerstone Investment Agreement, and
there shall be no orders or injunctions from a court of competent jurisdiction in effect
precluding or prohibiting consummation of such transaction;
(e) the representations, warranties, acknowledgements, undertakings and confirmations of
the Cornerstone Investor under the Cornerstone Investment Agreement are (as at the
date of the Cornerstone Investment Agreement) and will be (as at the Listing Date or,
if applicable, the Delayed Delivery Date (as defined in the Cornerstone Investment
Agreement)) accurate, true and complete in all material respects and not misleading
and that there is no material breach of the Cornerstone Investment Agreement on the
part of the Cornerstone Investor; and
(f) our respective representations, warranties, undertakings and confirmations under the
Cornerstone Investment Agreement are (as at the date of the Cornerstone Investment
Agreement) and will be (as at the Listing Date or, if applicable, the Delayed Delivery
Date (as defined in the Cornerstone Investment Agreement)) accurate, true and
complete in all material respects and not misleading and that there is no material
breach of the Cornerstone Investment Agreement on our part.
RESTRICTIONS ON THE CORNERSTONE INVESTOR
The Cornerstone Investor has agreed that it will not, and will cause its affiliates not to,
whether directly or indirectly, at any time during the period of six months from (and inclusive
of) the Listing Date (the “ Lock-up Period ”), dispose of, in any way, any of the Offer Shares or
any interest in any company or entity holding such Offer Shares that it has purchased pursuant
to the Cornerstone Investment Agreement, save for certain limited circumstances, such as
transfers to any of its wholly-owned subsidiaries who will be bound by the same obligations of
the Cornerstone Investor, including the Lock-up Period restriction.
CORNERSTONE INVESTOR
– 491 –


--- page 502 ---
HONG KONG UNDERWRITERS
Red Solar Capital Limited
CMBC Securities Company Limited
CCB International Capital Limited
CMB International Capital Limited
uSMART Securities Limited
Star River Securities Limited
Eddid Securities and Futures Limited
Innovax Securities Limited
Long Bridge HK Limited
UNDERWRITING ARRANGEMENTS AND EXPENSES
Hong Kong Public Offering
Hong Kong Underwriting Agreement
Pursuant to the Hong Kong Underwriting Agreement, we are offering 5,357,000 Hong Kong
Offer Shares for subscription by the public in Hong Kong on, and subject to, the terms and
conditions set out in this prospectus.
Subject to:
(a) the Stock Exchange granting the listing of, and permission to deal in, the H Shares in
issue and to be issued as mentioned in this prospectus on the Main Board of the Stock
Exchange and such listing approval and permission not subsequently being revoked;
and
(b) certain other conditions set out in the Hong Kong Underwriting Agreement (including
but not limited to the Offer Price being agreed upon between us and the Joint Overall
Coordinators (for themselves and on behalf of the Underwriters)),
the Hong Kong Underwriters have agreed severally, and not jointly, to subscribe for, or procure
subscribers for, the Hong Kong Offer Shares which are being offered but are not taken up under
the Hong Kong Public Offering, on the terms and conditions set out in this prospectus and the
Hong Kong Underwriting Agreement. If, for any reason, the Offer Price is not agreed between us
and the Joint Overall Coordinators (for themselves and on behalf of the Underwriters) by 12:00
noon on Thursday, 27 March 2025, the Global Offering will not proceed and will lapse.
The Hong Kong Underwriting Agreement is conditional upon and subject to the
International Underwriting Agreement having been signed and becoming unconditional and not
having been terminated.
UNDERWRITING
– 492 –


--- page 503 ---
Grounds for termination
The obligations of the Hong Kong Underwriters to subscribe or procure subscribers for the
Hong Kong Offer Shares will be subject to termination by notice in writing to us from the Joint
Overall Coordinators (for themselves and on behalf of the Hong Kong Underwriters) with
immediate effect if any of the following events occur at or prior to 8:00 a.m. on the Listing
Date:
(a) there has come to the notice of the Joint Overall Coordinators:
(i) that any statement contained in any of this prospectus and/or any notices,
announcements, advertisements, communications or other documents issued or
used by or on behalf of our Company in connection with the Global Offering
(including any supplement or amendment thereto) (collectively, the “ Relevant
Documents ”), was, when it was issued, or has become, untrue, incorrect,
misleading or deceptive in any material respect or that any forecast, expression
of opinion, intention or expectation expressed in any of the Relevant Documents
is not, in the sole and absolute opinion of the Joint Overall Coordinators (for
themselves and on behalf of the Hong Kong Underwriters), fair and honest and
based on reasonable assumptions, when taken as a whole; or
(ii) that any matter has arisen or has been discovered which would or might, had it
arisen or been discovered immediately before the respective dates of the
publication of the Relevant Documents, constitute an omission of a material
nature therefrom; or
(iii) any breach of a material nature of any of the obligations imposed or to be
imposed upon any party to the Hong Kong Underwriting Agreement or the
International Underwriting Agreement (in each case, other than on the part of any
of the Underwriters); or
(iv) any event, act or omission which gives or is likely to give rise to any liability of
any of our Company, our executive Directors and our Controlling Shareholders
(the “ Warrantors ”) pursuant to the indemnities given by them under the Hong
Kong Underwriting Agreement or under the International Underwriting
Agreement; or
(v) any change or development involving a prospective adverse change in the assets,
liabilities, general affairs, management, business, prospects, shareholders’ equity,
profits, losses, results of operations, position or conditions (financial, trading or
otherwise) or performance of any member of our Group (“ Group Company ”); or
UNDERWRITING
– 493 –


--- page 504 ---
(vi) any breach of, or any event or circumstance rendering untrue or incorrect in any
material respect, any of the representations, warranties, agreements and
undertakings to be given by the Warrantors respectively in terms set out in the
Hong Kong Underwriting Agreement; or
(vii) the approval by the Stock Exchange of the listing of, and permission to deal in,
the H Shares (including any additional H Shares that may be issued upon the
exercise of the Over-allotment Option) is refused or not granted, or is qualified
(other than subject to customary conditions), on or before the Listing Date, or if
granted, the approval is subsequently withdrawn, qualified (other than by
customary conditions) or withheld; or
(viii) we withdraw any of the Relevant Documents or the Global Offering; or
(ix) any person (other than the Hong Kong Underwriters) has withdrawn or sought to
withdraw its consent to being named in any of the Relevant Documents or to the
issue of any of the Relevant Documents; or
(x) that a petition or an order is presented for the winding-up or liquidation of any
Group Company or any Group Company makes any composition or arrangement
with its creditors or enters into a scheme of arrangement or any resolution is
passed for the winding-up of any Group Company or a provisional liquidator,
receiver or manager is appointed to take over all or part of the assets or
undertaking of any Group Company or anything analogous thereto occurs in
respect of any Group Company; or
(xi) an authority or a political body or organisation in any relevant jurisdiction has
commenced any investigation or other action, or announced an intention to
investigate or take other action, against any of our Directors, Supervisors and
senior management member of our Group as set out in the section headed
“Directors, Supervisors and Senior Management” in this prospectus; or
(xii) a portion of the orders in the bookbuilding process, which is considered by the
Joint Overall Coordinators (for themselves and on behalf of the Hong Kong
Underwriters) in its sole and absolute opinion to be material, at the time the
International Underwriting Agreement is entered into, or the investment
commitments by any cornerstone investors after signing of agreements with such
cornerstone investors, have been withdrawn, terminated or cancelled, and the
Joint Overall Coordinators (for themselves and on behalf of the Hong Kong
Underwriters) in their sole and absolute discretion, conclude that it is therefore
inadvisable or inexpedient or impracticable to proceed with the Global Offering;
or
UNDERWRITING
– 494 –


--- page 505 ---
(xiii) any loss or damage has been sustained by any Group Company (howsoever
caused and whether or not the subject of any insurance or claim against any
person) which is considered by the Joint Overall Coordinators (for themselves
and on behalf of the Hong Kong Underwriters) in their sole and absolute opinion
to be material to our Group as a whole; or
(b) there shall develop, occur, exist or come into effect:
(i) any local, national, regional, international event or circumstance, or series of
events or circumstances, beyond the reasonable control of the Underwriters
(including, without limitation, any acts of government or orders of any courts,
strikes, calamity, crisis, lock-outs, fire, explosion, flooding, civil commotion,
acts of war, outbreak or escalation of hostilities (whether or not war is declared),
acts of God, acts of terrorism, declaration of a local, regional, national or
international emergency, riot, public disorder, economic sanctions, outbreaks of
diseases, pandemics or epidemics (including, without limitation, COVID-19,
avian influenza A (H5N1), Swine Flu (H1N1), Middle East Respiratory Syndrome
or such related or mutated forms) or interruption or delay in transportation); or
(ii) any change or development involving a prospective change, or any event or
circumstance or series of events or circumstances likely to result in any change
or development involving a prospective change, in any local, regional, national,
international, financial, economic, political, military, industrial, fiscal, legal
regulatory, currency, credit or market conditions (including, without limitation,
conditions in the stock and bond markets, money and foreign exchange markets,
the interbank markets and credit markets); or
(iii) any moratorium, suspension or restriction on trading in securities generally
(including, without limitation, any imposition of or requirement for any minimum
or maximum price limit or price range) on the Stock Exchange, the New Y ork
Stock Exchange, the London Stock Exchange, the NASDAQ Global Market, the
Shanghai Stock Exchange, the Shenzhen Stock Exchange and the Tokyo Stock
Exchange; or
(iv) any new law(s), rule(s), statute(s), ordinance(s), regulation(s), guideline(s),
opinion(s), notice(s), circular(s), order(s), judgment(s), decree(s) or ruling(s) of
any governmental authority (“ Law(s) ”), or any change or development involving
a prospective change in existing Laws, or any event or circumstance or series of
events or circumstances likely to result in any change or development involving a
prospective change in the interpretation or application of existing Laws by any
court or other competent authority, in each case, in or affecting any of Hong
Kong, the PRC, the United States, or any other jurisdictions relevant to any
Group Company or the Global Offering (the “ Specific Jurisdictions ”); or
UNDERWRITING
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(v) any general moratorium on commercial banking activities, or any disruption in
commercial banking activities, foreign exchange trading or securities settlement
or clearance services or procedures or matters, in or affecting any of the Specific
Jurisdictions; or
(vi) any imposition of economic sanctions, in whatever form, directly or indirectly,
by or for any of the Specific Jurisdictions; or
(vii) a change or development involving a prospective change in or affecting taxation
or exchange control (or the implementation of any exchange control), currency
exchange rates or foreign investment Laws (including, without limitation, any
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 material fluctuation in the
exchange rate of the Hong Kong dollar or the Renminbi against any foreign
currency) in or affecting any of the Specific Jurisdictions or affecting an
investment in the Shares; or
(viii) any change or development involving a prospective change, or a materialisation
of, any of the risks set out in the section headed “Risk Factors” in this
prospectus; or
(ix) any litigation or claim of any third party being threatened or instigated against
any Group Company or any of the Warrantors; or
(x) any of our Directors, Supervisors and senior management members of our Group
as set out in the section headed “Directors, Supervisors and Senior Management”
in this prospectus being charged with an indictable offence or prohibited by
operation of Law or otherwise disqualified from taking part in the management
of a company; or
(xi) the chairman or chief executive officer of our Company vacating his office; or
(xii) the commencement by any governmental, regulatory or political body or
organisation of any action against a Director or Supervisors in his or her capacity
as such or an announcement by any governmental, regulatory or political body or
organisation that it intends to take any such action; or
(xiii) a contravention by any Group Company or any Director or Supervisors of the
Listing Rules, the Companies Ordinance or any other Laws applicable to the
Global Offering; or
(xiv) a prohibition on our Company for whatever reason from allotting, issuing or
selling the Offer Shares and/or the Shares to be issued upon the exercise of the
Over-allotment Option pursuant to the terms of the Global Offering; or
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(xv) non-compliance of this prospectus and the other Relevant Documents or any
aspect of the Global Offering with the Listing Rules or any other Laws
applicable to the Global Offering; or
(xvi) the issue or requirement to issue by our Company of a supplement or amendment
to this prospectus and/or any other documents in connection with the Global
Offering pursuant to the Companies (Winding Up and Miscellaneous Provisions)
Ordinance, the Listing Rules or any requirement or request of the Stock
Exchange and/or the SFC; or
(xvii) a valid demand by any creditor for repayment or payment of any indebtedness of
any Group Company or in respect of which any Group Company is liable prior to
its stated maturity,
which in each case individually or in aggregate in the sole and absolute opinion of the Joint
Overall Coordinators (for themselves and on behalf of the Hong Kong Underwriters):
(a) has or is or will or may or could be expected to have a material adverse effect on the
assets, liabilities, business, general affairs, management, shareholders’ equity, profits,
losses, results of operation, financial, trading or other condition or position or
prospects or risks of our Company or any Group Company or on any present or
prospective shareholder of our Company in his, her or its capacity as such; or
(b) has or will or may have or could be expected to have a material adverse effect on the
success, marketability or pricing of the Global Offering or the level of applications
under the Hong Kong Public Offering or the level of interest under the International
Offering; or
(c) makes or will make or may make it inadvisable, inexpedient or impracticable for any
part of the Hong Kong Underwriting Agreement or the Global Offering to be
performed or implemented or proceeded with as envisaged or to market the Global
Offering or shall otherwise result in an interruption to or delay thereof; or
(d) has or will or may have the effect of making any part of the Hong Kong Underwriting
Agreement (including underwriting) incapable of performance in accordance with its
terms or which prevents the processing of applications and/or payments pursuant to
the Global Offering or pursuant to the underwriting thereof.
UNDERWRITING
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Undertakings given to the Stock Exchange pursuant to the Listing Rules
By us
We have undertaken to the Stock Exchange that we shall not issue any further Shares or
securities convertible into our equity securities (whether or not of a class already listed) or enter
into any agreement to issue any such Shares or securities within six months from the Listing
Date (whether or not such issue of Shares will be completed within six months from the Listing
Date), except in certain circumstances prescribed by Rule 10.08 of the Listing Rules.
By our Controlling Shareholders
Pursuant to Rule 10.07 of the Listing Rules, each of our Controlling Shareholders has
undertaken to us and to the Stock Exchange that except pursuant to the Global Offering, the
Over-allotment Option, he/it shall not:
(a) in the period commencing on the date by reference to which disclosure of its
shareholdings in our Company is made in this prospectus and ending on the date
which is six months from the Listing Date, 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 securities that it is shown to beneficially own in this prospectus (the
“Relevant Shares ”); or
(b) in the period of a further six months commencing on the date on which the period
referred to in paragraph (a) above expires, dispose of, nor enter into any agreement to
dispose of or otherwise create any options, rights, interests or encumbrances in respect
of, any of the Relevant Shares if, immediately following such disposal or upon the
exercise or enforcement of such options, rights, interests or encumbrances, he/it will
cease to be a controlling shareholder (as defined in the Listing Rules) of our
Company.
Each of our Controlling Shareholders has further undertaken to us and the Stock Exchange
that, within the period commencing on the date by reference to which disclosure of his/its
shareholdings in us is made in this prospectus and ending on the date which is 12 months from
the Listing Date, it will:
(a) when he/it pledges or charges any securities in our Company beneficially owned by
him/it in favour of an authorised institution pursuant to Note (2) to Rule 10.07(2) of
the Listing Rules, immediately inform us in writing of such pledge or charge together
with the number of our securities so pledged or charged; and
(b) when he/it receives indications, either verbal or written, from the pledgee or chargee
that any of our pledged or charged securities beneficially owned by him/it will be
disposed of, immediately inform us in writing of such indications.
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We will also inform the Stock Exchange as soon as we have been informed of the matters
mentioned in the paragraphs (a) and (b) above by any of our Controlling Shareholders and
subject to the then requirements of the Listing Rules disclose such matters by way of an
announcement which is published in accordance with Rule 2.07C of the Listing Rules as soon as
possible.
Undertakings given to the Hong Kong Underwriters
Undertakings by us
We have 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 Hong Kong Underwriters that except pursuant to the Global Offering
(including pursuant to the Over-allotment Option), during the period commencing on the date of
the Hong Kong Underwriting Agreement and ending on, and including, the date that is six
months after the Listing Date (the “ First Six-Month Period ”), we will not, and will procure
each other member of our Group not to, without the prior written consent of the Sole Sponsor
and the Joint Overall Coordinators (for themselves and on behalf of the Hong Kong
Underwriters) and unless in compliance with the requirements of the Listing Rules:
(a) allot, issue, sell, accept subscription for, offer to allot, issue, repurchase, sell, contract
or agree to allot, issue or sell, mortgage, charge, pledge, assign, hypothecate, lend,
grant or sell any option, warrant, contract or right to subscribe for or purchase, grant
or purchase any option, warrant, contract or right to allot, issue or sell, or otherwise
transfer or dispose of or create a pledge, charge, lien, mortgage, option, restriction,
right of first refusal, security interest, claim, pre-emption rights, equity interest, third
party rights or interests or rights of the same nature as that of the foregoing or other
encumbrances or security interest of any kind or another type of preferential
arrangement (including without limitation, retention arrangement) having similar
effect (“ Encumbrance ”) over, or agree to transfer or dispose of or create an
Encumbrance over, either directly or indirectly, conditionally or unconditionally, any
legal or beneficial interest in, Shares or other securities of our Company, or any shares
or other securities of such other member of our Group, as applicable, or any interest
in any of the foregoing (including, without limitation, any securities convertible into
or exchangeable or exercisable for or that represent the right to receive, or any other
warrants or other rights to purchase, any Shares or other securities of our Company, as
applicable), or deposit any Shares or other securities of our Company, as applicable,
with a depositary in connection with the issue of depositary receipts; or
UNDERWRITING
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(b) enter into any swap or other arrangement that transfers to another, in whole or in part,
any of the economic consequences of ownership (legal or beneficial) of any Shares or
other securities of our Company, or any shares or other securities of such other
member of our Group, as applicable, or any interest in any of the foregoing
(including, without limitation, any securities convertible into or exchangeable or
exercisable for or that represent the right to receive, or any warrants or other rights to
purchase, any Shares or other securities of our Company, as applicable); or
(c) enter into any transaction with the same economic effect as any transactions specified
in (a) or (b) above; or
(d) offer to or agree to or announce any intention to enter into or effect any transaction
specified in (a), (b) or (c) above,
in each case, whether any of the transactions specified in (a), (b) or (c) above is to be settled by
delivery of H Shares or other securities of our Company or shares or other securities of such
other member of our Group, as applicable, or in cash or otherwise (whether or not the issue of
such H Shares or other shares or securities will be completed within the First Six-Month
Period).
We have also undertaken that we will not, and will procure each other member of our
Group not to, enter into any of the transactions specified in (a), (b) or (c) above or offer to or
agree to or announce any intention to effect any such transaction, such that any of our
Controlling Shareholders would cease to be a controlling shareholder (as defined in the Listing
Rules) of our Company during the period of six months immediately following the expiry of the
First Six-Month Period (the “ Second Six-Month Period ”).
In the event that, during the Second Six-Month Period, we enter into any of the
transactions specified in (a), (b) or (c) above or offers to or agrees to or announces any intention
to effect any such transaction, we shall take all reasonable steps to ensure that it will not create
a disorderly or false market in any Shares or other securities of our Company.
By our Controlling Shareholders
Each of our Controlling Shareholders has undertaken jointly and severally 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 Hong
Kong Underwriters that, without the prior written consent of the Sole Sponsor and the Joint
Overall Coordinators (for themselves and on behalf of the Hong Kong Underwriters) and unless
in compliance with the requirements of the Listing Rules:
(i) at any time during the First Six-Month Period, it/he shall not, and shall procure that
the relevant registered holder(s), any nominee or trustee holding on trust for it/him
and the companies controlled by it/he (together, the “ Controlled Entities ”) shall not,
UNDERWRITING
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(a) sell, offer to sell, contract or agree to sell, mortgage, charge, pledge,
hypothecate, lend, grant or sell any option, warrant, contract or right to sell, or
otherwise transfer or dispose of or create an Encumbrance over, or agree to
transfer or dispose of or create an Encumbrance over, either directly or indirectly,
conditionally or unconditionally, any Shares or other securities of our Company
or any interest therein (including, without limitation, any securities convertible
into or exchangeable or exercisable for or that represent the right to receive, or
any warrants or other rights to purchase, any Shares) beneficially owned by
it/him directly or indirectly through its/his Controlled Entities (the “ Relevant
Securities ”), or deposit any Relevant Securities with a depositary in connection
with the issue of depositary receipts; or
(b) enter into any swap or other arrangement that transfers to another, in whole or in
part, any of the economic consequences of ownership of the Relevant Securities;
or
(c) enter into or effect any transaction with the same economic effect as any of the
transactions referred to in sub-paragraphs (a) or (b) above; or
(d) offer to or agree to or announce any intention to enter into or effect any of the
transactions referred to in sub-paragraphs (a), (b) or (c) above, which any of the
foregoing transactions referred to in sub-paragraphs (a), (b), (c) or (d) is to be
settled by delivery of H Shares or such other securities of our Company or in
cash or otherwise (whether or not the issue of such H Shares or other securities
will be completed within the First Six-Month Period);
(ii) at any time during the Second Six-Month Period, it/he shall not, and shall procure that
the Controlled Entities shall not, enter into any of the transactions referred to in (i)(a),
(b) or (c) above or offer to or agree to or announce any intention to enter into any
such transaction if, immediately following any sale, transfer or disposal or upon the
exercise or enforcement of any option, right, interest or Encumbrance pursuant to such
transaction, it/he would cease to be a “controlling shareholder” (as defined in the
Listing Rules) of our Company or would together with the other Controlling
Shareholder cease to be “Controlling Shareholder” (as defined in the Listing Rules) of
our Company;
(iii) in the event that it/he enters into any of the transactions specified in (i)(a), (b) or (c)
above or offer to or agrees to or announce any intention to effect any such transaction
within the Second Six-Month Period, it/he shall take all reasonable steps to ensure
that it/he will not create a disorderly or false market for any Shares or other securities
of our Company; and
UNDERWRITING
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(iv) it/he shall, and shall procure that the relevant registered holder(s) and other Controlled
Entities shall, comply with all the restrictions and requirements under the Listing
Rules on the sale, transfer or disposal by it/he or by the registered holder(s) and/or
other Controlled Entities of any Shares or other securities of our Company.
Each of our Controlling Shareholders has further undertaken to each of our Company, the
Stock Exchange, the Sole Sponsor, the Joint Overall Coordinators, the Joint Global
Coordinators, the Joint Bookrunners, the Joint Lead Managers, the Capital Market Intermediaries
and the Hong Kong Underwriters that, within the period from the date by reference to which
disclosure of its/his shareholding in us is made in this prospectus and ending on the date which
is 12 months from the Listing Date, it/he will:
(i) when it/he pledges or charges any securities or interests in the Relevant Securities in
favour of an authorised institution pursuant to Note 2 to Rule 10.07(2) of the Listing
Rules, immediately inform us and the Sole Sponsor in writing of such pledges or
charges together with the number of securities and nature of interest so pledged or
charged; and
(ii) when it/he 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 us and the Sole
Sponsor in writing of such indications.
Underwriters’ interests in our Group
Save for their respective interests and obligations under the Hong Kong Underwriting
Agreement and the International Underwriting Agreement or as otherwise disclosed in this
prospectus, as at the Latest Practicable Date, none of the Underwriters was interested directly or
indirectly in any of our Shares or securities or any shares or securities of any other member of
our Group or had any right or option (whether legally enforceable or not) to subscribe for, or to
nominate persons to subscribe for, any of our Shares or securities or any shares or securities of
any other member of our Group.
Following the completion of the Global Offering, the Underwriters and their affiliated
companies may hold a certain portion of our Shares as a result of fulfilling their respective
obligations under the Hong Kong Underwriting Agreement and the International Underwriting
Agreement.
The Sole Sponsor’s Independence
The Sole Sponsor satisfies the independence criteria applicable to sponsors set out in
Rule 3A.07 of the Listing Rules. Save for (i) the advisory and documentation fees to be paid to
the Sole Sponsor as the Sole Sponsor and one of the Joint Overall Coordinators to the Global
Offering, (ii) the advisory fee to be paid to the Sole Sponsor as our Company’s compliance
adviser pursuant to the requirements under Rule 3A.19 of the Listing Rules, (iii) its obligations
UNDERWRITING
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under the Underwriting Agreements and any interests in securities that may be subscribed by it
pursuant to the Global Offering, neither the Sole Sponsor nor any of its associates has or may, as
a result of the Global Offering, have any interest in any class of securities of our Company or
any other company in our Group (including options or rights to subscribe for such securities).
No director or employee of the Sole Sponsor who is involved in providing advice to our
Company has, or may, as a result of the Global Offering, have any interest in any class of
securities of our Company or other company in our Group (including options or rights to
subscribe for such securities but, for the avoidance of doubt, excluding interests in securities
that may be subscribed for or purchased by any such director or employee pursuant to the Global
Offering).
No director or employee of the Sole Sponsor has a directorship in our Company or any
other company in our Group.
The International Offering
International Underwriting Agreement
In connection with the International Offering, we expect to enter into the International
Underwriting Agreement on the Price Determination Date with, among others, the International
Underwriters. Under the International Underwriting Agreement, the International Underwriters
would, subject to certain conditions, severally and not jointly, agree to purchase the International
Offer Shares or procure purchasers for the International Offer Shares initially being offered
pursuant to the International Offering. Please refer to the paragraph headed “Structure of the
Global Offering – The International Offering” in this prospectus.
Under the International Underwriting Agreement, we intend to grant to the International
Underwriters the Over-allotment Option, exercisable in whole or in part at one or more times, at
the sole and absolute discretion of the Sponsor-Overall Coordinator on behalf of the
International Underwriters from the date of the International Underwriting Agreement until 30
days from the last day for the lodging of applications under the Hong Kong Public Offering to
require us to issue and allot up to an aggregate of 8,034,000 additional Offer Shares,
representing approximately 15% of the Offer Shares initially available under the Global Offering
and at the Offer Price, to cover any over-allocations in the International Offering, if any.
Total Commission and Expenses
The Capital Market Intermediaries will receive an underwriting commission of 4.5% of the
aggregate Offer Price of all the Offer Shares (including Offer Shares to be issued pursuant to the
Over-allotment Option) (collectively, the “ Gross Proceeds ”). The Joint Overall Coordinators
will receive 1.545% 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
UNDERWRITING
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Discretionary Fees are paid in full, the ratio of Fixed Fees and Discretionary Fees payable is
therefore approximately 75%:25%.
Assuming the Over-allotment Option is not exercised and based on an Offer Price of
HK$2.75 (being the mid-point of the indicative Offer Price range), the aggregate commissions
and estimated expenses, together with the Stock Exchange listing fee, SFC transaction levy,
Stock Exchange trading fee, legal and other professional fees, printing and other fees and
expenses relating to the Global Offering, are estimated to amount in aggregate to HK$42.2
million in total and are payable by us.
Indemnity
We, our Controlling Shareholders and our executive Directors have jointly and severally
undertaken to indemnify 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 Hong Kong Underwriters against certain losses which they may suffer,
including losses arising from their performance of their obligations under the Hong Kong
Underwriting Agreement and any breach by us of the Hong Kong Underwriting Agreement.
Restrictions on the Offer Shares
No action has been taken to permit a public offering of the Offer Shares, other than in
Hong Kong, or the distribution of this prospectus in any jurisdiction other than Hong Kong.
Accordingly, this prospectus may not be used for the purpose 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.
UNDERWRITING
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THE GLOBAL OFFERING
This prospectus is published in connection with the Hong Kong Public Offering as part of
the Global Offering. The Global Offering comprises (subject to reallocation and the
Over-allotment Option):
(i) the Hong Kong Public Offering of initially 5,357,000 H Shares in Hong Kong as
described below in the paragraph headed “The Hong Kong Public Offering” in this
section below; and
(ii) the International Offering of an aggregate of initially 48,205,000 H Shares to be
offered outside the United States in reliance on Regulation S. At any time from the
date of the International Underwriting Agreement until 30 days after the last day for
the lodging of applications in the Hong Kong Public Offering, the Sponsor-Overall
Coordinator, as representatives of the International Underwriters, has an option to
require the Company to issue and allot up to an aggregate of 8,034,000 additional H
Shares, representing approximately 15% of the initial number of Offer Shares to be
offered in the Global Offering, at the Offer Price to cover over-allocations in the
International Offering, if any.
Investors may apply for Hong Kong Offer Shares under the Hong Kong Public Offering or
apply for or indicate an interest for International Offer Shares under the International Offering,
but may not do both.
The Offer Shares will represent approximately 25% of the enlarged issued share capital of
the Company immediately after completion of the Global Offering without taking into account
the exercise of the Over-allotment Option. If the Over-allotment Option is exercised in full, the
Offer Shares will represent approximately 27.71% of the enlarged issued share capital of the
Company immediately after completion of the Global Offering and the exercise of the
Over-allotment Option as set out in the paragraph headed “The International Offering –
Over-allotment Option” in this section below.
The number of Offer Shares to be offered under the Hong Kong Public Offering and the
International Offering may be subject to reallocation as described in the paragraph headed “The
Hong Kong Public Offering – Reallocation” in this section below.
STRUCTURE OF THE GLOBAL OFFERING
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THE HONG KONG PUBLIC OFFERING
Number of Offer Shares initially offered
The Company is initially offering 5,357,000 H Shares for subscription by the public in
Hong Kong at the Offer Price, representing approximately 10% of the total number of Offer
Shares initially available under the Global Offering. The Hong Kong Offer Shares will represent
approximately 2.50% of the Company’s enlarged share capital immediately after completion of
the Global Offering, assuming that the Over-allotment Option is not exercised.
The Hong Kong Public Offering is open to members of the public in Hong Kong as well as
to institutional and professional investors. Professional investors generally include brokers,
dealers, companies (including fund managers) whose ordinary business involves dealing in
shares and other securities and corporate entities which regularly invest in shares and other
securities.
Completion of the Hong Kong Public Offering is subject to the conditions as set out in the
paragraph headed “Conditions of the Global Offering” in this section below.
Allocation
Allocation of the Hong Kong Offer Shares to applicants under the Hong Kong Public
Offering will be based solely on the level of valid applications to be received under the Hong
Kong Public Offering. The basis of allocation may vary, depending on the number of Hong Kong
Offer Shares validly applied for by applicants. Such allocation could, where appropriate, consist
of balloting, which would mean that some applicants may receive a higher allocation than others
who have applied for the same number of Hong Kong Offer Shares, and those applicants who
are not successful in the ballot may not receive any Hong Kong Offer Shares.
The total number of the Hong Kong Offer Shares available under the Hong Kong Public
Offering (after taking account of any reallocation referred to below) is to be divided into two
pools for allocation purposes: pool A and pool B (with any odd lots being allocated to pool A).
The Hong Kong Offer Shares in pool A will be allocated on an equitable basis to applicants who
have applied for the Hong Kong Offer Shares with an aggregate price of HK$5 million
(excluding the brokerage, SFC transaction levy, AFRC transaction levy and Stock Exchange
trading fee payable) or less. The Hong Kong Offer Shares in pool B will be allocated on an
equitable basis to applicants who have applied for the Hong Kong Offer Shares with an
aggregate price of more than HK$5 million (excluding the brokerage, SFC transaction levy,
AFRC transaction levy and Stock Exchange trading fee payable) and up to the total value in
pool B. Investors should be aware that applications in pool A and applications in pool B may
receive different allocation ratios. If the Hong Kong Offer Shares in one (but not both) of the
pools are undersubscribed, the surplus Hong Kong Offer Shares will be transferred to the other
pool to satisfy demand in this other pool and be allocated accordingly.
STRUCTURE OF THE GLOBAL OFFERING
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For the purpose of this paragraph only, the “price” for Offer Shares means the price
payable on application therefor (without regard to the Offer Price as finally determined).
Applicants can only receive an allocation of Offer Shares from either pool A or pool B but not
from both pools. Multiple or suspected multiple applications and any application for more than
2,678,000 Hong Kong Offer Shares (being approximately 50% of the Hong Kong Offer Shares
initially available for subscription under the Hong Kong Public Offering) are liable to be
rejected.
Reallocation
The allocation of the Offer Shares between the Hong Kong Public Offering and the
International Offering is subject to reallocation at the discretion of the Joint Overall
Coordinators, subject to the following:
(a) where the International Offer Shares are fully subscribed or oversubscribed:
(i) if the Hong Kong Offer Shares are undersubscribed, the Joint Overall
Coordinators have the authority (but not the obligation) in their absolute
discretion to reallocate all or any unsubscribed Hong Kong Offer Shares to the
International Offering, in such proportions as the Joint Overall Coordinators
deem appropriate to satisfy demand under the International Offering;
(ii) if the number of Offer Shares validly applied for under the Hong Kong Public
Offering represents less than 15 times the number of the Offer Shares initially
available for subscription under the Hong Kong Public Offering, then up to
5,357,000 Offer Shares may be reallocated to the Hong Kong Public Offering
from the International Offering, so that the total number of the Offer Shares
available under the Hong Kong Public Offering will be increased to 10,714,000
Offer Shares, representing twice of the total number of the Offer Shares initially
available under the Hong Kong Public Offering;
(iii) if the number of Offer Shares validly applied for under the Hong Kong Public
Offering represents (i) 15 times or more but less than 50 times, (ii) 50 times or
more but less than 100 times, and (iii) 100 times or more of the number of Offer
Shares initially available under the Hong Kong Public Offering, the Offer Shares
will be reallocated to the Hong Kong Public Offering from the International
Offering in accordance with the clawback requirements set forth in paragraph 4.2
of Practice Note 18 of the Listing Rules, so that the total number of Hong Kong
Offer Shares will be increased to 16,069,000 Offer Shares (in the case of (i)),
21,425,000 Offer Shares (in the case of (ii)) and 26,781,000 Offer Shares (in the
case of (iii)), representing approximately 30%, 40% and 50% of the Offer Shares
initially available under the Global Offering, respectively;
STRUCTURE OF THE GLOBAL OFFERING
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--- page 518 ---
(b) where the International Offer Shares are undersubscribed:
(i) if the Hong Kong Offer Shares are also undersubscribed, the Global Offering will
not proceed unless the Underwriters would subscribe for or procure subscribers
for their respective applicable proportions of the Offer Shares being offered
which are not taken up under the Global Offering on the terms and conditions of
this Prospectus and the Underwriting Agreements; and
(ii) if the Hong Kong Offer Shares are fully subscribed or oversubscribed
(irrespective of the extent of over-subscription), then up to 5,357,000 Offer
Shares may be reallocated to the Hong Kong Public Offering from the
International Offering, so that the total number of the Offer Shares available
under the Hong Kong Public Offering will be increased to 10,714,000 Offer
Shares, representing twice of the total number of the Offer Shares initially
available under the Hong Kong Public Offering.
In the event of reallocation of the Offer Shares from the International Offering to the Hong
Kong Public Offering in the circumstances described in paragraph (a)(ii) or (b)(ii) above, the
final Offer Price shall be fixed at the bottom end of the Offer Price range (i.e. HK$2.5 per Offer
Share) according to Chapter 4.14 of the Guide for New Listing Applicants published by the
Stock Exchange.
In all cases of reallocation of Offer Shares from the International Offering to the Hong
Kong Public Offering, the additional Offer Shares reallocated to the Hong Kong Public Offering
will be allocated between pool A and pool B, and the number of Offer Shares allocated to the
International Offering will be correspondingly reduced in such manner as the Joint Overall
Coordinators may, at their sole and absolute discretion, determine. In addition, the Joint Overall
Coordinators may in their discretion reallocate the Offer Shares from the International Offering
to the Hong Kong Public Offering to satisfy valid applications under the Hong Kong Public
Offering. Details of any reallocation of the Offer Shares between the Hong Kong Public Offering
and the International Offering will be disclosed in the allotment results announcement of the
Global Offering, which is expected to be published on or around Friday, 28 March 2025.
Applications
Each applicant under the Hong Kong Public Offering will also be required to give an
undertaking and confirmation in the application submitted by him/her/it that he/she/it and any
person(s) 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 International Offering, and such applicant’s application is liable to be
rejected if the said undertaking and/or confirmation is breached and/or untrue (as the case may
be) or he/she/it has been or will be placed or allocated Offer Shares under the International
Offering.
STRUCTURE OF THE GLOBAL OFFERING
– 508 –


--- page 519 ---
The listing of the H Shares on the Stock Exchange is sponsored by the Sole Sponsor.
Applicants under the Hong Kong Public Offering are required to pay, on application, the
maximum price of HK$3.00 per Hong Kong Offer Share in addition to any brokerage, SFC
transaction levy, AFRC transaction levy and Stock Exchange trading fee payable on each Hong
Kong Offer Share. If the Offer Price, as finally determined in the manner described in the
paragraph headed “Pricing of the Global Offering” in this section below, is less than the
maximum price of HK$3.00 per Hong Kong Offer Share, appropriate refund payments (including
the brokerage, SFC transaction levy, AFRC transaction levy and Stock Exchange trading fee
attributable to the surplus application monies) will be made to successful applicants, without
interest. Further details are set out below in the section headed “How to Apply for Hong Kong
Offer Shares” in this prospectus.
References in this prospectus to applications, application monies or the procedure for
application relate solely to the Hong Kong Public Offering.
THE INTERNATIONAL OFFERING
Number of Offer Shares offered
Subject to reallocation as described above, the International Offering will consist of an
initial offering of 48,205,000 H Shares representing approximately 90% of the Offer Shares
under the Global Offering and approximately 22.5% of the Company’s enlarged share capital
immediately after the completion of the Global Offering, assuming that the Over-allotment
Option is not exercised.
Allocation
The International Offering will include selective marketing of the International Offer
Shares to institutional and professional investors and other investors anticipated to have a
sizeable demand for such International Offer Shares. Professional investors generally include
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. Allocation of the International Offer Shares pursuant to the International Offering will
be effected in accordance with the “book-building” process described in the paragraph headed
“Pricing of the Global Offering” below in this section and based on a number 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 Offer Shares, and/or hold or sell the Offer Shares, after the listing of the
Offer Shares on the Stock Exchange. Such allocation is intended to result in a distribution of the
Offer Shares on a basis which would lead to the establishment of a solid professional and
institutional shareholder base to the benefit of the Company and our Shareholders as a whole.
STRUCTURE OF THE GLOBAL OFFERING
– 509 –


--- page 520 ---
The Joint Overall Coordinators (for themselves and on behalf of the Underwriters) may
require any investor who has been offered the International Offer Shares under the International
Offering, and who has made an application under the Hong Kong Public Offering to provide
sufficient information to the Joint Overall Coordinators so as to allow them to identify the
relevant application under the Hong Kong Public Offering and to ensure that he/she/it is
excluded from any application of the Hong Kong Offer Shares under the Hong Kong Public
Offering.
Reallocation
The total number of the Offer Shares to be issued or sold pursuant to the International
Offering may change as a result of the clawback arrangement described in the paragraph headed
“The Hong Kong Public Offering – Reallocation” in this section or the Over-allotment Option in
whole or in part and/or any reallocation of unsubscribed Offer Shares originally included in the
Hong Kong Public Offering.
Over-allotment Option
In connection with the Global Offering, we are expected to grant an Over-allotment Option
to the International Underwriters exercisable by the Joint Overall Coordinators on behalf of the
International Underwriters.
Pursuant to the Over-allotment Option, the Sponsor-Overall Coordinator has the right,
exercisable at any time from the Listing Date until 30 days after the last day for the lodging of
applications in the Hong Kong Public Offering, to require the Company to issue and allot up to
an aggregate of 8,034,000 additional Offer Shares, representing approximately 15% of the initial
number of Offer Shares to be offered in the Global Offering, at the Offer Price, to cover
over-allocation in the International Offering. If the Over-allotment Option is exercised in full,
the additional Offer Shares will represent approximately 3.61% of the enlarged share capital of
the Company immediately following the completion of the Global Offering and the exercise of
the Over-allotment Option. In the event that the Over-allotment Option is exercised, an
announcement will be made. The Sponsor-Overall Coordinator may also cover any
over-allocations by purchasing the H Shares in the secondary market or by a combination of
purchases in the secondary market and a partial exercise of the Over-allotment Option. Any such
secondary market purchase will be made in compliance with all applicable laws, rules and
regulations.
STABILISATION
Stabilisation is a usual practice used by underwriters in many markets to facilitate the
distribution of securities. To stabilise, the underwriters may bid for, or purchase, the securities in
the secondary market, during a specified period of time, to retard and, if possible, prevent, any
decline in the market price of the securities below the offer price. In Hong Kong and certain
other jurisdictions, the price at which stabilisation is effected is not permitted to exceed the offer
price.
STRUCTURE OF THE GLOBAL OFFERING
– 510 –


--- page 521 ---
In connection with the Global Offering, the Stabilising Manager or any person acting for
them, on behalf of the Underwriters, may over-allocate or effect short sales or any other
stabilising transactions with a view to stabilising or maintaining the market price of the H
Shares at a level higher than that which might otherwise prevail in the open market. Short sales
involve the sale by the Stabilising Manager of a greater number of H Shares than the
Underwriters are required to purchase in the Global Offering. “Covered” short sales are sales
made in an amount not greater than the Over-allotment Option. The Stabilising Manager may
close out the covered short position by either exercising the Over-allotment Option to purchase
additional H Shares or purchasing H Shares in the open market. In determining the source of the
H Shares to close out the covered short position, the Stabilising Manager will consider, among
others, the price of H Shares in the open market as compared to the price at which they may
purchase additional H Shares pursuant to the Over-allotment Option. Stabilising transactions
consist of certain bids or purchases to be made for the purpose of preventing or retarding a
decline in the market price of the H Shares while the Global Offering is in progress. Any market
purchases of the H Shares may be effected on any stock exchange, including the Stock
Exchange, any over-the-counter market or otherwise, provided that they are made in compliance
with all applicable laws and regulatory requirements. However, there is no obligation on the
Stabilising Manager or any person acting for it to conduct any such stabilising activity, which if
commenced, will be done at the absolute discretion of the Stabilising 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 Hong Kong Public Offering.
The number of the H Shares that may be over-allocated will not exceed the number of the
H Shares that may be sold under the Over-allotment Option, namely, 8,034,000 H Shares, which
is approximately 15% of the number of Offer Shares initially available under the Global
Offering, in the event that the whole or part of the Over-allotment Option is exercised.
In Hong Kong, stabilising activities must be carried out in accordance with the Securities
and Futures (Price Stabilising) Rules (Chapter 571W of the Laws of Hong Kong), as amended.
Stabilising actions permitted pursuant to the Securities and Futures (Price Stabilizing) Rules
include:
(a) over-allocation for the purpose of preventing or minimising any reduction in the
market price of the H shares;
(b) selling or agreeing to sell the H Shares so as to establish a short position in them for
the purpose of preventing or minimising any deduction in the market price;
(c) subscribing, or agreeing to subscribe, for the H Shares pursuant to the Over-allotment
Option in order to close out any position established under (a) or (b) above;
(d) purchasing, or agreeing to purchase, the H Shares for the sole purpose of preventing
or minimising any reduction in the market price;
STRUCTURE OF THE GLOBAL OFFERING
–5 1 1–


--- page 522 ---
(e) selling the H Shares to liquidate a long position held as a result of those purchases;
and
(f) offering or attempting to do anything described in (b), (c), (d) and (e) above.
Stabilising actions by the Stabilising Manager, or any person acting for it, will be entered
into in accordance with the laws, rules and regulations in place in Hong Kong on stabilisation.
As a result of effecting transactions to stabilise or maintain the market price of the H
Shares, the Stabilising Manager, or any person acting for it, may maintain a long position in the
H Shares. The size of the long position, and the period for which the Stabilising Manager, or any
person acting for it, will maintain the long position is at the discretion of the Stabilising
Manager and is uncertain. In the event that the Stabilising Manager liquidates this long position
by making sales in the open market, this may lead to a decline in the market price of the H
Shares.
Stabilising action by the Stabilising Manager, or any person acting for it, is not permitted
to support the price of the H Shares for longer than the stabilising period, which begins on the
day on which trading of the H Shares commences on the Stock Exchange and ends on the
thirtieth day after the last day for the lodging of applications under the Hong Kong Public
Offering. The stabilising period is expected to end on Friday, 25 April 2025. As a result, demand
for the H Shares, and their market price, may fall after the end of the stabilising period. These
activities by the Stabilising Manager may stabilise, maintain or otherwise affect the market price
of the H Shares. As a result, the price of the H Shares may be higher than the price that
otherwise may exist in the open market. Any stabilising action taken by the Stabilising Manager,
or any person acting for it, may not necessarily result in the market price of the H Shares
staying at or above the Offer Price either during or after the stabilising period. Bids for or
market purchases of the H Shares by the Stabilising Manager, or any person acting for it, may be
made at a price at or below the Offer Price and therefore at or below the price paid for the H
Shares by applicants. 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.
PRICING OF THE GLOBAL OFFERING
The International Underwriters will be soliciting from prospective investors’ indications of
interest in acquiring the International Offer Shares in the International Offering. Prospective
professional and institutional investors will be required to specify the number of the
International Offer Shares under the International Offering they would be prepared to acquire
either at different prices or at a particular price. This process, known as “book-building,” is
expected to continue up to, and to cease on or around, the last day for lodging applications
under the Hong Kong Public Offering.
STRUCTURE OF THE GLOBAL OFFERING
– 512 –


--- page 523 ---
Pricing for the Offer Shares for the purpose of the various offerings under the Global
Offering will be fixed on the Price Determination Date, which is expected to be on or before
Thursday, 27 March 2025, and in any event no later than 12:00 noon on Thursday, 27 March
2025, by agreement between the Joint Overall Coordinators (for themselves and on behalf of the
Underwriters) and the Company and the number of Offer Shares to be allocated under various
offerings will be determined shortly thereafter.
The Offer Price will not be more than HK$3.00 per Offer Share and is expected to be not
less than HK$2.50 per Offer Share unless to be otherwise announced, as further explained below,
not later than the morning of the last day for lodging applications under the Hong Kong Public
Offering. Prospective investors should be aware that the Offer Price to be determined on
the Price Determination Date may be, but is not expected to be, lower than the indicative
Offer Price range stated in this prospectus.
The Joint Overall Coordinators, on behalf of the Underwriters, may, where considered
appropriate, based on the level of interest expressed by prospective professional and institutional
investors during the book-building process, and with the consent of the Company, reduce the
number of Offer Shares offered in the Global Offering and/or the indicative Offer Price stated
below in this prospectus at any time on or prior to the morning of the last day for lodging
applications under the Hong Kong Public Offering. In such a case, the Company will, as soon as
practicable following the decision to make such reduction, and in any event not later than the
morning of the day which is the last day for lodging applications under the Hong Kong Public
Offering, cause there to be posted on the website of the Stock Exchange ( www.hkexnews.hk )
and on the website of the Company ( www.hxsupermarket.cn ) notices of the reduction. Upon
issue of such a notice, the number of Offer Shares offered in the Global Offering and/or the
revised Offer Price range will be final and conclusive and the offer price, if agreed upon by the
Joint Overall Coordinators, on behalf of the Underwriters, and the Company, will be fixed within
such revised Offer Price range.
Supplemental listing documents will also be issued by the Company in the event of a
reduction in the number of Offer Shares or the Offer Price. Such supplemental listing documents
will also include confirmation or revision, as appropriate, of the working capital statement and
the Global Offering statistics as currently set out in this prospectus, and any other financial
information which may change as a result of any such reduction. In the absence of any such
notice so published, the number of Offer Shares and/or the Offer Price will not be reduced.
If the number of Offer Shares being offered under the Global Offering or the indicative
Offer Price range is so reduced, applicants who have already submitted an application will be
notified that they are required to confirm their applications. All applicants who have already
submitted an application need to confirm their applications in accordance with the procedures set
out in the announcement and all unconfirmed applications will not be valid.
STRUCTURE OF THE GLOBAL OFFERING
– 513 –


--- page 524 ---
Before submitting applications for the Hong Kong Offer Shares, applicants should have
regard to the possibility that any announcement of a reduction in the number of Offer Shares or
the indicative Offer Price range may not be made until the day which is the last day for lodging
applications under the Hong Kong Public Offering. Such notice will also include such
information as agreed with the Stock Exchange which may change materially as a result of any
such reduction. In the absence of any such notice of reduction published as described in this
paragraph, the number of Offer Shares will not be reduced and/or the Offer Price, if agreed upon
with our Company and the Joint Overall Coordinators (for themselves and on behalf of the
Underwriters), will under no circumstances be set outside the Offer Price range as stated in this
prospectus.
In the event of a reduction in the number of Offer Shares being offered under the Global
Offering, the Joint Overall Coordinators may at their discretion reallocate the number of Offer
Shares to be offered under the Hong Kong Public Offering and the International Offering,
provided that the number of the initial Hong Kong Offer Shares shall not be less than 10% of
the total number of Offer Shares in the Global Offering. The International Offer Shares to be
offered in the International Offering and the Offer Shares to be offered in the Hong Kong Public
Offering may, in certain circumstances, be reallocated as between these offerings at the
discretion of the Joint Overall Coordinators.
The Offer Price under the Global Offering is expected to be announced on Friday, 28
March 2025. The indications of interest in the Global Offering, the results of applications and
the basis of allotment of the Hong Kong Offer Shares available under the Hong Kong Public
Offering, are expected to be announced on Friday, 28 March 2025 on the website of the Stock
Exchange ( www.hkexnews.hk ) and on the website of the Company ( www.hxsupermarket.cn ).
If there is any change to the offer size due to change in the number of Offer Shares offered
in the Global Offering (other than pursuant to the reallocation mechanism as disclosed in this
prospectus), or change to the Offer Price as stated in this Prospectus, or if our Company
becomes aware that there has been a significant change affecting any matter contained in this
prospectus or a significant new matter has arisen, the inclusion of information in respect of
which would have been required to be in this prospectus if it had arisen before this prospectus
was issued, after the issue of this prospectus and before the commencement of dealings in our H
Shares as prescribed under Rule 11.13 of the Listing Rules, we are required to cancel the Global
Offering and relaunch the offer with a supplemental prospectus or a new prospectus in FINI.
The level of indications of interest in the International Offering, the level of applications in
the Hong Kong Public Offering, the basis of allocations of the Hong Kong Offer Shares and the
results of allocations in the Hong Kong Public Offering are expected to be made available
through a variety of channels in the manner described in the paragraph headed “How to Apply
for Hong Kong Offer Shares – B. Publication of Results” in this prospectus.
STRUCTURE OF THE GLOBAL OFFERING
– 514 –


--- page 525 ---
HONG KONG UNDERWRITING AGREEMENT
The Hong Kong Public Offering is fully underwritten by the Hong Kong Underwriters
under the terms of the Hong Kong Underwriting Agreement and is conditional upon the
International Underwriting Agreement being signed and becoming unconditional.
The Company expects to enter into the International Underwriting Agreement relating to
the International Offering on or around the Price Determination Date.
These underwriting arrangements, and the respective Underwriting Agreements, are
summarised in the section headed “Underwriting” in this prospectus.
ADMISSION OF THE H SHARES INTO CCASS
All necessary arrangements have been made enabling the H Shares to be admitted into
CCASS.
If the Stock Exchange grants the listing of, and permission to deal in, the H Shares and the
Company complies with the stock admission requirements of HKSCC, the H Shares will be
accepted as eligible securities by HKSCC for deposit, clearance and settlement in CCASS with
effect from the date of commencement of dealings in the H Shares on the Stock Exchange or any
other date HKSCC chooses. Settlement of transactions between participants of the Stock
Exchange is required to take place in CCASS on the second settlement day after any trading day.
All activities under CCASS are subject to the General Rules of HKSCC and the HKSCC
Operational Procedures in effect from time to time.
DEALING ARRANGEMENTS
Assuming that the Hong Kong Public Offering becomes unconditional at or before
8:00 a.m. in Hong Kong on Monday, 31 March 2025, it is expected that dealings in the H Shares
on the Stock Exchange will commence at 9:00 a.m. on Monday, 31 March 2025. The H Shares
will be traded in board lots of 1,000 H Shares each and the stock code of the H Shares will be
2625.
CONDITIONS OF THE GLOBAL OFFERING
Acceptance of all applications for Hong Kong Offer Shares pursuant to the Hong Kong
Public Offering will be conditional on:
(i) the Listing Committee of the Stock Exchange granting listing of, and permission to
deal in, the Offer Shares being offered pursuant to the Global Offering (including the
additional Offer Shares which may be made available pursuant to the exercise of the
Over-allotment Option) (subject only to allotment);
STRUCTURE OF THE GLOBAL OFFERING
– 515 –


--- page 526 ---
(ii) the Offer Price having been fixed on or around the Price Determination Date;
(iii) the execution and delivery of the International Underwriting Agreement on or around
the Price Determination Date; and
(iv) the obligations of the Underwriters under each of the respective Underwriting
Agreements becoming and remaining unconditional and not having been terminated in
accordance with the terms of the respective agreements.
If, for any reason, the Offer Price is not agreed between the Company and the Joint Overall
Coordinators (for themselves and on behalf of the Underwriters) by 12:00 noon on Thursday, 27
March 2025, the Global Offering will not proceed and will lapse.
The consummation of each of the Hong Kong Public Offering and the International
Offering is conditional upon, among other things, the other offering becoming unconditional and
not having been terminated in accordance with its terms.
If the above conditions are not fulfilled or waived prior to the times and dates specified,
the Global Offering will lapse and the Stock Exchange will be notified immediately. Notice of
the lapse of the Hong Kong Public Offering will be published by the website of the Stock
Exchange ( www.hkexnews.hk ) and on the website of the Company ( www.hxsupermarket.cn )
on the next day following such lapse. In such eventuality, all application monies will be
returned, without interest, on the terms set out in the section headed “How to Apply for Hong
Kong Offer Shares” in this prospectus. In the meantime, all application monies will be held in
(a) separate Company account(s) with the receiving banker or other licensed bank(s) in Hong
Kong licensed under the Banking Ordinance (Chapter 155 of the Laws of Hong Kong) (as
amended).
H Share certificates for the Offer Shares are expected to be issued on Friday, 28 March
2025 but will only become valid evidence of title at 8:00 a.m. on Monday, 31 March 2025
provided that (i) the Global Offering has become unconditional in all respects and (ii) the right
of termination as described in the paragraph headed “Underwriting – Underwriting Arrangements
and Expenses – Hong Kong Public Offering – Grounds for Termination” in this prospectus has
not been exercised. Investors who trade the Offer Shares prior to the receipt of H Share
certificates or prior to the H Share certificates becoming valid evidence of title do so entirely at
their own risk.
STRUCTURE OF THE GLOBAL OFFERING
– 516 –


--- page 527 ---
IMPORTANT NOTICE TO INVESTORS OF HONG KONG OFFER SHARES
FULLY ELECTRONIC APPLICATION PROCESS
We have adopted a fully electronic application process for the Hong Kong Public
Offering and below are the procedures for application.
This prospectus is available at the website of the Stock Exchange at www.hkexnews.hk
under the “ HKEXnews > New Listings > New Listing Information ” section, and our website
at www.hxsupermarket.cn.
The contents of this prospectus are identical to the prospectus as registered with the
Registrar of Companies in Hong Kong pursuant to Section 342C of the Companies (Winding Up
and Miscellaneous Provisions) Ordinance.
A. APPLICATION FOR HONG KONG OFFER SHARES
1. Who Can Apply
Y ou can apply for Hong Kong Offer Shares if you or the person(s) for whose benefit
you are applying for:
 are 18 years of age or older; and
 have a Hong Kong address (for the White Form eIPO service only).
Unless permitted by the Listing Rules or a waiver and/or consent has been granted by
the Stock Exchange to us, you cannot apply for any Hong Kong Offer Shares if you or the
person(s) for whose benefit you are applying for:
 are an existing beneficial owner of any Shares in the Company and/or any of its
subsidiaries;
 are a Director or a Supervisor or chief executive officer of the Company and/or
any of its subsidiaries;
 are a close associate (as defined in the Listing Rules) of any of the above;
HOW TO APPLY FOR HONG KONG OFFER SHARES
– 517 –


--- page 528 ---
2. Application Channels
The Hong Kong Public Offering period will begin at 9:00 a.m. on Friday, 21
March 2025 and end at 12:00 noon on Wednesday, 26 March 2025 (Hong Kong time).
To apply for Hong Kong Offer Shares, you may use one of the following application
channels:
Application
Channel Platform Target Investors Application Time
White Form
eIPO
Service
www.eipo.com.hk Applicants who would like
to receive a physical H
Share certificate. Hong
Kong Offer Shares
successfully applied for
will be allotted and
issued in your own
name.
From 9:00 a.m.
on Friday,
21 March 2025
to 11:30 a.m.
on Wednesday,
26 March 2025, Hong
Kong time. The latest
time for completing full
payment of application
monies will be
12:00 noon
on Wednesday,
26 March 2025 Hong
Kong time.
HKSCC EIPO
channel
Y our broker or custodian
who is a HKSCC
Participant will submit
electronic application
instruction(s) on your
behalf through HKSCC’s
FINI system in
accordance with your
instruction
Applicants who would not
like to receive a physical
H Share certificate.
Hong Kong Offer Shares
successfully applied for
will be allotted and
issued in the name of
HKSCC Nominees,
deposited directly into
CCASS and credited to
your designated HKSCC
Participant’s stock
account.
Contact your broker or
custodian for the earliest
and latest time for giving
such instructions, as this
may vary by broker or
custodian.
The White Form eIPO service and the HKSCC EIPO channel are facilities subject to
capacity limitations and potential service interruptions and you are advised not to wait until
the last day of the application period to apply for Hong Kong Offer Shares.
HOW TO APPLY FOR HONG KONG OFFER SHARES
– 518 –


--- page 529 ---
For those applying through the White Form eIPO service, once you complete
payment in respect of any application instructions given by you or for your benefit through
the White Form eIPO service to make an application for Hong Kong Offer Shares, an
actual application shall be deemed to have been made. If you are a person for whose
benefit the electronic application instructions are given, you shall be deemed to have
declared that only one set of electronic application instructions has been given for your
benefit. If you are an agent for another person, you shall be deemed to have declared that
you have only given one set of electronic application instructions for the benefit of the
person for whom you are an agent and that you are duly authorised to give those
instructions as an agent.
For the avoidance of doubt, giving an application instruction under White Form eIPO
service more than once and obtaining different application reference numbers without
effecting full payment in respect of a particular reference number will not constitute an
actual application.
If you apply through the White Form eIPO service, you are deemed to have
authorised the White Form eIPO Service Provider to apply on the terms and conditions in
this prospectus, as supplemented and amended by the terms and conditions of White Form
eIPO service.
By instructing your broker or custodian to apply for the Hong Kong Offer Shares on
your behalf through the HKSCC EIPO channel, you (and, if you are joint applicants, each
of you jointly and severally) are deemed to have instructed and authorised HKSCC to cause
HKSCC Nominees (acting as nominee for the relevant HKSCC Participants) to apply for
Hong Kong Offer Shares on your behalf and to do on your behalf all the things stated in
this prospectus and any supplement to it.
For those applying through HKSCC EIPO channel, an actual application will be
deemed to have been made for any application instructions given by you or for your benefit
to HKSCC (in which case an application will be made by HKSCC Nominees on your
behalf) provided such application instruction has not been withdrawn or otherwise
invalidated before the closing time of the Hong Kong Public Offering.
HKSCC Nominees will only be acting as a nominee for you and neither HKSCC nor
HKSCC Nominees shall be liable to you or any other person in respect of any actions taken
by HKSCC or HKSCC Nominees on your behalf to apply for Hong Kong Offer Shares or
for any breach of the terms and conditions of this prospectus.
HOW TO APPLY FOR HONG KONG OFFER SHARES
– 519 –


--- page 530 ---
3. Information Required to Apply
Y ou must provide the following information with your application:
For Individual/Joint Applicants For Corporate Applicants
 Full name(s)
2 as shown on your
identity document
 Full name(s) 2 as shown on your identity
document
 Identity document’s issuing
country or jurisdiction
 Identity document’s issuing country or
jurisdiction
 Identity document type, with
order of priority:
i. Hong Kong identity card
(“HKID ”); or
ii. National identification
document; or
iii. Passport; and
 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  Identity document number
Notes:
1. If you are applying through the White Form eIPO service, you are required to provide a valid
e-mail address, a contact telephone number and a Hong Kong address. Y ou are also required to
declare that the identity information provided by you follows the requirements as described in Note
2 below. In particular, where you cannot provide a HKID number, you must confirm that you do not
hold a HKID card.
2. The applicant’s full name as shown on their identity document must be used. If an applicant’s
identity document contains both an English and Chinese name, both English and Chinese names
must be used. Otherwise, either English or Chinese names will be accepted. The order of priority of
the applicant’s identity document type must be strictly followed and where an individual applicant
has a valid HKID card, the HKID number must be used when making an application to subscribe for
Hong Kong Offer Shares. Similarly for corporate applicants, a LEI number must be used if an entity
has a LEI certificate.
3. If the applicant is a trustee, the client identification data (“ CID ”) of the trustee, as set out above,
will be required. If the applicant is an investment fund (i.e. a collective investment scheme, or CIS),
the CID of the asset management company or the individual fund, as appropriate, which has opened
a trading account with the broker will be required, as above.
4. The maximum number of joint applicants on FINI is capped at 4 in accordance with market practice.
HOW TO APPLY FOR HONG KONG OFFER SHARES
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5. If you are applying as a nominee, you must provide: (i) the full name (as shown on the identity
document), the identity document’s issuing country or jurisdiction, the identity document type; and
(ii), the identity document number, for each of the beneficial owners or, in the case(s) of joint
beneficial owners, for each joint beneficial owner. If you do not include this information, the
application will be treated as being made for your benefit.
6. If you are applying as an unlisted company and (i) the principal business of that company is dealing
in securities; and (ii) you exercise statutory control over that company, then the application will be
treated as being for your benefit and you should provide the required information in your application
as stated above.
“Unlisted company” means a company with no equity securities listed on the Stock Exchange or any
other stock exchange.
“Statutory control” means you:
 control the composition of the board of directors of the company;
 control more than half of the voting power of the company; or
 hold more than half of the issued share capital of the company (not counting any part of it
which carries no right to participate beyond a specified amount in a distribution of either
profits or capital).
For those applying through HKSCC EIPO channel, and making an application under
a power of attorney, we and the Joint Overall 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 information may result in your application being
rejected.
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4. Permitted Number of Hong Kong Offer Shares for Application
Board lot size : 1,000 Shares
Permitted number of
Hong Kong
: Hong Kong Offer Shares are available for application
in specified board lot sizes only. Please refer to the
amount payable associated with each specified board
lot size in the table below.
Offer Shares for
application and
amount payable on
application/successful
allotment
: The maximum Offer Price is HK$3.00 per H 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 Hong Kong Offer Shares on your behalf through
the HKSCC EIPO channel, you (and, if you are joint
applicants, each of you jointly and severally) are
deemed to have instructed and authorised HKSCC to
cause HKSCC Nominees (acting as nominee for the
relevant HKSCC Participants) to arrange payment of
the final Offer Price, brokerage, SFC transaction
levy, the Stock Exchange trading fee and the AFRC
transaction levy by debiting the relevant nominee
bank account at the Designated Bank for your broker
or custodian.
If you are applying through the White Form eIPO
service, you may refer to the table below for the
amount payable for the number of Offer Shares you
have selected. Y ou must pay the respective maximum
amount payable on application in full upon
application for Hong Kong Offer Shares.
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--- page 533 ---
JIANGSU HORIZON CHAIN SUPERMARKET COMPANY LIMITED
(HK$3.00 per Hong Kong Offer Share)
NUMBER OF HONG KONG OFFER SHARES
THAT MAY BE APPLIED FOR AND PAYMENTS
No. of
Hong Kong
Offer Shares
applied for
Amount
payable (2)
on
application
No. of
Hong Kong
Offer Shares
applied for
Amount
payable (2)
on
application
No. of
Hong Kong
Offer Shares
applied for
Amount
payable (2)
on
application
No. of
Hong Kong
Offer Shares
applied for
Amount
payable (2)
on
application
HK$ HK$ HK$ HK$
1,000 3,030.25 20,000 60,605.10 100,000 303,025.50 800,000 2,424,204.00
2,000 6,060.51 25,000 75,756.38 150,000 454,538.26 900,000 2,727,229.50
3,000 9,090.76 30,000 90,907.66 200,000 606,051.00 1,000,000 3,030,255.00
4,000 12,121.02 35,000 106,058.93 250,000 757,563.76 1,250,000 3,787,818.76
5,000 15,151.28 40,000 121,210.20 300,000 909,076.50 1,500,000 4,545,382.50
6,000 18,181.54 45,000 136,361.48 350,000 1,060,589.26 1,750,000 5,302,946.26
7,000 21,211.79 50,000 151,512.76 400,000 1,212,102.00 2,000,000 6,060,510.00
8,000 24,242.05 60,000 181,815.30 450,000 1,363,614.76 2,250,000 6,818,073.76
9,000 27,272.30 70,000 212,117.86 500,000 1,515,127.50 2,678,000
(1) 8,115,022.89
10,000 30,302.56 80,000 242,420.40 600,000 1,818,153.00
15,000 45,453.83 90,000 272,722.96 700,000 2,121,178.50
Notes:
(1) Maximum number of Hong Kong Offer Share you may apply for.
(2) The amount payable is inclusive of brokerage, SFC transaction levy, the Stock Exchange trading fee and AFRC
transaction levy. If your application is successful, brokerage will be paid to the Exchange Participants (as defined
in the Listing Rules) and the SFC transaction levy, the Stock Exchange trading fee and AFRC transaction levy
are paid to the Stock Exchange (in the case of the SFC transaction levy, collected by the Stock Exchange on
behalf of the SFC; and in the case of the AFRC transaction levy, collected by the Stock Exchange on behalf of
the AFRC).
5. Multiple Applications Prohibited
Y ou or your joint applicant(s) shall not make more than one application for your own
benefit, except where you are a nominee and provide the information of the underlying
investor in your application as required under the paragraph headed “– A. Applications for
Hong Kong Offer Shares – 3. Information Required to Apply” in this section. If you are
suspected of submitting or cause to submit more than one application, all of your
applications will be rejected.
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Multiple applications made either through (i) the White Form eIPO service, (ii)
HKSCC EIPO channel, or (iii) both channels concurrently are prohibited and will be
rejected. If you have made an application through the White Form eIPO service or
HKSCC EIPO channel, you or the person(s) for whose benefit you have made the
application shall not apply for any Offer Shares.
6. Terms and Conditions of an Application
By applying for Hong Kong Offer Shares through the White Form eIPO 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, as our agents, to execute any documents for you
and to do on your behalf all things necessary to register any Hong Kong Offer
Shares allocated to you in your name or in the name of HKSCC Nominees as
required by the Articles of Association, and (if you are applying through the
HKSCC EIPO channel) to deposit the allotted Hong Kong Offer Shares directly
into CCASS for the credit of your designated HKSCC Participant’s stock account
on your behalf;
(ii) confirm that you have read and understand the terms and conditions and
application procedures set out in this prospectus and the designated website of
the White Form eIPO service (or as the case may be, the agreement you entered
into with your broker or custodian), and agree to be bound by them;
(iii) (if you are applying through the HKSCC EIPO channel) agree to the
arrangements, undertakings and warranties under the participant agreement
between your broker or custodian and HKSCC and observe the General Rules of
HKSCC and the HKSCC Operational Procedures for giving application
instructions to apply for Hong Kong Offer Shares;
(iv) confirm that you are aware of the restrictions on offers and sales of shares set
out in this prospectus and they do not apply to you, or the person(s) for whose
benefit you have made the application;
(v) confirm that you have read this prospectus and any supplement to it and have
relied only on the information and representations contained therein in making
your application (or as the case may be, causing your application to be made)
and will not rely on any other information or representations;
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(vi) agree that the Sole Sponsor, the Joint Overall Coordinators, the Joint Global
Coordinators, the Joint Bookrunners, the Joint Lead Managers, the Capital
Market Intermediaries, the Underwriters, their directors, officers, employees,
partners, agents, advisors and any other parties involved in the Global Offering
(the “ Relevant Persons ”), the H Share Registrar and HKSCC will not be liable
for any information and representations not in this prospectus and any
supplement to it;
(vii) agree to disclose the details of your application and your personal data and any
other personal data which may be required about you and the person(s) for whose
benefit you have made the application to us, the Relevant Persons, the H Share
Registrar, HKSCC, HKSCC Nominees, the Stock Exchange, the SFC and any
other statutory regulatory or governmental bodies or otherwise as required by
laws, rules or regulations, for the purposes under the paragraph headed “– G.
Personal Data – 3. Purposes and 4. Transfer of personal data” in this section;
(viii) agree (without prejudice to any other rights which you may have once your
application (or as the case may be, HKSCC Nominees’ application) has been
accepted) that you will not rescind it because of an innocent misrepresentation;
(ix) agree that subject to Section 44A(6) of the Companies (Winding Up and
Miscellaneous Provisions) Ordinance, any application made by you or HKSCC
Nominees on your behalf cannot be revoked once it is accepted, which will be
evidenced by the notification of the result of the ballot by the H Share Registrar
by way of publication of the results at the time and in the manner as specified in
the paragraph headed “– B. Publication of Results” in this section;
(x) confirm that you are aware of the situations specified in the paragraph headed
“– C. Circumstances In Which Y ou Will Not Be Allocated Hong Kong Offer
Shares” in this section;
(xi) agree that your application or HKSCC Nominees’ application, any acceptance of
it and the resulting contract will be governed by and construed in accordance
with the laws of Hong Kong;
(xii) agree to comply with the Companies Ordinance, the Companies (Winding Up and
Miscellaneous Provisions) Ordinance, the Articles of Association and laws of any
place outside Hong Kong that apply to your application and that neither we nor
the Relevant Persons will breach any law inside and/or outside Hong Kong as a
result of the acceptance of your offer to purchase, or any action arising from
your rights and obligations under the terms and conditions contained in this
prospectus;
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(xiii) confirm that (a) your application or HKSCC Nominees’ application on your
behalf is not financed directly or indirectly by the Company, any of the directors,
chief executives, substantial Shareholder(s) or existing shareholder(s) of the
Company or any of its subsidiaries or any of their respective close associates;
and (b) you are not accustomed or will not be accustomed to taking instructions
from the Company, any of the directors, chief executives, substantial
shareholder(s) or existing shareholder(s) of the Company or any of its
subsidiaries or any of their respective close associates in relation to the
acquisition, disposal, voting or other disposition of the Shares registered in your
name or otherwise held by you;
(xiv) warrant that the information you have provided is true and accurate;
(xv) confirm that you understand that we and the Joint Overall Coordinators will rely
on your declarations and representations in deciding whether or not to allocate
any Hong Kong Offer Shares to you and that you may be prosecuted for making
a false declaration;
(xvi) agree to accept Hong Kong Offer Shares applied for or any lesser number
allocated to you under the application;
(xvii) declare and represent that this is the only application made and the only
application intended by you to be made to benefit you or the person for whose
benefit you are applying;
(xviii) (if the application is made for your own benefit) warrant that no other
application has been or will be made for your benefit by giving electronic
application instructions to HKSCC directly or indirectly or through the
application channel of the H Share Registrar 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 (2) you have due authority to give electronic application instructions on
behalf of that other person as its agent.
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B. PUBLICATION OF RESULTS
Results of Allocation
Y ou can check whether you are successfully allocated any Hong Kong Offer Shares
through:
Platform Date/Time
Applying through White Form eIPO service or HKSCC EIPO channel:
Website The designated results of allocation at
www.iporesults.com.hk (alternatively:
www.eipo.com.hk/eIPOAllotment )
with a “search by ID” function.
The full list of (i) wholly or partially
successful applicants using the White
Form eIPO service and HKSCC
EIPO channel, and (ii) the number of
Hong Kong Offer Shares conditionally
allotted to them, among other things,
will be displayed on the “Allotment
Results” page of the White Form
eIPO service at
www.iporesults.com.hk (alternatively:
www.eipo.com.hk/eIPOAllotment ).
24 hours, from 11:00 p.m.
on Friday, 28 March 2025
to 12:00 midnight on
Thursday, 3 April 2025
(Hong Kong time)
The Stock Exchange’s website at
www.hkexnews.hk and our website at
www.hxsupermarket.cn which will
provide links to the above mentioned
websites of the H Share Registrar.
No later than 11:00 p.m.
on Friday, 28 March 2025
(Hong Kong time)
Telephone +852 2862 8555 – the allocation results
telephone enquiry line provided by
the H Share Registrar
between 9:00 a.m. and
6:00 p.m., from Monday, 31
March 2025 to Thursday, 3
April 2025 (Hong Kong
time)
For those applying through HKSCC EIPO channel, you may also check with your
broker or custodian from 6:00 p.m. on Thursday, 27 March 2025 (Hong Kong time).
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HKSCC Participants can log into FINI and review the allotment result from 6:00 p.m.
on Thursday, 27 March 2025 (Hong Kong time) on a 24-hour basis and should report any
discrepancies on allotments to HKSCC as soon as practicable.
Allocation Announcement
We expect to announce the results of the final Offer Price, the level of indications of
interest in the International Offering, the level of applications in the Hong Kong Public
Offering and the basis of allocations of Hong Kong Offer Shares on the Stock Exchange’s
website at www.hkexnews.hk and our website at www.hxsupermarket.cn by no later than
11:00 p.m. on Friday, 28 March 2025 (Hong Kong time).
C. CIRCUMSTANCES IN WHICH YOU WILL NOT BE ALLOCATED HONG KONG
OFFER SHARES
Y ou should note the following situations in which Hong Kong Offer Shares will not be
allocated to you or the person(s) for whose benefit you are applying for:
1. If your application is revoked:
Y our application or the application made by HKSCC Nominees on your behalf may be
revoked pursuant to Section 44A(6) of the Companies (Winding Up and Miscellaneous
Provisions) Ordinance.
2. If we or our agents exercise our discretion to reject your application:
We, the Joint Overall Coordinators, the H Share Registrar and their respective agents
and nominees have full discretion to reject or accept any application, or to accept only part
of any application, without giving any reasons.
3. If the allocation of Hong Kong Offer Shares is void:
The allocation of Hong Kong Offer Shares will be void if the Stock Exchange does
not grant permission to list the Shares either:
 within three weeks from the closing date of the application lists; or
 within a longer period of up to six weeks if the Stock Exchange notifies us of
that longer period within three weeks of the closing date of the application lists.
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4. If:
 you make multiple applications or suspected multiple applications. Y ou may refer
to the paragraph headed “– A. Applications for Hong Kong Offer Shares – 5.
Multiple Applications Prohibited” in this section on what constitutes multiple
applications;
 you or the person for whose benefit you are applying have applied for or taken
up, or indicated an interest for, or have been or will be placed or allocated
(including conditionally and/or provisionally) Hong Kong Offer Shares and
International Offer Shares;
 your electronic application instructions through the White Form eIPO service
are not completed in accordance with the instructions, terms and conditions on
the designated website at www.eipo.com.hk ;
 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 or the Joint Overall Coordinators believe that by accepting your application,
it or we would violate applicable securities or other laws, rules or regulations; or
 your application is for more than 50% of the Hong Kong Offer Shares initially
offered under the Hong Kong Public Offering.
5. If there is money settlement failure for allotted Offer Shares:
Based on the arrangements between HKSCC Participants and HKSCC, HKSCC
Participants will be required to hold sufficient application funds on deposit with their
Designated Bank before balloting. After balloting of Hong Kong Offer Shares, the
Receiving Bank will collect the portion of these funds required to settle each HKSCC
Participant’s actual Hong Kong Offer Share allotment from their Designated Bank.
There is a risk of money settlement failure. In the extreme event of money
settlement failure by a HKSCC Participant (or its Designated Bank), who is acting on your
behalf in settling payment for your allotted shares, HKSCC will contact the defaulting
HKSCC Participant and its Designated Bank to determine the cause of failure and request
such defaulting HKSCC Participant to rectify or procure to rectify the failure.
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However, if it is determined that such settlement obligation cannot be met, the
affected Hong Kong Offer Shares will be reallocated to the International Offer Shares.
Hong Kong Offer Shares applied for by you through the broker or custodian may be
affected to the extent of the settlement failure. In the extreme case, you will not be
allocated any Hong Kong Offer Shares due to the money settlement failure by such HKSCC
Participant. None of us, the Relevant Persons, the H Share Registrar and HKSCC is or will
be liable if Hong Kong Offer Shares are not allocated to you due to the money settlement
failure.
D. DESPATCH/COLLECTION OF H SHARE CERTIFICATES AND REFUND OF
APPLICATION MONIES
Y ou will receive one H Share certificate for all Hong Kong Offer Shares allotted to you
under the Hong Kong Public Offering (except pursuant to applications made through the
HKSCC EIPO channel where the H Share certificates will be deposited into CCASS as
described below).
No temporary document of title will be issued in respect of the Shares. No receipt will be
issued for sums paid on application.
H Share certificates will only become valid evidence of title at 8:00 a.m. on Monday, 31
March 2025 (Hong Kong time), provided that the Global Offer has become unconditional and the
right of termination described in the section headed “Underwriting” has not been exercised.
Investors who trade Shares prior to the receipt of H Share certificates or the H Share certificates
becoming valid do so entirely at their own risk.
The right is reserved to retain any H Share certificate(s) and (if applicable) any surplus
application monies pending clearance of application monies.
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--- page 541 ---
The following sets out the relevant procedures and time:
White Form eIPO service HKSCC EIPO channel
Despatch/collection of H Share certificate 1
For physical H Share
certificates of equal or over
1,000,000 Hong Kong Offer
Shares issued under your
own name
Collection in person from the H
Share Registrar, Computershare
Hong Kong Investor Services
Limited at Shops 1712–1716, 17th
Floor, Hopewell Centre, 183
Queen’s Road East, Wanchai, Hong
Kong
H 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
Time: from 9:00 a.m. to 1:00 p.m. on
Monday, 31 March 2025 (Hong
Kong time). If you are an
individual, you must not authorise
any other person to collect for you.
If you are a corporate applicant, your
authorised representative must bear
a letter of authorisation from your
corporation stamped with your
corporation’s chop.
Both individuals and authorised
representatives must produce, at the
time of collection, evidence of
identity acceptable to the H Share
Registrar.
Note: If you do not collect your H
Share certificate(s) personally
within the time above, it/they
will be sent to the address
specified in your application
instructions by ordinary post at
your own risk.
For physical H Share
certificates of less than
1,000,000 Offer Shares
issued under your own
name
Y our H Share certificate(s) will be
sent to the address specified in
your application instructions by
ordinary post at your own risk
Time: Friday, 28 March 2025
1 In case a Severe Weather Signal in force is hoisted on Friday, 28 March 2025, the Company shall procure the H
Share Registrar to arrange for delivery of the supporting documents and H Share certificates in accordance with
the contingency arrangements as agreed between them. Y ou may refer to the paragraph headed “– E. Severe
Weather Arrangements” in this section.
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--- page 542 ---
White Form eIPO service HKSCC EIPO channel
Refund mechanism for surplus application monies paid by you
Date Monday, 31 March 2025 Subject to the arrangement between
you and your broker or custodian
Responsible party H Share Registrar Y our broker or custodian
Application monies paid
through single bank
account
White Form e-Refund payment
instructions to your designated
bank account
Y our broker or custodian will arrange
refund to your designated bank
account subject to the arrangement
between you and it
Application monies paid
through multiple bank
accounts
Refund cheque(s) will be despatched
to the address as specified in your
application instructions by ordinary
post at your own risk
E. SEVERE WEATHER ARRANGEMENTS
The Opening and Closing of the Application Lists
The application lists will not open or close on Wednesday, 26 March 2025 if, there is:
 a tropical cyclone warning signal number 8 or above;
 a black rainstorm warning; and/or
 Extreme Conditions,
(collectively, “ Severe Weather Signals ”),
in force in Hong Kong at any time between 9:00 a.m. and 12:00 noon on Wednesday, 26
March 2025.
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 of the revised timetable will be made and published on the Stock Exchange’s
website at www.hkexnews.hk and our website at www.hxsupermarket.cn .
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If a Severe Weather Signal is hoisted on Friday, 28 March 2025, the H Share Registrar
will make appropriate arrangements for the delivery of the H Share certificates to the
CCASS Depository’s service counter so that they would be available for trading on
Monday, 31 March 2025.
If a Severe Weather Signal is hoisted on Monday, 31 March 2025:
 for physical H Share certificates of equal or over 1,000,000 Offer Shares issued
under your own name, you may collect the physical H Share certificates from the
H Share Registrar’s office after the Severe Weather Signal is lowered or
cancelled (e.g. in the afternoon of Monday, 31 March 2025 or on Tuesday, 1
April 2025).
If a Severe Weather Signal is hoisted on Friday, 28 March 2025:
 for physical H Share certificates of less than 1,000,000 Offer Shares issued under
your own name, despatch 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 Friday, 28 March 2025 or on Monday, 31 March 2025).
Prospective investors should be aware that if they choose to receive physical H
Share certificates issued in their own name, there may be a delay in receiving the H
Share certificates.
F. ADMISSION OF THE 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 the Shares or any other date
HKSCC chooses. Settlement of transactions between Exchange Participants is required to take
place in CCASS on the second settlement day after any trading day.
All activities under CCASS are subject to the General Rules of HKSCC and the HKSCC
Operational Procedures in effect from time to time.
All necessary arrangements have been made enabling the Shares to be admitted into
CCASS.
Y ou should seek the advice of your broker or other professional advisor for details of the
settlement arrangement as such arrangements may affect your rights and interests.
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G. PERSONAL DATA
The following Personal Information Collection Statement applies to any personal data
collected and held by the Company, the H Share Registrar, the receiving bank(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 information. By giving application instructions to HKSCC, you acknowledge that
you have read, understood and agree to all of the terms of the Personal Information Collection
Statement below.
1. Personal Information Collection Statement
This Personal Information Collection Statement informs the applicant for, and holder
of, Hong Kong Offer Shares, of the policies and practices of the Company and the H Share
Registrar in relation to personal data and the Personal Data (Privacy) Ordinance (Chapter
486 of the Laws of Hong Kong).
2. Reasons for the Collection of Y our Personal Data
It is necessary for applicants and registered holders of Hong Kong Offer Shares to
ensure that personal data supplied to the Company or its agents and the H Share Registrar
is accurate and up-to-date when applying for Hong Kong Offer Shares or transferring Hong
Kong Offer Shares into or out of their names or in procuring the services of the H Share
Registrar.
Failure to supply the requested data or supplying inaccurate data may result in your
application for Hong Kong Offer Shares being rejected, or in the delay or the inability of
the Company or the H Share Registrar to effect transfers or otherwise render their services.
It may also prevent or delay registration or transfers of Hong Kong Offer Shares which you
have successfully applied for and/or the despatch of H Share certificate(s) to which you are
entitled.
It is important that applicants for and holders of Hong Kong Offer Shares inform the
Company and the H Share Registrar immediately of any inaccuracies in the personal data
supplied.
3. Purposes
Y our personal data may be used, held, processed, and/or stored (by whatever means)
for the following purposes:
 processing your application and refund cheque and White Form e-Refund
payment instruction(s), where applicable, verification of compliance with the
terms and application procedures set out in this prospectus and announcing
results of allocation of Hong Kong Offer Shares;
HOW TO APPLY FOR HONG KONG OFFER SHARES
– 534 –


--- page 545 ---
 compliance with applicable laws and regulations in Hong Kong and elsewhere;
 registering new issues or transfers into or out of the names of the holders of the
Offer 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 Offer Shares and
identifying any duplicate applications for the Offer Shares;
 facilitating Hong Kong Offer Shares balloting;
 establishing benefit entitlements of holders of the Offer 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 Offer Shares;
 disclosing relevant information to facilitate claims on entitlements; and
 any other incidental or associated purposes relating to the above and/or to enable
the Company and the H Share Registrar to discharge their obligations to
applicants and holders of the Offer Shares and/or regulators and/or any other
purposes to which applicants and holders of the Offer Shares may from time to
time agree.
4. Transfer of Personal Data
Personal data held by the Company and the H Share Registrar relating to the
applicants for and holders of Hong Kong Offer Shares will be kept confidential but the
Company and the H Share Registrar may, to the extent necessary for achieving any of the
above purposes, disclose, obtain or transfer (whether within or outside Hong Kong) the
personal data to, from or with any of the following:
 the Company’s appointed agents such as financial advisers and receiving bank(s);
 HKSCC or HKSCC Nominees, who will use the personal data and may transfer
the personal data to the H Share Registrar for the purposes of providing its
services or facilities or performing its functions in accordance with its rules or
procedures and operating FINI and CCASS (including where applicants for the
Hong Kong Offer Shares request a deposit into CCASS);
HOW TO APPLY FOR HONG KONG OFFER SHARES
– 535 –


--- page 546 ---
 any agents, contractors or third-party service providers who offer administrative,
telecommunications, computer, payment or other services to the Company or the
H Share Registrar in connection with their respective business operation;
 the Stock Exchange, the SFC and any other statutory regulatory or governmental
bodies or otherwise as required by laws, rules or regulations, including for the
purpose of the Stock Exchange’s administration of the Listing Rules and the
SFC’s performance of its statutory functions; and
 any persons or institutions with which the holders of Hong Kong Offer Shares
have or propose to have dealings, such as their bankers, solicitors, accountants or
brokers etc.
5. Retention of Personal Data
The Company and the H Share Registrar will keep the personal data of the applicants
and holders of Hong Kong Offer Shares for as long as necessary to fulfil the purposes for
which the personal data were collected. Personal data which is no longer required will be
destroyed or dealt with in accordance with the Personal Data (Privacy) Ordinance (Chapter
486 of the Laws of Hong Kong).
6. Access to and Correction of Personal Data
Applicants for and holders of Hong Kong Offer Shares have the right to ascertain
whether the Company or the H Share Registrar hold their personal data, to obtain a copy of
that data, and to correct any data that is inaccurate. The Company and the H Share
Registrar have the right to charge a reasonable fee for the processing of such requests. All
requests for access to data or correction of data should be addressed to the Company and
the H Share Registrar, at their registered address disclosed in the section headed “Corporate
Information” in this prospectus or as notified from time to time, for the attention of the
company secretary, or the H Share Registrar for the attention of the privacy compliance
officer.
HOW TO APPLY FOR HONG KONG OFFER SHARES
– 536 –


--- page 547 ---
The following is the text of a report set out on pages I-1 to I-90, received from the
Company’ s reporting accountants, KPMG, Certified Public Accountants, Hong Kong, for the
purpose of incorporation in this prospectus.
ACCOUNTANTS’ REPORT ON HISTORICAL FINANCIAL INFORMATION TO THE
DIRECTORS OFʮ̡ JIANGSU HORIZON CHAIN
SUPERMARKET COMPANY LIMITED * AND RED SOLAR CAPITAL LIMITED
Introduction
We report on the historical financial information ofʮ̡
Jiangsu Horizon Chain Supermarket Company Limited (the “Company”) and its subsidiaries
(together, the “Group”) set out on pages I-4 to I-90, which comprises the consolidated
statements of financial position of the Group and the statements of financial position of the
Company as at 31 December 2021, 2022 and 2023 and 30 September 2024, the consolidated
statements of profit or loss, 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, for each of the years ended 31 December 2021, 2022 and 2023 and the
nine months ended 30 September 2024 (the “Track Record Period”), and material accounting
policy information and other explanatory information (together, the “Historical Financial
Information”). The Historical Financial Information set out on pages I-4 to I-90 forms an
integral part of this report, which has been prepared for inclusion in the prospectus of the
Company dated 21 March 2025 (the “Prospectus”) in connection with the initial listing of shares
of the Company on the Main Board of The Stock Exchange of Hong Kong Limited.
Directors’ responsibility for Historical Financial Information
The directors of the Company are responsible for the preparation of Historical Financial
Information that gives a true and fair view in accordance with the basis of preparation and
presentation set out in Note 1 to the Historical Financial Information, and for such internal
control as the directors of the Company determine is necessary to enable the preparation of the
Historical Financial Information that is free from material misstatement, whether due to fraud or
error.
* For identification purposes only
APPENDIX I ACCOUNTANTS’ REPORT
– I-1 –


--- page 548 ---
Reporting accountants’ responsibility
Our responsibility is to express an opinion on the Historical Financial Information and to
report our opinion to you. We conducted our work in accordance with Hong Kong Standard on
Investment Circular Reporting Engagements 200 “Accountants’ Reports on Historical Financial
Information in Investment Circulars” issued by the Hong Kong Institute of Certified Public
Accountants (“HKICPA”). This standard requires that we comply with ethical standards and plan
and perform our work to obtain reasonable assurance about whether the Historical Financial
Information is free from material misstatement.
Our work involved performing procedures to obtain evidence about the amounts and
disclosures in the Historical Financial Information. The procedures selected depend on the
reporting accountants’ judgement, including the assessment of risks of material misstatement of
the Historical Financial Information, whether due to fraud or error. In making those risk
assessments, the reporting accountants consider internal control relevant to the entity’s
preparation of Historical Financial Information that gives a true and fair view in accordance with
the basis of preparation and presentation set out in Note 1 to the Historical Financial
Information in order to design procedures that are appropriate in the circumstances, but not for
the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Our
work also included evaluating the appropriateness of accounting policies used and the
reasonableness of accounting estimates made by the directors, as well as evaluating the overall
presentation of the Historical Financial Information.
We believe that the evidence we have obtained is sufficient and appropriate to provide a
basis for our opinion.
Opinion
In our opinion, the Historical Financial Information gives, for the purpose of the
accountants’ report, a true and fair view of the Company’s and the Group’s financial position as
at 31 December 2021, 2022 and 2023 and 30 September 2024 of the Group’s financial
performance and cash flows for the Track Record Period in accordance with the basis of
preparation and presentation set out in Note 1 to the Historical Financial Information.
Review of stub period corresponding financial information
We have reviewed the stub period corresponding financial information of the Group which
comprises the consolidated statement of profit or loss, the consolidated statement of profit 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 2023 and other
explanatory information (the “Stub Period Corresponding Financial Information”). The directors
of the Company are responsible for the preparation and presentation of the Stub Period
Corresponding Financial Information in accordance with the basis of preparation and
presentation set out in Note 1 to the Historical Financial Information. Our responsibility is to
express a conclusion on the Stub Period Corresponding Financial Information based on our
APPENDIX I ACCOUNTANTS’ REPORT
– I-2 –


--- page 549 ---
review. We conducted our review in accordance with Hong Kong Standard on Review
Engagements 2410 “Review of Interim Financial Information Performed by the Independent
Auditor of the Entity” issued by the HKICPA. A review consists of making enquiries, primarily
of persons responsible for financial and accounting matters, and applying analytical and other
review procedures. A review is substantially less in scope than an audit conducted in accordance
with Hong Kong Standards on Auditing and consequently does not enable us to obtain assurance
that we would become aware of all significant matters that might be identified in an audit.
Accordingly, we do not express an audit opinion. Based on our review, nothing has come to our
attention that causes us to believe that the Stub Period Corresponding Financial Information, for
the purpose of the accountants’ report, is not prepared, in all material respects, in accordance
with the basis of preparation and presentation set out in Note 1 to the Historical Financial
Information.
Report on matters under the Rules Governing the Listing of Securities on The Stock
Exchange of Hong Kong Limited and the Companies (Winding Up and Miscellaneous
Provisions) Ordinance
Adjustments
In preparing the Historical Financial Information, no adjustments to the Underlying
Financial Statements as defined on page I-4 have been made.
Dividend
We refer to Note 26(b) to the Historical Financial Information which states that no
dividends have been paid by the Company in respect of the Track Record Period.
KPMG
Certified Public Accountants
8th Floor, Prince’s Building
10 Chater Road
Central, Hong Kong
21 March 2025
APPENDIX I ACCOUNTANTS’ REPORT
– I-3 –


--- page 550 ---
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 audited byה( ౷
ஷΥྫ )הKPMG Huazhen LLP Nanjing Branch in accordance with Hong Kong
Standards on Auditing issued by the HKICPA (the “Underlying Financial Statements”).
APPENDIX I ACCOUNTANTS’ REPORT
– I-4 –


--- page 551 ---
CONSOLIDATED STATEMENTS OF PROFIT OR LOSS
(Expressed in Renminbi Yuan)
Y ear ended 31 December
Nine months ended
30 September
2021 2022 2023 2023 2024
Note RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(Unaudited)
Revenue 4 1,432,193 1,328,685 1,401,972 987,833 1,005,810
Cost of sales (1,149,508) (1,026,547) (1,100,596) (777,952) (797,376)
Gross profit 282,685 302,138 301,376 209,881 208,434
Other revenue 5(a) 3,875 5,982 5,355 4,576 4,884
Other net gain 5(b) 18 225 1,244 2,919 1,116
Selling and distribution costs (158,759) (165,357) (162,119) (115,482) (115,961)
Administrative and other
operating expenses (50,544) (51,983) (52,614) (38,019) (41,064)
Impairment loss on trade and
other receivables 27(a) (10,148) (1,387) (3,214) (7,031) (6,133)
Profit from operations 67,127 89,618 90,028 56,844 51,276
Finance income 6(a) 228 480 1,573 944 1,396
Finance costs 6(a) (18,954) (21,611) (21,543) (15,992) (17,570)
Net finance costs (18,726) (21,131) (19,970) (15,048) (16,174)
Share of losses of an associate 13 (705) ––––
Profit before taxation 47,696 68,487 70,058 41,796 35,102
Income tax 7 (12,616) (17,422) (18,456) (11,268) (11,024)
Profit for the year/period 35,080 51,065 51,602 30,528 24,078
Attributable to:
Equity shareholders of the
Company 36,056 50,029 50,088 29,868 23,667
Non-controlling interests (976) 1,036 1,514 660 411
Profit for the year/period 35,080 51,065 51,602 30,528 24,078
Earnings per share
Basic and diluted (RMB) 10 0.22 0.31 0.31 0.19 0.15
The accompanying notes form part of the Historical Financial Information.
APPENDIX I ACCOUNTANTS’ REPORT
– I-5 –


--- page 552 ---
CONSOLIDATED STATEMENTS OF PROFIT OR LOSS AND OTHER
COMPREHENSIVE INCOME
(Expressed in Renminbi Yuan)
Y ear ended 31 December
Nine months ended
30 September
2021 2022 2023 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(Unaudited)
Profit for the year/period 35,080 51,065 51,602 30,528 24,078
Other comprehensive income for
the year (after tax and
reclassification adjustments)
Item that will not be reclassified to
profit or loss:
Financial assets at fair value through
other comprehensive income
(FVOCI) – movement in fair value
reserves (non-recycling) 2,262 (2,395) (6,721) (1,119) 1,408
Related tax (566) 599 1,680 280 (352)
Other comprehensive income for
the year/period 1,696 (1,796) (5,041) (839) 1,056
Total comprehensive income for
the year/period 36,776 49,269 46,561 29,689 25,134
Attributable to:
Equity shareholders of the Company 37,679 48,311 45,265 29,065 24,677
Non-controlling interests (903) 958 1,296 624 457
Total comprehensive income for
the year/period 36,776 49,269 46,561 29,689 25,134
The accompanying notes form part of the Historical Financial Information.
APPENDIX I ACCOUNTANTS’ REPORT
– I-6 –


--- page 553 ---
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(Expressed in Renminbi Yuan)
As at 31 December
As at
30 September
2021 2022 2023 2024
Note RMB’000 RMB’000 RMB’000 RMB’000
Non-current assets
Property, plant and equipment 11 371,456 359,490 344,227 336,343
Financial assets at FVOCI 14 37,570 35,175 28,454 29,862
Deferred tax assets 25(b) 3,310 3,325 5,091 8,138
412,336 397,990 377,772 374,343
Current assets
Inventories 15 286,376 324,018 266,267 317,589
Trade and bills receivables 16 121,191 199,930 213,779 257,649
Prepayments, deposits and other
receivables 17 171,140 244,114 313,092 301,001
Restricted deposits 18 1,571 – – 1,600
Cash and cash equivalents 19(a) 184,386 165,487 236,226 147,792
764,664 933,549 1,029,364 1,025,631
Current liabilities
Bank loans and other borrowings 20 385,306 372,357 462,799 425,068
Lease liabilities 21 21,538 24,530 23,561 23,420
Trade and bills payables 22 112,587 190,619 160,721 105,581
Other payables and accruals 23 45,577 64,484 45,755 60,756
Contract liabilities 24 111,435 130,204 112,120 115,958
Taxation payable 25(a) 7,432 14,220 15,027 14,423
683,875 796,414 819,983 745,206
Net current assets 80,789 137,135 209,381 280,425
Total assets less current
liabilities 493,125 535,125 587,153 654,768
APPENDIX I ACCOUNTANTS’ REPORT
– I-7 –


--- page 554 ---
As at 31 December
As at
30 September
2021 2022 2023 2024
Note RMB’000 RMB’000 RMB’000 RMB’000
Non-current liabilities
Bank loans and other borrowings 20 5,675 – 12,552 53,691
Lease liabilities 21 82,727 81,950 76,533 77,593
Deferred tax liabilities 25(b) 7,212 6,395 4,727 5,009
95,614 88,345 93,812 136,293
Net assets 397,511 446,780 493,341 518,475
Capital and reserves
Share capital 26 160,685 160,685 160,685 160,685
Reserves 26 224,624 271,678 316,943 341,620
Total equity attributable to
equity shareholders of the
Company 385,309 432,363 477,628 502,305
Non-controlling interests 12,202 14,417 15,713 16,170
Total equity 397,511 446,780 493,341 518,475
The accompanying notes form part of the Historical Financial Information.
APPENDIX I ACCOUNTANTS’ REPORT
– I-8 –


--- page 555 ---
STATEMENTS OF FINANCIAL POSITION OF THE COMPANY
(Expressed in Renminbi Yuan)
As at 31 December
As at
30 September
2021 2022 2023 2024
Note RMB’000 RMB’000 RMB’000 RMB’000
Non-current assets
Property, plant and equipment 11 294,083 279,467 265,553 262,513
Investments in subsidiaries 12 78,317 93,317 93,817 93,317
Deferred tax assets 1,714 2,549 5,017 8,100
374,114 375,333 364,387 363,930
Current assets
Inventories 15 222,151 251,306 205,879 241,814
Trade and bills receivables 16 118,348 190,732 201,431 254,671
Prepayments, deposits and other
receivables 17 184,200 214,737 293,088 226,759
Restricted deposits 18 1,571 – – 1,600
Cash and cash equivalents 19(a) 62,662 47,231 83,147 47,852
588,932 704,006 783,545 772,696
Current liabilities
Bank loans and other borrowings 20 311,295 281,032 310,296 276,510
Lease liabilities 21 21,538 24,530 23,561 23,420
Trade and bills payables 22 106,433 180,468 143,708 100,977
Other payables and accruals 23 38,301 51,704 82,902 111,225
Contract liabilities 24 54,188 70,860 74,584 61,720
Taxation payable 4,528 9,253 11,365 11,929
536,283 617,847 646,416 585,781
Net current assets 52,649 86,159 137,129 186,915
Total assets less current
liabilities 426,763 461,492 501,516 550,845
APPENDIX I ACCOUNTANTS’ REPORT
– I-9 –


--- page 556 ---
As at 31 December
As at
30 September
2021 2022 2023 2024
Note RMB’000 RMB’000 RMB’000 RMB’000
Non-current liabilities
Bank loans and other borrowings 20 – – 12,552 43,680
Lease liabilities 21 82,727 81,950 76,533 77,593
82,727 81,950 89,085 121,273
Net assets 344,036 379,542 412,431 429,572
Capital and reserves
Share capital 26 160,685 160,685 160,685 160,685
Reserves 26 183,351 218,857 251,746 268,887
Total equity 344,036 379,542 412,431 429,572
The accompanying notes form part of the Historical Financial Information.
APPENDIX I ACCOUNTANTS’ REPORT
– I-10 –


--- page 557 ---
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(Expressed in Renminbi Yuan)
Attributable to equity shareholders of the Company
Non-
controlling
interests
Total
equity
Share
capital
Capital
reserve
PRC
statutory
reserve
Fair value
reserve
(non-
recycling)
Retained
profits Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(Note
26(c))
(Note
26(d)(i))
(Note
26(d)(ii))
Balance at 1 January 2021 160,685 149,253 14,725 21,551 1,416 347,630 8,276 355,906
Changes in equity for 2021:
Profit for the year –––– 36,056 36,056 (976) 35,080
Other comprehensive income – – – 1,623 – 1,623 73 1,696
Total comprehensive income for
the year – – – 1,623 36,056 37,679 (903) 36,776
Capital contribution from
non-controlling interests –––––– 4,900 4,900
Dividends to non-controlling
shareholders of subsidiaries –––––– (71) (71)
Appropriation of reserve – – 2,704 – (2,704) – – –
Balance at 31 December 2021 160,685 149,253 17,429 23,174 34,768 385,309 12,202 397,511
APPENDIX I ACCOUNTANTS’ REPORT
– I-11 –


--- page 558 ---
Attributable to equity shareholders of the Company
Non-
controlling
interests
Total
equity
Share
capital
Capital
reserve
PRC
statutory
reserve
Fair value
reserve
(non-
recycling)
Retained
profits Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(Note
26(c))
(Note
26(d)(i))
(Note
26(d)(ii))
Balance at 1 January 2022 160,685 149,253 17,429 23,174 34,768 385,309 12,202 397,511
Changes in equity for 2022:
Profit for the year –––– 50,029 50,029 1,036 51,065
Other comprehensive income – – – (1,718) – (1,718) (78) (1,796)
Total comprehensive income for
the year – – – (1,718) 50,029 48,311 958 49,269
Acquisition of non-controlling
interests – (1,257) – – – (1,257) 1,257 –
Appropriation of reserve – – 4,240 – (4,240) – – –
Balance at 31 December 2022 160,685 147,996 21,669 21,456 80,557 432,363 14,417 446,780
Balance at 1 January 2023 160,685 147,996 21,669 21,456 80,557 432,363 14,417 446,780
Changes in equity for 2023:
Profit for the year –––– 50,088 50,088 1,514 51,602
Other comprehensive income – – – (4,823) – (4,823) (218) (5,041)
Total comprehensive income for
the year – – – (4,823) 50,088 45,265 1,296 46,561
Appropriation of reserve – – 3,735 – (3,735) – – –
Balance at 31 December 2023 160,685 147,996 25,404 16,633 126,910 477,628 15,713 493,341
APPENDIX I ACCOUNTANTS’ REPORT
– I-12 –


--- page 559 ---
Attributable to equity shareholders of the Company
Non-
controlling
interests
Total
equity
Share
capital
Capital
reserve
PRC
statutory
reserve
Fair value
reserve
(non-
recycling)
Retained
profits Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(Note
26(c))
(Note
26(d)(i))
(Note
26(d)(ii))
Balance at 1 January 2024 160,685 147,996 25,404 16,633 126,910 477,628 15,713 493,341
Changes in equity for the nine
months ended 30 September
2024:
Profit for the period –––– 23,667 23,667 411 24,078
Other comprehensive income – – – 1,010 – 1,010 46 1,056
Total comprehensive income
for the period – – – 1,010 23,667 24,677 457 25,134
Balance at 30 September 2024 160,685 147,996 25,404 17,643 150,577 502,305 16,170 518,475
(Unaudited)
Balance at 1 January 2023 160,685 147,996 21,669 21,456 80,557 432,363 14,417 446,780
Changes in equity for the nine
months ended 30 September
2023:
Profit for the period –––– 29,868 29,868 660 30,528
Other comprehensive income – – – (803) – (803) (36) (839)
Total comprehensive income for
the period – – – (803) 29,868 29,065 624 29,689
Balance at 30 September 2023 160,685 147,996 21,669 20,653 110,425 461,428 15,041 476,469
The accompanying notes form part of the Historical Financial Information.
APPENDIX I ACCOUNTANTS’ REPORT
– I-13 –


--- page 560 ---
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Expressed in Renminbi Yuan)
Y ear ended 31 December
Nine months ended
30 September
2021 2022 2023 2023 2024
Note RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(Unaudited)
Operating activities
Cash (used in)/generated from
operations 19(b) (27,711) 80,902 88,622 5,908 4,120
Income tax paid 25(a) (18,116) (10,867) (19,403) (17,051) (14,745)
Net cash (used in)/generated
from operating activities (45,827) 70,035 69,219 (11,143) (10,625)
Investing activities
Payment for the acquisition of
property, plant and equipment (50,627) (26,884) (40,731) (33,653) (29,058)
Proceeds from disposal of
property, plant and equipment 120 2 4,115 168 482
Payment for purchases of
structured deposits and wealth
management products (538,300) (435,700) (205,000) (169,000) (506,000)
Proceeds from disposal of
structured deposits and wealth
management products 538,672 436,063 205,260 169,167 506,207
Proceeds from disposal of
interests in an associate 25,000 ––––
Dividends received 158 226 247 247 293
Interest received 228 480 1,573 944 1,396
Net cash used in investing
activities (24,749) (25,813) (34,536) (32,127) (26,680)
APPENDIX I ACCOUNTANTS’ REPORT
– I-14 –


--- page 561 ---
Y ear ended 31 December
Nine months ended
30 September
2021 2022 2023 2023 2024
Note RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(Unaudited)
Financing activities
Capital element of lease rental
paid 19(c) (22,179) (24,401) (25,706) (19,069) (15,119)
Interest element of lease rental
paid 19(c) (4,990) (4,932) (4,485) (3,361) (3,330)
Proceeds from bank loans and
other borrowings 19(c) 482,800 573,438 595,617 396,218 389,527
Repayment of bank loans and
other borrowings 19(c) (368,400) (593,054) (513,042) (366,684) (409,010)
Interest paid 19(c) (13,685) (16,549) (16,655) (13,479) (12,749)
Capital contributions from
non-controlling interests 4,900 ––––
Payment of dividends to
non-controlling shareholders of
subsidiaries (71) ––––
Net cash generated from/(used
in) financing activities 78,375 (65,498) 35,729 (6,375) (50,681)
Net increase/(decrease) in cash
and cash equivalents 7,799 (21,276) 70,412 (49,645) (87,986)
Cash and cash equivalents at
the beginning of the
year/period 178,152 184,386 165,487 165,487 236,226
Effect of foreign exchange rate
changes (1,565) 2,377 327 (214) (448)
Cash and cash equivalents at
the end of the year/period 184,386 165,487 236,226 115,628 147,792
The accompanying notes form part of the Historical Financial Information.
APPENDIX I ACCOUNTANTS’ REPORT
– I-15 –


--- page 562 ---
NOTES TO THE HISTORICAL FINANCIAL INFORMATION
(Expressed in Renminbi Yuan)
1 BASIS OF PREPARATION AND PRESENTATION OF HISTORICAL FINANCIAL INFORMATION
ʮ̡ Jiangsu Horizon Chain Supermarket Company Limited*, (the “Company”) was
established in the People’s Republic of China (the “PRC”) on 19 October 2005 as a limited liability company. Upon
approval by the Company’s board meeting held on 30 September 2007, the Company was converted from a limited
liability company into a joint stock company.
The Company and its subsidiaries (together, “the Group”) are principally engaged in operation of retail stores
and shopping malls in areas around Y angzhou, Jiangsu, sales of goods to wholesale customers and supply and sales of
meals. The information of the principal subsidiaries is set out in Note 12.
The Historical Financial Information has been prepared in accordance with all applicable IFRS Accounting
Standards issued by the International Accounting Standards Board (“IASB”). Further details of the material accounting
policy information are set out in Note 2.
The IASB has issued a number of new and revised IFRS Accounting Standards. For the purpose of preparing the
Historical Financial Information, the Group has adopted all applicable new and revised IFRS Accounting Standards for
the Track Record Periods, except for any new standards or interpretations that are not yet effective for the accounting
period beginning on 1 January 2025. The revised and new accounting standards and interpretations issued but not yet
effective are set out in Note 31.
The Historical Financial Information also complies with the applicable disclosure provisions of the Rules
Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Stock Exchange”).
The accounting policies set out below have been applied consistently to all periods presented in the Historical
Financial Information.
The Stub Period Corresponding Financial Information has been prepared in accordance with the same basis of
preparation and presentation adopted in respect of the Historical Financial Information.
The Historical Financial Information and the Stub Period Corresponding Financial Information is presented in
Renminbi (“RMB”) and all values are rounded to the nearest thousand (RMB’000) except when otherwise indicated.
2 MATERIAL ACCOUNTING POLICIES
(a) Basis of measurement
The measurement basis used in the preparation of the Historical Financial Information is the historical cost
basis except that the certain assets and liabilities are stated at their fair value as explained in the accounting
policies as set out below.
* For identification purposes only
APPENDIX I ACCOUNTANTS’ REPORT
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--- page 563 ---
(b) Use of estimates and judgements
The preparation of Historical Financial Information in conformity with IFRS Accounting Standards
requires management to make judgements, estimates and assumptions that affect the application of policies and
reported amounts of assets, liabilities, income and expenses. The estimates and associated assumptions are based
on historical experience and various other factors that are believed to be reasonable under the circumstances, the
results of which form the basis of making the judgements about carrying values of assets and liabilities that are
not readily apparent from other sources. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting
estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or
in the period of the revision and future periods if the revision affects both current and future periods.
Judgements made by management in the application of IFRS Accounting Standards that have significant
effect on the Historical Financial Information and major sources of estimation uncertainty are discussed in Note
3.
(c) Subsidiaries and non-controlling interests
Subsidiaries are entities controlled by the Group. The Group controls an entity when it is exposed to, or
has rights to, variable returns from its involvement with the entity and has the ability to affect those returns
through its power over the entity. The financial statements of subsidiaries are included in the Historical Financial
Information from the date on which control commences until the date on which control ceases.
Intra-group balances and transactions, and any unrealised income and expenses (except for foreign
currency transaction gains or losses) arising from intra-group transactions, are eliminated. Unrealised losses
resulting from intra-group transactions are eliminated in the same way as unrealised gains, but only to the extent
that there is no evidence of impairment.
For each business combination, the Group can elect to measure any non-controlling interests (“NCI”)
either at fair value or at the NCI’s proportionate share of the subsidiary’s net identifiable assets. NCI are
presented in the consolidated statement of financial position within equity, separately from equity attributable to
the equity shareholders of the Company. NCI in the results of the Group are presented on the face of the
consolidated statement of profit or loss and the consolidated statement of profit or loss and other comprehensive
income as an allocation of the total profit or loss and total comprehensive income for the year between NCI and
the equity shareholders of the Company.
Changes in the Group’s interests in a subsidiary that do not result in a loss of control are accounted for as
equity transactions.
When the Group loses control of a subsidiary, it derecognises the assets and liabilities of the subsidiary,
and any related NCI and other components of equity. Any resulting gain or loss is recognised in profit or loss.
Any interest retained in that former subsidiary is measured at fair value when control is lost.
In the Company’s statement of financial position, an investment in a subsidiary is stated at cost less
impairment losses (see Note 2(h)(ii)), unless it is classified as held for sale (or included in a disposal group
classified as held for sale).
APPENDIX I ACCOUNTANTS’ REPORT
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--- page 564 ---
(d) Associates and joint ventures
An associate is an entity in which the Group or the Company has significant influence, but not control or
joint control, over the financial and operating policies. A joint venture is an arrangement in which the Group or
the Company has joint control, whereby the Group or the Company has the rights to the net assets of the
arrangement, rather than rights to its assets and obligations for its liabilities.
An interest in an associate or a joint venture is accounted for using the equity method, unless it is
classified as held for sale (or included in a disposal group classified as held for sale). They are initially
recognised at cost, which includes transaction costs. Subsequently, the Historical Financial Information include
the Group’s share of the profit or loss and other comprehensive income (“OCI”) of those investees, until the date
on which significant influence or joint control ceases.
When the Group’s share of losses exceeds its interest in the associate or the joint venture, the Group’s
interest is reduced to nil and recognition of further losses is discontinued except to the extent that the Group has
incurred legal or constructive obligations or made payments on behalf of the investee. For this purpose, the
Group’s interest is the carrying amount of the investment under the equity method, together with any other
long-term interests that in substance form part of the Group’s net investment in the associate or the joint venture,
after applying the ECL model to such other long-term interests where applicable (see Note 2(h)(i)).
Unrealised gains arising from transactions with equity-accounted investees are eliminated against the
investment to the extent of the Group’s interest in the investee. Unrealised losses are eliminated in the same way
as unrealised gains, but only to the extent there is no evidence of impairment.
In the Company’s statement of financial position, an investment in an associate or a joint venture is stated
at cost less impairment losses (see Note 2(h)), unless it is classified as held for sale (or included in a disposal
group classified as held for sale).
(e) Other investments in securities
The Group’s policies for investments in securities, other than investments in subsidiaries, associates and
joint ventures, are set out below.
Investments in securities are recognised/derecognised on the date the Group commits to purchase/sell the
investment. The investments are initially stated at fair value plus directly attributable transaction costs, except
for those investments measured at FVPL for which transaction costs are recognised directly in profit or loss. For
an explanation of how the Group determines fair value of financial instruments, see Note 27(e). These
investments are subsequently accounted for as follows, depending on their classification.
APPENDIX I ACCOUNTANTS’ REPORT
– I-18 –


--- page 565 ---
(i) Non-equity investments
Non-equity investments are classified into one of the following measurement categories:
– amortised cost, if the investment is held for the collection of contractual cash flows which
represent solely payments of principal and interest. Expected credit losses, interest income
calculated using the effective interest method (see Note 2(r)(viii)), foreign exchange gains and
losses are recognised in profit or loss. Any gain or loss on derecognition is recognised in
profit or loss.
– FVOCI – recycling, if the contractual cash flows of the investment comprise solely payments
of principal and interest and the investment is held within a business model whose objective
is achieved by both the collection of contractual cash flows and sale. Expected credit losses,
interest income (calculated using the effective interest method) and foreign exchange gains
and losses are recognised in profit or loss and computed in the same manner as if the financial
asset was measured at amortised cost. The difference between the fair value and the amortised
cost is recognised in OCI. When the investment is derecognised, the amount accumulated in
OCI is recycled from equity to profit or loss.
– FVPL if the investment does not meet the criteria for being measured at amortised cost or
FVOCI (recycling). Changes in the fair value of the investment (including interest) are
recognised in profit or loss.
(ii) Equity investments
An investment in equity securities is classified as FVPL, unless the investment is not held for
trading purposes and on initial recognition the Group makes an irrevocable election to designate the
investment at FVOCI (non-recycling) such that subsequent changes in fair value are recognised in OCI.
Such elections are made on an instrument-by-instrument basis, but may only be made if the investment
meets the definition of equity from the issuer’s perspective. If such election is made for a particular
investment, at the time of disposal, the amount accumulated in the fair value reserve (non-recycling) is
transferred to retained earnings and not recycled through profit or loss. Dividends from an investment in
equity securities, irrespective of whether classified as at FVPL or FVOCI, are recognised in profit or loss
as other income (see Note 2(r)(vii)).
(f) Property, plant and equipment
The following items of property, plant and equipment are stated at cost, which includes capitalised
borrowing costs, less accumulated depreciation and any accumulated impairment losses (see Note 2(h)):
– right-of-use assets arising from leases over freehold or leasehold properties where the Group is not
the registered owner of the property interest; and
– items of plant and equipment, including right-of-use assets arising from leases of underlying plant
and equipment (see Note 2(g)).
If significant parts of an item of property, plant and equipment have different useful lives, then they are
accounted for as separate items (major components).
APPENDIX I ACCOUNTANTS’ REPORT
– I-19 –


--- page 566 ---
Any gain or loss on disposal of an item of property, plant and equipment is recognised in profit or loss.
Depreciation is calculated to write off the cost or valuation of items of property, plant and equipment less
their estimated residual values, if any, using the straight-line method over their estimated useful lives, and is
generally recognised in profit or loss.
The estimated useful lives for the current and comparative periods are as follows:
Estimated useful life
Plant and buildings 20–30 years
Machinery and equipment 5–10 years
Office and other equipment 3–10 years
Motor vehicles 5 years
Leasehold improvements The shorter of the unexpired term of lease
and the estimated useful lives
Right-of-use assets Over the unexpired term of lease
Depreciation methods, useful lives and residual values are reviewed at each reporting date and adjusted if
appropriate.
Construction in progress represents properties under construction and machinery and equipment pending
installation and is stated at cost less impairment losses (see Note 2(h)(ii)). Cost comprises the purchase costs of
the asset and the related construction and installation costs.
Construction in progress is transferred to property, plant and equipment when the asset is substantially
ready for its intended use and depreciation will be provided at the appropriate rates in accordance with the
depreciation polices specified above.
No depreciation is provided in respect of construction in progress.
(g) Leased assets
At inception of a contract, the Group assesses whether the contract is, or contains, a lease. This is the case
if the contract conveys the right to control the use of an identified asset for a period of time in exchange for
consideration. Control is conveyed where the customer has both the right to direct the use of the identified asset
and to obtain substantially all of the economic benefits from that use.
(i) As a lessee
Where the contract contains lease component(s) and non-lease component(s), the Group has elected
not to separate non-lease components and accounts for each lease component and any associated non-lease
components as a single lease component for all leases.
At the lease commencement date, the Group recognises a right-of-use asset and a lease liability,
except for leases that have a short lease term of 12 months or less, and leases of low-value items such as
laptops and office furniture. When the Group enters into a lease in respect of a low-value item, the Group
decides whether to capitalise the lease on a lease-by-lease basis. If not capitalised, the associated lease
payments are recognised in profit or loss on a systematic basis over the lease term.
Where the lease is capitalised, the lease liability is initially recognised at the present value of the
lease payments payable over the lease term, discounted using the interest rate implicit in the lease or, if
that rate cannot be readily determined, using a relevant incremental borrowing rate. After initial
recognition, the lease liability is measured at amortised cost and interest expense is recognized using the
effective interest method. V ariable lease payments that do not depend on an index or rate are not included
in the measurement of the lease liability, and are charged to profit or loss as incurred.
APPENDIX I ACCOUNTANTS’ REPORT
– I-20 –


--- page 567 ---
The right-of-use asset recognised when a lease is capitalised is initially measured at cost, which
comprises the initial amount of the lease liability adjusted for any lease payments made at or before the
commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and
remove the underlying asset or to restore the underlying asset or the site on which it is located, less any
lease incentives received. The right-of-use asset is subsequently stated at cost less accumulated
depreciation and impairment losses (see Notes 2(f) and 2(h)(ii)).
Refundable rental deposits are accounted for separately from the right-of-use assets in accordance
with the accounting policy applicable to investments in non-equity securities carried at amortised cost (see
Note 2(e)(i)). Any excess of the nominal value over the initial fair value of the deposits is accounted for
as additional lease payments made and is included in the cost of right-of use assets.
The lease liability is remeasured when there is a change in future lease payments arising from a
change in an index or rate, if there is a change in the Group’s estimate of the amount expected to be
payable under a residual value guarantee, or if the Group changes its assessment of whether it will
exercise a purchase, extension or termination option. When the lease liability is remeasured in this way, a
corresponding adjustment is made to the carrying amount of the right-of-use asset, or is recorded in profit
or loss if the carrying amount of the right-of-use asset has been reduced to zero.
The lease liability is also remeasured when there is a lease modification, which means a change in
the scope of a lease or the consideration for a lease that is not originally provided for in the lease contract,
if such modification is not accounted for as a separate lease. In this case, the lease liability is remeasured
based on the revised lease payments and lease term using a revised discount rate at the effective date of
the modification. The only exceptions are rent concessions that occurred as a direct consequence of the
COVID-19 pandemic and met the conditions set out in paragraph 46B of IFRS 16 Leases. In such cases,
the Group has taken advantage of the practical expedient not to assess whether the rent concessions are
lease modifications, and recognised the change in consideration as negative variable lease payments in
profit or loss in the period in which the event or condition that triggers the rent concessions occurred.
In the consolidated statement of financial position, the current portion of long-term lease liabilities
is determined as the present value of contractual payments that are due to be settled within twelve months
after the reporting period.
(ii) As a lessor
The Group determines at lease inception whether each lease is a finance lease or an operating lease.
A lease is classified as a finance lease if it transfers substantially all the risks and rewards incidental to the
ownership of an underlying assets to the lessee. Otherwise, the lease is classified as an operating lease.
When a contract contains lease and non-lease components, the Group allocates the consideration in
the contract to each component on a relative stand-alone selling price basis. The rental income from
operating leases is recognised in accordance with Note 2(r)(v).
APPENDIX I ACCOUNTANTS’ REPORT
– I-21 –


--- page 568 ---
(h) Credit losses and impairment of assets
(i) Credit losses from financial instruments
The Group recognizes a loss allowance for expected credit losses (ECLs) on financial assets
measured at amortised cost (including cash and cash equivalents, trade receivables and other receivables).
Measurement of ECLs
ECLs are a probability-weighted estimate of credit losses. Generally, credit losses are
measured as the present value of all expected cash shortfalls between the contractual and expected
amounts.
The expected cash shortfalls are discounted using the following discount rates where the
effect of discounting is material:
– fixed-rate financial assets, trade and other receivables and contract assets: effective
interest rate determined at initial recognition or an approximation thereof; and
– variable-rate financial assets: current effective interest rate.
The maximum period considered when estimating ECLs is the maximum contractual period
over which the Group is exposed to credit risk.
ECLs are measured on either of the following bases:
– 12-month ECLs: these are the portion of ECLs that result from default events that are
possible within the 12 months after the reporting date (or a shorter period if the
expected life of the instrument is less than 12 months); and
– lifetime ECLs: these are the ECLs that result from all possible default events over the
expected lives of the items to which the ECL model applies.
The Group measures loss allowances at an amount equal to lifetime ECLs, except for the
following, which are measured at 12-months ECLs:
– financial instruments that are determined to have low credit risk at the reporting date;
and
– other financial instruments (including loan commitments issued) for which credit risk
(i.e. the risk of default occurring over the expected life of the financial instrument) has
not increased significantly since initial recognition.
Loss allowances for trade receivables and contract assets are always measured at an amount
equal to lifetime ECLs.
APPENDIX I ACCOUNTANTS’ REPORT
– I-22 –


--- page 569 ---
Significant increases in credit risk
When determining whether the credit risk of a financial instrument has increased significantly
since initial recognition and when measuring ECLs, the Group considers reasonable and supportable
information that is relevant and available without undue cost or effort. This includes both
quantitative and qualitative information and analysis, based on the Group’s historical experience and
informed credit assessment, that includes forward-looking information.
The Group assumes that the credit risk on a financial asset has increased significantly if it is
more than 3 months past due.
The Group considers a financial asset to be in default when:
– the debtor is unlikely to pay its credit obligations to the Group in full, without recourse
by the Group to actions such as realizing security (if any is held); or
– the financial asset is 12 months past due.
ECLs are remeasured at each reporting date to reflect changes in the financial instrument’s
credit risk since initial recognition. Any change in the ECL amount is recognized as an impairment
gain or loss in profit or loss. The Group recognizes an impairment gain or loss for all financial
instruments with a corresponding adjustment to their carrying amount through a loss allowance
account.
Credit-impaired financial assets
At each reporting date, the Group assesses whether a financial asset is credit-impaired. A
financial asset is credit-impaired when one or more events that have a detrimental impact on the
estimated future cash flows of the financial asset have occurred.
Evidence that a financial asset is credit-impaired includes the following observable events:
– significant financial difficulties of the debtor;
– a breach of contract, such as a default or being more than 12 months past due;
– the restructuring of a loan or advance by the Group on terms that the Group would not
consider otherwise;
– it is probable that the debtor will enter bankruptcy or other financial reorganisation; or
– the disappearance of an active market for a security because of financial difficulties of
the issuer.
Write-off policy
The gross carrying amount of a financial asset, lease receivable or contract asset is written off
to the extent that there is no realistic prospect of recovery. This is generally the case when the
Group otherwise determines that the debtor does not have assets or sources of income that could
generate sufficient cash flows to repay the amounts subject to the write-off. Subsequent recoveries
of an asset that was previously written off are recognized as a reversal of impairment in profit or
loss in the period in which the recovery occurs.
APPENDIX I ACCOUNTANTS’ REPORT
– I-23 –


--- page 570 ---
(ii) Impairment of other non-current assets
At each reporting date, the Group reviews the carrying amounts of its non-financial assets (other
than property carried at revalued amounts, investment property, inventories and other contract costs,
contract assets and deferred tax assets) to determine whether there is any indication of impairment. If any
such indication exists, then the asset’s recoverable amount is estimated.
For impairment testing, assets are grouped together into the smallest group of assets that generates
cash inflows from continuing use that are largely independent of the cash inflows of other assets or
cash-generating units (“CGUs”).
The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less
costs of disposal. V alue in use based on the estimated future cash flows, discounted to their present value
using a pre-tax discount rate that reflects current market assessments of the time value of money and the
risks specific to the asset or CGU.
An impairment loss is recognised if the carrying amount of an asset or CGU exceeds its recoverable
amount.
Impairment losses are recognised in profit or loss. They are allocated first to reduce the carrying
amount of any goodwill allocated to the CGU, and then to reduce the carrying amounts of the other assets
in the CGU on a pro rata basis.
For other assets, an impairment loss is reversed only to the extent that the resulting carrying amount
does not exceed the carrying amount that would have been determined, net of depreciation or amortisation,
if no impairment loss had been recognised.
(i) Inventories
Inventories are measured at the lower of cost and net realisable value.
Cost is calculated using the first-in first-out method formula and comprises all costs of purchase, costs of
conversion and other costs incurred in bringing the inventories to their present location and condition.
Net realisable value is the estimated selling price in the ordinary course of business less the estimated
costs of completion and the estimated costs necessary to make the sale.
(j) Contract liabilities
A contract liability is recognised when the customer pays non-refundable consideration before the Group
recognises the related revenue (see Note 2(r)(i)). A contract liability is also recognised if the Group has an
unconditional right to receive non-refundable consideration before the Group recognises the related revenue. In
such latter cases, a corresponding receivable is also recognized (see Note 2(k)).
(k) Trade and other receivables
A receivable is recognised when the Group has an unconditional right to receive consideration and only the
passage of time is required before payment of that consideration is due.
Trade receivables that do not contain a significant financing component are initially measured at their
transaction price. Trade receivables that contain a significant financing component and other receivables are
initially measured at fair value plus transaction costs. All receivables are subsequently stated at amortised cost
(see Note 2(h)(i)).
APPENDIX I ACCOUNTANTS’ REPORT
– I-24 –


--- page 571 ---
(l) Cash and cash equivalents
Cash and cash equivalents comprise cash at bank and on hand, demand deposits with banks and other
financial institutions, and other short-term, highly liquid investments that are readily convertible into known
amounts of cash and which are subject to an insignificant risk of changes in value, having been within three
months of maturity at acquisition. Bank overdrafts that are repayable on demand and form an integral part of the
Group’s cash management are also included as a component of cash and cash equivalents for the purpose of the
consolidated cash flow statement. Cash and cash equivalents are assessed for ECL (see Note 2(h)(i)).
(m) Trade and other payables (other than refund liabilities)
Trade and other payables are initially recognised at fair value. Subsequent to initial recognition, trade and
other payables are stated at amortised cost unless the effect of discounting would be immaterial, in which case
they are stated at invoice amounts.
(n) Interest-bearing borrowings
Interest-bearing borrowings are measured initially at fair value less transaction costs. Subsequently, these
borrowings are stated at amortised cost using the effective interest method. Interest expense is recognised in
accordance with Note 2(t).
(o) Employee benefits
(i) Short-term employee benefits and contributions to defined contribution retirement plans
Short-term employee benefits are expensed as the related service is provided. A liability is
recognised for the amount expected to be paid if the Group has a present legal or constructive obligation
to pay this amount as a result of past service provided by the employee and the obligation can be
estimated reliably.
Obligations for contributions to defined contribution retirement plans are expensed as the related
service is provided.
(ii) Termination benefits
Termination benefits are expensed at the earlier of when the Group can no longer withdraw the offer
of those benefits and when the Group recognises costs for a restructuring.
(p) Income tax
Income tax expense comprises current tax and deferred tax. It is recognised in profit or loss except to the
extent that it relates to a business combination, or items recognised directly in equity or in OCI.
Current tax comprises the estimated tax payable or receivable on the taxable income or loss for the year
and any adjustments to the tax payable or receivable in respect of previous years. The amount of current tax
payable or receivable is the best estimate of the tax amount expected to be paid or received that reflects any
uncertainty related to income taxes. It is measured using tax rates enacted or substantively enacted at the
reporting date. Current tax also includes any tax arising from dividends.
Current tax assets and liabilities are offset only if certain criteria are met.
APPENDIX I ACCOUNTANTS’ REPORT
– I-25 –


--- page 572 ---
Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not
recognised for:
– temporary differences on the initial recognition of assets or liabilities in a transaction that is not a
business combination and that affects neither accounting nor taxable profit or loss and does not give
rise to equal taxable and deductible temporary differences;
– temporary differences related to investment in subsidiaries, associates and joint venture to the extent
that the Group is able to control the timing of the reversal of the temporary differences and it is
probable that they will not reverse in the foreseeable future;
– taxable temporary differences arising on the initial recognition of goodwill; and
– those related to the income taxes arising from tax laws enacted or substantively enacted to
implement the Pillar Two model rules published by the Organisation for Economic Co-operation and
Development.
The Group recognised deferred tax assets and deferred tax liabilities separately in relation to its lease
liabilities and right-of-use assets.
Deferred tax assets are recognised for unused tax losses, unused tax credits and deductible temporary
differences to the extent that it is probable that future taxable profits will be available against which they can be
used. Future taxable profits are determined based on the reversal of relevant taxable temporary differences. If the
amount of taxable temporary differences is insufficient to recognise a deferred tax asset in full, then future
taxable profits, adjusted for reversals of existing temporary differences, are considered, based on the business
plans for individual subsidiaries in the Group. Deferred tax assets are reviewed at each reporting date and are
reduced to the extent that it is no longer probable that the related tax benefit will be realised; such reductions are
reversed when the probability of future taxable profits improves.
The measurement of deferred tax reflects the tax consequences that would follow from the manner in
which the Group expects, at the reporting date, to recover or settle the carrying amount of its assets and
liabilities.
Deferred tax assets and liabilities are offset only if certain criteria are met.
(q) Provisions
Generally provisions are determined by discounting the expected future cash flows at a pre-tax rate that
reflects current market assessment of the time value of money and the risks specific to the liability.
Where it is not probable that an outflow of economic benefits will be required, or the amount cannot be
estimated reliably, the obligation is disclosed as a contingent liability, unless the probability of outflow of
economic benefits is remote. Possible obligations, whose existence will only be confirmed by the occurrence or
non-occurrence of one or more future events are also disclosed as contingent liabilities unless the probability of
outflow of economic benefits is remote.
Where some or all of the expenditure required to settle a provision is expected to be reimbursed by
another party, a separate asset is recognised for any expected reimbursement that would be virtually certain. The
amount recognised for the reimbursement is limited to the carrying amount of the provision.
APPENDIX I ACCOUNTANTS’ REPORT
– I-26 –


--- page 573 ---
(r) Revenue and other income
Income is classified by the Group as revenue when it arises from the sale of goods, the provision of
services or the use by others of the Group’s assets under leases in the ordinary course of the Group’s business.
Revenue is recognised when control over a product or service is transferred to the customer, or the lessee
has the right to use the asset, 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.
Further details of the Group’s revenue and other income recognition policies are as follows:
(i) Sale of goods
For the sale of goods from general sales, revenue is recognised when control passes to the retail
customers, being the point the retail customers purchase the goods at the retail stores and shopping malls.
Payment of transaction price is due immediately at the point the retail customers purchase the goods. The
payment is usually settled in cash, using bank cards or by means of electronic payment.
Revenue from bulk sales of goods to retail customers is recognised when control of products has
transferred, being when the products are delivered and there is no unfulfilled obligation that could affect
them to accept the products. The retail customers make payments upon products delivery or according to
the agreed credit terms normally for a period of 0–90 days from the invoice date. Collected payments
before product delivery is recognised as contract liabilities.
The Group’s retail stores and shopping malls operate a customer loyalty program where points can
be earned by customers which can be used to reduce the cost of future purchases. The Group allocates a
portion of the consideration received to loyalty points based on the estimated relative stand-alone selling
prices. The amount allocated to the loyalty programme is deferred, and is recognised as revenue when
loyalty points are redeemed or expired. The deferred revenue is included in contract liabilities.
Revenue from sales of goods to wholesale customers is recognised when control over a product or
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 such as value added
tax or other sales taxes. The wholesale customers make payments upon products delivery or according to
the agreed credit terms normally for a period of 0–90 days from the invoice date. Collected payments
before product delivery is recognised as contract liabilities.
The Group is the principal for the sales of goods to retail and wholesale customers and recognises
revenue on a gross basis. In determining whether the Group acts as a principal or as an agent, it considers
whether it obtains control of the products before they are transferred to the customers. Control refers to
the Group’s ability to direct the use of and obtain substantially all of the remaining benefits from the
products.
(ii) Supply and sales of meals
The Group owns a central kitchen to produce meals daily and deliver to customers like local
corporates or schools. Revenue is recognised when control passes to the customers, being the point when
the meals have been delivered. The customers make payments upon the meal delivery or according to the
agreed credit terms normally for a period of 0–90 days from the invoice date. Collected payments before
product delivery is recognised as contract liabilities.
APPENDIX I ACCOUNTANTS’ REPORT
– I-27 –


--- page 574 ---
(iii) Commission income from concessionaire sales
The Group grants concessionaire the right to operate business within retail stores and shopping
malls under a concession. The Group recognises commission income from concessionaire sales upon sales
of goods by concessionaire. The concessionaires will pay to the Group commission income at the higher of
the minimum guaranteed commission and certain percentage of their sales in accordance with the terms of
contracts. The Group receives the entire sales proceeds from customers on behalf of the concessionaires
and reimburses the sales proceeds to the concessionaires after deducting its share of the commission
income.
(iv) Commission income from supply of goods
The Group charges commission fees to customers from supply of goods, where the Group generally
is acting as an agent and does not control the specified products provided before they are transferred to the
customers. The Group recognises revenue in the amount of any fee or commission to which it expects to
be entitled in exchange for arranging for the specified products to be provided. The commission income
from sale of goods is recognised on a net basis at the point of acceptance of products.
(v) Rental income from operating lease
Rental income receivable under operating leases is recognised in profit or loss in equal instalments
over the periods covered by the lease term, except where an alternative basis is more representative of the
pattern of benefits to be derived from the use of the leased asset. Lease incentives granted are recognised
in profit or loss as an integral part of the aggregate net lease payments receivable.
(vi) Service income
Service income is recognised in profit or loss when the services are delivered.
(vii) Dividends
– Dividend income from unlisted investments is recognised when the shareholder’s right to
receive payment is established.
– Dividend income from listed investments is recognised when the share price of the investment
goes ex-dividend.
(viii) Interest income
Interest income is recognised as it accrues using the effective interest method using the rate that
exactly discounts estimated future cash receipts through the expected life of the financial asset to the gross
carrying amount of the financial asset. For financial assets measured at amortised cost of FVOCI
(recycling) that are not credit-impaired, the effective interest rate is applied to the gross carrying amount
of the asset. For credit-impaired financial assets, the effective rate is applied to the amortised cost (i.e.
gross carrying amount net of loss allowance) of the asset (see Note 2(h)(i)).
(ix) Government grants
Government grants are recognised in the statement of financial position initially when there is
reasonable assurance that they will be received and that the Group will comply with the conditions
attaching to them. Grants that compensate the Group for expenses incurred are recognised as income in
profit or loss on a systematic basis in the same periods in which the expenses are incurred. Grants that
compensate the Group for the cost of an asset are presented in the consolidated statements of financial
position by setting up the grant as deferred income and consequently are effectively recognised in profit or
loss on a systematic basis over the useful life of the asset.
APPENDIX I ACCOUNTANTS’ REPORT
– I-28 –


--- page 575 ---
(s) Translation of foreign currencies
Monetary assets and liabilities denominated in foreign currencies are translated into the functional
currency at the exchange rate at the reporting date. Non-monetary assets and liabilities that are measured at fair
value in a foreign currency are translated into the functional currency at the exchange rate when the fair value
was determined. Non-monetary assets and liabilities that are measured based on historical cost in a foreign
currency are translated at the exchange rate at the date of the transaction. Foreign currency differences are
generally recognised in profit or loss.
(t) Borrowing costs
Borrowing costs that are directly attributable to the acquisition, construction or production of an asset
which necessarily takes a substantial period of time to get ready for its intended use or sale are capitalised as
part of the cost of that asset. Other borrowing costs are expensed in the period in which they are incurred.
(u) Related parties
(a) A person, or a close member of that person’s family, 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 the Group’s parent.
(b) An entity is related to the Group if any of the following conditions applies:
(i) The entity and the Group are members of the same group (which means that each parent,
subsidiary and fellow subsidiary is related to the others).
(ii) One entity is an associate or 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 plan for the benefit of employees of either the Group
or an entity related to the Group.
(vi) The entity is controlled or jointly controlled by a person identified in (a).
(vii) A person identified in (a)(i) has significant influence over the entity or is a member of the key
management personnel of the entity (or of a parent of the entity).
(viii) The entity, or any member of a group of which it is a part, provides key management
personnel services to the Group or to the Group’s parent.
Close members of the family of a person are those family members who may be expected to influence, or
be influenced by, that person in their dealings with the entity.
APPENDIX I ACCOUNTANTS’ REPORT
– I-29 –


--- page 576 ---
(v) Segment reporting
Operating segments, and the amounts of each segment item reported in the Historical Financial
Information, are identified from the financial information provided regularly to the Group’s most senior
executive management for the purposes of allocating resources to, and assessing the performance of, the Group’s
various lines of business and geographical locations.
Individually material operating segments are not aggregated for financial reporting purposes unless the
segments have similar economic characteristics and are similar in respect of the nature of products and services,
the nature of production processes, the type or class of customers, the methods used to distribute the products or
provide the services, and the nature of the regulatory environment. Operating segments which are not
individually material may be aggregated if they share a majority of these criteria.
3 ACCOUNTING JUDGEMENTS AND ESTIMATES
Sources of estimation uncertainty
Note 27(e) contain information about the assumptions and their risk factors relating to the fair value of
financial assets. Other significant sources of estimation uncertainty are as follows:
(a) Net realizable value of inventories
Net realizable value of inventories is the estimated selling price in the ordinary course of business,
less estimated costs of completion and selling expenses. These estimates are based on the current market
condition and the historical experience of manufacturing and selling products of similar nature. Any
change in the assumptions would increase or decrease the amount of inventories write-down or the related
reversals of write-down made in prior years and affect the Group’s net assets value. The Group reassesses
these estimates annually. Management measures these estimates at each statement of financial position
date.
(b) Loss allowance for expected credit losses
The Group estimates the amount of loss allowance for ECLs on trade and other receivables that are
measured at amortised cost based on the credit risk of the respective financial instruments. The loss
allowance amount is measured as the asset’s carrying amount and the present value of estimated future
cash flows with the consideration of expected future credit loss of the respective financial instrument. The
assessment of the credit risk of the respective financial instrument involves high degree of estimation and
uncertainty. When the actual future cash flows are less than expected or more than expected, a material
impairment loss or a material reversal of impairment loss may arise, accordingly.
APPENDIX I ACCOUNTANTS’ REPORT
– I-30 –


--- page 577 ---
4 REVENUE AND SEGMENT REPORTING
(a) Revenue
The Group is principally engaged in operation of retail stores and shopping malls in areas around
Y angzhou, Jiangsu, and sales of goods to wholesale customers and supply and sales of meals.
(i) Disaggregation of revenue
Disaggregation of revenue from contracts with customers by major products is as follows:
Y ear ended 31 December
Nine months ended
30 September
2021 2022 2023 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(Unaudited)
Revenue from contracts with
customers within the scope of
IFRS 15
Sales of goods
– general sales 751,615 613,209 616,813 472,480 362,049
– bulk sales 104,176 143,930 38,883 30,145 34,963
– wholesales 515,654 495,056 679,641 434,820 568,338
Subtotal 1,371,445 1,252,195 1,335,337 937,445 965,350
Commission income
– concessionaire sales 32,718 30,748 32,894 21,795 20,752
– supply of goods 9,639 17,283 6,860 6,405 4,073
Subtotal 42,357 48,031 39,754 28,200 24,825
Supply and sales of meals 7,723 17,886 15,315 12,603 4,725
1,421,525 1,318,112 1,390,406 978,248 994,900
Revenue from other sources
Rental income from operating
lease 10,668 10,573 11,566 9,585 10,910
1,432,193 1,328,685 1,401,972 987,833 1,005,810
The Group’s revenue from contracts with customers were recognised at point in time for the Track
Record Period.
During the years ended 31 December 2021, 2022 and 2023 and the nine months ended 30 September
2023 and 2024, nil, one, one, one (unaudited) and one customer with whom transactions have exceeded
10% of the Group’s revenues. Details of concentrations of credit risk arising from the customers are set
out in Note 27(a).
APPENDIX I ACCOUNTANTS’ REPORT
– I-31 –


--- page 578 ---
(ii) Revenue expected to be recognised in the future arising from contracts with customers in existence
at the reporting date.
Except for the disclosures in Note 24, the Group has applied the practical expedient in paragraph
121 of IFRS 15 to its sales contracts for goods such that information about revenue expected to be
recognised in the future is not disclosed in respect of revenue that the Group will be entitled to
when it satisfies the remaining performance obligations under these contracts that had an expected
duration of one year or less.
(b) Segment reporting
Operating segments are identified on the basis of internal reports that the Group’s most senior executive
management reviews regularly in allocating resources to segments and in assessing their performances.
The Group’s most senior executive management makes resources allocation decisions based on internal
management functions and assess the Group’s business performance as one integrated business instead of by
separate business lines or geographical regions. Accordingly, the Group has only one operating segment and
therefore, no segment information is presented.
IFRS 8, Operating Segments, requires identification and disclosure of information about an entity’s
geographical areas, regardless of the entity’s organization (i.e. even if the entity has a single reportable segment).
The Group operates within one geographical location because primarily all of its revenue was generated in the
PRC and primarily all of its non-current operating assets and capital expenditure were located/incurred in the
PRC. Accordingly, no geographical information is presented.
5 OTHER REVENUE AND OTHER NET GAIN/(LOSS)
(a) Other revenue
Y ear ended 31 December
Nine months ended
30 September
2021 2022 2023 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(Unaudited)
Service income 2,495 3,939 3,998 3,423 4,520
Government grants 1,222 1,817 1,110 906 71
Dividends income 158 226 247 247 293
3,875 5,982 5,355 4,576 4,884
During the years ended 31 December 2021, 2022 and 2023 and nine months ended 30 September 2023 and
2024, the Group received unconditional government grants of RMB1,222,000, RMB1,817,000, RMB1,110,000,
RMB906,000 (unaudited) and RMB71,000, mainly as rewards of the Group’s contribution to secure employment
for regional employees and special funds for industrial development.
APPENDIX I ACCOUNTANTS’ REPORT
– I-32 –


--- page 579 ---
(b) Other net gain
Y ear ended 31 December
Nine months ended
30 September
2021 2022 2023 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(Unaudited)
Net realised gain on structured
deposits and wealth
management products 372 363 260 167 207
Net foreign exchange
(loss)/gain (112) (155) 10 404 1,404
Net loss on disposal of an
associate (577) ––––
Net (loss)/gain on disposal of
property, plant and
equipment (4) – 28 (50) (390)
Compensation received from
early termination of lease
agreement – – 2,300 2,300 –
Impairment losses of property,
plant and equipment and
right-of-use assets – – (1,490) – –
Others 339 17 136 98 (105)
18 225 1,244 2,919 1,116
6 PROFIT BEFORE TAXATION
Profit before taxation is arrived at after charging:
(a) Net finance costs
Y ear ended 31 December
Nine months ended
30 September
2021 2022 2023 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(Unaudited)
Interest income from bank
deposits (228) (480) (1,573) (944) (1,396)
Finance income (228) (480) (1,573) (944) (1,396)
Interest expenses on bank loans
and other borrowings 13,964 16,679 17,058 12,631 14,240
Interest expenses on lease
liabilities 4,990 4,932 4,485 3,361 3,330
Finance costs 18,954 21,611 21,543 15,992 17,570
Net finance costs 18,726 21,131 19,970 15,048 16,174
APPENDIX I ACCOUNTANTS’ REPORT
– I-33 –


--- page 580 ---
(b) Staff costs
Y ear ended 31 December
Nine months ended
30 September
2021 2022 2023 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(Unaudited)
Salaries, wages and other
benefits 105,095 102,249 95,561 70,130 66,709
Contribution to defined
retirement plans (Note (i)) 8,190 9,598 9,413 7,112 6,469
113,285 111,847 104,974 77,242 73,178
Note:
(i) The employees of the subsidiaries of the Group established in the PRC participate in a defined
contribution scheme managed by the local municipal governments, whereby these companies are
required to contribute to the scheme at certain rates of the employees’ salaries as agreed by the local
municipal governments. Employees of these companies are entitled to benefits, calculated based on a
percentage of the average salaries level in the PRC, from the above mentioned retirement scheme at
their normal retirement age.
The Group has no further obligation for payment of other retirement benefits beyond the above
contributions.
(c) Other items
Y ear ended 31 December
Nine months ended
30 September
2021 2022 2023 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(Unaudited)
Cost of inventories recognised
as expenses 1,137,269 1,015,224 1,089,334 770,344 789,727
Depreciation charge
– owned property, plant and
equipment 32,865 36,441 41,689 32,804 31,341
– right-of-use assets 25,924 29,023 28,048 20,938 20,767
Impairment loss on trade and
other receivables 10,148 1,387 3,214 7,031 6,133
Listing expense – 1,747 3,449 3,125 7,276
APPENDIX I ACCOUNTANTS’ REPORT
– I-34 –


--- page 581 ---
7 INCOME TAX
(a) Taxation in the consolidated statements of profit or loss represents
Y ear ended 31 December
Nine months ended
30 September
2021 2022 2023 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(Unaudited)
Current tax
– Provision for the
year/period 17,133 17,655 20,210 13,483 14,141
Deferred tax
– Origination and reversal of
temporary differences
(Note 25(b)) (4,517) (233) (1,754) (2,215) (3,117)
12,616 17,422 18,456 11,268 11,024
Note: Pursuant to the income tax rules and regulations of Hong Kong, the subsidiary in Hong Kong were
liable to the Hong Kong Profits Tax at a rate of 16.5% during the years ended 31 December 2021,
2022 and 2023 and the nine months ended 30 September 2023 and 2024.
The PRC subsidiaries of the Group are subject to PRC Corporate Income Tax (“CIT”) at a statutory
rate of 25%, except for the following specified subsidiaries:
According to Announcement [2021] No. 12, “The Announcement of Implementation of Income Tax
Incentives for Micro and Small Enterprises and Individually-owned Businesses” issued by Ministry
of Finance of the PRC and National Tax Bureau on 2 April 2021, the small-scaled minimal profit
enterprise with an annual taxable income below RMB1,000,000 (RMB1,000,000 included) is entitled
to a preferential tax treatment of 87.5% exemption of taxable income and application of income tax
rate as 20% from 1 January 2021 to 31 December 2022.
According to Announcement [2022] No. 13, “The Announcement of Further Implementation of
Income Tax Incentives for Small-scaled Minimal Profit Enterprise” issued by Ministry of Finance of
the PRC and National Tax Bureau on 14 March 2022, the small-scaled minimal profit enterprise with
an annual taxable income between RMB1,000,000 and RMB3,000,000 (RMB3,000,000 included) is
entitled to a preferential tax treatment of 75% exemption of taxable income and application of
income tax rate as 20% for the years from 2022 to 2024.
Certain subsidiaries in the Group meet the conditions as small-scaled minimal profit enterprise were
qualified for the entitlement of such preferential tax treatment during the years ended 31 December
2021, 2022 and 2023 and nine months ended 30 September 2023 and 2024.
APPENDIX I ACCOUNTANTS’ REPORT
– I-35 –


--- page 582 ---
(b) Reconciliation between tax expense and accounting profit at applicable tax rates
Y ear ended 31 December
Nine months ended
30 September
2021 2022 2023 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(Unaudited)
Profit before taxation 47,696 68,487 70,058 41,796 35,102
Notional tax on profit before
taxation, calculated using the
PRC statutory tax rate of
25% 11,924 17,122 17,515 10,449 8,776
Effect of different tax rates (347) (475) (190) (42) (115)
Tax effect of non-deductible
expenses 426 176 312 354 2,048
Tax effect of non-taxable
income (40) (56) (62) (21) (73)
Tax effect of tax losses not
recognised 617 569 755 436 438
Tax effect of temporary
differences not recognised 36 86 126 92 (50)
Actual tax expense 12,616 17,422 18,456 11,268 11,024
8 DIRECTORS’ EMOLUMENTS
Directors’ emoluments disclosed pursuant to section 383(1) of the Hong Kong Companies Ordinance and Part 2
of the Companies (Disclosure of Information about Benefits of Directors) Regulation are as follows:
For the year ended 31 December 2021 Fees
Salaries,
allowances
and benefits
in kind
Discretionary
bonuses
Retirement
scheme
contributions Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Executive directors
Gao Feng – 185 527 – 712
Y uan Y uan – 181 400 23 604
Zhang Jiaan – 134 241 10 385
Y ao Jun – 96 90 7 193
Shen Zhigen – 83 90 6 179
L i X i –––––
Supervisors
Zhan Mingyu – 88 90 – 178
Xia Zhonglin – 58 24 7 89
Zhu Aizhen – 93 4 7 104
Total – 918 1,466 60 2,444
APPENDIX I ACCOUNTANTS’ REPORT
– I-36 –


--- page 583 ---
For the year ended 31 December 2022 Fees
Salaries,
allowances
and benefits
in kind
Discretionary
bonuses
Retirement
scheme
contributions Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Executive directors
Gao Feng – 186 527 – 713
Y uan Y uan – 167 350 13 530
Zhang Jiaan – 140 241 19 400
Y ao Jun – 83 90 8 181
Shen Zhigen – 73 90 – 163
L i X i –––––
Wang Fei (appointed in December 2022) –––––
Supervisors
Zhan Mingyu – 74 90 – 164
Xia Zhonglin – 50 38 8 96
Zhu Aizhen – 74 5 8 87
Total – 847 1,431 56 2,334
For the year ended 31 December 2023 Fees
Salaries,
allowances
and benefits
in kind
Discretionary
bonuses
Retirement
scheme
contributions Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Executive directors
Gao Feng – 185 527 – 712
Y uan Y uan – 151 350 – 501
Zhang Jiaan – 139 241 19 399
Y ao Jun – 81 90 9 180
Shen Zhigen – 77 90 – 167
L i X i –––––
W a n g F e i –––––
Supervisors
Zhan Mingyu – 74 90 – 164
Xia Zhonglin – 50 24 4 78
Zhu Aizhen – 74 4 9 87
Total – 831 1,416 41 2,288
APPENDIX I ACCOUNTANTS’ REPORT
– I-37 –


--- page 584 ---
For the nine months ended
30 September 2023 (unaudited) Fees
Salaries,
allowances
and benefits
in kind
Discretionary
bonuses
Retirement
scheme
contributions Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Executive directors
Gao Feng – 139 – – 139
Y uan Y uan – 113 – – 113
Zhang Jiaan – 104 – 14 118
Y ao Jun – 61 – 6 67
Shen Zhigen – 58 – – 58
L i X i –––––
W a n g F e i –––––
Supervisors
Zhan Mingyu – 55 – – 55
Xia Zhonglin – 37 – 3 40
Zhu Aizhen – 56 – 6 62
Total – 623 – 29 652
For the nine months ended
30 September 2024 Fees
Salaries,
allowances
and benefits
in kind
Discretionary
bonuses
Retirement
scheme
contributions Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Executive directors
Gao Feng – 139 – – 139
Y uan Y uan – 114 – – 114
Zhang Jiaan – 104 – 14 118
Y ao Jun – 62 – 7 69
Shen Zhigen – 57 – – 57
L i X i –––––
W a n g F e i –––––
Nai Jingjing (appointed in May 2024) –––––
Non-executive director
Wei Y an (appointed in May 2024) –––––
Independent non-executive directors
Zhu Bo (appointed in May 2024) –––––
Lam Ka Tak (appointed in May 2024) –––––
Zheng Manjun (appointed in May 2024) –––––
Zheng Y u (appointed in May 2024) –––––
Supervisors
Zhan Mingyu – 55 – – 55
Xia Zhonglin – 35 – – 35
Zhu Aizhen – 57 – 7 64
Total – 623 – 28 651
APPENDIX I ACCOUNTANTS’ REPORT
– I-38 –


--- page 585 ---
In May 2024, Lam Ka Tak, Zheng Manjun, Zheng Y u and Zhu Bo were appointed as independent non-executive
directors which will be effective upon the date of listing.
During the years ended 31 December 2021, 2022 and 2023 and nine months ended 30 September 2023 and 2024,
no director or chief executive has waived or agreed to waive any emoluments and no amounts were paid or payable by
the Group to the directors and the chief executive as an inducement to join or upon joining the Group or as
compensation for loss of any office in connection with the management of the affairs of any member of the Group.
9 INDIVIDUALS WITH HIGHEST EMOLUMENTS
Of the five individuals with the highest emoluments of the Group for the years ended 31 December 2021, 2022
and 2023 and nine months ended 30 September 2023 and 2024, three, three, three, three (unaudited) and three
individuals’ emoluments are disclosed in Note 8 and the emoluments in respect of the remaining two, two, two, two
(unaudited) and two individuals during the Track Record Periods are as follows:
Y ear ended 31 December
Nine months ended
30 September
2021 2022 2023 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(Unaudited)
Salaries, allowance and benefits in
kind 262 262 264 245 237
Discretionary bonuses 650 600 550 – –
Retirement scheme contributions ––967
912 862 823 251 244
The emoluments of the individuals who are not director and with the highest emoluments are within the
following bands:
Y ear ended 31 December
Nine months ended
30 September
2021 2022 2023 2023 2024
Number of
individuals
Number of
individuals
Number of
individuals
Number of
individuals
Number of
individuals
HK$
Nil – 1,000,000 22222
10 EARNINGS PER SHARE
(a) Basic earnings per share
The calculation of basic earnings per share during the years ended 31 December 2021, 2022 and 2023 and
nine months ended 30 September 2023 and 2024 is based on the profit attributable to equity shareholders of the
Company of RMB36,056,000, RMB50,029,000, RMB50,088,000, RMB29,868,000 (unaudited) and
RMB23,667,000 respectively, and the weighted average number of 160,684,910, 160,684,910, 160,684,910,
160,684,910 (unaudited) and 160,684,910 ordinary shares in issue during the respective year/period.
(b) Diluted earnings per share
The Company had no dilutive potential ordinary shares outstanding during the years ended 31 December
2021, 2022, 2023 and nine months ended 30 September 2023 and 2024, therefore diluted earnings per share is
the same as the basic earnings per share.
APPENDIX I ACCOUNTANTS’ REPORT
– I-39 –


--- page 586 ---
11 PROPERTY, PLANT AND EQUIPMENT
(a) Reconciliation of carrying amount
The Group
Plant and
buildings
Machinery
and
equipment
Office and
other
equipment
Motor
vehicles
Leasehold
improvements
Construction
in progress
Right-of-use
assets – land
use rights
Right-of-use
assets – other
properties Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Cost:
At 1 January 2021 215,458 21,386 53,002 13,031 113,746 5,140 44,650 149,338 615,751
Additions 397 6,977 4,055 1,349 21,896 15,953 – 28,120 78,747
Transfers 12,993 –––– (12,993) – – –
Disposals – (5) (679) (116) – – – (571) (1,371)
At 31 December 2021
and 1 January 2022 228,848 28,358 56,378 14,264 135,642 8,100 44,650 176,887 693,127
Additions 769 2,992 1,649 1,521 14,453 5,500 – 26,616 53,500
Transfers 5,050 –––– (5,050) – – –
Disposals – – (2) –––– (3,119) (3,121)
At 31 December 2022
and 1 January 2023 234,667 31,350 58,025 15,785 150,095 8,550 44,650 200,384 743,506
Additions 643 1,276 1,576 414 36,822 – – 19,320 60,051
Transfers 8,550 –––– (8,550) – – –
Disposals – (2,253) (218) (392) (1,229) – – (4,403) (8,495)
At 31 December 2023
and 1 January 2024 243,860 30,373 59,383 15,807 185,688 – 44,650 215,301 795,062
Additions 581 47 541 20 20,079 7,790 – 16,038 45,096
Disposals – (8) (269) – (382) – – (2,422) (3,081)
At 30 September 2024 244,441 30,412 59,655 15,827 205,385 7,790 44,650 228,917 837,077
APPENDIX I ACCOUNTANTS’ REPORT
– I-40 –


--- page 587 ---
Plant and
buildings
Machinery
and
equipment
Office and
other
equipment
Motor
vehicles
Leasehold
improvements
Construction
in progress
Right-of-use
assets – land
use rights
Right-of-use
assets – other
properties Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Accumulated
depreciation:
At 1 January 2021 (111,455) (16,023) (29,948) (9,675) (47,402) – (11,944) (35,160) (261,607)
Charge for the year (7,404) (1,713) (5,612) (874) (17,262) – (1,127) (24,797) (58,789)
Written back on
disposals – 5 558 113 – – – 571 1,247
At 31 December 2021
and 1 January 2022 (118,859) (17,731) (35,002) (10,436) (64,664) – (13,071) (59,386) (319,149)
Charge for the year (7,841) (2,279) (4,851) (1,103) (20,367) – (1,127) (27,896) (65,464)
Written back on
disposals ––––––– 2,511 2,511
At 31 December 2022
and 1 January 2023 (126,700) (20,010) (39,853) (11,539) (85,031) – (14,198) (84,771) (382,102)
Charge for the year (8,559) (2,502) (4,948) (1,347) (24,333) – (1,127) (26,921) (69,737)
Written back on
disposals – 2,185 212 380 331 – – 1,300 4,408
At 31 December 2023
and 1 January 2024 (135,259) (20,327) (44,589) (12,506) (109,033) – (15,325) (110,392) (447,431)
Charge for the period (6,339) (1,849) (3,360) (881) (18,912) – (845) (19,922) (52,108)
Written back on
disposals – 4 202 – 35 – – 1,968 2,209
At 30 September 2024 (141,598) (22,172) (47,747) (13,387) (127,910) – (16,170) (128,346) (497,330)
APPENDIX I ACCOUNTANTS’ REPORT
– I-41 –


--- page 588 ---
Plant and
buildings
Machinery
and
equipment
Office and
other
equipment
Motor
vehicles
Leasehold
improvements
Construction
in progress
Right-of-use
assets – land
use rights
Right-of-use
assets – other
properties Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Accumulated
impairment:
At 1 January 2021 and
2022 ––––––– (2,522) (2,522)
Written back on
disposals ––––––– 6 0 8 6 0 8
At 31 December 2022
and 1 January 2023 ––––––– (1,914) (1,914)
Charge for the year –––– (552) – – (938) (1,490)
At 31 December 2023
and 30 September
2024 –––– (552) – – (2,852) (3,404)
Net book value:
At 31 December 2021 109,989 10,627 21,376 3,828 70,978 8,100 31,579 114,979 371,456
At 31 December 2022 107,967 11,340 18,172 4,246 65,064 8,550 30,452 113,699 359,490
At 31 December 2023 108,601 10,046 14,794 3,301 76,103 – 29,325 102,057 344,227
At 30 September 2024 102,843 8,240 11,908 2,440 76,923 7,790 28,480 97,719 336,343
APPENDIX I ACCOUNTANTS’ REPORT
– I-42 –


--- page 589 ---
The Company
Plant and
buildings
Machinery
and
equipment
Office and
other
equipment
Motor
vehicles
Leasehold
improvements
Construction
in progress
Right-of-use
assets-land
use rights
Right-of-use
assets-other
properties Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Cost:
At 1 January 2021 121,968 9,364 41,074 4,642 86,406 – 29,415 149,338 442,207
Additions – 1,912 2,241 731 15,322 – – 28,120 48,326
Disposals – – – (116) – – – (571) (687)
At 31 December 2021
and 1 January 2022 121,968 11,276 43,315 5,257 101,728 – 29,415 176,887 489,846
Additions – 2,125 1,371 1,211 11,388 – – 26,616 42,711
Disposals ––––––– (3,119) (3,119)
At 31 December 2022
and 1 January 2023 121,968 13,401 44,686 6,468 113,116 – 29,415 200,384 529,438
Additions – 1,044 1,363 34 30,414 – – 19,320 52,175
Disposals – – (84) – (1,229) – – (4,403) (5,716)
At 31 December 2023
and 1 January 2024 121,968 14,445 45,965 6,502 142,301 – 29,415 215,301 575,897
Additions 151 47 421 6 19,109 7,790 – 16,038 43,562
Disposals – – (137) – (360) – – (2,422) (2,919)
At 30 September 2024 122,119 14,492 46,249 6,508 161,050 7,790 29,415 228,917 616,540
APPENDIX I ACCOUNTANTS’ REPORT
– I-43 –


--- page 590 ---
Plant and
buildings
Machinery
and
equipment
Office and
other
equipment
Motor
vehicles
Leasehold
improvements
Construction
in progress
Right-of-use
assets-land
use rights
Right-of-use
assets-other
properties Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Accumulated
depreciation:
At 1 January 2021 (35,095) (6,291) (20,299) (3,853) (37,162) – (4,834) (35,160) (142,694)
Charge for the year (5,931) (833) (3,990) (269) (14,676) – (735) (24,797) (51,231)
Written back on
disposals – – – 113 – – – 571 684
At 31 December 2021
and 1 January 2022 (41,026) (7,124) (24,289) (4,009) (51,838) – (5,569) (59,386) (193,241)
Charge for the year (5,931) (1,181) (4,085) (402) (17,097) – (735) (27,896) (57,327)
Written back on
disposals ––––––– 2,511 2,511
At 31 December 2022
and 1 January 2023 (46,957) (8,305) (28,374) (4,411) (68,935) – (6,304) (84,771) (248,057)
Charge for the year (5,931) (1,670) (4,248) (565) (20,526) – (735) (26,921) (60,596)
Written back on
disposals – – 82 – 331 – – 1,300 1,713
At 31 December 2023
and 1 January 2024 (52,888) (9,975) (32,540) (4,976) (89,130) – (7,039) (110,392) (306,940)
Charge for the period (4,444) (1,146) (2,902) (331) (16,516) – (551) (19,922) (45,812)
Written back on
disposals – – 135 – 26 – – 1,968 2,129
At 30 September 2024 (57,332) (11,121) (35,307) (5,307) (105,620) – (7,590) (128,346) (350,623)
APPENDIX I ACCOUNTANTS’ REPORT
– I-44 –


--- page 591 ---
Plant and
buildings
Machinery
and
equipment
Office and
other
equipment
Motor
vehicles
Leasehold
improvements
Construction
in progress
Right-of-use
assets-land
use rights
Right-of-use
assets-other
properties Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Accumulated
impairment:
At 1 January 2021 and
2022 ––––––– (2,522) (2,522)
Written back on
disposals ––––––– 6 0 8 6 0 8
At 31 December 2022
and 1 January 2023 ––––––– (1,914) (1,914)
Charge for the year –––– (552) – – (938) (1,490)
At 31 December 2023
and 30 September
2024 –––– (552) – – (2,852) (3,404)
Net book value:
At 31 December 2021 80,942 4,152 19,026 1,248 49,890 – 23,846 114,979 294,083
At 31 December 2022 75,011 5,096 16,312 2,057 44,181 – 23,111 113,699 279,467
At 31 December 2023 69,080 4,470 13,425 1,526 52,619 – 22,376 102,057 265,553
At 30 September 2024 64,787 3,371 10,942 1,201 54,878 7,790 21,825 97,719 262,513
Notes:
(i) As at 31 December 2021, 2022 and 2023 and 30 September 2024, property certificates of certain
properties with an aggregate net book value of RMB71,070,000, RMB71,955,000, RMB75,556,000
and RMB71,442,000 respectively, are yet to be obtained.
(ii) As at 31 December 2021, 2022 and 2023 and 30 September 2024, certain property, plant and
equipment were pledged as security for banking facilities (see Note 20).
(iii) Impairment loss
As at 31 December 2021, 2022 and 2023 and 30 September 2024, in view of the unfavourable future
prospects of certain retail stores, the Group’s management estimated the recoverable amount of each such
retail store (cash generating unit (“CGU”)) with an indication of impairment. The recoverable amount of
each CGU is determined based on fair value less cost of disposal or the value-in-use calculations by
preparing cash flow projections of the relevant CGUs derived from the most recent financial forecast
approved by the management covering the remaining lease term, which is higher. The cash flows are
discounted using a discount rate of 12.9%, 12.5%, 11.3% and 12.0% as at 31 December 2021, 2022 and
2023 and 30 September 2024, respectively. The discount rate used is pre-tax and reflects specific risks
relating to the relevant CGU.
APPENDIX I ACCOUNTANTS’ REPORT
– I-45 –


--- page 592 ---
During the year ended 31 December 2021, 2022 and 2023 and nine months ended 30 September
2024, an impairment loss of nil, nil, RMB1,490,000 and nil which was allocated to the assets including
right-of-use assets and leasehold improvements within CGU, was recognised in profit or loss as the “Other
net gain/(loss)” in the consolidated statements of profit or loss, respectively.
(b) Right-of-use assets
The Group has obtained the right to use certain retail stores and warehouse properties through tenancy
agreements during the years ended 31 December 2021, 2022 and 2023 and nine months ended 2023 and 2024.
The leases typically run for a period of 5 to 10 years. The analysis of the net book value of right-of-use assets by
class of underlying asset is as follows:
As at 31 December
As at
30 September
2021 2022 2023 2024
Notes RMB’000 RMB’000 RMB’000 RMB’000
Land use rights carried at
depreciated cost (i) 31,579 30,452 29,325 28,480
Other properties leased for
own use, carried at
depreciated cost (ii) 114,979 113,699 102,057 97,719
146,558 144,151 131,382 126,199
Notes:
(i) Land use rights
All lands in the PRC are state-owned or collectively owned and no individual ownership right exists.
The Group acquired the rights to use certain lands. The consideration paid for such rights are treated as
right-of-use assets and depreciated over the period of lease term using straight-line method.
Up to the issuance date of the Historical Financial Information, the Group has been in the process of
applying for registration of the ownership certificates for certain land use rights. The aggregate carrying
value of such land use rights of the Group as at 31 December 2021, 2022 and 2023 and 30 September 2024
is RMB2,671,000, RMB2,597,000, RMB2,523,000 and RMB2,468,000 respectively.
(ii) Other properties leased
The Group leases the certain retail stores under leases expiring from 5 to 10 years.
APPENDIX I ACCOUNTANTS’ REPORT
– I-46 –


--- page 593 ---
The analysis of expense items in relation to leases recognised in profit or loss is as follows:
Y ear ended 31 December
Nine months ended
30 September
2021 2022 2023 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(Unaudited)
Land use rights carried
at depreciated cost 1,127 1,127 1,127 845 845
Other properties leased
for own use, carried at
depreciated cost 24,797 27,896 26,921 20,093 19,922
Interest on lease
liabilities
(Note 6(a)) 4,990 4,932 4,485 3,361 3,330
During the year ended 31 December 2021, 2022 and 2023 and nine months ended 30 September
2023 and 2024, additions to right-of-use assets were RMB28,120,000, RMB26,616,000, RMB19,320,000,
RMB12,928,000 (unaudited) and RMB16,038,000, respectively, primarily related to the capitalized lease
payments under new tenancy agreements.
Details of total cash outflow for leases and the maturity analysis of lease liabilities are set out in
Notes 19(d) and 21, respectively.
APPENDIX I ACCOUNTANTS’ REPORT
– I-47 –


--- page 594 ---
12 INVESTMENTS IN SUBSIDIARIES
During the Track Record Period, the Company has direct or indirect interests in the following principal
subsidiaries, all of which are private companies:
Name of company
Place and date of
incorporation/
establishment
Particulars of
issued and paid
up capital
Proportion of ownership interest
As at 31 December
As at
30 September At the date
of this report Principal activities2021 2022 2023 2024
Directly held by the Company
Jiangsu Hongxin Trade Co., Ltd.
(ʮ̡ ) (i)
26 June 1994
The PRC
RMB33,000,000 96% 96% 96% 96% 96% Shopping mall
business
Jiangsu Hongxinlong Agricultural
Products Production and
Marketing Co., Ltd.
(ࠢ
ʮ̡) (ii)
5 July 2013
The PRC
RMB5,000,000 100% 100% 100% 100% 100% Wholesaling
Y ancheng Runbaijia Trading Co., Ltd.
(ʮ̡ ) (ii)
12 December 2019
The PRC
RMB2,000,000 100% 100% 100% 100% 100% Wholesaling
Y angzhou Hongxin Pharmacy Co., Ltd.
(ʮ̡ ) (ii)
14 May 2014
The PRC
RMB2,000,000 100% 100% 100% 100% 100% Retailing
Tianchang Hongxinlong Supermarket
Chain Co., Ltd.
(ࠢ
ʮ̡) (ii)(iv)
14 August 2020
The PRC
RMB500,000 100% 100% 100% – – Retailing
Y angzhou Xintongyuan Trading
Co., Ltd.
(ʮ̡ ) (ii)
30 January 2007
The PRC
RMB500,000 100% 100% 100% 100% 100% Wholesaling
Y angzhou Muyuan Modern
Supply Chain Co., Ltd.
(ʮ̡ ) (ii)
26 August 2019
The PRC
RMB35,000,000 51% 72% 72% 72% 72% Supply and sales of
meals
Indirectly held by the Company
Jiangsu Hongxin (HK) Co., Ltd.
(ڦ( ಥ)ʮ̡ ) (iii)
31 March 2011
Hong Kong
HK$1,000,000 96% 96% 96% 96% 96% No business
operations
Notes:
(i) No audited financial statements were prepared for this entity during the Track Record Period. The official name
of this entity is in Chinese. The English translation is for identification purposes only. This entity is a joint stock
company.
(ii) No audited financial statements were prepared for these entities during the Track Record Period. The official
names of these entities are in Chinese. The English translation is for identification purposes only. These entities
are all limited liability company.
(iii) The audited financial statements of this entity for the year ended 31 December 2021, 2022 and 2023 were
prepared in accordance with Hong Kong Financial Reporting Standards. The statutory auditor is Omicron & Co
Certified Public Accountants.
(iv) This entity went into dissolution and was deregistered on 12 August 2024.
All companies now comprising the Group have adopted 31 December as their financial year end date.
APPENDIX I ACCOUNTANTS’ REPORT
– I-48 –


--- page 595 ---
The following table lists out the information relating to Y angzhou Muyuan Modern Supply Chain Co., Ltd., the
only subsidiary of the Group which has a material NCI. The summarised financial information presented below
represents the amounts before any inter-company elimination.
Y ear ended 31 December
Nine months ended
30 September
2021 2022 2023 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(Unaudited)
NCI percentage 49% 28% 28% 28% 28%
Current assets 10,081 14,299 34,984 18,177 33,797
Non-current assets 29,796 34,685 35,625 33,314 33,670
Current liabilities 24,729 16,386 35,011 17,613 21,229
Net assets 15,148 32,598 35,598 33,879 36,227
Carrying amount of NCI 7,422 9,127 9,967 9,486 10,144
Revenue 9,475 25,824 21,237 16,214 9,504
(Loss)/profit for the year/period (4,084) 3,271 3,749 1,688 693
Total comprehensive income (3,071) 2,451 3,000 1,280 629
(Loss)/profit allocated to NCI (1,505) 449 840 358 176
13 INTERESTS IN AN ASSOCIATE
At 1 January 2021, the Group invested in an associate, which is unlisted corporate entity whose quoted market
price is not available:
Name of company
Place and date of
incorporation/
establishment
Particulars of
issued and
paid-up
capital
Proportion of ownership interest
Principal activities
Group’s
effective
interest
Held
by the
Company
Held
by the
subsidiary
Y angzhou City Jiangdu District
Binjiang Rural Microfinance
Co., Ltd. ( ౮ψ̹ϪேਜᏵϪ
ʮ̡ )
24 October 2011
The PRC
RMB25,000,000 25% – 25% Provision of loan and
financing guarantees,
business agents of
financial institutions
In April 2021, the Group disposed its entire interest in the associate with RMB25,000,000. The loss on the
disposal of investment in an associate was RMB577,000.
APPENDIX I ACCOUNTANTS’ REPORT
– I-49 –


--- page 596 ---
14 FINANCIAL ASSETS AT FAIR V ALUE THROUGH OTHER COMPREHENSIVE INCOME
As at 31 December
As at
30 September
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
Financial assets measured at FVOCI –
non-current
– Unlisted equity securities 36,590 33,950 27,329 28,450
– Equity securities listed in the PRC 980 1,225 1,125 1,412
37,570 35,175 28,454 29,862
Note: The unlisted equity securities at FVOCI (non-recycling) represent investment in unlisted equity interest of
a private company incorporated in the PRC. The listed equity security at FVOCI (non-recycling) represent
investment in an listed equity securities issued by a listed company incorporated in the PRC. These
companies are principally engaged in offering banking services to individuals or enterprises.
The Group designated these investments at FVOCI (non-recycling), as the investment is held for strategic
purposes. During the years ended 31 December 2021, 2022 and 2023 and nine months ended 30 September
2023 and 2024, the Group received cash dividends of RMB158,000, RMB226,000, RMB247,000,
RMB247,000 and RMB293,000 respectively, from the investment in listed and unlisted equity security.
The analysis on the fair value measurement of the above financial asset is disclosed in Note 27(e).
15 INVENTORIES
(a) Inventories in the consolidated statements of financial position comprise:
The Group
As at 31 December
As at
30 September
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
Trade merchandise 286,376 324,018 266,267 317,589
The Company
As at 31 December
As at
30 September
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
Trade merchandise 222,151 251,306 205,879 241,814
APPENDIX I ACCOUNTANTS’ REPORT
– I-50 –


--- page 597 ---
(b) The analysis of the amount of inventories recognised as an expense and included in profit or loss is as
follows:
Y ear ended 31 December
Nine months ended
30 September
2021 2022 2023 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(Unaudited)
Carrying amount of inventories
sold 1,135,837 1,015,532 1,087,789 767,418 788,847
Provision/(reversal) for
write-down of inventories 1,432 (308) 1,545 2,926 880
1,137,269 1,015,224 1,089,334 770,344 789,727
All inventories are expected to be recovered within one year.
16 TRADE AND BILLS RECEIV ABLES
The Group
As at 31 December
As at
30 September
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
Trade receivables
– related parties 77––
– third parties 121,184 199,923 213,779 235,575
Bill receivables – – – 22,074
121,191 199,930 213,779 257,649
The Company
As at 31 December
As at
30 September
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
Trade receivables
– related parties 6,806 4,671 2,090 4,650
– third parties 111,542 186,061 199,341 227,947
Bill receivables – – – 22,074
118,348 190,732 201,431 254,671
APPENDIX I ACCOUNTANTS’ REPORT
– I-51 –


--- page 598 ---
All of the trade receivables are expected to be recovered within one year.
As at 31 December 2021, 2022 and 2023 and 30 September 2024, the Group endorsed certain bank acceptance
bills to suppliers for settling trade and other payables of the same amount on a full recourse basis. The Group has
derecognised these bills receivable and payables to suppliers in their entirety. These derecognised bank acceptance bills
had a maturity date of less than six months from the end of the reporting period. In the opinion of the directors of the
Company, the Group has transferred substantially all the risks and rewards of ownership of these bills and has
discharged its obligation of the payables to its suppliers, and the Group has limited exposure in respect of the
settlement obligation of these bills receivable under the relevant PRC rules and regulations, should the issuing banks
fail to settle the bills on maturity date. The Group considered the issuing banks of these bills are of good credit quality
and non-settlement of these bills by the issuing banks on maturity is not probable. As at 31 December 2021, 2022 and
2023 and 30 September 2024, the Group’s maximum exposure to loss and undiscounted cash outflow, which is same as
the amount payable by the Group to suppliers in respect of the endorsed bills, should the issuing banks fail to settle the
bills on maturity date, amounted to RMB237,972,000, RMB130,000,000, nil and RMB139,000 respectively.
Ageing analysis
As of the end of the reporting period, the ageing analysis of the Group’s trade receivables, based on the
invoice date and net of loss allowance, is as follows:
As at 31 December
As at
30 September
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
Within 3 months 63,786 171,661 172,055 149,745
Over 3 months but within 6 months 52,400 21,658 30,000 61,208
Over 6 months but within 9 months 4,499 6,244 10,043 21,763
Over 9 months but within 12 months 353 356 1,601 2,752
Over 12 months 153 11 80 107
121,191 199,930 213,779 235,575
Trade receivables are due within 90 days from the date of billing. Further details on the Group’s credit
policy and credit risk arising from trade receivables are set out in Note 27(a).
17 PREPAYMENTS, DEPOSITS AND OTHER RECEIV ABLES
The Group
As at 31 December
As at
30 September
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
Amount due from a related party (non-trade) 50 0–––
Prepayments 150,810 220,899 283,491 274,096
V alue added tax recoverable 1,895 120 344 1,131
Other deposits and receivables 20,576 25,077 31,286 27,922
173,781 246,096 315,121 303,149
Less: loss allowance (2,641) (1,982) (2,029) (2,148)
171,140 244,114 313,092 301,001
APPENDIX I ACCOUNTANTS’ REPORT
– I-52 –


--- page 599 ---
The Company
As at 31 December
As at
30 September
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
Amounts due from subsidiaries 23,288 13,423 13,479 6,286
Prepayments 143,387 180,816 257,780 202,930
Dividend receivable from subsidiaries 5,368 5,368 5,368 5,368
Other deposits and receivables 12,668 15,161 16,543 12,307
184,711 214,768 293,170 226,891
Less: loss allowance (511) (31) (82) (132)
184,200 214,737 293,088 226,759
All prepayments, deposits and other receivables are expected to be recovered or recognised as expense within
one year.
18 RESTRICTED DEPOSITS
The Group and the Company
As at 31 December
As at
30 September
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
Restricted deposits
– issuance of letter of guarantee 1,57 1–––
– pledged for bills payables and letter of credit – – – 1,600
1,571 – – 1,600
APPENDIX I ACCOUNTANTS’ REPORT
– I-53 –


--- page 600 ---
19 CASH AND CASH EQUIV ALENTS
(a) Cash and cash equivalents comprise:
The Group
As at 31 December
As at
30 September
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
Cash at bank 181,911 162,440 234,494 146,806
Cash in hand 2,475 3,047 1,732 986
184,386 165,487 236,226 147,792
The Company
As at 31 December
As at
30 September
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
Cash at bank 60,565 45,403 81,803 46,935
Cash in hand 2,097 1,828 1,344 917
62,662 47,231 83,147 47,852
As at 31 December 2021, 2022 and 2023 and 30 September 2024, the Group’s cash included cash at bank
and on hand of RMB184,386,000, RMB165,487,000, RMB236,226,000 and RMB147,792,000 respectively held in
the PRC. Remittance of funds out of Mainland China is subject to relevant rules and regulations of foreign
exchange control.
APPENDIX I ACCOUNTANTS’ REPORT
– I-54 –


--- page 601 ---
(b) Reconciliation of profit before taxation to cash generated from operations:
Y ear ended 31 December
Nine months ended
30 September
Note 2021 2022 2023 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(Unaudited)
Profit before taxation 47,696 68,487 70,058 41,796 35,102
Adjustments for:
Depreciation of owned
property, plant and
equipment 6(c) 32,865 36,441 41,689 32,804 31,341
Depreciation of right-of-use
assets 6(c) 25,924 29,023 28,048 20,938 20,767
Net realised gain on
structured deposits and
wealth management
products 5(b) (372) (363) (260) (167) (207)
Finance costs 6(a) 18,954 21,611 21,543 15,992 17,570
Finance income 6(a) (228) (480) (1,573) (944) (1,396)
Provision of loss allowance
on trade receivables and
other receivables 6(c) 10,148 1,387 3,214 7,031 6,133
Impairment losses of
property, plant and
equipment 5(b) – – 1,490 – –
Share of losses of an
associate 13 70 5––––
Net loss on disposal of an
associate 5(b) 57 7––––
Dividends income 5(a) (158) (226) (247) (247) (293)
Net loss/(gain) on disposal
of property, plant and
equipment 5(b) 4 – (28) 50 390
Foreign exchange loss/(gain) 775 (2,515) (311) 213 448
Operating profit before
changes in working
capital 136,890 153,365 163,623 117,466 109,855
(Increase)/decrease in
restricted deposits (720) 1,571 – – (1,600)
(Increase)/decrease in
inventories (84,415) (37,642) 57,751 24,982 (51,322)
Increase in trade and other
receivables (31,998) (153,100) (86,041) (167,966) (37,912)
Increase/(decrease) in trade
and other payables 9,564 97,939 (28,627) 63,742 (18,739)
(Decrease)/increase in
contract liabilities 57,032 18,769 (18,084) (32,316) 3,838
Cash (used in)/generated
from operations (27,711) 80,902 88,622 5,908 4,120
APPENDIX I ACCOUNTANTS’ REPORT
– I-55 –


--- page 602 ---
(c) Reconciliation of liabilities arising from financing activities
The table below details changes in the Group’s liabilities from financing activities, including both cash
and non-cash changes. Liabilities arising from financing activities are liabilities for which cash flows were, or
future cash flows will be, classified in the Group’s consolidated cash flow statements as cash flows from
financing activities.
Bank loans and
other borrowings Lease liabilities Total
RMB’000 RMB’000 RMB’000
(Note 20) (Note 21)
At 1 January 2021 276,091 98,324 374,415
Changes from financing cash flows:
Proceeds from bank loans and other
borrowings 482,800 – 482,800
Repayment of bank loans and other
borrowings (368,400) – (368,400)
Capital element of lease rentals paid – (22,179) (22,179)
Interest element of lease rentals paid – (4,990) (4,990)
Interest paid (13,685) – (13,685)
Total changes from financing cash flows 100,715 (27,169) 73,546
Other changes:
Bank loans arising from supplier
finance arrangements (Note 20(iii)) 1,000 – 1,000
Increase in lease liabilities from
entering into new leases during the
year – 28,120 28,120
Effect of foreign exchange rate changes (789) – (789)
Interest expenses (Note 6(a)) 13,964 4,990 18,954
At 31 December 2021 and
1 January 2022 390,981 104,265 495,246
Changes from financing cash flows:
Proceeds from bank loans and other
borrowings 573,438 – 573,438
Repayment of bank loans and other
borrowings (593,054) – (593,054)
Capital element of lease rentals paid – (24,401) (24,401)
Interest element of lease rentals paid – (4,932) (4,932)
Interest paid (16,549) – (16,549)
Total changes from financing cash flows (36,165) (29,333) (65,498)
Other changes:
Bank loans arising from supplier
finance arrangements (Note 20(iii)) 1,000 – 1,000
Increase in lease liabilities from
entering into new leases during the
year – 26,616 26,616
Effect of foreign exchange rate changes (138) – (138)
Interest expenses (Note 6(a)) 16,679 4,932 21,611
At 31 December 2022 and
1 January 2023 372,357 106,480 478,837
APPENDIX I ACCOUNTANTS’ REPORT
– I-56 –


--- page 603 ---
Bank loans and
other borrowings Lease liabilities Total
RMB’000 RMB’000 RMB’000
(Note 20) (Note 21)
At 1 January 2023 372,357 106,480 478,837
Changes from financing cash flows:
Proceeds from bank loans and other
borrowings 595,617 – 595,617
Repayment of bank loans and other
borrowings (513,042) – (513,042)
Capital element of lease rentals paid – (25,706) (25,706)
Interest element of lease rentals paid – (4,485) (4,485)
Interest paid (16,655) – (16,655)
Total changes from financing cash flows 65,920 (30,191) 35,729
Other changes:
Bank loans arising from supplier
finance arrangements (Note 20(iii)) 20,000 – 20,000
Increase in lease liabilities from
entering into new leases during the
year – 19,320 19,320
Effect of foreign exchange rate changes 16 – 16
Interest expenses (Note 6(a)) 17,058 4,485 21,543
At 31 December 2023 and
1 January 2024 475,351 100,094 575,445
Changes from financing cash flows:
Proceeds from new bank loans 389,527 – 389,527
Repayment of bank loans (409,010) – (409,010)
Capital element of lease rentals paid – (15,119) (15,119)
Interest element of lease rentals paid – (3,330) (3,330)
Interest paid (12,749) – (12,749)
Total changes from financing cash flows (32,232) (18,449) (50,681)
Other changes:
Bank loans arising from supplier
finance arrangements (Note 20(iii)) 21,400 – 21,400
Increase in lease liabilities from
entering into new leases during the
period – 16,038 16,038
Interest expenses (Note 6(a)) 14,240 3,330 17,570
At 30 September 2024 478,759 101,013 579,772
APPENDIX I ACCOUNTANTS’ REPORT
– I-57 –


--- page 604 ---
(d) Total cash flow for leases
Amounts included in the cash flow statement for leases comprise the following:
As at 31 December
As at
30 September
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
Within financing cash flows 27,169 29,333 30,191 18,449
These amounts relate to the following:
As at 31 December
As at
30 September
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
Lease rentals paid 27,169 29,333 30,191 18,449
20 BANK LOANS AND OTHER BORROWINGS
The Group
As at 31 December
As at
30 September
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
Short-term bank loans and other
borrowings 384,849 370,890 462,422 424,634
Accrued interest 457 1,467 377 434
Bank loans and other borrowing –
current 385,306 372,357 462,799 425,068
Long-term bank loans and other
borrowings 4,795 – 12,511 53,630
Accrued interest 880 – 41 61
Bank loans and other borrowing –
non-current 5,675 – 12,552 53,691
Total 390,981 372,357 475,351 478,759
APPENDIX I ACCOUNTANTS’ REPORT
– I-58 –


--- page 605 ---
The Company
As at 31 December
As at
30 September
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
Short-term bank loans and other
borrowings 310,900 280,700 310,022 276,307
Accrued interest 395 332 274 203
Bank loans and other borrowing –
current 311,295 281,032 310,296 276,510
Long-term bank loans and other
borrowings – – 12,511 43,630
Accrued interest – – 41 50
Bank loans and other borrowing –
non-current – – 12,552 43,680
Total 311,295 281,032 322,848 320,190
The maturity profile for the interest-bearing bank loans and other borrowing of the Group at the end of each
reporting period is as follows:
The Group
As at 31 December
As at
30 September
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
Within 1 year or on demand 385,306 372,357 462,799 425,068
After 1 year but within 2 years 5,675 – 11,371 43,680
After 2 years but within 5 years – – 1,181 10,011
Total 390,981 372,357 475,351 478,759
The Company
As at 31 December
As at
30 September
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
Within 1 year or on demand 311,295 281,032 310,296 276,510
After 1 year but within 2 years – – 11,371 43,680
After 2 years but within 5 years – – 1,181 –
Total 311,295 281,032 322,848 320,190
APPENDIX I ACCOUNTANTS’ REPORT
– I-59 –


--- page 606 ---
At the end of each reporting period, the Group’s bank and other borrowings were secured as follows:
The Group
As at 31 December
As at
30 September
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
Bank loans and other borrowings
– Secured (Note (i)) 370,857 356,402 437,477 468,759
– Unsecured 20,124 15,955 37,874 10,000
390,981 372,357 475,351 478,759
The Company
As at 31 December
As at
30 September
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
Bank loans and other borrowings
– Secured (Note (i)) 311,295 281,032 322,848 320,190
– Unsecured ––––
311,295 281,032 322,848 320,190
Notes:
(i) The bank loans and other borrowings were secured by certain assets of the Group. An analysis of the
carrying value of these assets is as follows:
As at 31 December
As at
30 September
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
Land use rights 31,579 30,452 29,325 28,480
Plants and buildings 38,920 36,012 33,045 30,864
Machinery and equipment, office
and other equipment, and motor
vehicles – – 11,880 6,651
70,499 66,464 74,250 65,995
APPENDIX I ACCOUNTANTS’ REPORT
– I-60 –


--- page 607 ---
(ii) Certain facilities granted to the Group were guaranteed by Mr. Gao Feng, the ultimate controlling
shareholder of the Group, and his spouse Ms. Leng Y uemei, Mr. Zhang Jiaan, the controlling shareholder,
and Ms. Yin Qin, the key management personnel. All the below mentioned guarantees will be released
upon Listing.
As at 31 December
As at
30 September
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
Guarantees for granting bank
loans and other borrowings 252,400 266,000 290,533 304,389
(iii) The Group has entered into certain supplier finance arrangements with banks, under which the Group
obtained extended credit in respect of the invoice amounts owed to certain suppliers.
Under these arrangements, the banks pay suppliers the amounts owed by the Group on the original due
dates. The Group then settles with the banks within one year after the original due dates with the
suppliers, with fixed interest rates.
In the consolidated statement of financial position, the Group has presented the payables to the banks
under these arrangements as “bank loans and other borrowings”, in view of the nature and function of such
liabilities when compared with the Group’s trade payables to suppliers.
As at 31 December 2021, 2022 and 2023 and 30 September 2024, the carrying amount of financial
liabilities under these arrangements amounted to RMB1,020,000, RMB1,020,000, RMB20,200,000 and
RMB21,540,000, respectively, RMB1,000,000, RMB1,000,000, RMB20,000,000 and RMB21,400,000,
respectively of which suppliers have received payments from the banks.
In the consolidated statement of cash flows, payments to the banks are included within financing cash
flows based on the nature of the arrangements, and payments to the suppliers by the banks amounting to
RMB1,000,000, RMB1,000,000, RMB20,000,000, RMB20,000,000 (unaudited) and RMB21,400,000,
respectively during the years ended 31 December 2021, 2022 and 2023 and nine months ended 30
September 2023 and 2024 are non-cash transactions.
21 LEASE LIABILITIES
The Group and The Company
As at 31 December
As at
30 September
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
Within 1 year 21,538 24,530 23,561 23,420
After 1 year but within 2 years 17,313 16,960 21,199 21,613
After 2 years but within 5 years 41,932 46,030 40,024 42,654
After 5 years 23,482 18,960 15,310 13,326
82,727 81,950 76,533 77,593
104,265 106,480 100,094 101,013
APPENDIX I ACCOUNTANTS’ REPORT
– I-61 –


--- page 608 ---
22 TRADE AND BILLS PAYABLES
The Group
As at 31 December
As at
30 September
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
Trade payables 112,537 175,819 160,721 105,581
Bills payable 50 14,800 – –
112,587 190,619 160,721 105,581
The Company
As at 31 December
As at
30 September
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
Trade payables 106,383 165,668 143,708 100,977
Bills payable 50 14,800 – –
106,433 180,468 143,708 100,977
All of the trade and bills payables are expected to be settled within one year or repayable on demand.
As of the end of each reporting period, the ageing analysis of the Group’s trade payables and bills payable
(which are included in trade and other payables), based on the invoice date, is as follows:
As at 31 December
As at
30 September
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
Within 3 months 82,412 141,860 116,819 82,307
3 to 12 months 10,422 23,364 30,587 12,082
Over 12 months 19,753 25,395 13,315 11,192
112,587 190,619 160,721 105,581
APPENDIX I ACCOUNTANTS’ REPORT
– I-62 –


--- page 609 ---
23 OTHER PAYABLES AND ACCRUALS
The Group
As at 31 December
As at
30 September
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
Payable for staff related costs 17,686 17,246 16,773 10,822
Deposits received 14,441 29,563 11,746 10,664
Other taxes payable 8,867 5,422 4,145 12,527
Others 4,583 12,253 13,091 26,743
45,577 64,484 45,755 60,756
The Company
As at 31 December
As at
30 September
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
Amount due to subsidiaries 6,174 21,015 47,325 57,614
Payable for staff related costs 11,851 12,092 11,290 7,027
Deposits received 11,741 8,671 9,632 8,270
Other taxes payable 5,503 3,642 2,609 12,170
Others 3,032 6,284 12,046 26,144
38,301 51,704 82,902 111,225
All of the other payables and accruals are expected to be settled within one year or repayable on demand.
24 CONTRACT LIABILITIES
The Group
As at 31 December
As at
30 September
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
Advance receipts from customers
(Note (i)) 43,696 62,236 47,273 46,676
Advance receipts from operating lease 2,555 2,635 1,742 1,795
Prepaid cards (Note (ii)) 63,703 64,271 62,042 66,499
Customer loyalty program points
liability (Note (iii)) 1,481 1,062 1,063 988
111,435 130,204 112,120 115,958
APPENDIX I ACCOUNTANTS’ REPORT
– I-63 –


--- page 610 ---
The Company
As at 31 December
As at
30 September
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
Advance receipts from customers
(Note i) 22,050 37,953 41,960 25,115
Advance receipts from operating lease 2,555 2,635 1,742 1,795
Prepaid cards (Note ii) 28,619 29,412 30,241 34,215
Customer loyalty program points
liability (Note iii) 964 860 641 595
54,188 70,860 74,584 61,720
Notes:
(i) The amounts of consideration received in advance as prepayments by customers are short-term as the
respective revenue is expected to be recognised within a few days when the goods are delivered to
customers.
(ii) Revenue is recognised when customers accept the products so revenue from prepaid cards is recognised
when the prepaid cards are redeemed by customers. Based on recent trends in redemption by customers of
the prepaid cards, it is expected that most of the prepaid cards will be redeemed within one year from
purchase.
(iii) The Group operates a customer loyalty programme for sales to retail customers where points can be earned
by customers and to be used to reduce the cost of future purchases. The contract liability in respect of
unredeemed retail customer loyalty points will be recognised as revenue when the points are redeemed by
those customers or expire, which is expected to occur before the end of the following year based on the
expiry terms of the loyalty points.
APPENDIX I ACCOUNTANTS’ REPORT
– I-64 –


--- page 611 ---
Movements in contract liabilities
The Group
Advance
receipts from
customers
Advance
receipts from
operating lease Prepaid cards
Customer
loyalty
program
points liability Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
At 1 January 2021 106,289 1,249 59,675 1,255 168,468
Increase in contract liabilities excluding
amounts recognised as revenue during the
year 43,696 2,555 28,623 1,481 76,355
Decrease in contract liabilities as a result of
recognising revenue during the period that
was included in the contract liabilities at the
beginning of the year (106,289) (1,249) (24,595) (1,255) (133,388)
At 31 December 2021 and 1 January 2022 43,696 2,555 63,703 1,481 111,435
Increase in contract liabilities excluding
amounts recognised as revenue during the
year 62,236 2,635 25,774 1,062 91,707
Decrease in contract liabilities as a result of
recognising revenue during the period that
was included in the contract liabilities at the
beginning of the year (43,696) (2,555) (25,206) (1,481) (72,938)
At 31 December 2022 and 1 January 2023 62,236 2,635 64,271 1,062 130,204
Increase in contract liabilities excluding
amounts recognised as revenue during the
year 26,294 1,742 22,848 1,063 51,947
Decrease in contract liabilities as a result of
recognising revenue during the period that
was included in the contract liabilities at the
beginning of the year (41,257) (2,635) (25,077) (1,062) (70,031)
At 31 December 2023 and 1 January 2024 47,273 1,742 62,042 1,063 112,120
Increase in contract liabilities excluding
amounts recognised as revenue during the
period 46,676 1,795 22,243 988 71,702
Transferred to other payables and accruals (20,979) – – – (20,979)
Decrease in contract liabilities as a result of
recognising revenue during the period that
was included in the contract liabilities at the
beginning of the period (26,294) (1,742) (17,786) (1,063) (46,885)
At 30 September 2024 46,676 1,795 66,499 988 115,958
APPENDIX I ACCOUNTANTS’ REPORT
– I-65 –


--- page 612 ---
The Company
Advance
receipts from
customers
Advance
receipts from
operating lease Prepaid cards
Customer
loyalty
program
points liability Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
At 1 January 2021 82,953 1,249 23,152 692 108,046
Increase in contract liabilities excluding
amounts recognised as revenue during the
year 22,050 2,555 15,739 964 41,308
Decrease in contract liabilities as a result of
recognising revenue during the period that
was included in the contract liabilities at the
beginning of the year (82,953) (1,249) (10,272) (692) (95,166)
At 31 December 2021 and 1 January 2022 22,050 2,555 28,619 964 54,188
Increase in contract liabilities excluding
amounts recognised as revenue during the
year 37,953 2,635 13,284 860 54,732
Decrease in contract liabilities as a result of
recognising revenue during the period that
was included in the contract liabilities at the
beginning of the year (22,050) (2,555) (12,491) (964) (38,060)
At 31 December 2022 and 1 January 2023 37,953 2,635 29,412 860 70,860
Increase in contract liabilities excluding
amounts recognised as revenue during the
year 20,981 1,742 12,656 641 36,020
Decrease in contract liabilities as a result of
recognising revenue during the period that
was included in the contract liabilities at the
beginning of the year (16,974) (2,635) (11,827) (860) (32,296)
At 31 December 2023 and 1 January 2024 41,960 1,742 30,241 641 74,584
Increase in contract liabilities excluding
amounts recognised as revenue during the
period 25,115 1,795 11,373 595 38,878
Transferred to other payables and accruals (20,979) – – – (20,979)
Decrease in contract liabilities as a result of
recognising revenue during the period that
was included in the contract liabilities at the
beginning of the period (20,981) (1,742) (7,399) (641) (30,763)
At 30 September 2024 25,115 1,795 34,215 595 61,720
APPENDIX I ACCOUNTANTS’ REPORT
– I-66 –


--- page 613 ---
Except for the disclosures above related to redemptions of prepaid cards, advance receipts from customers
and customer loyalty program points, the Group applies the practical expedient in paragraph 121 of IFRS 15 for
other sales contracts and does not disclose information about remaining performance obligations that have
original expected duration of one year or less.
25 INCOME TAX IN THE CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(a) Current taxation in the consolidated statements of financial position represents:
As at 31 December
As at
30 September
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
At the beginning of the
year/period 8,415 7,432 14,220 15,027
Provision for income tax 17,133 17,655 20,210 14,141
Tax paid (18,116) (10,867) (19,403) (14,745)
At the end of the year/period 7,432 14,220 15,027 14,423
Represented by:
Taxation payable 7,432 14,220 15,027 14,423
APPENDIX I ACCOUNTANTS’ REPORT
– I-67 –


--- page 614 ---
(b) Deferred tax assets and liabilities recognised
(i) Movement of each component of deferred tax assets and liabilities
The components of deferred tax assets/(liabilities) recognised in the consolidated statements of
financial position and the movement during each year are as follows:
Credit loss
allowance
Inventory
provision
Impairment
on property,
plant and
equipment
Deductible
tax losses
Fair value
change of
financial
assets
Lease
liabilities
Right-of-
use assets Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Deferred tax arising from:
At 1 January 2021 666 1,738 – 582 (7,507) 24,582 (27,914) (7,853)
Recognised in profit or loss 2,519 340 – 1,004 – 1,485 (831) 4,517
Recognised in other
comprehensive income –––– (566) – – (566)
At 31 December 2021 and
1 January 2022 3,185 2,078 – 1,586 (8,073) 26,067 (28,745) (3,902)
Recognised in profit or loss 279 (96) – (823) – 553 320 233
Recognised in other
comprehensive income –––– 5 9 9–– 5 9 9
At 31 December 2022 and
1 January 2023 3,464 1,982 – 763 (7,474) 26,620 (28,425) (3,070)
Recognised in profit or loss 801 263 138 (763) – (1,596) 2,911 1,754
Recognised in other
comprehensive income –––– 1,680 – – 1,680
At 31 December 2023 and
1 January 2024 4,265 2,245 138 – (5,794) 25,024 (25,514) 364
Recognised in profit or loss 1,559 24 4––– 2 3 0 1,084 3,117
Recognised in other
comprehensive income –––– (352) – – (352)
At 30 September 2024 5,824 2,489 138 – (6,146) 25,254 (24,430) 3,129
(ii) Reconciliation to the consolidated statements of financial position
As at 31 December
As at
30 September
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
Deferred tax assets 3,310 3,325 5,091 8,138
Deferred tax liabilities (7,212) (6,395) (4,727) (5,009)
(3,902) (3,070) 364 3,129
APPENDIX I ACCOUNTANTS’ REPORT
– I-68 –


--- page 615 ---
(c) Deferred tax assets not recognised
As at 31 December 2021, 2022 and 2023 and 30 September 2024, in accordance with the accounting policy
set out in Note 2(p), the Group did not recognise deferred tax assets of RMB306,000, RMB875,000,
RMB1,630,000 and RMB2,409,000, in respect of cumulative tax losses of RMB1,223,000, RMB3,500,000,
RMB6,522,000 and RMB9,636,000 respectively. The Group did not recognise deferred tax assets of
RMB203,000, RMB289,000, RMB416,000 and RMB404,000, in respect of cumulative time differences of
RMB813,000, RMB1,158,000, RMB1,663,000 and RMB1,616,000. It was not probable that future taxable profits
against which the losses and time differences can be utilised will be available in the relevant tax jurisdiction and
entities.
APPENDIX I ACCOUNTANTS’ REPORT
– I-69 –


--- page 616 ---
26 CAPITAL, RESERVES AND DIVIDENDS
(a) Movements in components of equity
The reconciliation between the opening and closing balances of each component of the Group’s
consolidated equity is set out in the consolidated statements of changes in equity. Details of the changes in the
Company’s individual components of equity between the beginning and the end of each year are set out below:
Attributable to equity shareholders of the Company
Share capital
Capital
reserve
PRC statutory
reserve
(Accumulated
losses)/
Retained
profits Total equity
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Balance at 1 January 2021 160,685 170,505 – (15,578) 315,612
Changes in equity for 2021:
Total comprehensive income for the
year – – – 28,424 28,424
Appropriation of reserve – – 1,285 (1,285) –
Balance at 31 December 2021 and
1 January 2022 160,685 170,505 1,285 11,561 344,036
Changes in equity for 2022:
Total comprehensive income for the
year – – – 35,506 35,506
Appropriation of reserve – – 3,550 (3,550) –
Balance at 31 December 2022 and
1 January 2023 160,685 170,505 4,835 43,517 379,542
Changes in equity for 2023:
Total comprehensive income for the
year – – – 32,889 32,889
Appropriation of reserve – – 3,294 (3,294) –
Balance at 31 December 2023 and
1 January 2024 160,685 170,505 8,129 73,112 412,431
Changes in equity for the period:
Total comprehensive income for the
period – – – 17,141 17,141
Balance at 30 September 2024 160,685 170,505 8,129 90,253 429,572
APPENDIX I ACCOUNTANTS’ REPORT
– I-70 –


--- page 617 ---
(b) Dividends
The directors of the Company did not propose the payment of any dividend during the Track Record
Period.
(c) Share capital
No. of shares RMB’000
Ordinary shares, issued and fully paid:
At 1 January 2021, 31 December 2021, 31 December 2022,
31 December 2023 and 30 September 2024 160,684,910 160,685
(d) Nature and purpose of reserves
(i) Capital Reserve
The capital reserve represents:
 the difference between consideration received for ordinary shares subscription net of any
transaction costs directly attributable to the subscription and the par value of the ordinary
shares subscribed; and
 the difference between the carrying value of the net assets acquired and the consideration paid
for the acquisition of the subsidiaries under common control and non-controlling interests.
(ii) PRC Statutory reserve
Statutory reserve is established in accordance with the relevant PRC rules and regulations and the
articles of association of the companies comprising the Group which are incorporated in the PRC.
In accordance with the PRC Company Law, certain subsidiaries of the Group which are domestic
enterprises are required to allocate 10% of their profit after tax, as determined in accordance with the
relevant PRC accounting standards, to their respective statutory reserves until the reserves reach 50% of
their respective registered capital. For the entity concerned, statutory reserves can be used to make good
previous years’ losses, if any, and may be converted into capital in proportion to the existing equity
interests of investors, provided that the balance of the reserve after such conversion is not less than 25%
of the entity’s registered capital.
APPENDIX I ACCOUNTANTS’ REPORT
– I-71 –


--- page 618 ---
(e) Capital management
The Group’s primary objectives when managing capital are to safeguard the Group’s ability to continue as
a going concern, so that it can continue to provide returns for shareholders and benefits for other stakeholders,
by pricing products and services commensurately with the level of risk and by securing access to finance at a
reasonable cost.
The Group actively and regularly reviews and manages its capital structure to maintaining a balance
between the higher shareholders returns that might be possible with higher levels of borrowings and the
advantages and security afforded by a sound capital position, and makes adjustments to the capital structure in
light of changes in economic conditions.
The Group monitors its capital structure on the basis of an adjusted net debt-to-capital ratio. For this
purpose, adjusted net debt is defined as total debt (which includes interest-bearing loans and borrowings and
lease liabilities) plus unaccrued dividends less cash and cash equivalents and restricted cash. Adjusted capital
comprises all components of equity less unaccrued proposed dividends.
The Group’s adjusted net debt-to-capital ratio as at 31 December 2021 and 2022 and 2023 and 30
September 2024 are as follows:
As at 31 December
As at
30 September
2021 2022 2023 2024
Note RMB’000 RMB’000 RMB’000 RMB’000
Current liabilities:
– Bank loans and
other borrowings 20 385,306 372,357 462,799 425,068
– Lease liabilities 21 21,538 24,530 23,561 23,420
Non-current liabilities:
– Bank loans and other
borrowings 20 5,675 – 12,552 53,691
– Lease liabilities 21 82,727 81,950 76,533 77,593
Total debt 495,246 478,837 575,445 579,772
Less: Cash and cash
equivalents 19(a) (184,386) (165,487) (236,226) (147,792)
Restricted deposits 18 (1,571) – – (1,600)
Adjusted net debt 309,289 313,350 339,219 430,380
Total equity 397,511 446,780 493,341 518,475
Adjusted capital 397,511 446,780 493,341 518,475
Adjusted net
debt-to-capital
ratio 78% 70% 69% 83%
Neither the Company nor any of its subsidiaries are subject to externally imposed capital requirements.
APPENDIX I ACCOUNTANTS’ REPORT
– I-72 –


--- page 619 ---
27 FINANCIAL RISK MANAGEMENT AND FAIR V ALUES OF FINANCIAL INSTRUMENTS
Exposure to credit, liquidity, interest rate and currency risks arises in the normal course of the Group’s business.
The Group’s exposures to these risks and the financial risk management policies and practices used by the Group
to manage these risks are described below.
(a) Credit risk
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in a
financial loss to the Group. The Group’s credit risk is primarily attributable to trade receivables and other
receivables. The Group’s exposure to credit risk arising from cash and cash equivalents and pledged deposits is
limited because the counterparties are banks and financial institutions with high credit standing, for which the
Group considers to have low credit risk.
The Group does not provide any guarantees which would expose the Group to credit risk.
Trade receivables
The Group has established a credit risk management policy under which individual credit
evaluations are performed on all customers requiring credit over a certain amount. These evaluations focus
on the customer’s past history of making payments when due and current ability to pay, and take into
account information specific to the customer as well as pertaining to the economic environment in which
the customer operates. Trade receivables are due within 90 days from the date of billing. Normally, the
Group does not obtain collateral from customers.
As at 31 December 2021, 2022 and 2023 and 30 September 2024, 33%, 25%, 21% and 22%
respectively, of the total trade receivables were due from the Group’s largest customer during the
year/period and 49%, 65%, 60% and 58% respectively, of the total trade receivables were due from the
Group’s five largest customers during the year/period.
The Group measures loss allowances for trade receivables at an amount equal to lifetime ECLs,
which is calculated using a provision matrix. As the Group’s historical credit loss experience does not
indicate significantly different loss patterns for different customer segments, the loss allowance based on
past due status is not further distinguished between the Group’s different customer bases.
APPENDIX I ACCOUNTANTS’ REPORT
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--- page 620 ---
The following table provides information about the Group’s exposure to credit risk and ECLs for
trade receivables:
As at 31 December 2021
Expected loss
rate
Gross carrying
amount Loss allowance
% RMB’000 RMB’000
Current (not past due) 0.86% 64,338 552
Less than 3 month past due 3.63% 54,375 1,975
More than 3 months but less than
6 months past due 14.35% 5,253 754
More than 6 months but less than
9 months past due 66.64% 1,058 705
More than 9 months but less than
12 months past due 83.09% 905 752
More than 12 months past due 100.00% 5,556 5,556
131,485 10,294
As at 31 December 2022
Expected loss
rate
Gross carrying
amount Loss allowance
% RMB’000 RMB’000
Current (not past due) 1.21% 173,771 2,110
Less than 3 month past due 6.61% 23,190 1,532
More than 3 months but less than
6 months past due 32.37% 9,232 2,988
More than 6 months but less than
9 months past due 69.23% 1,157 801
More than 9 months but less than
12 months past due 97.05% 373 362
More than 12 months past due 100.00% 4,547 4,547
212,270 12,340
APPENDIX I ACCOUNTANTS’ REPORT
– I-74 –


--- page 621 ---
As at 31 December 2023
Expected loss
rate
Gross carrying
amount Loss allowance
% RMB’000 RMB’000
Current (not past due) 1.05% 173,878 1,823
Less than 3 month past due 5.90% 31,880 1,880
More than 3 months but less than
6 months past due 23.46% 13,121 3,078
More than 6 months but less than
9 months past due 58.25% 3,835 2,234
More than 9 months but less than
12 months past due 87.08% 619 539
More than 12 months past due 100.00% 5,953 5,953
229,286 15,507
As at 30 September 2024
Expected loss
rate
Gross carrying
amount Loss allowance
% RMB’000 RMB’000
Current (not past due) 1.10% 151,403 1,658
Less than 3 month past due 6.14% 65,215 4,007
More than 3 months but less than
6 months past due 27.14% 29,869 8,106
More than 6 months but less than
9 months past due 60.11% 6,899 4,147
More than 9 months but less than
12 months past due 87.01% 824 717
More than 12 months past due 100.00% 2,886 2,886
257,096 21,521
APPENDIX I ACCOUNTANTS’ REPORT
– I-75 –


--- page 622 ---
Expected loss rates are based on provision matrix approach and historical actual credit loss
experience over the past years. These rates are adjusted based on the Group’s historical credit loss
experience, adjusted for factors including customer mix, general market risk and specific conditions to
debtors, if any, at the reporting date.
Other receivables
For other receivables, the Group has assessed whether there has been a significant increase in credit
risk since initial recognition. If there has been a significant increase in credit risk, the Group will measure
the loss allowance based on lifetime rather than 12-month ECL. The management has assessed that during
the Track Record Period, other receivables did not have a significant increase in credit risk since initial
recognition. Thus, a 12-month ECL approach that results from possible default event within 12 months of
each reporting date is adopted by management. As at 31 December, 2021, 2022, 2023 and 30 September
2024, the loss allowance of other receivables were RMB2,641,000, RMB1,982,000, RMB2,029,000 and
RMB2,148,000, respectively.
Movement in the loss allowance account in respect of the trade receivables and other receivables
during the Track Record Period is as follows:
As at 31 December
As at
30 September
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
At the beginning of the
year/period 2,787 12,935 14,322 17,536
Loss allowance recognised
during the year/period 10,148 1,387 3,214 6,133
At the end of the
year/period 12,935 14,322 17,536 23,669
APPENDIX I ACCOUNTANTS’ REPORT
– I-76 –


--- page 623 ---
(b) Liquidity risk
Individual operating entities within the Group are responsible for their own cash management, including
the short-term investment of cash surpluses and the raising of loans to cover expected cash demands, subject to
approval by the parent company’s board when the borrowings exceed certain predetermined levels of authority.
The Group’s policy is to regularly monitor its liquidity requirements and its compliance with lending covenants,
to ensure that it maintains sufficient reserves of cash and adequate committed lines of funding from major
financial institutions to meet its liquidity requirements in the short and longer term.
The following tables show the remaining contractual maturities at the end of each reporting period of the
Group’s financial liabilities, which are based on contractual undiscounted cash flows (including interest
payments computed using contractual rates or, if floating, based on rates current at the reporting date) and the
earliest date the Group can be required to pay:
As at 31 December 2021
Within 1 year
or on demand
More than
1 year but less
than 2 years
More than
2 years but
less than
5 years
More than
5 years Total
Carrying
amount at
31 December
2021
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Bank loans and other
borrowings 385,661 5,605 – – 391,266 390,981
Lease liabilities 25,935 20,798 48,113 25,340 120,186 104,265
Trade and bills payables 112,587 – – – 112,587 112,587
Other payables and
accruals 45,577 – – – 45,577 45,577
569,760 26,403 48,113 25,340 669,616 653,410
As at 31 December 2022
Within 1 year
or on demand
More than
1 year but less
than 2 years
More than
2 years but
less than
5 years
More than
5 years Total
Carrying
amount at
31 December
2022
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Bank loans and other
borrowings 377,013 – – – 377,013 372,357
Lease liabilities 28,744 20,280 51,330 20,116 120,470 106,480
Trade and bills payables 190,619 – – – 190,619 190,619
Other payables and
accruals 64,484 – – – 64,484 64,484
660,860 20,280 51,330 20,116 752,586 733,940
APPENDIX I ACCOUNTANTS’ REPORT
– I-77 –


--- page 624 ---
As at 31 December 2023
Within 1 year
or on demand
More than
1 year but less
than 2 years
More than
2 years but
less than
5 years
More than
5 years Total
Carrying
amount at
31 December
2023
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Bank loans and other
borrowings 472,112 11,921 1,211 – 485,244 475,351
Lease liabilities 27,375 24,108 44,337 16,076 111,896 100,094
Trade and bills payables 160,721 – – – 160,721 160,721
Other payables and
accruals 45,755 – – – 45,755 45,755
705,963 36,029 45,548 16,076 803,616 781,921
As at 30 September 2024
Within 1 year
or on demand
More than
1 year but less
than 2 years
More than
2 years but
less than
5 years
More than
5 years Total
Carrying
amount at
30 September
2024
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Bank loans and other
borrowings 433,655 45,766 10,243 – 489,664 478,759
Lease liabilities 26,821 24,068 45,982 13,838 110,709 101,013
Trade and bills payables 105,581 – – – 105,581 105,581
Other payables and
accruals 60,756 – – – 60,756 60,756
626,813 69,834 56,225 13,838 766,710 746,109
APPENDIX I ACCOUNTANTS’ REPORT
– I-78 –


--- page 625 ---
(c) Interest rate risk
Interest rate risk if the risk that the fair value or future cash flows of a financial instrument will fluctuate
because of changes in market interest rates. The Group’s interest rate risk arises primarily from bank loans.
Borrowings issued at variable rates and at fixed rates expose the Group to cash flow interest rate risk and fair
value interest rate risk respectively. The cash flow interest risk arising from the change of market interest rate on
these balances is not considered significant.
The Group’s interest rate profile as monitored by management is set out below.
As at 31 December As at 30 September
2021 2022 2023 2024
Effective Interest
rate
Effective Interest
rate
Effective Interest
rate
Effective Interest
rate
% RMB’000 % RMB’000 % RMB’000 % RMB’000
Net fixed rate instruments:
Bank loans and other
borrowings
2.5%–5.2% 234,081 2.5%–5.1% 241,357 3.5%–8.0% 263,751 3.2%–8.3% 304,759
Lease Liabilities 4.0% 104,265 4.0% 106,480 4.0% 100,094 4.0% 101,013
Less: Restricted cash 0.3%–0.35% (1,571) – – – – 1.2%–1.85% (1,600)
Cash and cash equivalents 0.15%–0.35% (184,386) 0.15%–0.9% (165,487) 0.15%–2.1% (236,226) 0.1%-2.05% (147,792)
Total 152,389 182,350 127,619 256,380
Net variable rate
instruments:
Bank loans and other
borrowings
1 Y ear LPR –
1 Y ear LPR
+0.7175%
156,900 1 Y ear LPR –
1 Y ear LPR
+0.7175%
131,000 1 Y ear LPR –
1 Y ear LPR
+0.7%
211,600 1 Y ear LPR –
1 Y ear LPR
+0.6%
174,000
Total 309,289 313,350 339,219 430,380
APPENDIX I ACCOUNTANTS’ REPORT
– I-79 –


--- page 626 ---
Sensitivity analysis
As the Group accounts for the above fixed rate financial instruments at amortised cost, change in
interest rates would have no impact on the Group’s Historical Financial Information. For the variable rate
instruments, at 31 December 2021, 2022 and 2023 and 30 September 2024, it is estimated that a general
increase/decrease of 100 basis points in interest rates, with all other variables held constant, would have
decreased/increased the Group’s profit after tax and retained profits by approximately RMB1,177,000,
RMB983,000, RMB1,590,000 and RMB1,305,000, respectively.
The sensitivity analysis above indicates the instantaneous change in the Group’s profit after tax (and
retained profits) and other components of consolidated equity that would arise assuming that the change in
interest rates had occurred at the end of the reporting period and had been applied to re-measure those
financial instruments held by the Group which expose the Group to fair value interest rate risk at the end
of the reporting period. In respect of the exposure to cash flow interest rate risk arising from floating rate
non-derivative instruments held by the Group at the end of the reporting period, the impact on the Group’s
profit after tax (and retained profits) and other components of consolidated equity is estimated as an
annualized impact on interest expense or income of such a change in interest rates.
(d) Currency risk
The Group is exposed to currency risk primarily through sales and purchases which give rise to
receivables, payables and cash balances that are denominated in a currency other than the functional currency of
the operations to which the transactions relate. The currencies giving rise to this risk are primarily USD and
AUD.
APPENDIX I ACCOUNTANTS’ REPORT
– I-80 –


--- page 627 ---
(i) Exposure to currency risk
The following table details the Group’s exposure as at 31 December 2021, 2022 and 2023 and 30
September 2024 to currency risk arising from the recognised assets or liabilities denominated in a currency
other than the functional currency of the entity to which they relate. For presentation purpose, the amounts
of the exposure are shown in RMB translated using the spot rate of the end of each reporting period.
Differences resulting from the translation of the financial statements of the Group’s subsidiaries with
functional currency other than RMB into the Group’s presentation currency are excluded.
Exposure to foreign currency
(expressed in Renminbi)
Y ear ended 31 December
Nine months
ended
30 September
2021 2022 2023 2024
USD USD USD USD
RMB’000 RMB’000 RMB’000 RMB’000
Trade and other receivables 4,523 6,291 4,355 2,136
Cash and cash equivalents 24,079 30,687 48,217 35,209
Trade and other payables (19,299) (63,065) (21,359) –
Overall net exposure 9,303 (26,087) 31,213 37,345
Exposure to foreign currency
(expressed in Renminbi)
Y ear ended 31 December
Nine months
ended
30 September
2021 2022 2023 2024
AUD AUD AUD AUD
RMB’000 RMB’000 RMB’000 RMB’000
Cash and cash equivalents 9,222 4,868 2,575 909
Interest-bearing borrowings (10,124) (5,955) – –
Overall net exposure (902) (1,087) 2,575 909
APPENDIX I ACCOUNTANTS’ REPORT
– I-81 –


--- page 628 ---
(ii) Sensitivity analysis
The following table indicates the instantaneous change in the Group’s profit after tax (and retained
profits) that would arise if foreign exchange rates to which the Group has significant exposure at the end
of each reporting period had changed at that date, assuming all other risk variables remained constant.
Results of the analysis as presented in the above table represent an aggregation of the instantaneous
effects on each of the Group entities’ profit after tax and equity measured in the respective functional
currencies, translated into RMB at the exchange rate ruling at the end of each reporting period for
presentation purpose.
The sensitivity analysis assumes that the change in foreign exchange rates had been applied to
re-measure those financial instruments held by the Group which expose the Group to foreign currency risk
as at 31 December 2021, 2022 and 2023 and 30 September 2024.
Y ear ended 31 December Nine months ended 30 September
2021 2022 2023 2024
Increase/
(decrease)
in foreign
exchange
rates
Effect on
profit after
tax and
retained
profits
Effect on
other
components
of equity
Increase/
(decrease)
in foreign
exchange
rates
Effect on
profit after
tax and
retained
profits
Effect on
other
components
of equity
Increase/
(decrease)
in foreign
exchange
rates
Effect on
profit after
tax and
retained
profits
Effect on
other
components
of equity
Increase/
(decrease)
in foreign
exchange
rates
Effect on
profit after
tax and
retained
profits
Effect on
other
components
of equity
% RMB’000 RMB’000 % RMB’000 RMB’000 % RMB’000 RMB’000 % RMB’000 RMB’000
USD 5% 461 461 5% (1,305) (1,305) 5% 1,293 1,293 5% 1,444 1,444
-5% (461) (461) -5% 1,305 1,305 -5% (1,293) (1,293) -5% (1,444) (1,444)
AUD 5% (45) (45) 5% (54) (54) 5% 129 129 5% 45 45
-5% 45 45 -5% 54 54 -5% (129) (129) -5% (45) (45)
(e) Fair value measurement
(i) Financial assets measured at fair value
Fair value hierarchy
The following table presents the fair value of the Group’s financial instruments measured at
the end of each reporting period on a recurring basis, categorised into the three-level fair value
hierarchy as defined in IFRS 13, Fair value measurement . The level into which a fair value
measurement is classified is determined with reference to the observability and significance of the
inputs used in the valuation technique as follows:
– Level 1 valuations: Fair value measured using only Level 1 inputs i.e. unadjusted
quoted prices in active markets for identical assets or liabilities at the measurement
date;
– Level 2 valuations: Fair value measured using Level 2 inputs i.e. observable inputs
which fail to meet Level 1, and not using significant unobservable inputs. Unobservable
inputs are inputs for which market data are not available;
– Level 3 valuations: Fair value measured using significant unobservable inputs.
APPENDIX I ACCOUNTANTS’ REPORT
– I-82 –


--- page 629 ---
Analysis on fair value measurement of financial instruments as at 31 December 2021, 2022
and 2023 and 30 September 2024 are as follows:
Fair value at
31 December 2021
Fair value measurements
as at 31 December 2021 categorised into
Level 1 Level 2 Level 3
RMB’000 RMB’000 RMB’000 RMB’000
Recurring fair value
measurement
Assets:
Financial assets at
FVOCI:
– Unlisted equity
securities 36,590 – – 36,590
– Listed equity securities 980 980 – –
Fair value at
31 December 2022
Fair value measurements
as at 31 December 2022 categorised into
Level 1 Level 2 Level 3
RMB’000 RMB’000 RMB’000 RMB’000
Recurring fair value
measurement
Assets:
Financial assets at
FVOCI:
– Unlisted equity
securities 33,950 – – 33,950
– Listed equity securities 1,225 1,225 – –
APPENDIX I ACCOUNTANTS’ REPORT
– I-83 –


--- page 630 ---
Fair value at
31 December 2023
Fair value measurements
as at 31 December 2023 categorised into
Level 1 Level 2 Level 3
RMB’000 RMB’000 RMB’000 RMB’000
Recurring fair value
measurement
Assets:
Financial assets at
FVOCI:
– Unlisted equity
securities 27,329 – – 27,329
– Listed equity securities 1,125 1,125 – –
Fair value at
30 September
2024
Fair value measurements
as at 30 September 2024 categorised into
Level 1 Level 2 Level 3
RMB’000 RMB’000 RMB’000 RMB’000
Recurring fair value
measurement
Assets:
Financial assets at
FVOCI:
– Unlisted equity
securities 28,450 – – 28,450
– Listed equity securities 1,412 1,412 – –
During the years ended 31 December 2021, 2022 and 2023 and nine months ended 30
September 2023 and 2024, there were no transfers, or transfers into or out of Level 3. The Group’s
policy is to recognise transfers between levels of fair value hierarchy as at the end of the reporting
period in which they occur.
Any gain or loss arising from the remeasurement of the Group’s unlisted equity security held
for strategic purposes are recognised in the fair value reserve (non-recycling) in other
comprehensive income. Upon disposal of the equity security, the amount accumulated in other
comprehensive income is transferred directly to accumulated losses.
APPENDIX I ACCOUNTANTS’ REPORT
– I-84 –


--- page 631 ---
Information about Level 3 fair value measurements
Valuation techniques
Significant unobservable
inputs
Unlisted equity security V aluation multiples (Note (i)) Medium market multiples of
comparable companies
Note:
(i) The fair value of certain unlisted investments is determined using valuation multiples
adjusted for medium market multiples of comparable companies. The fair value
measurement is positively correlated to the medium market multiples of comparable
companies. As at 31 December 2021, 2022 and 2023 and 30 September 2024, it is
estimated that with all other variables held constant, an increase/decrease in change of
medium market multiples of comparable companies by 5% would have
increased/decreased the Group’s comprehensive income for the year by RMB1,372,000,
RMB1,273,000, RMB1,025,000 and RMB1,067,000, respectively.
The following table shows a reconciliation from the beginning balances to the ending balances
for fair value measurement in Level 3 of the fair value hierarchy:
Financial assets
at FVOCI
RMB’000
As at 1 January 2021 34,390
Net unrealised gain recognised in other comprehensive income 2,200
As at 31 December 2021 and 1 January 2022 36,590
Net unrealised gain recognised in other comprehensive income (2,640)
As at 31 December 2022 and 1 January 2023 33,950
Net unrealised gain recognised in other comprehensive income (6,621)
As at 31 December 2023 and 1 January 2024 27,329
Net unrealised gain recognised in other comprehensive income 1,121
As at 30 September 2024 28,450
All financial instruments carried at cost or amortised cost are at amounts not materially
different from their values as at 31 December 2021, 2022 and 2023 and 30 September 2024.
APPENDIX I ACCOUNTANTS’ REPORT
– I-85 –


--- page 632 ---
28 COMMITMENTS
Capital commitments outstanding at 31 December 2021, 2022 and 2023 and 30 September 2024, not provided in
the Historical Financial Information were as follows:
As at 31 December
As at
30 September
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
Authorised and contracted for 6,744 521 425 1,191
29 MATERIAL RELATED PARTY TRANSACTIONS
(a) Names and relationships of the related parties that had material transactions with the Group
Name of related parties Relationship
Mr. Gao Feng Ultimate controlling party of the Group
Ms. Leng Y uemei Spouse of Mr. Gao Feng
Mr. Zhang Jiaan Director of the Group
Jiangsu Ruichuanda Investment
Co., Ltd.ࠢ
ʮ̡
Company and its affiliates controlled by the ultimate controlling
shareholder of the Group
Y angzhou Xiandafengtian Sales
and Services Co., Ltd. ౮ψ̀
ʮ̡
Company and its affiliates controlled by the ultimate controlling
shareholder of the Group
Jiangsu Meijiachen Waterproof
Technology Co., Ltd.Գ
ʮ̡
Company and its affiliates controlled by the ultimate controlling
shareholder of the Group
APPENDIX I ACCOUNTANTS’ REPORT
– I-86 –


--- page 633 ---
(b) Key management personnel remuneration
Remuneration for key management personnel of the Group, including amounts paid to the Company’s
directors as disclosed in Note 8 and certain of the highest paid employees as disclosed in Note 9, is as follows:
Y ear ended 31 December
Nine months ended
30 September
2021 2022 2023 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(unaudited)
Short-term
employee
benefits 3,125 2,972 2,939 878 879
Contribution to
defined
retirement
plans 74 72 59 41 42
3,199 3,044 2,998 919 921
Total remuneration is included in staff costs (see Note 6(b)).
(c) Guarantees issued by related parties
As at 31 December
As at
30 September
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
Guarantees for granting bank
loans and other borrowings 252,400 266,000 290,533 304,389
Certain facilities granted to the Group were guaranteed by Mr. Gao Feng, the controlling shareholder, and
his spouse Ms. Leng Y uemei, Mr. Zhang Jiaan, the controlling shareholder, and Ms. Yin Qin, the key
management personnel. All the above mentioned guarantees will be released upon listing.
APPENDIX I ACCOUNTANTS’ REPORT
– I-87 –


--- page 634 ---
(d) Other significant related party transactions:
The Group had following transactions with related parties:
Y ear ended 31 December
Nine months ended
30 September
2021 2022 2023 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(unaudited)
Sales of goods
Y angzhou
Xiandafengtian
Sales and
Services Co.,
Ltd. 71 6 4–––
Purchase of
property,
plant and
equipment
Jiangsu
Meijiachen
Waterproof
Technology
Co., Ltd. 647 – 89 85 –
(e) Significant related party balances:
At 31 December 2021, 2022 and 2023 and 30 September 2024, the Group had following trade in nature
balances with related parties:
Trade in nature:
As at 31 December
As at
30 September
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
Trade receivables
Y angzhou Xiandafengtian Sales
and Services Co., Ltd. 77––
Trade payables
Jiangsu Meijiachen Waterproof
Technology Co., Ltd. ––44
APPENDIX I ACCOUNTANTS’ REPORT
– I-88 –


--- page 635 ---
At 31 December 2021, 2022 and 2023 and 30 September 2024, the Group had following non-trade in
nature balances with a related party:
Non-trade in nature:
As at 31 December
As at
30 September
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
Amount due from a related
party
Jiangsu Ruichuanda Investment
Co., Ltd. 50 0–––
30 IMMEDIATE AND ULTIMATE CONTROLLING PARTY
At 31 December 2021, 2022 and 2023 and 30 September 2024, the directors consider the immediate controlling
party of the Group to be Mr. Gao Feng, Jiangsu Ruichuanda Investment Co., Ltd., Mr. Y uan Y uan and Mr. Zhang Jiaan.
At 31 December 2021, 2022 and 2023 and 30 September 2024, the directors consider the ultimate controlling party of
the Group to be Mr. Gao Feng, Mr. Y uan Y uan and Mr. Zhang Jiaan.
31 POSSIBLE IMPACT OF AMENDMENTS, NEW STANDARDS AND INTERPRETATIONS ISSUED BUT
NOT YET EFFECTIVE FOR THE TRACK RECORD PERIOD
Up to the date of issue of the Historical Financial Information, the IASB has issued a number of new or amended
standards, which are not yet effective for the Track Record Period and which have not been adopted in the Historical
Financial Information. These developments include the following which may be relevant to the Group.
Effective for accounting
periods beginning on or after
Amendments to IAS 21, The effects of changes in foreign exchange rates:
Lack of exchangeability
1 January 2025
Amendments to IFRS 9 and IFRS 7, Amendments to the Classification and
Measurement of Financial Instruments
1 January 2026
Annual Improvements to IFRS Accounting Standards – V olume 11 1 January 2026
IFRS 18, Presentation and Disclosure in Financial Statements 1 January 2027
IFRS 19, Subsidiaries without Public Accountability: Disclosures 1 January 2027
Amendments to IFRS 10 and IAS 28, Sale or contribution of assets
between an investor and its associate or joint venture
No mandatory effective date
yet determined
The Group is in the process of making an assessment of what the impact of these developments is expected to be
in the period of initial application. So far it has concluded that the adoption of them is unlikely to have a significant
impact on the consolidated financial statements.
32 SUBSEQUENT EVENTS
There was no material non-adjusting event after reporting period up to the date of this report.
APPENDIX I ACCOUNTANTS’ REPORT
– I-89 –


--- page 636 ---
SUBSEQUENT FINANCIAL STATEMENTS
No audited financial statements have been prepared by the Company and its subsidiaries
comprising the Group in respect of any period subsequent to 30 September 2024.
APPENDIX I ACCOUNTANTS’ REPORT
– I-90 –


--- page 637 ---
The information set forth in this appendix does not form part of the Accountants’ Report
from KPMG, Certified Public Accountants, Hong Kong, the reporting accountants of the
Company, as set forth in Appendix I to this Prospectus, and is included herein for illustrative
purposes only.
The unaudited pro forma financial information should be read in conjunction with the
section headed “Financial Information” in this Prospectus and the Accountants’ Report set out
in Appendix I to this Prospectus.
A. UNAUDITED PRO FORMA STATEMENT OF ADJUSTED NET TANGIBLE ASSETS
The following unaudited pro forma statement of adjusted net tangible assets of Jiangsu
Horizon Chain Supermarket Company Limited (the “Company”) and its subsidiaries (collectively
the “Group”) is prepared in accordance with Rule 4.29 of the Listing Rules Governing the
Listing of Securities on The Stock Exchange of Hong Kong Limited and set out below to
illustrate the effect of the Global Offering on the consolidated net tangible assets attributable to
equity shareholders of the Company as at 30 September 2024 as if the Global Offering had taken
place on 30 September 2024.
The unaudited pro forma statement of adjusted net tangible assets has been prepared for
illustrative purpose only and because of its hypothetical nature, it may not give a true picture of
the financial position of the Group had the Global Offering been completed as at 30 September
2024 or any future date.
Consolidated
net tangible
assets
attributable
to the equity
shareholders
of the
Company
as at
30 September
2024 (1)
Estimated net
proceeds from
the Global
Offering (2)(4)
Unaudited
pro forma
adjusted net
tangible
assets
attributable
to the equity
shareholders
of the
Company
Unaudited pro forma adjusted
net tangible assets attributable
to the equity shareholders of
the Company per Share
RMB’000 RMB’000 RMB’000 RMB (3) HK$ (4)
Based on an Offer Price of
HK$2.50 per Share 502,305 97,951 600,256 2.80 3.03
Based on an Offer Price of
HK$3.00 per Share 502,305 121,200 623,505 2.91 3.15
APPENDIX IIA UNAUDITED PRO FORMA FINANCIAL INFORMATION
– IIA-1 –


--- page 638 ---
Notes:
(1) The consolidated net tangible assets attributable to equity shareholders of the Company as of 30 September
2024 is based on the audited total equity attributable to equity shareholders of the Company of
RMB502,305,000 as at 30 September 2024, which is extracted from the Accountants’ Report set out in
Appendix I in this Prospectus.
(2) The estimated net proceeds from this Global Offering are based on 53,562,000 H Shares to be issued
pursuant to the Global Offering and the indicative Offer Prices of HK$2.50 per H Share and HK$3.00 per
H Share, being the low end and high end of the Offer Price range respectively, after deduction of the
estimated underwriting fees and other related listing expenses paid or payable by the Group (excluding the
listing expenses of RMB12,472,000 that have been charged to profit or loss during the Track Record
Period), and does not take into account the exercise of the Over-allotment Option.
(3) The unaudited pro forma adjusted net tangible assets attributable to the equity shareholders of the
Company per Share is arrived at after the above adjustment and on the basis that a total of 214,246,910
shares were in issue immediately following the completion of the Global Offering assuming the Global
Offering had been completed on 30 September 2024 without taking into account of any Shares which may
be issued upon the exercise of the Over-allotment Option.
(4) For illustrative purpose, the estimated net proceeds from the Global Offering is converted from the Hong
Kong dollar into Renminbi and the unaudited pro forma adjusted net tangible assets attributable to equity
shareholders of the Company per Share is converted from the Renminbi into Hong Kong dollar at the
exchange rate of HK$1.00 to RMB0.9236, the exchange rate set by the People’s Bank of China (“PBOC”)
prevailing on Latest Practicable Date. No representation is made that the Hong Kong dollar amounts have
been, could have been or may be converted to Renminbi, or vice versa, at the rate or at any other rates or
at all.
(5) No adjustment has been made to the unaudited pro forma adjusted net tangible assets attributable to equity
shareholders of the Company to reflect our trading results or other transactions entered into subsequent to
30 September 2024.
APPENDIX IIA UNAUDITED PRO FORMA FINANCIAL INFORMATION
– IIA-2 –


--- page 639 ---
The following is the text of a report received from the reporting accountants, KPMG,
Certified Public Accountants, Hong Kong, in respect of the Group’ s pro forma financial
information for the purpose in this prospectus.
INDEPENDENT REPORTING ACCOUNTANTS’ ASSURANCE REPORT ON THE
COMPILATION OF PRO FORMA FINANCIAL INFORMATION
TO THE DIRECTORS OFʮ̡ JIANGSU HORIZON CHAIN
SUPERMARKET COMPANY LIMITED *
We have completed our assurance engagement to report on the compilation of pro forma
financial information ofʮ̡ Jiangsu Horizon Chain Supermarket
Company Limited* (the “Company”) and its subsidiaries (collectively the “Group”) by the
directors of the Company (the “Directors”) for illustrative purposes only. The unaudited pro
forma financial information consists of the unaudited pro forma statement of adjusted net
tangible assets as at 30 September 2024 and related notes as set out in Part A of Appendix IIA to
the prospectus dated 21 March 2025 (the “Prospectus”) issued by the Company. The applicable
criteria on the basis of which the Directors have compiled the pro forma financial information
are described in Part A of Appendix IIA to the Prospectus.
The pro forma financial information has been compiled by the Directors to illustrate the
impact of the proposed offering of the ordinary shares of the Company (the “Global Offering”)
on the Group’s financial position as at 30 September 2024 as if the Global Offering had taken
place at 30 September 2024. As part of this process, information about the Group’s financial
position as at 30 September 2024 has been extracted by the Directors from the Group’s historical
financial information included in the Accountants’ Report as set out in Appendix I to the
Prospectus.
Directors’ Responsibilities for the Pro Forma Financial Information
The Directors are responsible for compiling the pro forma financial information in
accordance with paragraph 4.29 of the Rules Governing the Listing of Securities on The Stock
Exchange of Hong Kong Limited (the “Listing Rules”) and with reference to Accounting
Guideline 7 “Preparation of Pro Forma Financial Information for Inclusion in Investment
Circulars” (“AG 7”) issued by the Hong Kong Institute of Certified Public Accountants
(“HKICPA”).
* For identification purpose only
APPENDIX IIA UNAUDITED PRO FORMA FINANCIAL INFORMATION
– IIA-3 –


--- page 640 ---
Our Independence and Quality Management
We have complied with the independence and other ethical requirements of the Code of
Ethics for Professional Accountants issued by the HKICPA, which is founded on fundamental
principles of integrity, objectivity, professional competence and due care, confidentiality and
professional behaviour.
Our firm applies Hong Kong Standard on Quality Management 1 “Quality Management for
Firms that Perform Audits or Reviews of Financial Statements, or Other Assurance or Related
Services Engagements”, which requires the firm to design, implement and operate a system of
quality management including policies or procedures regarding compliance with ethical
requirements, professional standards and applicable legal and regulatory requirements.
Reporting Accountants’ Responsibilities
Our responsibility is to express an opinion, as required by paragraph 4.29(7) of the Listing
Rules, on the pro forma financial information and to report our opinion to you. We do not accept
any responsibility for any reports previously given by us on any financial information used in
the compilation of the pro forma financial information beyond that owed to those to whom those
reports were addressed by us at the dates of their issue.
We conducted our engagement in accordance with Hong Kong Standard on Assurance
Engagements (“HKSAE”) 3420 “Assurance Engagements to Report on the Compilation of Pro
Forma Financial Information Included in a Prospectus” issued by the HKICPA. This standard
requires that the reporting accountants plan and perform procedures to obtain reasonable
assurance about whether the Directors have compiled the pro forma financial information in
accordance with paragraph 4.29 of the Listing Rules, and with reference to AG 7 issued by the
HKICPA.
For purpose of this engagement, we are not responsible for updating or reissuing any
reports or opinions on any historical financial information used in compiling the pro forma
financial information, nor have we, in the course of this engagement, performed an audit or
review of the financial information used in compiling the pro forma financial information.
The purpose of pro forma financial information included in an investment circular is solely
to illustrate the impact of a significant event or transaction on unadjusted financial information
of the Group as if the event had occurred or the transaction had been undertaken at an earlier
date selected for purposes of the illustration. Accordingly, we do not provide any assurance that
the actual outcome of events or transactions as at 30 September 2024 would have been as
presented.
APPENDIX IIA UNAUDITED PRO FORMA FINANCIAL INFORMATION
– IIA-4 –


--- page 641 ---
A reasonable assurance engagement to report on whether the pro forma financial
information has been properly compiled on the basis of the applicable criteria involves
performing procedures to assess whether the applicable criteria used by the Directors in the
compilation of the pro forma financial information provide a reasonable basis for presenting the
significant effects directly attributable to the event or transaction, and to obtain sufficient
appropriate evidence about whether:
 the related pro forma adjustments give appropriate effect to those criteria; and
 the pro forma financial information reflects the proper application of those
adjustments to the unadjusted financial information.
The procedures selected depend on the reporting accountants’ judgement, having regard to
the reporting accountants’ understanding of the nature of the Group, the event or transaction in
respect of which the pro forma financial information has been compiled, and other relevant
engagement circumstances.
The engagement also involves evaluating the overall presentation of the pro forma financial
information.
We believe that the evidence we have obtained is sufficient and appropriate to provide a
basis for our opinion.
Our procedures on the pro forma financial information have not been carried out in
accordance with attestation standards or other standards and practices generally accepted in the
United States of America, auditing standards of the Public Company Accounting Oversight
Board (United States) or any overseas standards and accordingly should not be relied upon as if
they had been carried out in accordance with those standards and practices.
We make no comments regarding the reasonableness of the amount of net proceeds from
the issuance of the Company’s shares, the application of those net proceeds, or whether such use
will actually take place as described in the section headed “Future Plans and Use of Proceeds” in
the Prospectus.
APPENDIX IIA UNAUDITED PRO FORMA FINANCIAL INFORMATION
– IIA-5 –


--- page 642 ---
Opinion
In our opinion:
(a) the pro forma financial information has been properly compiled on the basis stated;
(b) such basis is consistent with the accounting policies of the Group, and
(c) the adjustments are appropriate for the purposes of the pro forma financial information
as disclosed pursuant to paragraph 4.29(1) of the Listing Rules.
KPMG
Certified Public Accountants
8th Floor, Prince’s Building
10 Chater Road
Central, Hong Kong
21 March 2025
APPENDIX IIA UNAUDITED PRO FORMA FINANCIAL INFORMATION
– IIA-6 –


--- page 643 ---
The following is the preliminary financial information of our Group as at and for the year
ended 31 December 2024 (“ 2024 Preliminary Financial Information ”), together with
comparative financial information as at and for the year ended 31 December 2023 and a
discussion of changes in our Group’ s financial condition and results of operations between the
two financial years. The 2024 Preliminary Financial Information was not audited. Investors
should bear in mind that the 2024 Preliminary Financial Information in this Appendix may be
subject to adjustments.
APPENDIX IIB UNAUDITED PRELIMINARY FINANCIAL INFORMATION
FOR THE YEAR ENDED 31 DECEMBER 2024
– IIB-1 –


--- page 644 ---
2024 PRELIMINARY FINANCIAL INFORMATION
CONSOLIDATED STATEMENTS OF PROFIT OR LOSS
(Expressed in Renminbi Yuan)
2023 2024
Note RMB’000 RMB’000
(unaudited)
Revenue 3 1,401,972 1,350,925
Cost of sales (1,100,596) (1,061,824)
Gross profit 301,376 289,101
Other revenue 4(a) 5,355 7,657
Other net gain 4(b) 1,244 1,573
Selling and distribution costs (162,119) (160,390)
Administrative and other operating expenses (52,614) (54,425)
Impairment loss on trade and other receivables (3,214) 942
Profit from operations 90,028 84,458
Finance income 1,573 1,917
Finance costs (21,543) (24,030)
Net finance costs 5(a) (19,970) (22,113)
Profit before taxation 70,058 62,345
Income tax 6 (18,456) (18,370)
Profit for the year 51,602 43,975
Attributable to:
Equity shareholders of the Company 50,088 42,722
Non-controlling interests 1,514 1,253
Profit for the year 51,602 43,975
Earnings per share
Basic and diluted (RMB) 7 0.31 0.27
APPENDIX IIB UNAUDITED PRELIMINARY FINANCIAL INFORMATION
FOR THE YEAR ENDED 31 DECEMBER 2024
– IIB-2 –


--- page 645 ---
CONSOLIDATED STATEMENTS OF PROFIT OR LOSS AND OTHER
COMPREHENSIVE INCOME
(Expressed in Renminbi Yuan)
2023 2024
RMB’000 RMB’000
(unaudited)
Profit for the year 51,602 43,975
Other comprehensive income for the year (after tax and
reclassification adjustments)
Item that will not be reclassified to profit or loss:
Financial assets at fair value through other comprehensive
income (FVOCI) – movement in fair value reserves
(non-recycling) (6,721) 4,792
Related tax 1,680 (1,198)
Other comprehensive income for the year (5,041) 3,594
Total comprehensive income for the year 46,561 47,569
Attributable to:
Equity shareholders of the Company 45,265 46,161
Non-controlling interests 1,296 1,408
Total comprehensive income for the year 46,561 47,569
APPENDIX IIB UNAUDITED PRELIMINARY FINANCIAL INFORMATION
FOR THE YEAR ENDED 31 DECEMBER 2024
– IIB-3 –


--- page 646 ---
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(Expressed in Renminbi Yuan)
At 31 December
2023 2024
Note RMB’000 RMB’000
(unaudited)
Non-current assets
Property, plant and equipment 344,227 360,127
Financial assets at FVOCI 28,454 31,710
Deferred tax assets 5,091 7,271
377,772 399,108
Current assets
Inventories 8 266,267 330,062
Trade and bills receivables 9 213,779 190,007
Prepayments, deposits and other receivables 10 313,092 318,053
Restricted deposits – 1,600
Cash and cash equivalents 236,226 216,858
1,029,364 1,056,580
Current liabilities
Bank loans and other borrowings 11 462,799 409,688
Lease liabilities 23,561 24,720
Trade payables 12 160,721 110,285
Other payables and accruals 13 45,755 88,524
Contract liabilities 14 112,120 120,913
Taxation payable 15,027 20,425
819,983 774,555
Net current assets 209,381 282,025
Total assets less current liabilities 587,153 681,133
APPENDIX IIB UNAUDITED PRELIMINARY FINANCIAL INFORMATION
FOR THE YEAR ENDED 31 DECEMBER 2024
– IIB-4 –


--- page 647 ---
At 31 December
2023 2024
Note RMB’000 RMB’000
(unaudited)
Non-current liabilities
Bank loans and other borrowings 11 12,552 58,829
Lease liabilities 76,533 75,901
Deferred tax liabilities 4,727 5,493
93,812 140,223
Net assets 493,341 540,910
Capital and reserves
Share capital 160,685 160,685
Reserves 316,943 363,104
Total equity attributable to equity
shareholders of the Company 477,628 523,789
Non-controlling interests 15,713 17,121
Total equity 493,341 540,910
APPENDIX IIB UNAUDITED PRELIMINARY FINANCIAL INFORMATION
FOR THE YEAR ENDED 31 DECEMBER 2024
– IIB-5 –


--- page 648 ---
NOTES TO THE 2024 PRELIMINARY FINANCIAL INFORMATION
(Expressed in Renminbi unless otherwise indicated)
1 BASIS OF PREPARATION AND ACCOUNTING POLICIES
The 2024 Preliminary Financial Information comprises the Company and its subsidiaries (together, the “Group”).
The 2024 Preliminary Financial Information has been prepared in accordance with all applicable IFRS Accounting
Standards issued by the International Accounting Standards Board (“IASB”), also comply with the applicable disclosure
provisions of the Rules Governing the Listing of Securities on the Stock Exchange of Hong Kong Limited. Material
accounting policy information adopted by the Group are disclosed in Note 2 in “Appendix I – Accountants’ Report”.
2 ISSUED BUT NOT YET EFFECTIVE IFRS ACCOUNTING STANDARDS
The IASB has issued a number of amendments and new standards which are not yet effective for the year ended
31 December 2024. The Group has not applied the following new and revised IFRSs that have been issued but are not
yet effective in the 2024 Preliminary Financial Information.
Effective for accounting
periods beginning on or after
Amendments to IAS 21, The effects of changes in foreign exchange rates:
Lack of exchangeability
1 January 2025
Amendments to IFRS 9 and IFRS 7: Amendments to the Classification and
Measurement of Financial Instruments
1 January 2026
Annual Improvements to IFRS Accounting Standards – V olume 11 1 January 2026
IFRS 18 Presentation and Disclosure in Financial Statements 1 January 2027
IFRS 19, Subsidiaries without Public Accountability: Disclosures 1 January 2027
Amendments to IFRS 10 and IAS 28, Sale or contribution of assets between
an investor and its associate or joint venture
No mandatory effective date
yet determined
The Group is in the process of making an assessment of what the impact of these amendments and new standards
is expected to be in the period of initial application. So far it has concluded that the adoption of them is unlikely to
have a significant impact on the Group’s consolidated financial statements.
3 REVENUE AND SEGMENT REPORTING
(a) Revenue
The Group is principally engaged in operation of retail stores and shopping mall in areas around
Y angzhou, Jiangsu and sales of goods to wholesale customers and sales of packed meals.
APPENDIX IIB UNAUDITED PRELIMINARY FINANCIAL INFORMATION
FOR THE YEAR ENDED 31 DECEMBER 2024
– IIB-6 –


--- page 649 ---
Disaggregation of revenue from contracts with customers by major products is as follows:
2023 2024
RMB’000 RMB’000
(unaudited)
Revenue from contracts with customers
within the scope of IFRS 15
Sales of goods
– general sales 616,813 505,761
– bulk sales 38,883 49,669
– wholesales 679,641 729,813
Subtotal 1,335,337 1,285,243
Commission income
– concessionaire sales 32,894 29,046
– supply of goods 6,860 5,899
Subtotal 39,754 34,945
Supply and sales of meals 15,315 16,877
1,390,406 1,337,065
Revenue from other sources
Rental income from operating lease 11,566 13,860
1,401,972 1,350,925
The Group’s revenue from contracts with customers were recognised at point in time for the year ended 31
December 2024 and 2023.
There is one (unaudited) and one customer with whom transactions has exceed 10% of the Group’s
revenues for the year ended 31 December 2024 and 2023.
(b) Segment reporting
Operating segments are identified on the basis of internal reports that the Group’s most senior executive
management reviews regularly in allocating resources to segments and in assessing their performances.
The Group’s most senior executive management makes resources allocation decisions based on internal
management functions and assess the Group’s business performance as one integrated business instead of by
separate business lines or geographical regions. Accordingly, the Group has only one operating segment and
therefore, no segment information is presented.
APPENDIX IIB UNAUDITED PRELIMINARY FINANCIAL INFORMATION
FOR THE YEAR ENDED 31 DECEMBER 2024
– IIB-7 –


--- page 650 ---
IFRS 8, Operating Segments , requires identification and disclosure of information about an entity’s
geographical areas, regardless of the entity’s organization (i.e. even if the entity has a single reportable segment).
The Group operates within one geographical location because primarily all of its revenue was generated in the
PRC and primarily all of its non-current operating assets and capital expenditure were located/incurred in the
PRC. Accordingly, no geographical information is presented.
4 OTHER REVENUE AND OTHER NET GAIN
(a) Other revenue
2023 2024
RMB’000 RMB’000
(unaudited)
Service income 3,998 6,323
Government grants 1,110 1,041
Dividends income 247 293
5,355 7,657
The Group received unconditional government grants of RMB293,000 (unaudited) and RMB247,000 for
the year ended 31 December 2024 and 2023 mainly as rewards of the Group’s contribution to secure employment
for regional employees and special funds for industrial development.
(b) Other net gain
2023 2024
RMB’000 RMB’000
(unaudited)
Net realised gain on structured deposits and wealth
management products 260 242
Net foreign exchange gain 10 1,767
Net gain/(loss) on disposal of property, plant and equipment 28 (505)
Compensation received from early termination of lease
agreement 2,300 –
Impairment losses of property, plant and equipment and
right-of-use assets (1,490) –
Others 136 69
1,244 1,573
APPENDIX IIB UNAUDITED PRELIMINARY FINANCIAL INFORMATION
FOR THE YEAR ENDED 31 DECEMBER 2024
– IIB-8 –


--- page 651 ---
5 PROFIT BEFORE TAXATION
Profit before taxation is arrived at after charging:
(a) Net finance costs
2023 2024
RMB’000 RMB’000
(unaudited)
Interest income from bank deposits (1,573) (1,917)
Finance income (1,573) (1,917)
Interest expenses on bank loans and other borrowings 17,058 19,749
Interest expenses on lease liabilities 4,485 4,281
Finance costs 21,543 24,030
Net finance costs 19,970 22,113
(b) Staff costs
2023 2024
RMB’000 RMB’000
(unaudited)
Salaries, wages and other benefits 95,561 91,850
Contribution to defined retirement plans (Note (i)) 9,413 9,204
104,974 101,054
Note:
(i) The employees of the subsidiaries of the Group established in the PRC participate in a defined
contribution scheme managed by the local municipal governments, whereby these companies are
required to contribute to the scheme at certain rates of the employees’ salaries as agreed by the local
municipal governments. Employees of these companies are entitled to benefits, calculated based on a
percentage of the average salaries level in the PRC, from the above-mentioned retirement scheme at
their normal retirement age.
The Group has no further obligation for payment of other retirement benefits beyond the above
contributions.
APPENDIX IIB UNAUDITED PRELIMINARY FINANCIAL INFORMATION
FOR THE YEAR ENDED 31 DECEMBER 2024
– IIB-9 –


--- page 652 ---
(c) Other items
2023 2024
RMB’000 RMB’000
(unaudited)
Cost of inventories recognised as expenses 1,089,334 1,049,646
Depreciation charge
– owned property, plant and equipment 41,689 42,568
– right-of-use assets 28,048 28,316
Provision/(reversal) of impairment loss on trade and other
receivables 3,214 (942)
Listing expense 3,449 7,276
6 INCOME TAX
(a) Taxation in the consolidated statements of profit or loss represents:
2023 2024
RMB’000 RMB’000
(unaudited)
Current tax
– Provision for the year 20,210 20,668
Deferred tax
– Origination and reversal of temporary differences (1,754) (2,298)
18,456 18,370
Note: Pursuant to the income tax rules and regulations of Hong Kong, the subsidiary in Hong Kong were
liable to the Hong Kong Profits Tax at a rate of 16.5% during the years ended 31 December 2024
and 2023.
The PRC subsidiaries of the Group are subject to PRC Corporate Income Tax (“CIT”) at a statutory
rate of 25%, except for the following specified subsidiaries:
According to Announcement [2022] No. 13, “The Announcement of Further Implementation of
Income Tax Incentives for Small-scaled Minimal Profit Enterprise” issued by Ministry of Finance of
the PRC and National Tax Bureau on 14 March 2022, the small-scaled minimal profit enterprise with
an annual taxable income between RMB1,000,000 and RMB3,000,000 (RMB3,000,000 included) is
entitled to a preferential tax treatment of 75% exemption of taxable income and application of
income tax rate as 20% for the years from 2022 to 2024.
Certain subsidiaries in the Group meet the conditions as small-scaled minimal profit enterprise were
qualified for the entitlement of such preferential tax treatment during the year ended 31 December
2023.
APPENDIX IIB UNAUDITED PRELIMINARY FINANCIAL INFORMATION
FOR THE YEAR ENDED 31 DECEMBER 2024
– IIB-10 –


--- page 653 ---
(b) Reconciliation between tax expense and accounting profit at applicable tax rates:
2023 2024
RMB’000 RMB’000
(unaudited)
Profit before taxation 70,058 62,345
Notional tax on profit before taxation, calculated using the
PRC statutory tax rate of 25% 17,515 15,586
Effect of different tax rates (190) –
Tax effect of non-deductible expenses 312 1,934
Tax effect of non-taxable income (62) (73)
Tax effect of tax losses not recognised 755 939
Tax effect of temporary differences not recognised 126 (16)
Actual tax expense 18,456 18,370
7 EARNINGS PER SHARE
(a) Basic earnings per share
The calculation of basic earnings per share is based on the profit attributable to equity shareholders of the
Company of RMB42,722,000 (unaudited) (2023: RMB50,088,000) respectively, and the weighted average number
of 160,685,000 (unaudited) (2023:160,685,000) ordinary shares in issue during the respective year.
(b) Diluted earnings per share
The Company had no dilutive potential ordinary shares outstanding during the years ended 31 December
2024 and 2023, diluted earnings per share is the same as the basic earnings per share.
8 INVENTORIES
(a) Inventories in the consolidated statements of financial position comprise:
As at 31 December
2023 2024
RMB’000 RMB’000
(unaudited)
Trade merchandise 266,267 330,062
APPENDIX IIB UNAUDITED PRELIMINARY FINANCIAL INFORMATION
FOR THE YEAR ENDED 31 DECEMBER 2024
– IIB-11 –


--- page 654 ---
(b) The analysis of the amount of inventories recognised as an expense and included in profit or loss is as
follows:
2023 2024
RMB’000 RMB’000
(unaudited)
Carrying amount of inventories sold 1,087,789 1,048,684
Provision for write-down of inventories 1,545 962
1,089,334 1,049,646
All inventories are expected to be recovered within one year.
9 TRADE AND BILLS RECEIV ABLES
As at 31 December
2023 2024
RMB’000 RMB’000
(unaudited)
Trade receivables
– third parties 213,779 173,007
Bill receivables – 17,000
213,779 190,007
All of the trade receivables are expected to be recovered within one year.
The Group endorsed certain bank acceptance bills to suppliers for settling trade and other payables of the same
amount on a full recourse basis. The Group has derecognised these bills receivable and payables to suppliers in their
entirety. These derecognised bank acceptance bills had a maturity date of less than six months from the end of the
reporting period. In the opinion of the directors of the Company, the Group has transferred substantially all the risks
and rewards of ownership of these bills and has discharged its obligation of the payables to its suppliers, and the Group
has limited exposure in respect of the settlement obligation of these bills receivable under the relevant PRC rules and
regulations, should the issuing banks fail to settle the bills on maturity date. The Group considered the issuing banks of
these bills are of good credit quality and non-settlement of these bills by the issuing banks on maturity is not probable.
As at 31 December 2024, the Group’s maximum exposure to loss and undiscounted cash outflow, which is same as the
amount payable by the Group to suppliers in respect of the endorsed bills, should the issuing banks fail to settle the
bills on maturity date, amounted to RMB107,608,000 (unaudited) (2023: nil).
APPENDIX IIB UNAUDITED PRELIMINARY FINANCIAL INFORMATION
FOR THE YEAR ENDED 31 DECEMBER 2024
– IIB-12 –


--- page 655 ---
Ageing analysis
As of the end of the reporting period, the ageing analysis of the Group’s trade receivables, based on the
invoice date and net of loss allowance, is as follows:
As at 31 December
2023 2024
RMB’000 RMB’000
(unaudited)
Within 3 months 172,055 122,506
Over 3 months but within 6 months 30,000 44,062
Over 6 months but within 9 months 10,043 3,293
Over 9 months but within 12 months 1,601 3,021
Over 12 months 80 125
213,779 173,007
Trade receivables are due within 90 days from the date of billing.
10 PREPAYMENTS, DEPOSITS AND OTHER RECEIV ABLES
As at 31 December
2023 2024
RMB’000 RMB’000
(unaudited)
Prepayments 283,491 295,909
V alue added tax recoverable 344 488
Other deposits and receivables 31,286 23,824
315,121 320,221
Less: loss allowance (2,029) (2,168)
313,092 318,053
All prepayments, deposits and other receivables are expected to be recovered or recognised as expense within
one year.
APPENDIX IIB UNAUDITED PRELIMINARY FINANCIAL INFORMATION
FOR THE YEAR ENDED 31 DECEMBER 2024
– IIB-13 –


--- page 656 ---
11 BANK LOANS AND OTHER BORROWINGS
As at 31 December
2023 2024
RMB’000 RMB’000
(unaudited)
Short-term bank loans and other borrowings 462,422 409,265
Accrued interest 377 423
Bank loans and other borrowing – current 462,799 409,688
Long-term bank loans and other borrowings 12,511 58,775
Accrued interest 41 54
Bank loans and other borrowing – non-current 12,552 58,829
Total 475,351 468,517
The maturity profile for the interest-bearing bank loans and other borrowing of the Group at the end of each
reporting period is as follows:
As at 31 December
2023 2024
RMB’000 RMB’000
(unaudited)
Within 1 year or on demand 462,799 409,688
After 1 year but within 2 years 11,371 48,787
After 2 years but within 5 years 1,181 10,042
Total 475,351 468,517
At the end of each reporting period, the Group’s bank and other borrowings were secured as follows:
As at 31 December
2023 2024
RMB’000 RMB’000
(unaudited)
Bank loans and other borrowings
– Secured 437,477 458,517
– Unsecured 37,874 10,000
475,351 468,517
APPENDIX IIB UNAUDITED PRELIMINARY FINANCIAL INFORMATION
FOR THE YEAR ENDED 31 DECEMBER 2024
– IIB-14 –


--- page 657 ---
12 TRADE PAYABLES
As at 31 December
2023 2024
RMB’000 RMB’000
(unaudited)
Trade payables 160,721 110,285
All of the trade and bills payables are expected to be settled within one year or repayable on demand.
As of the end of each reporting period, the ageing analysis of the Group’s trade payables and bills payable
(which are included in trade and other payables), based on the invoice date, is as follows:
As at 31 December
2023 2024
RMB’000 RMB’000
(unaudited)
Within 3 months 116,819 89,894
3 to 12 months 30,587 12,856
Over 12 months 13,315 7,535
160,721 110,285
13 OTHER PAYABLES AND ACCRUALS
As at 31 December
2023 2024
RMB’000 RMB’000
(unaudited)
Payable for staff related costs 16,773 15,878
Deposits received 11,746 12,423
Other taxes payable 4,145 12,169
Others 13,091 48,054
45,755 88,524
All of the other payables and accruals are expected to be settled within one year or repayable on demand.
APPENDIX IIB UNAUDITED PRELIMINARY FINANCIAL INFORMATION
FOR THE YEAR ENDED 31 DECEMBER 2024
– IIB-15 –


--- page 658 ---
14 CONTRACT LIABILITIES
As at 31 December
2023 2024
RMB’000 RMB’000
(unaudited)
Advance receipts from customers (Note (i)) 47,273 59,059
Advance receipts from operating lease 1,742 2,268
Prepaid cards (Note (ii)) 62,042 58,787
Customer loyalty program points liability (Note (iii)) 1,063 799
112,120 120,913
Notes:
(i) The amounts of consideration received in advance as prepayments by customers are short-term as the
respective revenue is expected to be recognised within a few days when the goods are delivered to
customers.
(ii) Revenue is recognised when customers accept the products so revenue from prepaid cards is recognised
when the prepaid cards are redeemed by customers. Based on recent trends in redemption by customers of
the prepaid cards, it is expected that most of the prepaid cards will be redeemed within one year from
purchase.
(iii) The Group operates a customer loyalty programme for sales to retail customers where points can be earned
by customers and to be used to reduce the cost of future purchases. The contract liability in respect of
unredeemed retail customer loyalty points will be recognised as revenue when the points are redeemed by
those customers or expire, which is expected to occur before the end of the following year based on the
expiry terms of the loyalty points.
APPENDIX IIB UNAUDITED PRELIMINARY FINANCIAL INFORMATION
FOR THE YEAR ENDED 31 DECEMBER 2024
– IIB-16 –


--- page 659 ---
BUSINESS REVIEW AND OUTLOOK
We are a wholesaler of grains and oil headquartered in Y angzhou, with retail operations of
supermarket and convenience stores focusing on the central region of Jiangsu Province under our
brand “Ꮂ ” (Hongxinlong*). Leveraging our ability to source and supply quality and fresh
food ingredients, we also operate a central kitchen to produce meals and deliver to local
corporates, schools or government entities.
Our business entails the following operations:
 Wholesale operations: We sell grains and oil, food products and other products to
resellers and other retail operators including other operators of supermarkets and
convenience stores as well as catering business operators. We also sell garment and
wooden products to overseas customers and household appliances to distributors and
retailers.
 Retail operations: We operate our supermarkets and convenience stores under our
brand “Ꮂ ” (Hongxinlong*), as well as two Malls, with geographical focus in the
central region of Jiangsu Province. We receive sales proceeds from (i) general sales to
consumers at our Retail Stores and Malls; and (ii) bulk sales to customers including
corporate and government entities. We also receive sales amounts for concessionaire
sales at our Retail Stores and Malls and charge the concessionaires certain percentage
of gross sale amounts or the agreed sales target, whichever is the higher, as
commissions.
Our supermarkets provide a wide range of daily consumer products to cater for the
daily needs of our customers, which could be broadly categorised as raw and fresh
food, grains and oil, non-staple food and household products, while our convenience
stores open for 16 or 24 hours a day to cater for quick purchases of everyday
consumable products.
Apart from supermarkets and convenience stores, we also operate two Malls located in
Y angzhou, namely Jiangdu Mall* (۬and Hongxinlong Mall* (ʕ
ː). We sell fashion and apparel, children’s wear, cosmetics and personal care,
jewellery, accessories, footwear, household appliances, consumer electronics, liquor
and miscellaneous products at our Malls.
 Rental operations: Ancillary to our retail operations, we lease some shop floor area
or shop premises in our Retail Stores and Malls to other retail operators like
restaurant, hotels and pharmacies, etc. and receive rental income.
 Supply and sales of meals: We operate a central kitchen to produce meals and deliver
to local corporates, schools or government entities.
APPENDIX IIB UNAUDITED PRELIMINARY FINANCIAL INFORMATION
FOR THE YEAR ENDED 31 DECEMBER 2024
– IIB-17 –


--- page 660 ---
Going forward, we plan to implement the following strategies, which we believe, will
strengthen our market position, increase our market share and capture the growth in the PRC
retail industry:
 expanding our presence and number of Retail Stores;
 expanding our warehousing capacity by establishing a new distribution centre;
 expanding our processing capacity of meals by establishing a new central kitchen; and
 enhancing our ERP system and infrastructure systems to improve our operational
efficiency.
Except for the estimated non-recurring Listing expenses as disclosed in this prospectus, to
the best of our Directors’ knowledge, there has been no material adverse change in the financial
or trading position or prospects of our Group since 31 December 2024 and up to the date of this
prospectus.
RESULTS OF OPERATIONS
Y ear ended 31 December 2023 compared to Y ear ended 31 December 2024
Revenue
Our revenue decreased by approximately RMB51.1 million from approximately
RMB1,402.0 million for the year ended 31 December 2023 to approximately RMB1,350.9
million for the year ended 31 December 2024. Such decrease was mainly driven by the decrease
in our revenue from general sales of approximately RMB111.1 million, and is partially offset by
the increase in our revenue from wholesales of approximately RMB50.2 million and the increase
in our revenue from bulk sales of approximately RMB10.8 million. Our revenue from rental
operations and supply and sales of meals remained relatively stable.
For the year ended 31 December 2024, our revenue generated from wholesales increased to
approximately RMB729.8 million from approximately RMB679.6 million for the year ended 31
December 2023. Such increase was mainly driven by the sales of food in wholesale. As advised
by the Industry Consultant, the increase in wholesale of food in the PRC in 2023 and 2024,
particularly as a result of recovery from COVID-19 pandemic, was driven by a combination of
economic recovery and pent-up demand. In particular, as COVID-19 restrictions were lifted,
businesses resumed normal operations, including resellers, retail operators such as operators of
supermarkets and convenience stores as well as catering business operators. This resurgence in
economic activity led to increased demand for wholesale food supplies as food service
establishments sought to replenish stock. In addition, during the lockdowns, businesses in the
PRC tended to postpone many purchases particularly in the food sector. As restrictions eased,
APPENDIX IIB UNAUDITED PRELIMINARY FINANCIAL INFORMATION
FOR THE YEAR ENDED 31 DECEMBER 2024
– IIB-18 –


--- page 661 ---
there was a tendency to purchase food supplies to meet the needs of retail operators and catering
business operators, thereby driving up wholesale sales.
For the year ended 31 December 2024, our revenue generated from general sales decreased
to approximately RMB505.8 million from approximately RMB616.8 million for the year ended
31 December 2023. Such decrease was mainly due to (i) the cessation of sales of tobacco
products; (ii) the decrease in revenue from sales of food in retail; and (iii) the bad weather in
Y angzhou in late June 2024 which hindered the performance of our 2024 half-year promotional
sales as compared to our 2023 half-year promotional sales. As advised by the Industry
Consultant, in 2024, there has been a notable increase in the number of individuals dining out at
restaurants, which was mainly driven by several key factors including, (1) the gradual recovery
of the general economy in Y angzhou and the PRC has resulted in increased disposable income
for consumers, enabling greater spending on dining out; (2) restaurants are proactively seeking
to attract customers in order to recover from business losses incurred during the lockdowns; and
(3) many people appreciate the social aspect of dining out, which fosters gatherings with friends
and family in a lively atmosphere. As a result of the increasing number of individuals dining out
at restaurants, consumers have reduced their spending on food purchased from supermarkets at
the retail level, while at the same time the demand for food ingredients (such as grains and oil)
at the wholesale level increased.
Our revenue from supply and sales of meals remained relatively stable at approximately
RMB15.3 million and RMB16.9 million for the years ended 31 December 2023 and 2024,
respectively; and our rental income from operating lease also remained relatively stable at
approximately RMB11.6 million and RMB13.9 million for the years ended 31 December 2023
and 2024, respectively.
Cost of sales
Our cost of sales mainly comprised the cost of inventories sold. Our cost of sales decreased
by approximately RMB38.8 million from approximately RMB1,100.6 million for the year ended
31 December 2023 to approximately RMB1,061.8 million for the year ended 31 December 2024.
Such decrease was generally in line with our decrease in revenue.
Gross profit and gross profit margin
Our gross profit decreased by approximately RMB12.3 million from approximately
RMB301.4 million for the year ended 31 December 2023 to approximately RMB289.1 million
for the year ended 31 December 2024. Such decrease was mainly driven by the decrease in our
gross profit from general sales, and is partially offset by the increase in our gross profit from
wholesales.
Our gross profit margin remained stable at approximately 21.5% and 21.4% for the years
ended 31 December 2023 and 2024, respectively.
APPENDIX IIB UNAUDITED PRELIMINARY FINANCIAL INFORMATION
FOR THE YEAR ENDED 31 DECEMBER 2024
– IIB-19 –


--- page 662 ---
Other revenue
Our other revenue mainly comprised service income for processing meals for two catering
business operators in Y angzhou and government grants. Our other revenue increased from
approximately RMB5.4 million for the year ended 31 December 2023 to approximately RMB7.7
million for the year ended 31 December 2024. Such increase was mainly driven by the increase
in our service income.
Other net gain
Our other net gain increased from approximately RMB1.2 million for the year ended 31
December 2023 to approximately RMB1.6 million for the year ended 31 December 2024. Such
increase was mainly driven by (i) the increase in net foreign exchange gain during the year
under review; and (ii) the impact of impairment losses of property, plant and equipment
recognised for the year ended 31 December 2023 (but not for the year ended 31 December
2024), and is offset by the impact of compensation received from early termination of lease
agreement recognised for the year ended 31 December 2023 (but not for the year ended 31
December 2024).
Selling and distribution costs
Our selling and distribution costs mainly comprised staff costs and depreciation and
amortisation expenses. Our selling and distribution costs decreased from approximately
RMB162.1 million for the year ended 31 December 2023 to approximately RMB160.4 million
for the year ended 31 December 2024. Such decrease was mainly due to the decrease in staff
costs, which was was mainly due to decrease in number of staff.
Administrative and other operating expenses
Our administrative and other operating expenses mainly comprised staff costs, depreciation
and amortisation expenses and Listing expenses. Our administrative and other operating
expenses increased from approximately RMB52.6 million for the year ended 31 December 2023
to approximately RMB54.4 million for the year ended 31 December 2024. Such increase was
mainly driven by the increase in our Listing expenses from approximately RMB3.4 million for
the year ended 31 December 2023 to approximately RMB7.3 million for the year ended 31
December 2024.
Impairment loss/(reversal of impairment loss) on trade and other receivables
Impairment loss represented the changes in loss allowance in respect of our trade
receivables and other receivables. We overturned from impairment loss of approximately
RMB3.2 million for the year ended 31 December 2023 to a reversal of impairment loss of
approximately RMB0.9 million for the year ended 31 December 2024, which was mainly driven
by the reversal of impairment loss on our trade receivables.
APPENDIX IIB UNAUDITED PRELIMINARY FINANCIAL INFORMATION
FOR THE YEAR ENDED 31 DECEMBER 2024
– IIB-20 –


--- page 663 ---
Net finance costs
Our net finance cost remained relatively stable at approximately RMB20.0 million and
RMB22.1 million for the years ended 31 December 2023 and 2024, respectively.
Income tax
Our income tax remained stable at approximately RMB18.5 million and RMB18.4 million
for the years ended 31 December 2023 and 2024, respectively. Our effective tax rate increased
from approximately 26.3% for the year ended 31 December 2023 to approximately 29.5% for the
year ended 31 December 2024, which was mainly driven by the increase in Listing expenses
which were non-deductible for tax.
Profit for the year
For the forgoing reasons, our profit for the year decreased from approximately RMB51.6
million for the year ended 31 December 2023 to approximately RMB44.0 million for the year
ended 31 December 2024. Our net profit margin decreased from approximately 3.7% for the year
ended 31 December 2023 to approximately 3.3% for the year ended 31 December 2024.
Non-IFRS financial measure
To supplement our consolidated financial statements which are presented in accordance
with IFRSs, we also presented the adjusted net profit (Non-IFRS measure) and adjusted net
profit margin (Non-IFRS measure) as additional financial measures, which are not required by,
or presented in accordance with IFRSs. We believe that the presentation of non-IFRS financial
measures when shown in conjunction with the corresponding IFRS financial measures provides
useful information to potential investors and management in facilitating a comparison of our
operating performance from period to period. Such non-IFRS financial measures allow investors
to consider matrices used by our management in evaluating our performance.
The use of non-IFRS financial measures has limitations as an analytical tool, and investors
should not consider these in isolation from, or as a substitute for, or superior to, analysis of our
results of operations or financial conditions as reported in accordance with IFRSs. In addition,
the non-IFRS financial measures may be defined differently from similar terms used by other
companies.
We adjusted for certain items as our non-IFRS financial measures, in order to provide
potential investors with an overall and fair understanding of our operating results and financial
performance, especially in making period-to-period comparisons of, and assessing the profile of,
our operating and financial performance. Listing expenses are mainly expenses related to the
Listing and are added back because they were incurred only for the purposes of the Listing.
APPENDIX IIB UNAUDITED PRELIMINARY FINANCIAL INFORMATION
FOR THE YEAR ENDED 31 DECEMBER 2024
– IIB-21 –


--- page 664 ---
Adjusted net profit (Non-IFRS measure)
We defined adjusted net profit (Non-IFRS measure) as net profit for the year adjusted by
adding back Listing expenses. The table below sets forth the adjusted net profit (Non-IFRS
measure) and the adjusted net profit margin (Non-IFRS measure) for the years ended 31
December 2023 and 31 December 2024:
Y ear ended 31 December
2023 2024
RMB’000 RMB’000
(unaudited)
Profit for the year 51,602 43,975
Adjusted:
Listing expenses 3,449 7,276
Adjusted net profit (Non-IFRS measure) for the
year 55,051 51,251
Adjusted net profit margin (Non-IFRS measure) 3.9% 3.8%
APPENDIX IIB UNAUDITED PRELIMINARY FINANCIAL INFORMATION
FOR THE YEAR ENDED 31 DECEMBER 2024
– IIB-22 –


--- page 665 ---
DESCRIPTION OF SELECTED ITEMS OF CONSOLIDATED STATEMENT OF
FINANCIAL POSITION
Current assets and current liabilities
As at 31 December
2023 2024
RMB’000 RMB’000
(unaudited)
Current assets
Inventories 266,267 330,062
Trade and bills receivables 213,779 190,007
Prepayments, deposits and other receivables 313,092 318,053
Restricted deposits – 1,600
Cash and cash equivalents 236,226 216,858
1,029,364 1,056,580
Current liabilities
Bank loans and other borrowings 462,799 409,688
Lease liabilities 23,561 24,720
Trade payables 160,721 110,285
Other payables and accruals 45,755 88,524
Contract liabilities 112,120 120,913
Taxation payable 15,027 20,425
819,983 774,555
Net current assets 209,381 282,025
APPENDIX IIB UNAUDITED PRELIMINARY FINANCIAL INFORMATION
FOR THE YEAR ENDED 31 DECEMBER 2024
– IIB-23 –


--- page 666 ---
Cash flows
The following table sets forth a summary of our cash flows for the years indicated:
Y ear ended 31 December
2023 2024
RMB’000 RMB’000
(unaudited)
Operating profit before changes in working capital 163,623 153,471
Changes in working capital (75,001) 1,884
Cash generated from operations 88,622 155,355
Income tax paid (19,403) (15,270)
Net cash generated from operating activities 69,219 140,085
Net cash used in investing activities (34,536) (64,238)
Net cash generated from/(used in) financing activities 35,729 (95,800)
Net increase/(decrease) in cash and cash equivalents 70,412 (19,953)
Effect of foreign exchange rate changes 327 585
Cash and cash equivalents at beginning of year 165,487 236,226
Cash and cash equivalents at end of year 236,226 216,858
Our cash and cash equivalent decreased from approximately RMB236.2 million as at 31
December 2023 to approximately RMB216.9 million. Such decrease was mainly our net cash
used in investing and financial activities during the year ended 31 December 2024, which
outweighed our net cash generated from operating activities.
For the year ended 31 December 2024, we recorded a net cash generated from operating
activities of approximately RMB140.1 million, which primarily reflected our operating profit
before changes in working capital of approximately RMB153.5 million. During the year ended
31 December 2024, we only had insignificant net changes in working capital as our decrease in
trade and other receivables and our increase in trade and other payables outweighed our increase
in inventories.
For the year ended 31 December 2024, we record a net cash used in investing activities of
approximately RMB64.2 million, which was mainly due to acquisition of property, plant and
equipment during the year.
APPENDIX IIB UNAUDITED PRELIMINARY FINANCIAL INFORMATION
FOR THE YEAR ENDED 31 DECEMBER 2024
– IIB-24 –


--- page 667 ---
For the year ended 31 December 2024, we record a net cash used in financing activities of
approximately RMB95.8 million, which was mainly due to our net repayment of bank loans and
other borrowings.
Inventories
Our inventories represented our trade merchandise. Our inventories increased from
approximately RMB266.3 million as at 31 December 2023 to approximately RMB330.1 million
as at 31 December 2024. Such increase was mainly driven by the increase in the balance for
food, which was primarily because we increased our purchase of food to accommodate the
upcoming demand on food. According to the Industry Consultant, with the COVID-19 pandemic
receded in the PRC and the gradual return to normalcy, consumers in the PRC generally were
more willing to spend on purchasing food.
The following table sets forth the average inventory turnover days for the years indicated:
Y ear ended 31 December
2023 2024
(days) (days)
Average inventory turnover days (1) 97.9 102.5
Note:
(1) Average inventory turnover days equal average inventories divided by cost of sales for the year and
multiplied by 365. Average inventories are calculated as inventories at the beginning of the year plus
inventories at the end of the year, divided by two.
Our average inventory turnover days increased from approximately 97.9 days for the year
ended 31 December 2023 to approximately 102.5 days for the year ended 31 December 2024.
Such increase was mainly driven by (i) the increase in food for retail and wholesales in our
inventories as we increased our purchase of food to accommodate the 2025 Chinese New Y ear,
which was earlier than 2024 Chinese New Y ear; and (ii) towards the end of 2024, we made
purchases in food for wholesales for sale orders to be fulfiled in January 2025.
Trade and bills receivables
Our trade and bills receivables decreased from approximately RMB213.8 million as at 31
December 2023 to approximately RMB190.0 million as at 31 December 2024 as we collected
more receivables from customers toward the end of the year ended 31 December 2024.
APPENDIX IIB UNAUDITED PRELIMINARY FINANCIAL INFORMATION
FOR THE YEAR ENDED 31 DECEMBER 2024
– IIB-25 –


--- page 668 ---
The following table sets forth the average turnover days of trade and bills receivables for
the years indicated:
Y ear ended 31 December
2023 2024
(days) (days)
Average turnover days of
trade and bills receivables (1) 53.9 54.5
Note:
(1) Average turnover days of trade and bills receivables equal average trade and bills receivables divided by
revenue for the year and multiplied by 365. Average trade and bills receivables are calculated as trade
receivables at the beginning of the year plus trade receivables at the end of the year, divided by two.
Our average turnover days of trade and bills receivables remained stable at approximately
53.9 days and 54.5 days for the years ended 31 December 2023 and 2024, respectively.
Prepayments, deposits and other receivables
Our prepayments, deposits and other receivables mainly comprises the prepayment for our
purchases. Our prepayments, deposits and other receivables remained relatively stable at
approximately RMB313.1 million and RMB318.1 million as at 31 December 2023 and 2024,
respectively.
Trade payables
Our trade payables decreased from approximately RMB160.7 million as at 31 December
2023 to approximately RMB110.3 million as at 31 December 2024. Such decrease was mainly
because we settled our trade payables more promptly during the year under review. As advised
by the Industry Consultant, the COVID-19 pandemic has strained the cash flow of suppliers in
the PRC, compelling them to pursue faster payments to ensure liquidity and operational stability.
Furthermore, the economic uncertainties in the post-pandemic era have further intensified this
need, as suppliers are increasingly focused on strengthening their cash flow management to
mitigate risks and sustain their businesses in a volatile market environment.
APPENDIX IIB UNAUDITED PRELIMINARY FINANCIAL INFORMATION
FOR THE YEAR ENDED 31 DECEMBER 2024
– IIB-26 –


--- page 669 ---
The following table sets forth the average turnover dates of trade payables for the years
indicated:
Y ear ended 31 December
2023 2024
(days) (days)
Average turnover days of trade payables (1) 58.3 46.6
Note:
(1) Average turnover days of trade payables equal average trade payables divided by cost of sales for the year
and multiplied by 365. Average trade payables are calculated as trade payables at the beginning of the year
plus trade payables at the end of the year, divided by two.
Our average turnover days of trade payables significantly decreased from approximately
58.3 days for the year ended 31 December 2023 to approximately 46.6 days for the year ended
31 December 2024. Such decrease was mainly driven by the decrease in our trade payables as
we settled our trade payables more promptly during the year ended 31 December 2024.
Contract liabilities
Our contract liabilities increased from approximately RMB112.1 million as at 31 December
2023 to approximately RMB120.9 million as at 31 December 2024. Such increase was mainly
driven by the increase in advance receipts from customers.
APPENDIX IIB UNAUDITED PRELIMINARY FINANCIAL INFORMATION
FOR THE YEAR ENDED 31 DECEMBER 2024
– IIB-27 –


--- page 670 ---
INDEBTEDNESS
Our indebtedness comprised bank borrowings and lease liabilities. The following table sets
forth our indebtedness as at the dates indicated:
As at 31 December
2023 2024
RMB’000 RMB’000
(unaudited)
Non-current liabilities
Bank loans and other borrowings 12,552 58,829
Lease liabilities 76,533 75,901
89,085 134,730
Current liabilities
Bank loans and other borrowings 462,799 409,688
Lease liabilities 23,561 24,720
486,360 434,408
Total 575,445 569,138
Bank loans and other borrowings
Our total bank loans and other borrowings decreased from approximately RMB475.4
million as at 31 December 2023 to approximately RMB468.5 million as at 31 December 2024.
Such decrease was mainly driven by our net repayment during the year under review. As at 31
December 2024, our unutilised banking facilities amounted to approximately RMB76.0 million.
Lease liabilities
Our total lease liabilities remained stable at approximately RMB100.1 million and
RMB100.6 million as at 31 December 2023 and 2024, respectively.
APPENDIX IIB UNAUDITED PRELIMINARY FINANCIAL INFORMATION
FOR THE YEAR ENDED 31 DECEMBER 2024
– IIB-28 –


--- page 671 ---
SELECTED FINANCIAL RATIOS
The following tables set forth certain key financial ratios as at/for the years ended 31
December 2023 and 31 December 2024:
As at/For the years ended
31 December
2023 2024
Gross profit margin (1) 21.5% 21.4%
Net profit margin (2) 3.7% 3.3%
Return on equity (3) 10.5% 8.1%
Return on assets (4) 3.7% 3.0%
Current ratio (5) 1.3 1.4
Quick ratio (6) 0.9 0.9
Gearing ratio (7) 68.8% 65.1%
Interest coverage ratio (8) 4.5 3.8
Notes:
(1) Gross profit margin represents gross profit for the year divided by total revenue for the respective year.
(2) Net profit margin represents profit for the year divided by total revenue for the respective year.
(3) Return on equity represents profit for the year divided by total equity as at the end of that year.
(4) Return on assets represents profit for the year divided by total assets as at the end of that year.
(5) Current ratio represents total current assets divided by total current liabilities as at the relevant year end.
(6) Quick ratio represents total current assets less inventories divided by total current liabilities as at the
relevant year end.
(7) Gearing ratio represents total bank loans and other borrowings and lease liabilities, less cash and cash
equivalents, divided by total equity as at the relevant year end.
(8) Interest coverage ratio represents profit before net finance costs and taxation divided by net finance costs
for the relevant year.
Gross profit margin
Our gross profit margin remained stable at approximately 21.5% and 21.4% for the years
ended 31 December 2023 and 2024, respectively.
APPENDIX IIB UNAUDITED PRELIMINARY FINANCIAL INFORMATION
FOR THE YEAR ENDED 31 DECEMBER 2024
– IIB-29 –


--- page 672 ---
Net profit margin
Our net profit margin decreased from approximately 3.7% for the year ended 31 December
2023 to approximately 3.3% for the year ended 31 December 2024. Such decrease was mainly
due to the increase in Listing expenses. Our adjusted net profit margin (non-IFRS measure as
disclosed above) remained stable at approximately 3.9% and 3.8% for the years ended 31
December 2023 and 2024, respectively.
Return on equity
Our return on equity decreased from approximately 10.5% for the year ended 31 December
2023 to approximately 8.1% for the year ended 31 December 2024. Such decrease was mainly
due to decrease in our net profits, which was primarily driven by the decrease in our gross profit
and the increase in Listing expenses.
Return on assets
Our return on assets decreased from approximately 3.7% for the year ended 31 December
2023 to approximately 3.0% for the year ended 31 December 2024. Such decrease was mainly
due to decrease in our net profits, which was primarily driven by the decrease in our gross profit
and the increase in Listing expenses.
Current ratio
Our current ratio increased from approximately 1.3 as at 31 December 2023 to
approximately 1.4 as at 31 December 2024. Such increase was mainly due to (1) the net increase
in our current assets, which was mainly driven by the increase in our inventories; and (2) the net
decrease in our current liabilities, which was mainly driven by the decrease in our bank loans
and other borrowings.
Quick ratio
Our quick ratio remained stable at approximately 0.9 and 0.9 as at 31 December 2023 and
2024.
Gearing ratio
Our gearing ratio decreased from approximately 68.8% as at 31 December 2023 to
approximately 65.1% as at 31 December 2024. Such decrease was mainly driven by the decrease
in our bank loans and other borrowing.
APPENDIX IIB UNAUDITED PRELIMINARY FINANCIAL INFORMATION
FOR THE YEAR ENDED 31 DECEMBER 2024
– IIB-30 –


--- page 673 ---
Interest coverage ratio
Our interest coverage ratio decreased from approximate 4.5 times for the year ended 31
December 2023 to approximately 3.8 times for the year ended 31 December 2024. Such decrease
was mainly due to decrease in our net profits, which was primarily driven by the decrease in our
gross profit and the increase in Listing expenses.
QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Please refer to Note 29 to the Accountant’s Report in Appendix I to this prospectus for the
details of the risks to which we are exposed to.
CODE ON CORPORATE GOVERNANCE PRACTICES
Since we were not yet listed on the Stock Exchange during the year ended 31 December
2024, the Corporate Governance Code set out in Appendix C1 (formerly Appendix 14) to the
Listing Rules (the “ CG Code ”) 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 CG Code.
REVIEW OF OUR PRELIMINARY FINANCIAL INFORMATION
The unaudited financial information in respect of our consolidated statement of financial
position as at 31 December 2024, our consolidated statement of profit or loss, our consolidated
statement of profit or loss and other comprehensive income and the related notes thereto for the
year ended 31 December 2024 as set out in the 2024 Preliminary Financial Information above
has been agreed by the Reporting Accountants to the amounts set out in the Group’s unaudited
consolidated financial statements for the year ended 31 December 2024 following their work
under Practice Note 730 “Guidance for Auditors Regarding Preliminary Announcements of
Annual Results” issued by the Hong Kong Institute of Certified Public Accountants (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 2024 Preliminary Financial Information.
PURCHASE, SALE OR REDEMPTION OF OUR COMPANY’S SHARES
Since we were not yet listed on the Stock Exchange during the year ended 31 December
2024, this disclosure requirement is not applicable to us.
APPENDIX IIB UNAUDITED PRELIMINARY FINANCIAL INFORMATION
FOR THE YEAR ENDED 31 DECEMBER 2024
– IIB-31 –


--- page 674 ---
TAXATION OF SECURITY HOLDERS
The taxation of income and capital gains of holders of H Shares is subject to the laws and
practices of the PRC and of jurisdictions in which holders of H Shares are residents or otherwise
subject to tax. The following summary of certain relevant taxation provisions is based on current
effective laws and practices, and no predictions are made about changes or adjustments to
relevant laws or policies, and no comments or suggestions will be made accordingly. The
discussion has no intention to cover all possible tax consequences resulting from the investment
in H Shares, nor does it take the specific circumstances of any particular investor into account,
some of which may be subject to special regulations. Accordingly, you should consult your own
tax adviser regarding the tax consequences of an investment in H Shares. The discussion is
based upon laws and relevant interpretations in effect as of the date of this document, which is
subject to change or adjustment and may have retrospective effect. No issues on PRC or Hong
Kong taxation other than income tax, capital tax, V A T, stamp duty and estate duty were referred
in the discussion. Prospective investors are urged to consult their financial advisers regarding
the PRC, Hong Kong and other tax consequences of owning and disposing of H Shares.
PRC TAXATION
Taxation on Dividends
Individual Investors
Pursuant to the Individual Income Tax Law of the PRC ( ),
which was last amended on August 31, 2018 and the Implementation Rules of the Individual
Income Tax Law of the PRC (ૢԷ ), which was last
amended on 18 December 2018 (the “ IIT Law ”), dividends paid by PRC enterprises are subject
to individual income tax levied at a flat rate of 20%. For a foreign individual who is not a
resident of the PRC, the receipt of dividends from a PRC enterprise is normally subject to
individual income tax of 20% unless specifically exempted by the tax authority of the State
Council or reduced by a relevant tax treaty. In addition, according to the Notice on Issues
Concerning the Implementation of Differential Individual Income Tax Policies on Dividends and
Bonuses of Listed Companies (ஷ
) issued on 7 September 2015, where an individual acquires the stocks of a listed company
from public offering of the company or from the stock market, if the stock holding period is
more than 1 year, the income from dividends and bonuses shall be exempted from individual
income tax; where an individual acquires the stocks of a listed company from public offering of
the company or from the stock market, if the stock holding period is 1 month or less, the income
from dividends and bonuses shall be included into the taxable incomes in full amount; if the
stock holding period is more than 1 month and up to l year, 50% of the income from dividends
and bonuses shall be temporarily included into the taxable incomes The individual income tax
rate on the aforesaid income is levied at a flat rate of 20%.
APPENDIX III TAXATION AND FOREIGN EXCHANGE
– III-1 –


--- page 675 ---
Enterprise Investors
In accordance with the Enterprise Income Tax Law of the PRC (੻
), which was promulgated by the NPC on 16 March 2007, came into effect on 1 January
2008 and was subsequently amended on 24 February 2017 and 29 December 2018, and the
Implementation Rules of the Enterprise Income Tax Law of the PRC (੻
ૢԷ), which was promulgated by the State Council on 6 December 2007, came into
effect on 1 January 2008 and was amended in 2019 (the “ EIT Law ”), a non-resident enterprise
is generally subject to a 10% enterprise income tax on PRC-sourced income (including dividends
and bonuses received from a PRC resident enterprise), if such non-resident enterprise does not
have an establishment or premise in the PRC or has an establishment or premise in the PRC but
its PRC-sourced income is not connected with such establishment or premise in the PRC. Such
withholding tax for non-resident enterprises are deducted at source, where the payer of the
income shall be the withholding agent, and is required to withhold the income tax from the
payment or due payment every time it is paid or due.
The Circular of the STA on Issues Relating to the Withholding of Enterprise Income Tax on
Dividends Paid by PRC Resident Enterprises to Overseas Non-PRC Resident Enterprise
Shareholders of H Shares (͏ΆุΣྤ̮ Hٰ
 ) (Guo Shui Han [2008] No. 897), which was issued by
the STA and implemented on November 6, 2008, further clarified that a PRC-resident enterprise
must withhold corporate income tax at a rate flat of 10% on the dividends of 2008 and onwards
that it distributes to overseas non-resident enterprise shareholders of H Shares. In addition, the
Response to Issues on Levying Enterprise Income Tax on Dividends Derived by Non-resident
Enterprise from Holding Stock such as B shares (͏Άุ՟੻ BᅄϗΆุ
ҭᔧ) (Guo Shui Han [2009] No. 394) which was issued by the STA and
implemented on 24 July 2009, further provides that any PRC-resident enterprise that is listed on
overseas stock exchanges must withhold enterprise income tax at a rate of 10% on dividends of
2008 and onwards that it distributes to non-resident enterprises. Such tax rates may be further
changed pursuant to the tax treaty or agreement that China has concluded with relevant
jurisdictions, where applicable. Accordingly, dividends paid to non-PRC resident enterprise
(including HKSCC Nominees) shall be subject to withholding enterprise income tax at a rate of
10%.
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 (ᅄ೼ձԣ˟ਊဍ
τર), which was signed on 21 August 2006, the PRC government may levy taxes on the
dividends paid by a PRC company to Hong Kong residents (including natural persons and legal
entities) in an amount not exceeding 10% of the total dividends payable by the PRC company. If
a Hong Kong resident directly holds 25% or more of the equity interest in a PRC company, then
such tax shall not exceed 5% of the total dividends payable by the PRC company if the Hong
Kong resident is the beneficial owner of the equity and certain other conditions are met. The
Fifth Protocol of the Arrangement between Mainland China and Hong Kong Special
Administrative Region for the Avoidance of Double Taxation and Prevention of Fiscal Evasion
APPENDIX III TAXATION AND FOREIGN EXCHANGE
– III-2 –


--- page 676 ---
with respect to Taxes on Income (ᅄ೼ձԣ˟ਊ
), which came into effect on 6 December 2019, adds criteria for the
qualification of entitlement to enjoy treaty benefits. Although there may be other provisions
under the Arrangement, the treaty benefits under the criteria shall not be granted for relevant
gains in the circumstance where relevant treaty benefits, after taking into account all relevant
facts and conditions, are reasonably deemed to be one of the main purposes for the arrangement
or transactions which will bring any direct or indirect benefits under the Arrangement, except
when the grant of benefits under such circumstance is consistent with relevant objective and
goal under the Arrangement. The application of the dividend clause of tax agreements shall be
subject to the requirements of PRC tax laws and regulations, such as the Circular of the SAT on
Relevant Issues Concerning the Implementation of Dividend Clauses in Tax Treaties (೼ਕ
 ) (Guo Shui Han [2009] No. 81).
Tax Treaties
Non-resident investors residing in jurisdictions which have entered into treaties or
arrangements for the avoidance of double taxation with the PRC might be entitled to a reduction
of the PRC enterprise income tax imposed on the dividends received from PRC companies. The
PRC currently has entered into Avoidance of Double Taxation Treaties or Arrangements with a
number of countries and regions including Hong Kong Special Administrative Region, Macau
Special Administrative Region, Australia, Canada, France, Germany, Japan, Malaysia, the
Netherlands, Singapore, the United Kingdom and the United States. Non-PRC resident
enterprises entitled to preferential tax rates in accordance with the relevant taxation treaties or
arrangements are required to apply to the PRC tax authorities for a refund of the enterprise
income tax in excess of the agreed tax rate, and the refund application is subject to approval by
the PRC tax authorities.
Taxation on Share Transfer
V alue-Added Tax and Local Surcharges
Pursuant to the Notice on the Full Implementation of Pilot Program for Transition from
Business Tax to VAT ( ) (Cai Shui [2016] No. 36)
(the “ Circular 36 ”), which was implemented on 1 May 2016 and amended on 11 July 2017, 25
December 2017 and 20 March 2019, respectively, entities and individuals engaged in sales of
services within the PRC shall be subject to V A T and “sales of services within the PRC” refers to
the situation where either the seller or the buyer of a taxable service is located within the PRC.
Circular 36 also provides that transfer of financial products, including transfer of the ownership
of marketable securities, shall be subject to V A T at 6% on the taxable income (which is the
balance of sales price upon deduction of purchase price), for a general or a foreign V A T
taxpayer. However, individuals are exempt from V A T upon transfer of financial products.
APPENDIX III TAXATION AND FOREIGN EXCHANGE
– III-3 –


--- page 677 ---
According to the provisions above, upon the sale or disposal of H shares, the holders are
exempt from V A T in the PRC if they are non-resident individuals; in case the holders are
non-resident enterprises, they may not be subject to the V A T in the PRC if the purchasers of the
H shares are individuals or entities located outside of the PRC whereas the holders may be
subject to the V A T in the PRC if the purchasers of the H shares are individuals or entities
located in the PRC.
Income Taxes
Individual investors
According to the IIT Law, gains from the transfer of equity interests in the PRC resident
enterprises are subject to individual income tax at a rate of 20%. According to the Circular of
the MOF and STA on Declaring that Individual Income Tax Continues to be Exempted over
Income of Individuals from Transfer of Shares (੻ᘱ
 ) (Cai Shui Zi [1998] No. 61) issued by the MOF and STA on 30
March 1998, since 1 January 1997, gains of individuals from the transfer of shares of listed
companies continue to be temporarily exempted from individual income tax.
However, on 31 December 2009, the MOF, the STA and CSRC jointly issued the Circular
on Related Issues on Levying Individual Income Tax over the Income Received by Individuals
from the Transfer of Listed Shares Subject to Sales Limitation (ٰ
 ) (Cai Shui [2009] No. 167), which became effective on 1
January 2010, states that individuals’ income from the transfer of listed shares obtained from the
public offering and transfer of the stock market of the listed company on the Shanghai Stock
Exchange and the Shenzhen Stock Exchange shall continue to be exempted from individual
income tax, except for the relevant shares which are subject to sales restriction (as defined in the
Supplementary Notice on Issues Concerning the Individual Income Tax on Individuals’ Income
from the Transfer of Restricted Stocks of Listed Companies (੻
 ) (Cai Shui [2010] No. 70) jointly issued by the above
three departments and came into effect on 10 November 2010). As of the Latest Practicable
Date, no aforesaid provisions have expressly provided that individual income tax shall be levied
from non-PRC resident individuals on the transfer of shares in PRC resident enterprises listed on
overseas stock exchanges.
Enterprise investors
In accordance with the EIT Law and the Implementation Rules of the Enterprise Income
Tax Law of the PRC, a non-resident enterprise is generally subject to a 10% enterprise income
tax on PRC-sourced income, including gains derived from the disposal of equity interests in a
PRC resident enterprise, if it does not have an establishment or premise in the PRC or has an
establishment or premises in the PRC but its PRC-sourced income is not connected in reality
with such establishment or premise. Such withholding tax for non-resident enterprises are
deducted at source, where the payer of the income shall be the withholding agent, and is
required to withhold the income tax from the payment or due payment every time it is paid or
APPENDIX III TAXATION AND FOREIGN EXCHANGE
– III-4 –


--- page 678 ---
due. Such tax may be reduced or exempted pursuant to relevant tax treaties or agreements on
avoidance of double taxation.
Stamp Duty
Pursuant to the Stamp Duty Law of the PRC ( ) promulgated by
the SCNPC on 10 June 2021 and came into effect on 1 July 2022 (the “ Stamp Duty Law ”), all
entities and individuals engaged in securities transactions within the PRC are subject to stamp
duty as stamp duty payers in accordance with the provisions of the Stamp Duty Law, thus the
requirements of the stamp duty imposed on the transfer of shares of PRC listed companies shall
not apply to the transfer and disposal of H Shares by non-PRC investors outside the PRC.
Estate Duty
According to PRC law, no estate duty is currently levied in the PRC.
Major Taxes on the Company in the PRC
Please refer to the section headed “Regulatory Overview” in this prospectus.
TAXATION IN HONG KONG
Tax on Dividends
Under the current practice of the Inland Revenue Department of Hong Kong, no tax is
payable in Hong Kong in respect of dividends paid by us.
Capital Gains and Profit Tax
No tax is imposed in Hong Kong in respect of capital gains from the sale of H Shares.
However, trading gains from the sale of the H Shares by persons carrying on a trade, profession
or business in Hong Kong, where such gains are derived from or arise in Hong Kong from such
trade, profession or business will be subject to Hong Kong profits tax, which is currently
imposed at the maximum rate of 16.5% on corporations and at the maximum rate of 15% on
unincorporated businesses. Certain categories of taxpayers (for example, financial institutions,
insurance companies and securities dealers) are likely to be regarded as deriving trading gains
rather than capital gains unless these taxpayers can prove that the investment securities are held
for long-term investment purposes. Trading gains from sales of H Shares effected on the Stock
Exchange will be considered to be derived from or arise in Hong Kong. Liability for Hong Kong
profits tax would thus arise in respect of trading gains from sales of H Shares effected on the
Stock Exchange realized by persons carrying on a business of trading or dealing in securities in
Hong Kong.
APPENDIX III TAXATION AND FOREIGN EXCHANGE
– III-5 –


--- page 679 ---
Stamp Duty
Hong Kong stamp duty, currently charged at the ad valorem rate of 0.1% on the higher of
the consideration for or the market value of the H Shares, will be payable by the purchaser on
every purchase and by the seller on every sale of Hong Kong securities, including H Shares (in
other words, a total of 0.2% is currently payable on a typical sale and purchase transaction
involving H Shares). In addition, a fixed duty of HK$5.00 is currently payable on any
instrument of transfer of H Shares. Where one of the parties is a resident outside Hong Kong
and does not pay the ad valorem duty due by it, the duty not paid will be assessed on the
instrument of transfer (if any) and will be payable by the transferee. If no stamp duty is paid on
or before the due date, a penalty of up to ten times the duty payable may be imposed.
Estate Duty
The Revenue (Abolition of Estate Duty) Ordinance 2005 came into effect on 11 February
2006 in Hong Kong, pursuant to which no Hong Kong estate duty is payable, and no estate duty
clearance papers are needed for an application of a grant of representation in respect of holders
of H Shares whose deaths occur on or after 11 February 2006.
FOREIGN EXCHANGE
The lawful currency of the PRC is Renminbi, which is currently subject to foreign
exchange control and cannot be freely converted into foreign currency. The SAFE, with the
authorization of the PBOC, is empowered with the functions of administering all matters relating
to foreign exchange, including the enforcement of foreign exchange control regulations.
The Regulations of the PRC on the Management of Foreign Exchange (ʕശɛ͏΍ձ਷̮
ි၍ଣૢԷ, the “ Regulations on the Management of Foreign Exchange ”), which was
promulgated by the State Council on 29 January 1996 and effective on 1 April 1996, classifies
all international payments and transfers into current items and capital items. Most of the current
items are not subject to the approval of foreign exchange administrative authorities, while
capital items are subject to the approval of foreign exchange administrative authorities.
According to the Regulations on the Management of Foreign Exchange as amended on 14
January 1997 and 5 August 2008, the PRC will not impose any restriction on international
current payments and transfers.
The Regulations for the Administration of Settlement, Sale and Payment of Foreign
Exchange ( , the “ Settlement Regulations ”), which was
promulgated by the PBOC on 20 June 1996 and effective on 1 July 1996, removes other
restrictions on convertibility of foreign exchange under current items, while imposing existing
restrictions on foreign exchange transactions under capital items.
According to the Announcement on Improving the Reform of the Renminbi Exchange Rate
Formation Mechanism (ʮѓ ) (PBOC Announcement
[2005] No. 16), which was issued by the PBOC on 21 July 2005 and effective on the same date,
APPENDIX III TAXATION AND FOREIGN EXCHANGE
– III-6 –


--- page 680 ---
the PRC began to implement a managed floating exchange rate system in which the exchange
rate would be determined based on market supply and demand and adjusted with reference to a
basket of currencies from 21 July 2005. Therefore, the Renminbi exchange rate was no longer
pegged to the U.S. dollar. The PBOC would publish the closing price of the exchange rate of the
Renminbi against trading currencies such as the U.S. dollar in the interbank foreign exchange
market after the closing of the market on each working day, as the central parity of the currency
against Renminbi transactions on the following working day.
On 5 August 2008, the State Council promulgated the revised Regulation on the
Management of Foreign Exchange, which has made substantial changes to the foreign exchange
supervision system of the PRC. First, it has adopted an approach of balancing the inflow and
outflow of foreign exchange. Foreign exchange income received overseas can be repatriated or
deposited overseas, and foreign exchange and settlement funds under the capital account are
required to be used only for purposes as approved by the competent authorities and foreign
exchange administrative authorities; second, it has improved the RMB exchange rate formation
mechanism based on market supply and demand; third, in the event that international balance of
payment suffer or may suffer a material misbalance, or the national economy encounters or may
encounter a severe crisis, the State may adopt necessary safeguard or control measures against
international balance of payment; fourth, it has enhanced the supervision and administration of
foreign exchange transactions and grant extensive authorities to the SAFE to enhance its
supervisory and administrative powers.
According to the relevant laws and regulations in the PRC, PRC enterprises (including
foreign investment enterprises) which need foreign exchange for current item transactions may,
without the approval of the foreign exchange administrative authorities, effect payment from
foreign exchange accounts opened at the designated foreign exchange banks, on the strength of
valid transaction receipt or proof. Foreign investment enterprises which need foreign exchange
for the distribution of profits to their shareholders and PRC enterprises which, in accordance
with regulations, are required to pay dividends to their shareholders in foreign exchange (such as
our Company) may, on the strength of resolutions of the board of directors or the shareholders’
meeting on the distribution of profits, effect payment from foreign exchange accounts at the
designated foreign exchange banks or effect exchange and payment at the designated foreign
exchange banks.
On 23 October 2014, the State Council promulgated the Decisions on Matters including
Canceling and Adjusting a Batch of Administrative Approval Items (՟ऊձሜ዆ɓ
 ) (Guo Fa [2014] No. 50), which decided to cancel the approval
requirement of the SAFE and its branches for the remittance and settlement of the proceeds
raised from the overseas listing of the foreign shares into RMB domestic accounts.
On 26 December 2014, the SAFE promulgated and implemented the Circular of the SAFE
on Issues Concerning the Foreign Exchange Administration of Overseas Listing (̮ි၍ଣ
 ) (Hui Fa [2014] No. 54), pursuant to which, a
domestic company shall, within 15 business days from the date of the end of its overseas listing
issuance, register the overseas listing with the Administration of Foreign Exchange at the place
APPENDIX III TAXATION AND FOREIGN EXCHANGE
– III-7 –


--- page 681 ---
of its establishment; the proceeds from an overseas listing of a domestic company may be
remitted to the PRC or deposited overseas, but the use of the proceeds shall be consistent with
the contents as specified in the document and other disclosure documents.
According to the Circular on Further Simplifying and Improving Policies for Foreign
Exchange Administration for Direct Investment (ટҳ
, the “ Circular 13 ”) (Hui Fa [2015] No. 13) promulgated by the SAFE
on 13 February 2015 and took effect on 1 June 2015, and further revised in 2019, two of the
administrative examination and approval items, being the confirmation of foreign exchange
registration under domestic direct investment and the confirmation of foreign exchange
registration under overseas direct investment have been canceled, the foreign exchange
registration under domestic direct investment and overseas direct investment shall be directly
examined and handled by banks. The SAFE and its branch offices shall indirectly regulate the
foreign exchange registration of direct investment through banks.
According to the Circular of the SAFE on the Policies for Reforming and Standardizing
Management of Foreign Exchange Settlement under the Capital Account (׵
 ) (Hui Fa [2016] No. 16), which was issued by the
SAFE and came into effect on 9 June 2016, and was partially amended on 4 December 2023, the
settlement of foreign exchange receipts under the capital account (including the foreign
exchange capital, external debts and funds recovered from overseas listing, etc.) that are subject
to discretionary settlement as already specified by relevant policies may be handled at banks
based on the domestic institutions’ actual requirements for business operation. The proportion of
discretionary settlement of domestic institutions’ foreign exchange receipts under the capital
account is temporarily determined as 100%. The SAFE may, based on the international balance
of payments, adjust the aforesaid proportion at appropriate time.
On 26 January 2017, the SAFE issued the Circular of the SAFE on Further Advancing
Foreign Exchange Administration Reform to Enhance Authenticity and Compliance Reviews (਷
 (Hui Fa [2017] No. 3)
to further expand the scope of settlement for domestic foreign exchange loans, allow settlement
for domestic foreign exchange loans with export background under goods trading; allow
repatriation of funds under domestic guaranteed foreign loans for domestic utilisation; allow
settlement for domestic foreign exchange accounts of foreign institutions operating in the Free
Trade Pilot Zones; and adopt the model of full-coverage RMB and foreign currency overseas
lending management, where a domestic institution engages in overseas lending, the sum of its
outstanding overseas lending in RMB and outstanding overseas lending in foreign currencies
shall not exceed 30% of its owner’s equity in the audited financial statements of the preceding
year.
APPENDIX III TAXATION AND FOREIGN EXCHANGE
– III-8 –


--- page 682 ---
On 23 October 2019, the SAFE issued the Circular of the SAFE Further Promoting
Cross-border Trade and Investment Facilitation (ҳ
) (Hui Fa [2019] No. 28), which was partially amended on 4 December 2023,
which stipulated that on the basis that investing foreign-funded enterprises may make domestic
equity investments with their capital funds in accordance with laws and regulations,
non-investing foreign-funded enterprises are permitted to legally make domestic equity
investments with their capital funds under the premise that the existing Special Administrative
Measures (Negative List) for the Access of Foreign Investment (݄( ࠋ
૶ఊ )) are not violated and domestic invested projects are true and compliant.
APPENDIX III TAXATION AND FOREIGN EXCHANGE
– III-9 –


--- page 683 ---
PROVISIONS
This appendix sets forth summaries of certain aspects of PRC laws and regulations which
are relevant to the operations and business of the Company. Laws and regulations relating to
taxation in the PRC are discussed separately in “Appendix III – Taxation and Foreign Exchange”
to this document. This Appendix also contains a summary of certain Hong Kong legal and
regulatory provisions, including summaries of certain material differences between the PRC
Company Law and the Companies (Winding Up and Miscellaneous Provisions) Ordinance,
certain requirements of the Listing Rules and additional provisions required by the Hong Kong
Stock Exchange for inclusion in the articles of association of PRC issuers. The principal
objective of this summary is to provide potential investors with an overview of the principal
laws and regulatory provisions applicable to the Company. This summary is not intended to
include all information that is important for potentially investors. For discussion of laws and
regulations governing the business of the Company, see “Regulatory Overview” of this
document.
PRC LA WS AND REGULATIONS
The PRC Legal System
The PRC legal system is based on the Constitution of the PRC (the “ Constitution ”) and is
made up of written laws, administrative regulations, local regulations, autonomous regulations,
separate regulations, rules and regulations of State Council departments, rules and regulations of
local governments, laws of special administrative regions and international treaties of which the
PRC government is a signatory and other regulatory documents. Court judgments do not
constitute legally binding precedents, although they are used for the purposes of judicial
reference and guidance.
Pursuant to the Constitution and the Legislation Law of the PRC (ج
) (the “ Legislation Law ”), the NPC and SCNPC are empowered to exercise the legislative
power of the State. The NPC has the power to formulate and amend the basic laws governing
criminal and civil matters, State institutions and other matters. The SCNPC formulates and
amends laws other than those required to be enacted by the NPC and to supplement and amend
parts of the laws enacted by the NPC during the adjournment of the NPC, provided that such
supplements and amendments are not in conflict with the basic principles of such laws.
The State Council is the highest organ of state administration and has the power to
formulate administrative regulations based on the Constitution and laws. The people’s congresses
of the provinces, autonomous regions and municipalities and their standing committees may
formulate local regulations based on the specific circumstances and actual needs of their
respective administrative areas, provided that such local regulations do not contravene any
provision of the Constitution, laws or administrative regulations. The people’s congresses of
cities with districts and their respective standing committees may formulate local regulations
with respect to urban and rural construction and administration, ecological civilization
APPENDIX IV SUMMARY OF PRINCIPAL LEGAL AND
REGULATORY PROVISIONS
–I V - 1–


--- page 684 ---
construction, historical and cultural protection, grassroots governance and other aspects
according to the specific circumstances and actual needs of such cities, provided that such local
regulations do not contravene any provision of the Constitution, laws, administrative regulations
and local regulations of their respective provinces or autonomous regions. If the law provides
otherwise on the formulation of local regulations by cities divided into districts, those provisions
shall prevail. Such local regulations of cities with districts will become enforceable after being
reported to and approved by the standing committees of the people’s congresses of the relevant
provinces or autonomous regions. The standing committees of the people’s congresses of the
provinces or autonomous regions examine the legality of local regulations submitted for
approval, and such approval should be granted within four months if they are not in conflict
with the Constitution, laws, administrative regulations and local regulations of such provinces or
autonomous regions. Where, during the examination for approval of local regulations of cities
divided into districts by the standing committees of the people’s congresses of the provinces or
autonomous regions, conflicts are identified with the rules and regulations of the people’s
governments of the provinces or autonomous regions concerned, a decision should be made by
the standing committees of the people’s congresses of provinces or autonomous regions to
resolve the issue. People’s congresses of national autonomous areas have the power to enact
autonomous regulations and separate regulations in light of the political, economic and cultural
characteristics of the ethnic groups in the areas concerned.
The ministries, commissions of the State Council, the PBOC, the National Audit Office,
institutions with administrative functions directly under the State Council, and other institutions
stipulated by law may formulate rules and regulations within the power of their respective
departments based on the laws and the administrative regulations, decisions and rulings of the
State Council. Matters governed by the departmental rules and regulations should be those for
the enforcement of the laws and administrative regulations, decisions and rulings of the State
Council. The people’s governments of provinces, autonomous regions and municipalities directly
under the central government and cities divided into districts and autonomous regions may
formulate rules, in accordance with laws, administrative regulations and relevant local
regulations of provinces, autonomous regions and municipalities directly under the central
government.
Pursuant to the Resolution of the SCNPC Providing an Improved Interpretation of the Law
(Ӕᙄ ) passed on 10 June 1981, issues
related to the further clarification or supplement of laws or decrees should be interpreted by the
SCNPC or provided by with decrees, issues related to the application of laws in a court trial
should be interpreted by the Supreme People’s Court, issues related to the application of laws in
a prosecution process should be interpreted by the Supreme People’s Procuratorate, and the
application of other laws and decrees in matters other than those involved in trial or prosecution
process should be interpreted by the State Council and the competent authorities. The State
Council and its ministries and commissions are also vested with the power to give
interpretations of the administrative regulations and departmental rules which they have
promulgated. At the regional level, the power to interpret regional laws and regulations is vested
APPENDIX IV SUMMARY OF PRINCIPAL LEGAL AND
REGULATORY PROVISIONS
–I V - 2–


--- page 685 ---
in the regional legislative and administrative authorities which promulgate such laws and
regulations.
The PRC Judicial System
Under the Constitution, the Law of Organization of the People’ s Courts of the PRC (2018
revision) (ج2018ࠈࡌ)) and the Law of Organization of the
People’ s Procuratorate of the PRC (2018 revision) (ج2018ࡌ
ࠈ)), the people’s courts of the PRC are classified into the Supreme People’s Court, the local
people’s courts at various levels, and other special people’s courts. The local people’s courts at
various levels are divided into three levels, namely, the primary people’s courts, the intermediate
people’s courts and the higher people’s courts. The primary people’s courts may set up a number
of people’s tribunals based on the facts of the region, population and cases. The Supreme
People’s Court is the highest judicial authority. The Supreme People’s Court shall supervise the
judicial work of the local people’s courts at all levels and special people’s courts, and people’s
courts at higher levels shall supervise the judicial work of people’s courts at lower levels. The
Chinese People’s Procuratorates are divided into the Supreme People’s Procuratorate, local
people’s procuratorates at various levels, and specialized people’s procuratorates such as the
Military Procuratorate. The Supreme People’s Procuratorate is the highest procuratorial organ.
The Supreme People’s Procuratorate directs the work of the local people’s procuratorates and
specialized people’s procuratorates at all levels, and the people’s procuratorates at higher levels
direct the work of the people’s procuratorates at lower levels.
The people’s court takes the rule of the second instance as the final rule, that is, the
judgments or rulings of the second instance of the people’s court are final. The parties may
appeal against the judgment or ruling of the first instance of a local people’s court. The people’s
procuratorate may present a protest to the people’s court at the next higher level in accordance
with the procedures stipulated by the laws. In the absence of any appeal by the parties and any
protest by the people’s procuratorate within the stipulated period, the judgments or rulings of the
people’s court are final. Judgments or rulings of the second instance of the intermediate people’s
courts, the higher people’s courts and the Supreme People’s Court are final. The first judgments
or rulings of the Supreme People’s Court are also final. However, if the Supreme People’s Court
or a people’s court at the next higher level discovers an error in the final and binding judgment
or ruling which has taken effect in any people’s court at a lower level, or the presiding judge of
a people’s court discovers an error in a final and binding judgment which has taken effect in the
court over which he presides, a retrial of the case may be initiated according to the judicial
supervision procedures.
The Civil Procedure Law of the PRC ( ) (the “ PRC Civil
Procedure Law ”) adopted on 9 April 1991 and amended four times on 28 October 2007, 31
August 2012, 27 June 2017, 24 December 2021 and 1 September 2023 prescribes the conditions
for instituting a civil action, the jurisdiction of the people’s courts, the procedures for
conducting a civil action, and the procedures for enforcement of a civil judgment or ruling. Each
party to a civil action conducted within the PRC must comply with the relevant provisions of the
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PRC Civil Procedure Law. A civil case is generally heard by the court located in the defendant’s
place of domicile. The court of jurisdiction in respect of a civil action may also be chosen by
explicit agreement among the parties to a contract, provided that the people’s court having
jurisdiction should be located at places directly connected with the disputes, such as the
plaintiff’s or the defendant’s place of domicile, the places where the contract is executed or
signed or the place where the object of the action is located. Meanwhile, such selection cannot
violate the stipulations of hierarchical jurisdiction and exclusive jurisdiction in any case.
A foreign individual, a person without nationality, a foreign enterprise and organization is
given the same litigation rights and obligations as a citizen, a legal person and other
organization of the PRC when initiating actions or defending against litigation at the people’s
court. Should a foreign court limit the litigation rights of citizens, a legal person, and other
organizations of the PRC, the PRC court may apply the same limitations to the civil litigation
rights to citizens, enterprises and organizations of such foreign country. A foreign individual, a
person without nationality, a foreign enterprise and organization must engage a PRC lawyer in
case he or it needs to engage a lawyer for the purpose of initiating actions or defending against
litigations at the people’s court. In accordance with the international treaties to which the PRC is
a signatory or participant or according to the principle of reciprocity, a people’s court and a
foreign court may request each other to serve documents, conduct investigation and collect
evidence and conduct other actions on its behalf. A people’s court shall not accommodate any
request made by a foreign court which will result in the violation of sovereignty, security or
public interests of the PRC.
All parties to a civil action shall perform the legally effective judgments and rulings. If any
party to a civil action refuses to abide by a judgement or ruling made by a people’s court or an
award made by an arbitration tribunal in the PRC, the other party may apply to the people’s
court for the enforcement of the same within two years subject to application for postponed
enforcement or revocation. If a party fails to satisfy within the stipulated period a judgement
which the court has granted an enforcement approval, the court may, upon the application of the
other party, mandatorily enforce the judgement on the party.
Where a party applies for enforcement of a legally effective judgement or ruling made by a
people’s court, and the opposite party or his property is not within the territory of the PRC, the
applicant may directly apply to a foreign court with jurisdiction for recognition and enforcement
of the judgement or ruling, or the people’s court may, in accordance with the provisions of
international treaties to which the PRC is a signatory or in which the PRC is a participant or the
principle of reciprocity, request recognition and enforcement by a foreign court. Similarly, where
an effective judgment or ruling made by a foreign court needs to be recognized and enforced by
the people’s court of the PRC, unless the people’s court considers that the recognition or
enforcement of the judgment or ruling would violate the basic legal principles of the PRC,
national sovereignty, national security or social and public interest, the parties involved may
directly apply to an intermediate people’s court of the PRC with jurisdiction for recognition and
enforcement, or the foreign court may, in accordance with the provisions of international treaties
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entered into or acceded to by that country and the PRC or according to the principle of
reciprocity, request the people’s court to recognize and enforce it.
The Company Law of the PRC, the Trial Administrative Measures of Overseas Securities
Offering and Listing by Domestic Companies and the Guidelines for the Articles of
Association of Listed Companies
The PRC Company Law was adopted by the Standing Committee of the Eighth NPC at its
Fifth Session on 29 December 1993 and came into effect on 1 July 1994, and was successively
amended on 25 December 1999, 28 August 2004, 27 October 2005, 28 December 2013, 26
October 2018 and 29 December 2023. The latest revised PRC Company Law was implemented
on 26 October 2018.
On 17 February 2023, CSRC promulgated the Trial Administrative Measures of Overseas
Securities Offering and Listing by Domestic Companies (the “ Overseas Listing Trial
Measures ”), which came into effect on 31 March 2023 and is applicable to direct and indirect
overseas share subscription and listing of domestic companies, which also stipulates the filing
administrative measures and regulatory requirements for the overseas securities offering and
listing by domestic companies.
On 15 December 2023, the CSRC promulgated the latest amended Guidelines for the
Articles of Association of Listed Companies (the “ Guidelines for the Articles of Association ”),
pursuant to the Overseas Listing Trial Measures and its supporting guidelines, Guidelines for
Application of Regulatory Rules – Overseas Listing Category No. 1, domestic enterprises that
are directly listed overseas shall formulate its articles of association with reference to the
Guidelines for the Articles of Association and other relevant provisions of the CSRC on
corporate governance to regulate corporate governance. Set out below is a summary of the main
provisions of the PRC Company Law, the Overseas Listing Trial Measures and the Guidelines
for the Articles of Association.
General Provisions
A “joint stock limited company” (hereinafter referred to as the “ company ”) refers to a
corporate legal person incorporated in China under the PRC Company Law with independent
legal person properties and entitlements to such legal person properties. The liability of the
company for its own debts is limited to all the properties it owns and the liability of its
shareholders for the company is limited to the extent of the shares they subscribe for.
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Companies engaged in business activities shall obey the relevant laws and administrative
regulations, observe social and business ethics, and act in good faith, accept the supervision of
the government and the public, and shoulder social responsibility. A company may invest in
other limited liability companies and joint stock limited companies. The liabilities of the
company to such invested companies are limited to the amount invested. Unless otherwise
provided by laws, a company cannot be the capital contributor who has the joint and several
liabilities associated with the debts of the invested enterprises.
Incorporation
A company may be incorporated by promotion or raising. A company shall be incorporated
by two to 200 promoters, provided that at least more than half of the promoters must reside in
the PRC. Companies established by promotion are companies of which the registered capital is
the total share capital subscribed for by all the promoters registered with the company’s
registration authorities. No shares shall be raised from others before the shares subscribed for by
the promoters are fully paid up. For companies established by subscription, the registered capital
is the total paid-up share capital as registered with the company’s registration authorities. If
laws, administrative regulations and decisions of the State Council have separate provisions on
paid-in registered capital and the minimum registered capital, the company should follow such
provisions.
For companies incorporated by way of promotion, the promoters shall subscribe in writing
for the shares required to be subscribed for by them and pay up their capital contributions under
the articles of association. Procedures relating to the transfer of titles to non-monetary assets
shall be duly completed if such assets are to be contributed as capital. Promoters who fail to pay
up their capital contributions in accordance with the foregoing provisions shall assume default
liabilities in accordance with the covenants set out in the promoters’ agreements. After the
promoters have confirmed the capital contribution under the articles of association, a Board of
Directors and a Supervisory Committee shall be elected and the Board of Directors shall apply
for registration of incorporation by filing the articles of association with the company
registration authority, and other documents as required by laws or administrative regulations.
Where companies are incorporated by raising, not less than 35% of their total number of
shares must be subscribed for by the promoters, unless otherwise provided for by laws or
administrative regulations. A prospectus shall be published and a subscription letter shall be
prepared when the promoters offer shares to the public. The subscription letter shall be filled in
by the subscriber with the number of shares to be subscribed, amount, address, and signed and
sealed. The subscribers shall pay up monies for the shares they subscribe for. Where a promoter
is offering shares to the public, such offer shall be underwritten by security companies
established under PRC laws, and an underwriting agreement shall be concluded thereon. A
promoter offering shares to the public shall also enter into agreements with banks in relation to
the receipt of subscription monies. The receiving banks shall receive and keep in custody the
subscription monies, issue receipts to subscribers who have paid the subscription monies and
furnish evidence of receipt of those subscription monies to relevant authorities. After the
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subscription monies for the share issue have been paid in full, a capital verification institution
established under PRC law must be engaged to conduct a capital verification and furnish a
certificate thereof. The promoters shall convene an inauguration meeting within 30 days after the
issued shares have been completely paid up. The inauguration meeting shall be formed by the
promoters and subscribers. Where the shares issued remain undersubscribed by the cut-off date
stipulated in the document, or where the promoter fails to convene an inauguration meeting
within 30 days after the subscription monies for the shares issued being fully paid up, the
subscribers may demand that the promoters refund the subscription monies so paid together with
the interest at bank rates of a deposit for the same period. Within 30 days of the conclusion of
the inauguration meeting, the Board of Directors shall apply to the company registration
authority for registration of the establishment of the company. A company is formally
established and has the status of a legal person after approval of registration has been given by
the company registration authority and a business license has been issued.
The promoters of a company shall: (1) individually and jointly be liable for the payment of
all liabilities and expenses incurred in the incorporation process if the company cannot be
incorporated; (2) individually and jointly be liable for the repayment of subscription monies to
the subscribers together with interest at bank rates of a deposit for the same period if the
company cannot be incorporated; and (3) be liable for compensation of damages suffered by the
company as a result of the default of the promoters in the course of incorporation of the
company.
Share Capital
The promoters may make a capital contribution in currencies, or non-monetary assets such
as in kind or intellectual property rights or land use rights which can be appraised with monetary
value and transferred lawfully, except for assets that are prohibited from being contributed as
capital by the laws or administrative regulations. Non-monetary property used for capital
contributions shall be evaluated and verified, and shall not be overvalued or undervalued. Where
laws or administrative regulations provide otherwise, those provisions shall prevail.
The issuance of shares shall be conducted in a fair and equitable manner, and each share of
the same class shall enjoy the same rights. For shares issued at the same time and within the
same class, the conditions and price per share must be the same; for the shares subscribed by an
entity or an individual, the price per share paid must be the same. The share offering price may
be equal to or in excess of the par value, but shall not be less than the par value.
Pursuant to the Overseas Listing Trial Measures, a domestic company that offers and lists
securities on overseas markets may raise funds and pay dividends in a foreign currency or the
RMB. Under specific circumstances such as equity incentives, issuance of securities to purchase
assets, etc., domestic enterprises are allowed to issue securities to specific domestic objects
when they directly issue and list overseas.
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According to the provisions of the PRC Company Law, a company that issues registered
shares shall establish a register of shareholders to record the following items: (1) the names or
titles and domiciles of the shareholders; (2) the number of shares held by each shareholder; (3)
the serial number of the shares held by each shareholder; and (4) the date on which each
shareholder acquired the shares.
Increase in Share Capital
Pursuant to the PRC Company Law, an increase in the capital of a company by means of an
issue of new shares must be approved by shareholders in a general meeting. In addition, the
Securities Law of the PRC (the “ PRC Securities Law ”) also stipulates the following conditions
for the company’s public offering of new shares: (1) have a sound organizational structure with
satisfactory operating; (2) have the capability of sustainable operation; (3) have been issued with
an unqualified opinion audit report by the auditor for the company’s financial accounting
documents in the latest three years; (4) the issuer and its controlling shareholder(s) and actual
controlling party do not have criminal record during the past three years for corruption, bribery,
encroachment of assets, misappropriation of assets or disruption of socialist market economy
order; and (5) other conditions required by the securities administration department of the State
Council as approved by the State Council. After the new shares issued by the company have
been fully paid up, the change must be registered with the company registration authority and a
public announcement shall be made.
Reduction of Share Capital
The Company shall reduce the registered capital in accordance with the following
procedures as stipulated in the PRC Company Law: (1) the company shall prepare a balance
sheet and an inventory of properties; (2) make a resolution at a shareholders’ general meeting to
reduce the registered capital; (3) the company shall notify its creditors within 10 days after
making the resolution to reduce the registered capital and publish the relevant announcement in
newspapers within 30 days; (4) a creditor may, within 30 days after receipt of the notification,
or within 45 days after the date of announcement if he/she has not received the notification,
have the right to request the company to repay its debts or provide relevant guarantees; and (5)
the company must apply to the companies registration authority for a change in registration.
Repurchase of Shares
Under the provisions of the PRC Company Law, a company shall not repurchase its own
shares except in the following circumstances: (1) reduction of the registered capital of the
company; (2) merger with another company that holds its shares; (3) use of its shares for
carrying out an employee stock ownership plan or equity incentive plan; (4) request from
shareholders who object to a resolution of a shareholders’ general meeting on merger or division
of the company to acquire their shares by the company; (5) use of shares for conversion of
convertible corporate bonds issued by the listed company; and (6) it is necessary for a listed
company to maintain its company value and protect its shareholders’ equity. A resolution of a
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shareholders’ general meeting is required for the repurchase of shares by a company under either
of the circumstances stipulated in item (1) or item (2) above; for a company’s repurchase of
shares under any of the circumstances stipulated in item (3), item (5) or item (6) above, a
resolution of a meeting of the Board of Directors shall be made by more than two-thirds of
directors attending the meeting according to the provisions of the Company’s Articles of
Association or as authorized by the shareholders’ general meeting.
The shares acquired by the company according to the above provisions under the
circumstance stipulated in item (1) hereof a company shall be deregistered within 10 days from
the date of acquisition of shares; the shares shall be transferred or deregistered within six
months if the repurchase of shares is made under the circumstances stipulated in either item (2)
or item (4); and the shares in the company held in total by the company after the repurchase of
shares under any of the circumstances stipulated in item (3), item (5) or item (6) shall not
exceed 10% of the Company’s total issued shares, and shall be transferred or deregistered within
three years.
A listed company acquires its own shares shall perform their obligation of information
disclosure according to the provisions of the PRC Securities Law. A listed company acquires its
own shares under any of the circumstances stipulated in item (3), item (5) and item (6) hereof,
shall be carried out trading in public and centralized manner.
A company shall not accept its own shares as the subject matter of a mortgage.
Transfer of Shares
Shares held by shareholders may be transferred legally. Under the PRC Company Law, a
shareholder should effect a transfer of his shares on the Stock Exchange established in
accordance with laws or by any other means as required by the State Council. The transfer of
registered shares by a shareholder must be conducted by means of an endorsement or by other
means stipulated by laws or by administrative regulations. Following the transfer of registered
shares, the company shall enter the names and domiciles of the transferee into its share register.
Change of the register of members described in the preceding paragraph shall not be registered
within 20 days before the convening of a shareholders’ general meeting or five days prior to the
base date on which the company decides to distribute dividends. However, where there are
separate provisions by law on the alternation of registration in the register of members of listed
companies, those provisions shall prevail. The transfer of bearer share certificates shall become
effective upon the delivery of the certificates to the transferee by the shareholder.
Pursuant to the PRC Company Law, shares held by promoters may not be transferred within
one year of the establishment of the company. Shares of the company issued prior to the public
issue of shares may not be transferred within one year of the date of the company’s listing on
the Stock Exchange. Directors, supervisors and the senior management of a company shall
declare to the company their shareholdings in it and any changes in such shareholdings. During
their terms of office, they may transfer no more than 25% of the total number of shares they
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hold in the company every year. They shall not transfer the shares they hold within one year of
the date of the company’s listing on the Stock Exchange, nor within six months after they leave
their positions in the company. The Articles of Association may set out other restrictive
provisions in respect of the transfer of shares in the company held by its directors, supervisors
and the senior management.
Pursuant to the Overseas Listing Trial Measures, for a domestic company directly offering
and listing overseas, the shareholders of its domestic unlisted shares applying to convert its
domestic unlisted shares into overseas listed shares and listed and traded on an overseas trading
venue shall conform to relevant regulations promulgated by the CSRC, and appoint the domestic
company to file with the CSRC.
Shareholders
Pursuant to the PRC Company Law and the Guidelines for Articles of Association, the
rights of shareholders include the rights: (1) to be legally entitled to assets income, participate in
significant decision-making and select management personnel; (2) to petition the people’s court
to revoke any resolution of a shareholders’ meeting, a shareholders’ general meeting or a
meeting of the board of directors that has been convened or whose voting has been conducted in
violation of the laws, administrative regulations or the articles of association of the company, or
any resolution the contents of which is in violation of the laws, administrative regulations or the
articles of association of the company, provided that such petition shall be submitted to the
people’s court within 60 days of the passing of such resolution; (3) to transfer his/her shares
legally; (4) to attend or appoint a proxy to attend shareholders’ general meetings and exercise
the voting rights; (5) to inspect the articles of association of the company, share register,
counterfoil of company debentures, the minutes of shareholders’ general meetings, board
resolutions, resolutions of the supervisory committee and the financial and accounting reports,
and to make suggestions or inquiries in respect of the company’s operations; (6) to receive
dividends in respect of the number of shares held; (7) to participate in the distribution of
residual properties of the company in proportion to their shareholdings upon the liquidation of
the company; and (8) any other shareholders’ rights provided for in laws, administrative
regulations, other normative documents and the articles of association of the company.
The obligations of shareholders include the obligation to abide by the articles of association
of the company, to pay the subscription monies in respect of the shares subscribed for, to be
liable for the company’s responsibilities in respect of the shares taken up by them and any other
shareholder obligation specified in the articles of association of the company.
Pursuant to the Overseas Listing Trial Measures, a domestic company offering and listing
overseas shall file with the CSRC as per requirement of this Measures, submit relevant materials
that contain a filing report and a legal opinion, and provide truthful, accurate and complete
information on the shareholders, etc..
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Shareholders’ General Meetings
The shareholders’ general meeting is the organ of authority of the company, which
exercises its powers in accordance with the PRC Company Law. The shareholders’ general
meeting may exercise its powers: (1) to decide on the company’s operational policies and
investment plans; (2) to elect or replace the directors and supervisors who are not
representatives of the employees and to decide on the matters relating to the remuneration of
directors and supervisors; (3) to consider and approve the reports of the board of directors; (4)
to consider and approve the reports of the supervisory committee or the reports of the
supervisors; (5) to consider and approve the company’s annual financial budget proposals and
final account proposals; (6) to consider and approve the company’s profit distribution and loss
recovery proposals; (7) to decide on any increase or reduction of the company’s registered
capital; (8) to decide on the issue of corporate bonds; (9) to decide on merger, division,
dissolution and liquidation of the company or change of its corporate form; (10) to amend the
articles of association of the company; and (11) to exercise any other authority stipulated in the
articles of association of the company.
Pursuant to the PRC Company Law and the Guidelines for Articles of Association, a
shareholders’ general meeting is required to be held once a year within six months after the end
of the previous accounting year. An extraordinary general meeting is required to be held within
two months upon the occurrence of any of the following: (1) the number of directors is less than
the number required by the law or less than two-thirds of the number specified in the articles of
association of the company; (2) the total outstanding losses of the company amounted to
one-third of the company’s total paid-in share capital; (3) shareholders individually or in
aggregate holding 10% or more of the company’s shares request to convene an extraordinary
general meeting; (4) the board of directors deems necessary; (5) the supervisory committee so
proposes; or (6) any other circumstances as provided for in the articles of associations of the
company.
A shareholders’ general meeting is convened by the board of directors and presided over by
the chairman of the board of directors. In the event that the chairman is incapable of performing
or is not performing his or her duties, the meeting shall be presided over by the vice chairman.
If the vice chairman is incapable of performing or is not performing his or her duties, a director
jointly recommended by more than half of directors shall preside over the meeting. If the board
of directors is unable to or fails to perform its duty of convening the shareholders’ general
meeting, the Supervisory Committee shall convene and preside over such meeting in a timely
manner; if the Supervisory Committee fails to convene and preside over such meeting,
shareholders who individually or jointly hold more than 10% of the company’s shares for more
than 90 consecutive days may independently convene and preside over such meeting.
In accordance with the PRC Company Law, a notice stating the time and venue of the
meeting and the matters to be considered at the meeting shall be given to all shareholders 20
days before the meeting if the shareholders’ general meeting is convened. Notice of the
extraordinary general meeting shall be given to all shareholders 15 days before the meeting. For
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the issuance of bearer share certificates, the time and venue of and matters to be considered at
the meeting shall be announced 30 days before the meeting. Shareholders who individually or
jointly hold more than three percent of the shares of the company may submit an interim
proposal in writing to the board of directors ten days before the shareholders’ general meeting is
held. The board of directors shall notify other shareholders within two days upon receipt of the
proposal, and submit the interim proposal to the general meeting for deliberation. The contents
of the interim proposal shall fall within the scope of powers of the shareholders’ general
meeting, and the proposal shall provide clear agenda and specific matters on which resolutions
are to be made. The shareholders’ general meeting shall not make any resolution in respect of
any matter not set out in the above-mentioned two types of notices. Holders of bearer share
certificates who attend the shareholders’ general meeting shall deposit their share certificates
with the company five days before the meeting and till the conclusion of the meeting.
According to the PRC Company Law, shareholders present at shareholders’ general meeting
shall have one vote for each share they hold, save that the Company’s shares held by the
company are not entitled to any voting rights.
An accumulative voting system may be adopted for the election of directors and
supervisors at the shareholders’ general meeting pursuant to the provisions of the articles of
association of the company or a resolution of the shareholders’ general meeting. Under the
accumulative voting system, when the shareholders’ general meeting elects directors or
supervisors, each share has the same voting rights as the number of directors or supervisors to
be elected, and the voting rights owned by shareholders can be used collectively.
Under the PRC Company Law, the passing of any resolution at the general meeting requires
affirmative votes of shareholders representing more than half of the voting rights held by the
shareholders who attend the general meeting except in cases of proposed amendments to a
Articles of Association, increase or decrease of registered capital, merger, division or
dissolution, or change of corporation form, which require affirmative votes of shareholders
representing more than two-thirds of the voting rights held by the shareholders who attend the
general meeting. Where the PRC Company Law and the Articles of Association provide that the
transfer or acquisition of significant assets or the provision of external guarantees by the
Company and the other matters must be approved by way of resolution of the general meeting,
the Board of Directors shall convene a shareholders’ general meeting promptly to vote on such
matters by shareholders’ general meeting. Shareholders may entrust a proxy to attend
shareholders’ general meetings on his or her behalf by a power of attorney which sets forth the
scope of exercising the voting rights.
Minutes shall be prepared in respect of matters considered at the shareholders’ general
meeting and the chairperson and directors attending the meeting shall endorse such minutes by
signature. The minutes shall be kept together with the shareholders’ attendance register and the
proxy forms.
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Board of Directors
A company shall have a board, which shall consist of 5 to 19 members. Members of the
Board of Directors may include staff representatives, who shall be democratically elected by the
Company’s staff at a staff representative assembly, general staff meeting or otherwise. The term
of office of the directors shall be provided for by the Articles of Association, but each term of
office shall not exceed three years. A director may seek reelection upon expiry of the said term.
A director shall continue to perform his/her duties as a director in accordance with the laws,
administrative regulations and the Articles of Association until a duly re-elected director takes
office, if re-election is not conducted in a timely manner upon the expiry of his/her term of
office or if the resignation of directors results in the number of directors being less than the
quorum.
Under the PRC Company Law, the Board of Directors may exercise the following powers:
(1) to convene shareholders’ general meetings and report on its work to the shareholders’
general meetings;
(2) to implement the resolutions passed by the shareholders at the shareholders’ general
meetings;
(3) to decide on the Company’s operational plans and investment proposals;
(4) to formulate proposal for the Company’s annual financial budgets and final accounts;
(5) to formulate the Company’s proposals for profit distribution and for recovery of
losses;
(6) to formulate proposals for the increase or reduction of the Company’s registered
capital and the issue of corporate bonds;
(7) to formulate proposals for the merger, division, dissolution of the Company or change
in the form of the Company;
(8) to decide on the setup of the Company’s internal management organs;
(9) to decide on appointment or dismissal the manager of the Company and his/her
remuneration matters, and as nominated by the manager, to decide on appointment or
dismissal the Company’s deputy general manager and financial officer and his/her
remuneration matters;
(10) to formulate the Company’s basic management system; and
(11) other authority stipulated in the Articles of Association.
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Meetings of the Board of Directors shall be convened at least twice a year. Notice of
meeting shall be given to all Directors and Supervisors 10 days before the meeting. Interim
board meetings may be proposed to be convened by shareholders representing more than
one-tenth of the voting rights, more than one-third of the Directors or the Supervisory
Committee. The chairman shall convene the meeting within 10 days of receiving such proposal,
and preside over the board meeting. The Board of Directors may otherwise determine the method
of giving notice and notice period for convening an interim meeting of the board of directors.
Meeting of the Board of Directors shall be held only if more than one half of the Directors are
present. Resolutions of the Board of Directors shall be passed by more than one half of all
Directors. Resolutions of the Board shall be passed on a one person one vote basis. The
Directors shall attend a board meeting in person. If a director is unable to attend for any reason,
he/she may appoint another director by a written power of attorney specifying the scope of the
authorization to attend the meeting on his/her behalf. The Board of Directors shall make minutes
of the meeting’s decisions on the matters discussed at the meeting, and the directors attending
the meeting shall sign the minutes.
If a resolution of the Board of Directors violates any laws, administrative regulations or the
Articles of Association or resolutions of the general meeting, and as a result of which the
Company sustains serious losses, the directors participating in the resolution are liable to
compensate the Company. However, if it can be proved that a director expressly objected to the
resolution when the resolution was voted on, and that such objection was recorded in the
minutes of the meeting, such director shall be relieved from that liability.
Under the PRC Company Law, the following person may not serve as a Director of the
Company: (1) devoid of or with restricted civil conduct ability; (2) within five years after
serving sentence for embezzlement, bribery, infringement or misappropriation of property, or for
jeopardizing socialist market economic order, or within five years after serving sentence and
being deprived of political rights for crime; (3) within three years after insolvency and
liquidation of such Company or enterprise where the person acted as a directors, factory
manager or business manager and has been held accountable for the insolvency; (4) within three
years after company or enterprise the person acted as legal representative is revoked business
license and ordered to shut down for violating law on which the person is held accountable; and
(5) liable to large amount of unliquidated mature debts.
Where a company elects or appoints a director to which any of the above circumstances
applies, such election, appointment or designation shall be invalid. A director to which any of
the above circumstances applies during his/her term of office shall be released of his/her duties
by the Company.
Under the PRC Company Law, the Board shall appoint a chairman and may appoint a vice
chairman. The chairman and the vice chairman shall be elected with approval of more than half
of all the directors. The chairman shall convene and preside over board meetings and review the
implementation of board resolutions. The vice chairman shall assist the chairman to perform
his/her duties. Where the chairman is incapable of performing or is not performing his/her
APPENDIX IV SUMMARY OF PRINCIPAL LEGAL AND
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--- page 697 ---
duties, the duties shall be performed by the vice chairman. Where the vice chairman is incapable
of performing or is not performing his/her duties, a director nominated by more than half of the
directors shall perform his/her duties.
Supervisory Committee
The company shall have a Supervisory Committee composed of not less than three
members. The Supervisory Committee shall consist of representatives of the shareholders and an
appropriate proportion of representatives of the Company’s staff, of which the proportion of
representatives of the company’s staff shall not be less than one-third, and the actual proportion
shall be determined in the Articles of Association. Representatives of the Company’s staff at the
Supervisory Committee shall be democratically elected by the Company’s staff at the staff
representative assembly, general staff meeting or otherwise. The Supervisory Committee shall
appoint a chairman and may appoint a vice chairman. The chairman and the vice chairman of the
Supervisory Committee shall be elected by more than half of all the supervisors. Directors and
senior management shall not act concurrently as supervisors.
The chairman of the Supervisory Committee shall convene and preside over supervisory
committee meetings. Where the chairman of the Supervisory Committee is incapable of
performing or is not performing his/her duties, the vice chairman of the Supervisory Committee
shall convene and preside over supervisory committee meetings. Where the vice chairman of the
Supervisory Committee is incapable of performing or is not performing his/her duties, a
supervisor elected by more than half of the supervisors shall convene and preside over
supervisory committee meetings.
The supervisors serve three-year terms. A supervisor may serve consecutive terms if
re-elected upon the expiration of his/her term. A supervisor shall continue to perform his/her
duties as a supervisor in accordance with the laws, administrative regulations and the Articles of
Association until a duly re-elected supervisor takes office, if re-election is not conducted in a
timely manner upon the expiry of his/her term of office or if the resignation of supervisors
results in the number of supervisors being less than the quorum.
The board of supervisors may exercise its powers:
(1) to review the company’s financial position;
(2) to supervise the directors and senior management in their performance of their duties
and to propose the removal of directors and senior management who have violated
laws, regulations, the Articles of Association or resolutions of the shareholders’
general meetings;
(3) when the acts of a director or senior management are detrimental to the company’s
interests, to require the director and senior management to correct these relevant acts;
APPENDIX IV SUMMARY OF PRINCIPAL LEGAL AND
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– IV-15 –


--- page 698 ---
(4) to propose the convening of extraordinary shareholders’ general meetings and to
convene and preside over shareholders’ general meetings when the board fails to
perform the duty of convening and presiding over shareholders’ general meetings
under the PRC Company Law;
(5) to submit proposals to the shareholders’ general meetings;
(6) to bring actions against directors and senior management pursuant to the relevant
provisions of the PRC Company Law; and
(7) to exercise any other authority stipulated in the Articles of Association.
Supervisors may be present at board meetings and make inquiries or proposals in respect of
the resolutions of the board of directors. The board of supervisors may investigate any
irregularities identified in the operation of the company and, when necessary, may engage an
accounting firm to assist its work at the cost of the company.
Manager and Senior Management
Pursuant to the relevant provisions of the PRC Company Law, a company shall have a
manager who shall be appointed or removed by the board of directors. The manager, who is
responsible to the board of directors, may exercise his/her functions and powers:
(1) to preside over the production and operation and administration of the company and
arrange for the implementation of the resolutions of the board of directors;
(2) to arrange for the implementation of the company’s annual operation plans and
investment proposals;
(3) to formulate proposals for the establishment of the company’s internal management
organs;
(4) to formulate the fundamental management system of the company;
(5) to formulate the company’s specific rules and regulations;
(6) to recommend the appointment or dismissal of any deputy manager and any financial
officer of the company;
(7) to appoint or dismiss management personnel (other than those required to be
appointed or dismissed by the board of directors); and
(8) to exercise any other authority granted by the board of directors.
APPENDIX IV SUMMARY OF PRINCIPAL LEGAL AND
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– IV-16 –


--- page 699 ---
Other provisions in the Articles of Association on the manager’s functions and powers shall
also be complied with. The manager shall be present at meetings of the board of directors.
According to the relevant provisions of the PRC Company Law, senior management refers
to the manager, deputy manager, financial officer, secretary to the board of directors of a listed
company and other personnel as stipulated in the Articles of Association.
Duties of Directors, Supervisors, General Managers and Other Senior Management
Directors, supervisors and senior management are required under the PRC Company Law to
comply with the relevant laws, administrative regulations and the articles of association, and
carry out their duties of loyalty and diligence. Directors, supervisors and senior management are
prohibited from abusing their authority in accepting bribes or other unlawful income and from
misappropriating the company’s property.
In the meantime, directors and senior management are prohibited from:
(1) misappropriating company funds;
(2) depositing company funds into accounts under their own names or the names of other
individuals;
(3) loaning company funds to others or providing guarantees in favor of others supported
by company’s property in violation of the articles of association or without approval
of the general meeting or the board of directors;
(4) entering into contracts or transactions with the company in violation of the articles of
association or without approval of the general meeting;
(5) using their position to procure business opportunities for themselves or others that
should have otherwise been available to the company or operating businesses similar
to that of the company for their own benefits or on behalf of others without approval
of the general meeting;
(6) accept commissions from transactions between others and the company for their own
benefits;
(7) unauthorized divulgence of confidential information of the company; and
(8) other acts in violation of their duty of loyalty to the company.
Income generated by directors or senior management in violation of aforementioned shall
be returned to the company.
APPENDIX IV SUMMARY OF PRINCIPAL LEGAL AND
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– IV-17 –


--- page 700 ---
A director, supervisor or senior management who contravenes law, administrative regulation
or articles of association in the performance of his/her duties resulting in any loss to the
company shall be liable to the company for compensation.
Where a director, supervisor or senior management is required to attend a shareholders’
general meeting, such director, supervisor or senior management shall attend the meeting and
answer the inquiries from shareholders. Directors and senior management shall furnish with
relevant facts and information to the board of supervisors without obstructing the exercise of
functions and powers by the board of supervisors or supervisors.
Where the directors and senior management violate laws, administrative regulations or the
articles of association in performance of duties to the company, thereby causing damages to the
company, the shareholders individually or jointly holding more than 1% of the shares in the
company for more than 180 consecutive days may request in writing the board of supervisors to
initiate proceedings in the people’s court. Where the supervisors violate the laws, administrative
regulations or the articles of association in performance of duties resulting in any loss to the
company, the aforementioned shareholder(s) may request in writing that the board of directors
institute litigation at a people’s court. Upon receipt of shareholders’ written request stipulated in
the preceding paragraph, if the board of supervisors or the board of directors refuses to file a
lawsuit or does not file a lawsuit within 30 days from receipt of such request, or in the event of
emergency where the interest of the company will suffer irreparable damages if lawsuit is not
filed immediately, the shareholders stipulated in the preceding paragraph shall have the right to
file a lawsuit directly with the people’s court in their own name for the interest of the company.
For other parties who infringe the lawful interests of the company resulting in loss to the
company, the aforementioned shareholder(s) may institute litigation at a people’s court in
accordance with the procedure described above. Where any director or senior management
violates the provisions of laws, administrative regulations or the Articles of Association,
damaging interests of shareholders, the shareholders may file a lawsuit with the people’s court.
The Overseas Listing Trial Measures stipulates that the filling materials for overseas listing
of domestic enterprises shall be true, accurate and complete, and shall not contain false records,
misleading statements or material omissions. Domestic enterprises and their controlling
shareholders, de facto controllers, directors, supervisors and senior management shall fulfill their
obligations of information disclosure in accordance with the law, be honest, trustworthy, diligent
and responsible and ensure that the filling materials are true, accurate and complete.
Finance and accounting
According to the PRC Company Law, a company shall establish its own financial and
accounting systems according to the laws, administrative regulations and the regulations of the
financial departments of the State Council. A company shall prepare its financial reports at the
end of each accounting year which shall be audited by accounting firm according to law. The
financial and accounting reports shall be prepared in accordance with the laws, administrative
regulations and the regulations of the financial departments of the State Council. The company’s
APPENDIX IV SUMMARY OF PRINCIPAL LEGAL AND
REGULATORY PROVISIONS
– IV-18 –


--- page 701 ---
financial and accounting reports shall be made available for shareholders’ inspection at the
company within 20 days before the convening of an annual general meeting. A joint stock
limited company that makes public stock offerings shall announce its financial and accounting
reports.
When distributing each year’s after-tax profits, the company shall set aside 10% of its
after-tax profits for the company’s statutory common reserve fund. However, when the
cumulative amount of the reserve fund has reached more than 50% of the PRC company’s
registered capital, it may no longer be allocated. When the company’s statutory common reserve
fund is not sufficient to make up for the company’s losses for the previous years, the current
year’s profits shall first be used to make up the losses before any allocation is set aside for the
statutory common reserve fund. After the company has made allocations to the statutory common
reserve fund from its after-tax profits, it may, upon passing a resolution at a shareholders’
general meeting, make further allocations from its after-tax profits to the discretionary common
reserve fund. After the company has made up its losses and made allocations to its discretionary
common reserve fund, the remaining after-tax profits shall be distributed to shareholders in
proportion to the number of shares held by the shareholders, except for those which are not
distributed in a proportionate manner as provided by the articles of association.
Profits distributed to shareholders by a resolution of a shareholder’s general meeting or the
board of directors before losses have been made up and allocations have been made to the
statutory common reserve fund in violation of the requirements described above must be
returned to the company. The company shall not be entitled to any distribution of profits in
respect of its own shares held by it.
Proceeds from shares issued by a company at a price above their nominal value and other
revenues required by the financial departments of the State Council to be stated as capital
reserve shall be accounted for as the capital reserve fund of the company. The common reserve
fund of a company shall be applied to make up the company’s losses, expand its production and
operations or convert it into an increase in its capital. The capital reserve fund, however, shall
not be used to make up the company’s losses. Upon the transfer of the statutory common reserve
fund into capital, the balance of the fund shall not be less than 25% of the registered capital of
the company before such transfer.
The company shall have no accounting books other than the statutory books. The
company’s assets shall not be deposited in any account opened under the name of an individual.
Appointment and Dismissal of Auditors
Pursuant to the PRC Company Law, the appointment or dismissal of an accounting firm
responsible for the auditing of the company shall be determined by shareholders at a
shareholders’ general meeting or the board of directors in accordance with the articles of
association. The accounting firm should be allowed to make representations when the
shareholders’ general meeting or the board of directors conducts a vote on the dismissal of the
APPENDIX IV SUMMARY OF PRINCIPAL LEGAL AND
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– IV-19 –


--- page 702 ---
accounting firm. The company should provide true and complete accounting evidence,
accounting books, financial and accounting reports and other accounting information to the
engaged accounting firm without any refusal or withholding or misrepresentation of information.
The Overseas Listing Trial Measures require that securities companies and law firms should
conduct adequate verification of the filing materials of overseas listed enterprises.
Profit Distribution
According to PRC Company Law, a company shall not distribute profits before losses are
covered and the statutory reserve fund is provided. At the same time, the Overseas Listing Trial
Measures stipulate that domestic enterprises may raise funds and pay dividends in foreign
currencies or RMB for overseas listings.
Amendment to Articles of Association
Pursuant to PRC Company Law, the resolution of a shareholders’ general meeting regarding
any amendment to a company’s articles of association requires affirmative votes by at least
two-thirds of the votes held by shareholders attending the meeting.
Dissolution and Liquidation
Pursuant to PRC Company Law, a company shall be dissolved for any of the following
reasons:
(1) upon expiry of term of business stipulated in the Articles of Association or occurrence
of other circumstances of dissolution stipulated in the Articles of Association;
(2) the shareholders’ general meeting has resolved to dissolve the company;
(3) the company is dissolved by reason of its merger or division;
(4) the business license of the company is revoked or the company is ordered to close
down or to be dissolved in accordance with the laws; or
(5) where the company encounters serious difficulties in its operations or management
that will lead to significant losses to the benefits of the shareholders if the company
continues its existence and the situation cannot be resolved by other means, the
company is dissolved by a people’s court in response to the request of shareholders
representing 10% or more of the voting rights of all shareholders of the company.
APPENDIX IV SUMMARY OF PRINCIPAL LEGAL AND
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– IV-20 –


--- page 703 ---
In the event of paragraph (1) above, the company may carry on its existence by amending
its articles of association. The amendments to the articles of association in accordance with the
provisions described above shall require the approval of more than two-thirds of voting rights of
shareholders attending a shareholders’ general meeting.
Where the company is dissolved under the circumstances set forth in paragraph (1), (2), (4)
or (5) above, it should establish a liquidation committee within 15 days of the date on which the
dissolution matter occurs and commence the liquidation. The liquidation committee shall be
composed of Directors or persons determined by a general meeting. If a liquidation committee is
not established within the prescribed period, the company’s creditors may file an application
with a people’s court to appoint relevant personnel to form a liquidation committee to conduct
the liquidation. The people’s court should accept such application and form a liquidation
committee to conduct liquidation in a timely manner.
The liquidation committee may exercise following powers during the liquidation:
(1) to verify the Company’s assets and to prepare a balance sheet and an inventory of
assets;
(2) to inform creditors by notice or announcement;
(3) to deal with and settle any outstanding business of relevant company;
(4) to pay all outstanding taxes and the taxes arising during the liquidation process;
(5) to settle claims and debts;
(6) to handle the company’s remaining assets after its debts have been paid off; and
(7) to represent the company in civil lawsuits.
The liquidation committee shall notify the company’s creditors within 10 days of its
establishment, and publish an announcement in newspapers within 60 days.
A creditor shall lodge his claim with the liquidation committee within 30 days of receipt of
the notification or within 45 days of the date of the announcement if he has not received any
notification.
The creditors shall explain matters relating to their claims and provide evidential
documents. The liquidation committee shall register the creditor’s claims. In the claims
declaration period, the liquidation committee shall not make repayment to the creditors.
APPENDIX IV SUMMARY OF PRINCIPAL LEGAL AND
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– IV-21 –


--- page 704 ---
Upon disposal of the company’s property and preparation of the required balance sheet and
inventory of assets, the liquidation committee shall draw up a liquidation plan and submit this
plan to a shareholders’ general meeting or a people’s court for endorsement. The remaining part
of the company’s assets, after payment of liquidation expenses, employee wages, social
insurance fees and statutory compensation, outstanding taxes and the company’s debts, shall be
distributed to shareholders in proportion to shares held by them. The company shall continue its
existence during the liquidation period, although it cannot conduct operating activities that are
not related to the liquidation. The company’s property shall not be distributed to shareholders
before repayments are made in accordance with the requirements described above.
Upon liquidation of the company’s property and preparation of the required balance sheet
and inventory of assets, if the liquidation committee becomes aware that the company does not
have sufficient assets to meet its liabilities, it must apply to a people’s court for a declaration of
bankruptcy in accordance with the laws. Following such declaration by the people’s court, the
liquidation committee shall hand over the administration of the liquidation to the people’s court.
Upon completion of the liquidation of the company, the liquidation team shall prepare a
liquidation report and submit it to the shareholders’ general meeting or a people’s court for
confirmation and the company registration authority to apply for cancelation of the company’s
registration, and an announcement of its termination shall be published. Members of the
liquidation committee are required to discharge their duties in good faith and perform their
obligation in compliance with laws. Members of the liquidation committee shall be prohibited
from abusing their authority in accepting bribes or other unlawful income and from
misappropriating the company’s properties. Members of the liquidation committee are liable to
indemnify the company and its creditors in respect of any loss arising from their willful or
material default. Furthermore, liquidation of a company declared bankrupt according to laws
shall be processed in accordance with the relevant laws on corporate bankruptcy.
Overseas Listing
According to the Overseas Listing Trial Measures, the securities refer to stocks, depositary
receipts, and corporate bonds that can be converted into stocks or other securities of an equity
nature that are directly or indirectly offered and listed overseas by domestic companies. The
direct overseas offering and listing of domestic companies refer to such overseas offering and
listing of a joint stock limited company incorporated in the territory of PRC. The indirect
overseas offering and listing of domestic companies refer to such overseas offering and listing
made in the name of an offshore entity but based on the equity, assets, earnings, or other similar
rights of a domestic company that operates its main business domestically.
The Overseas Listing Trial Measures also provide the conditions for overseas offering and
listing. An overseas offering and listing are prohibited under any of the following circumstances:
(1) the listing and financing fall under specific prohibiting in the laws, administrative
regulations, and relevant national provisions;
APPENDIX IV SUMMARY OF PRINCIPAL LEGAL AND
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– IV-22 –


--- page 705 ---
(2) the overseas offering and listing may constitute endangers to national security as
reviewed and determined by competent authorities under the State Council in
accordance with law;
(3) the domestic company and its controlling shareholder(s), actual controllers, have a
criminal record in recent three years for corruption, bribery, encroachment of assets,
misappropriation of assets, or disruption of socialist market economy order;
(4) the domestic company is under investigation according to law for suspected crimes or
major violations of laws and regulations, but no clear conclusions have been reached;
(5) there are material ownership disputes over the equities held by the controlling
shareholders or the shareholders whose actions are controlled by the controlling
shareholders or actual controllers.
In addition, under the Overseas Listing Trial Measures, where a PRC domestic company
submits an application for initial public offering to competent overseas regulators or overseas
stock exchanges, such issuer must file with the CSRC within three business days after such
application is submitted.
In the event of the occurrence of any of the following material events after the overseas
offering and listing, the PRC domestic companies shall make a detailed report to the CSRC
within three working days after the occurrence and public announcement of the relevant event:
(1) change in controlling rights;
(2) being subject to investigation, punishment, or other measures by overseas securities
regulatory authorities or the relevant competent authorities;
(3) changing the listing status or transferring the listing board;
(4) voluntary or compulsory termination of a listing.
Pursuant to the Provisions on Strengthening Confidentiality and Archives Administration
Concerning Overseas Securities Offerings and Listings by Domestic Enterprises, which was
issued by the CSRC, MOF, the National Administration of State Secrets Protection and the
National Archives Administration on 24 February 2023 and implemented since 31 March 2023, a
domestic enterprise that provides or through its overseas listed entity, publicly discloses or
provides to relevant individuals or entities including securities companies, securities service
providers and overseas regulators, any document and materials that contain state secrets or
working secrets of government agencies, shall first obtain approval from competent authorities
according to law, and files with the secrecy administrative department at the same level. A
domestic enterprise that provides accounting archives or copies of accounting archives to any
APPENDIX IV SUMMARY OF PRINCIPAL LEGAL AND
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– IV-23 –


--- page 706 ---
entities including securities companies, securities service providers and overseas regulators and
individuals shall fulfill due procedures in compliance with applicable national regulations.
Loss of Share Certificates
A shareholder may, in accordance with the public notice procedures set out in the PRC
Civil Procedure Law, apply to a people’s court if his share certificate(s) in registered form is
either stolen, lost or destroyed, for a declaration that such certificate(s) will no longer be valid.
After the people’s court declares that such certificate(s) will no longer be valid, the shareholder
may apply to the company for the issue of a replacement certificate(s).
Merger and Division
Pursuant to the PRC Company Law, a merger agreement shall be signed by merging
companies and the involved companies shall prepare respective balance sheets and inventory of
assets. The companies shall within 10 days of the date of passing the resolution approving the
merger notify their respective creditors and publicly announce the merger in newspapers within
30 days. A creditor may, within 30 days of receipt of the notification, or within 45 days of the
date of the announcement if he has not received the notification, request the company to settle
any outstanding debts or provide relevant guarantees.
In case of a merger, the credits and debts of the merging parties shall be assumed by the
surviving or the new company. In case of a division, the company’s assets shall be divided and a
balance sheet and an inventory of assets shall be prepared. When a resolution regarding the
company’s division is approved, the company should notify all its creditors within 10 days of
the date of passing such resolution and publicly announce the division in newspapers within 30
days. The liabilities of the company which have accrued prior to the division shall be jointly
borne by the separated companies other than in the agreement in writing entered into by the
company with creditors in respect of the settlement of debts prior to division, unless otherwise
stipulated in the agreement in writing entered into by the company with creditors in respect of
the settlement of debts prior to division.
Changes in the business registration of the companies as a result of the merger or division
shall be registered with the relevant administration authority for industry and commerce.
The PRC Securities Laws, Regulations and Regulatory Regimes
The PRC has promulgated a series of regulations that relate to the issue and trading of
shares and disclosure of information. In October 1992, the State Council established the
Securities Committee and CSRC. The Securities Committee is responsible for coordinating the
drafting of securities regulations, formulating securities-related policies, planning the
development of securities markets, directing, coordinating, and supervising all securities-related
institutions in the PRC, and administering CSRC. The CSRC is the regulatory executive body of
the Securities Committee and is responsible for the drafting of regulatory provisions governing
APPENDIX IV SUMMARY OF PRINCIPAL LEGAL AND
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– IV-24 –


--- page 707 ---
securities markets, supervising securities companies, regulating public offerings of securities by
PRC companies in the PRC or overseas, regulating the trading of securities, compiling
securities-related statistics and undertaking relevant research and analysis. In April 1998, the
State Council consolidated the two departments and reformed the CSRC.
On 22 April 1993, the State Council promulgated the Provisional Regulations Concerning
the Issue and Trading of Shares (၍ଣᅲБૢԷ ) governing the application
and approval procedures for public offerings of shares, issuance of and trading in shares, the
acquisition of listed companies, deposit, clearing, and transfer of shares, the disclosure of
information, investigation, penalties and dispute resolutions with respect to a listed company.
The PRC Securities Law took effect on 1 July 1999, and was revised as of 28 August 2004,
27 October 2005, 29 June 2013, 31 August 2014, and 28 December 2019, respectively. The latest
revised PRC Securities Law took effect on 1 March 2020. The PRC Securities Law is the first
national securities law in the PRC, comprehensively regulating activities in the PRC securities
market. It is divided into 14 chapters and 226 articles, including the issue and trading of
securities, takeovers by listed companies, securities exchanges, securities companies, and the
responsibilities of the securities registration and settlement institutions and securities regulatory
authorities. Article 224 of the PRC Securities Law provides that domestic enterprises issuing
shares overseas directly or indirectly or listing their shares overseas shall comply with the
relevant provisions of the State Council. Currently, the issue and trading of foreign-issued
securities (including shares) are principally governed by the regulations and rules promulgated
by the State Council and CSRC.
Arbitration and Enforcement of Arbitral Awards
The Arbitration Law of the PRC () (the “ PRC Arbitration Law ”)
was enacted by the SCNPC on 31 August 1994, which became effective on 1 September 1995,
and was amended on 27 August 2009, and 1 September 2017. The PRC Arbitration Law is
applicable to, among other matters, economic disputes involving foreign parties where all parties
had entered into a written agreement to resolve disputes by arbitration before an arbitration
committee constituted in accordance with the PRC Arbitration Law. The PRC Arbitration Law
provides that an arbitration committee may, before the promulgation of arbitration regulations by
the PRC Arbitration Association, formulate interim arbitration rules in accordance with the PRC
Arbitration Law and the PRC Civil Procedure Law. Where the parties have agreed to settle
disputes by means of arbitration, a people’s court will refuse to handle a legal proceeding
initiated by one of the parties at such people’s court unless the arbitration agreement is invalid.
APPENDIX IV SUMMARY OF PRINCIPAL LEGAL AND
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--- page 708 ---
Under the PRC Arbitration Law and PRC Civil Procedure Law, an arbitral award shall be
final and binding on the parties involved in the arbitration. If any party fails to comply with the
arbitral award, the other party to the award may apply to a people’s court for its enforcement. A
people’s court may refuse to enforce an arbitral award made by an arbitration commission if
there is any procedural irregularity (including irregularity in the composition of the arbitration
committee, the making of an award on matters beyond the scope of the arbitration agreement, or
the jurisdiction of the arbitration commission).
Any party seeking to enforce an award of a foreign affairs arbitral body of the PRC against
a party or whose property is not located within the PRC may apply to a foreign court with
jurisdiction over the case for recognition and enforcement of the award. Likewise, an arbitral
award made by a foreign arbitral body may be recognized and enforced by a PRC court in
accordance with the principle of reciprocity or any international treaties concluded or acceded to
by the PRC.
The PRC acceded to the Convention on the Recognition and Enforcement of Foreign
Arbitral Awards (the “ New Y ork Convention ”) adopted on 10 June 1958, pursuant to a
resolution passed by the SCNPC on 2 December 1986. The New Y ork Convention provides that
all arbitral awards made in a state which is a party to the New Y ork Convention shall be
recognized and enforced by other parties thereto subject to their rights to refuse recognition and
enforcement under certain circumstances, including where the enforcement of the arbitral award
is against the public policy of that state. At the time of the PRC’s accession to the Convention,
the SCNPC declared that (1) the PRC would only apply the Convention to the recognition and
enforcement of arbitral awards made in the territories of other parties based on the principle of
reciprocity; and (2) the New Y ork Convention will only be applied to disputes deemed under
PRC laws to be arising from contractual or non-contractual mercantile legal relations.
An agreement has been reached between Hong Kong and the Supreme People’s Court of the
PRC for the mutual enforcement of arbitral awards. On 18 June 1999, the Supreme People’s
Court of the PRC adopted the Arrangement on Mutual Enforcement of Arbitral Awards between
Mainland and Hong Kong Special Administrative Region (ʝੂБ
τર), which became effective on 1 February 2000. The Supreme People’s Court of
China issued the Supplementary Arrangements on the Mutual Enforcement of Arbitral Awards
between the Mainland and the Hong Kong Special Administrative Region (ಥतй
໾̂τર ) on 26 November 2020, which went into effect on 27
November 2020. The arrangements reflect the spirit of the New Y ork Convention. Pursuant to
the arrangements, awards made by PRC arbitral authorities acknowledged by Hong Kong
arbitration rules can be enforced in Hong Kong, and Hong Kong arbitration awards are also
enforceable in mainland China. Where a court of the mainland China finds that enforcement in
the mainland China of the ruling made by the Hong Kong arbitral authority will violate public
interests of the mainland China, execution of the ruling may be ignored.
APPENDIX IV SUMMARY OF PRINCIPAL LEGAL AND
REGULATORY PROVISIONS
– IV-26 –


--- page 709 ---
Shanghai-Hong Kong Stock Connect
On 10 April 2014, CSRC and Hong Kong Securities and Futures Commission (hereinafter
referred to as “ HKSFC ”) issued the Joint Announcement of CSRC and HKSFC – Principles that
Should be Followed when the Pilot Program that Links the Stock Markets in Shanghai and Hong
Kong is Expected to be Implemented and approved in principle the launch of the pilot program
that links the stock markets in Shanghai and Hong Kong (hereinafter referred to as
“Shanghai-Hong Kong Stock Connect ”) by the Shanghai Stock Exchange (hereinafter referred
to as “ SSE ”), the Stock Exchange, China Securities Depository and Clearing Corporation
Limited (hereinafter referred to as “ CSDCC ”) and HKSCC. Shanghai-Hong Kong Stock Connect
comprises the two portions of Northbound Trading Link and Southbound Trading Link.
Southbound Trading Link refers to the entrustment of China securities houses by China investors
to trade stocks listed on the Stock Exchange within a stipulated range via filing by the securities
trading service company established by the SSE with the Stock Exchange. During the initial
period of the pilot program, the stocks of Southbound Trading Link consist of constituent stocks
of the Stock Exchange Hang Seng Composite Large Cap Index and the Hang Seng Composite
MidCap Index as well as stocks of A+H stock companies concurrently listed on the Stock
Exchange and the SSE. The total limit of Southbound Trading Link is RMB250 billion and the
daily limit is RMB10.5 billion. During the initial period of the pilot program, it is required by
HKSFC that China investors participating in Southbound Trading Link are only limited to
institutional investors and individual investors with a securities account and capital account
balance of not less than RMB500,000 in total. On 10 November 2014, CSRC and HKSFC issued
a Joint Announcement, approving the official launch of Shanghai-Hong Kong Stock Connect by
SSE, the Stock Exchange, CSDCC and HKSCC. Pursuant to the Joint Announcement, trading of
stocks under Shanghai-Hong Kong Stock Connect will commence on 17 November 2014. On 30
September 2016, CSRC issued the Filing Provision on the Placement of Shares by Hong Kong
Listed Companies with Domestic Original Shareholders under Southbound Trading Link which
came into effect on the same day. The act of the placement of shares by Hong Kong listed
companies with domestic original shareholders under Southbound Trading Link shall be filed
with CSRC. Hong Kong listed companies shall file the application materials and approved
documents with CSRC after obtaining approval from the Stock Exchange for their share
placement applications. CSRC will carry out supervision based on the approved opinion and
conclusion of the Hong Kong side.
APPENDIX IV SUMMARY OF PRINCIPAL LEGAL AND
REGULATORY PROVISIONS
– IV-27 –


--- page 710 ---
SUMMARY OF MATERIAL DIFFERENCES BETWEEN HONG KONG AND THE PRC
COMPANY LA W
The Hong Kong laws applicable to a company incorporated in Hong Kong are based on the
Companies Ordinance and the Companies (Winding up and Miscellaneous Provisions) Ordinance
and are supplemented by common law and the rules of equity that apply to Hong Kong. As a
joint stock limited company established in the PRC that is seeking a listing of shares on the
Stock Exchange, we are governed by the Company Law and all other rules and regulations
promulgated pursuant to the Company Law.
Set out below is a summary of certain material differences between Hong Kong company
law applicable to a company incorporated in Hong Kong and the Company Law applicable to a
joint stock limited company incorporated and existing in accordance with the Company Law.
This summary is, however, not intended to be an exhaustive comparison.
Share Capital
The Company Law does not provide for authorised share capital. Our registered capital is
the amount of our issued share capital. Any increase in our registered capital must be approved
by our Shareholders’ general meeting and file with the relevant PRC governmental and
regulatory authorities. The Hong Kong laws does not provide for authorized share capital either.
The share capital of a company incorporated in Hong Kong would be its issued share capital.
The full proceeds of a share issue will be credited to share capital and becomes the company’s
share capital. The directors of a company incorporated in Hong Kong may, with the prior
approval of the shareholders if required, issue new shares of the company.
Under the PRC Securities Law, an application for listing shall comply with the listing rules
of the stock exchange. Hong Kong laws do not prescribe any minimum capital requirements for
companies incorporated in Hong Kong.
According to the Company Law, shareholders may provide capital contribution in the form
of money or non-monetary assets (other than assets not entitled to be used as capital
contributions under relevant laws and administrative regulations). For non-monetary assets to be
used as capital contributions, appraisals and assets verification must be carried out to ensure no
overvaluation or under-valuation of the assets. There is no such restriction on a Hong Kong
company under Hong Kong laws.
Restrictions on Shareholding and Transfer of Shares
Under the PRC law, the Domestic Unlisted Shares, which are denominated and subscribed
for in Renminbi, can only be subscribed for and traded by PRC investors, qualified overseas
institutional investors or qualified overseas strategic investors. Overseas listed shares, which are
denominated in Renminbi and subscribed for in a foreign currency, may only be subscribed for,
and traded by, investors from countries and regions outside the PRC or other qualified PRC
APPENDIX IV SUMMARY OF PRINCIPAL LEGAL AND
REGULATORY PROVISIONS
– IV-28 –


--- page 711 ---
institutional investors. If the H Shares are eligible securities under the Southbound Trading Link,
they are also available for subscription and trading by domestic investors in the PRC pursuant to
the rules and restrictions of Shanghai-Hong Kong Stock Connect or Shenzhen-Hong Kong Stock
Connect.
According to the Company Law, a promoter of a joint stock limited company is not allowed
to transfer the shares it holds for a period of one year after the date of establishment of the
company. Shares in a joint stock limited company held by its directors, supervisors and senior
management transferred each year during their term of office shall not exceed 25% of the total
shares they held in the company, and the shares they held in the company cannot be transferred
within one year from the listing date of the shares, and also cannot be transferred within half a
year after the said personnel has left office. The articles of association of a company may set
other restrictive requirements on the transfer of a company’s shares held by, its directors,
supervisors and senior management of the company. There are no such restrictions on
shareholdings and transfers of shares under Hong Kong laws apart from the six-month lockup on
the company’s issue of shares and the 12-month lockup on controlling shareholders’ disposal of
shares, as illustrated by the undertakings given by the Company and our Controlling
Shareholders to the Stock Exchange.
Notice of General Meeting
According to the Company Law, notice of annual general meeting must be given not less
than 20 days before the meeting, while notice of an extraordinary general meeting must be given
not less than 15 days before the meeting. If a company has bearer shares, a public announcement
of a general meeting must be made at least 30 days prior to the meeting.
For a company incorporated in Hong Kong with limited liability, the minimum period of
notice of a general meeting is 14 days. Further, where a meeting involves consideration of a
resolution requiring special notice, the company must also give its shareholders notice of the
resolution at least 14 days before the meeting. The notice period for the annual general meeting
is 21 days.
Quorum for General Meetings
The Company Law does not specify any quorum requirement for a general meeting.
Under the Hong Kong laws, the quorum for a general meeting is two members unless the
articles of association of the company otherwise provide or the company has only one member,
in which case the quorum is one.
APPENDIX IV SUMMARY OF PRINCIPAL LEGAL AND
REGULATORY PROVISIONS
– IV-29 –


--- page 712 ---
Voting at General Meetings
According to the Company Law, the passing of any resolution requires more than half of
the votes held by the shareholders present in person or by proxy. Amendments to the articles of
association, change of corporate form, increase or decrease of registered capital and merger,
division or dissolution must be approved by shareholders or proxies representing more than
two-thirds of the voting rights being present in shareholders’ general meeting.
Under the Hong Kong laws, (1) an ordinary resolution is passed by a simple majority of
affirmative votes cast by members present in person or by proxy at a shareholders’ general
meeting and (2) a special resolution is passed by not less than three-fourths of affirmative votes
cast by members present in person or by proxy at a shareholders’ general meeting.
Variation of Class Rights
The Company Law has no special provision relating to variation of class rights. However,
the Company Law states that the State Council can promulgate regulations relating to other
kinds of shares.
Under the Companies Ordinance, no rights attached to any class of shares can be varied
except (1) with the passing of a special resolution by the shareholders of the relevant class at a
separate meeting sanctioning the variation; (2) with the consent in writing of shareholders of at
least three-fourths of the total voting rights of shareholders of the relevant class or (3) if there
are provisions in the articles of association relating to the variation of those rights, then in
accordance with those provisions.
Directors, Senior Management and Supervisors
The Company Law, unlike the Companies Ordinance, does not contain any requirements
relating to the declaration of directors’ interests in material contracts, restrictions on directors’
authority in making major dispositions, restrictions on companies providing certain benefits to
directors and guarantees in respect of directors’ liability and prohibitions against compensation
for loss of office without shareholders’ approval.
Supervisory Committee
According to the Company Law, a joint stock limited company’s directors and senior
management are subject to the supervision of a supervisory committee. There is no mandatory
requirement for the establishment of a supervisory committee for a company incorporated in
Hong Kong.
APPENDIX IV SUMMARY OF PRINCIPAL LEGAL AND
REGULATORY PROVISIONS
– IV-30 –


--- page 713 ---
Derivative Action by Minority Shareholders
Hong Kong laws permit minority shareholders to initiate a derivative action on behalf of all
shareholders against directors who have committed a breach of their fiduciary duties to the
company if the directors control a majority of votes at a general meeting, thereby effectively
preventing a company from suing the directors in breach of their duties in its own name.
According to the Company Law, if the directors and senior management of a joint stock
limited company violate laws, administrative regulations or its articles of association, resulting
in losses to the company, shareholders individually or jointly holding over 1% of the shares in
the company for more than 180 consecutive days may request in writing the supervisory
committee to initiate proceedings in the people’s court. If the supervisors violate the relevant
provisions of the Company Law, the above shareholders may request in writing the board of
directors to initiate litigation at the people’s court. Upon receipt of such written request from the
shareholders, if the supervisory committee or the board of directors refuses to initiate such
proceedings, or has not initiated proceedings within 30 days upon receipt of the request, or if
under urgent situations, failure of initiating immediate proceeding may cause irremediable
damages to the company, the above said shareholders shall, for the benefit of the company’s
interests, have the right to initiate proceedings directly to the people’s court in their own name.
Protection of Minorities
The Company Law provides that any shareholders holding 10% or more of the voting rights
of all issued shares of a company may request a People’s Court to dissolve the company to the
extent that the operation or management of the company experiences any serious difficulties and
the company continues to suffer serious losses and no other alternatives can resolve.
Under the Hong Kong laws, a shareholder who complains that the affairs of a company
incorporated in Hong Kong are conducted in a manner unfairly prejudicial to his interests may
petition to court to either wind up the company or make an appropriate order regulating the
affairs of the company. In addition, on the application of a specified number of members, the
Financial Secretary of Hong Kong may appoint inspectors who are given extensive statutory
powers to investigate the affairs of a company incorporated in Hong Kong.
Financial Disclosure
According to the Company Law, a joint stock limited company is required to make
available at the company for inspection by shareholders its financial report 20 days before its
shareholders’ general meeting. In addition, a joint stock limited company of which the public
offering Shares are offered must publish its financial report. The Hong Kong laws require a
company incorporated in Hong Kong to send to every shareholder a copy of its financial report,
auditors’ report and directors’ report, which are to be presented before the company in its annual
general meeting, not less than 21 days before such meeting.
APPENDIX IV SUMMARY OF PRINCIPAL LEGAL AND
REGULATORY PROVISIONS
– IV-31 –


--- page 714 ---
According to the Company Law, a company shall at the end of each accounting year
prepare a financial report which shall be audited by the accounting firm in accordance with the
laws.
Information on Directors and Shareholders
The Company Law gives shareholders the right to inspect the articles of association,
minutes of the shareholders’ general meetings and financial and accounting reports. Under the
Articles of Association, shareholders have the right to inspect certain information on
shareholders and on directors similar to that available to shareholders of Hong Kong companies
under the Hong Kong laws.
Receiving Agents
According to the Hong Kong laws, dividends once declared by the Board will become debts
payable to shareholders. Under the Hong Kong laws, the limitation period for an action to
demand repayment of a debt is six years, whereas the Civil Code of the PRC ( ʕശɛ͏΍ձ਷
Պ) provides that the limitation period for an action to be taken is three years.
Corporate Reorganization
Corporate reorganization involving a company incorporated in Hong Kong may be effected
in a number of ways, such as a transfer of the whole or part of the business or property of the
company in the course of voluntary winding up to another company pursuant to Section 237 of
the Companies (Winding Up and Miscellaneous Provisions) Ordinance or a compromise or
arrangement between the company and its creditors or between the company and its members
pursuant to Section 673 and Section 674 of the Companies Ordinance, which requires the
sanction of the court. In addition, subject to the shareholders’ approval, an intra-group
wholly-owned subsidiary company may also be amalgamated horizontally or vertically under the
Companies Ordinance.
According to the Company Law, the merger, demerger, dissolution or change to the forms
of a joint stock limited company has to be approved by shareholders at general meeting.
Statutory Deductions
According to the Company Law, a company shall draw 10% of the profits as its statutory
reserve fund before it distributes any profits after taxation. When the aggregate amount of the
company’s statutory reserve fund reaches 50% of the company’s registered capital, the company
may no longer make allocations from the statutory reserve fund. After a company has made an
allocation to its statutory reserve fund from its after-tax profit, it may make an allocation to its
discretionary reserve fund from its after-tax profit upon a resolution approved at the
shareholders’ general meeting. There are no such requirements under Hong Kong laws.
APPENDIX IV SUMMARY OF PRINCIPAL LEGAL AND
REGULATORY PROVISIONS
– IV-32 –


--- page 715 ---
Remedies of Company
According to the Company Law, if a director, supervisor or senior management in carrying
out his duties infringes any law, administrative regulation or the articles of association of a
company, which results in damage to the company, that director, supervisor or senior
management should be responsible to the company for such damages.
The Listing Rules require listed companies’ articles of association to provide for remedies
of the company similar to those available under Hong Kong laws (including rescission of the
relevant contract and recovery of profits from a director, supervisor or senior management).
Dividend
The company has the power in certain circumstances to withhold, and pay to the relevant
tax authorities, any tax payable under PRC law on any dividends or other distributions payable
to a shareholder.
Under Hong Kong laws, the limitation period for an action to recover a debt (including the
recovery of declared dividends) is six years, whereas under PRC laws, the relevant limitation
period is three years. The company shall not exercise its powers to forfeit any unclaimed
dividend after the expiry of the applicable limitation period.
Fiduciary Duties
In Hong Kong, there is the common law concept of the fiduciary duty of directors,
including the duty not to act in conflict with the company’s interests. Furthermore, the
Companies Ordinance has codified the directors’ statutory duty of care.
Under the Company Law, directors, supervisors, managers and other senior management
personnel of a company have the duty of loyalty and diligence to the company. Such persons
shall abide by the articles of association of the company, perform their duties honestly and
diligently, safeguard the interests of the company, and shall not use their position and authority
in the company for their personal gain.
Closure of Register of Members
The Companies Ordinance requires that the register of shareholders of a company must not
generally be closed for the registration of transfers of shares for more than 30 days (extendable
to 60 days in certain circumstances) in a year, whereas, as required by the Company Law, share
transfers shall not be registered within 20 days before the date of a general meeting or within
five days before the base date set for the purpose of distribution of dividends.
APPENDIX IV SUMMARY OF PRINCIPAL LEGAL AND
REGULATORY PROVISIONS
– IV-33 –


--- page 716 ---
This Appendix contains a summary of the principal provisions of the Articles of
Association adopted by the Company on 10 May 2024, which will become effective on the date
on which the H Shares are listed on the Hong Kong Stock Exchange. The main purpose of this
Appendix is to provide potential investors with an overview of the Articles of Association of the
Company, and therefore it may not contain all the information that is important for potential
investors.
SHARES AND REGISTERED CAPITAL
Shares of the Company shall take the form of share certificates. The shares issued by the
Company shall be denominated in RMB. The par value per share is RMB1.00.
The Company shall issue shares in an open, fair and just manner, and each share of the
same class shall have the same rights.
Shares of the same class issued at the same time shall be issued on the same conditions and
at the same price. Any entity or individual shall pay the same price for each of the shares for
which it or he or she subscribes for.
INCREASE, DECREASE AND REPURCHASE OF SHARES
Capital Increase
The Company may, based on its business and development needs and in accordance with
the laws, regulations and the securities regulatory rules of the place where the Company’s shares
are listed, increase its capital in the following ways, subject to separate resolutions of the
shareholders’ meeting:
1. Public offering of shares;
2. Non-public issuance of shares;
3. Distributing bonus shares to its existing shareholders;
4. Conversion of capital reserve into share capital;
5. Other means as is stipulated by laws, administrative regulations, or as approved by
securities regulatory rules of the place where the Company’s shares are listed and
relevant regulatory authorities.
Capital Reduction
The Company may reduce its registered capital. The Company shall reduce its registered
capital in accordance with the procedures stipulated in the Company Law, the Hong Kong
Listing Rules and other relevant regulations and the Articles of Association.
APPENDIX V SUMMARY OF THE ARTICLES OF ASSOCIATION
–V - 1–


--- page 717 ---
When the company needs to reduce its registered capital, it should prepare a balance sheet
and an inventory of assets.
The Company shall notify its creditors within ten days from the date of the resolution on
the registered capital reduction and shall publish an announcement on the newspaper(s) or the
National Enterprise Credit Information Publicity System within 30 days. A creditor has the right,
within 30 days from the receipt of such notice; or, for creditors who do not receive the notice,
within 45 days from the date of the announcement, to request the Company to pay its debts or to
provide corresponding guarantee for such debts.
The registered capital of the Company after its reduction shall not be less than the statutory
minimum amount. In addition, if the Company increases or reduces registered capital, it shall
complete the registration for changes with the company registration authorities pursuant to the
laws.
Buy-back of Share
The Company shall not buy back its shares, except in one of the following circumstances:
1. reducing the registered capital of the Company;
2. merging with another company that holds shares in the Company;
3. using shares for employee stock ownership plan or equity incentives;
4. shareholders who object to resolutions of the shareholders’ meeting on merger or
division of the Company requesting the Company to buy back their shares;
5. to use the shares for conversion of corporate bonds issued by the Company which are
convertible into shares;
6. where it is necessary for the Company to preserve its value and shareholders’ interest.
The Company may repurchase its shares through public centralised trading or other
methods recognised by laws, administrative regulations, the CSRC and the stock exchange where
the Company’s shares are listed, and shall comply with applicable laws, administrative
regulations, departmental rules and the securities regulatory rules of the place where the
Company’s shares are listed. Where the Company acquires its own shares due to the
circumstances stipulated in item 3, 5 or 6 above, it should be made by public and centralized
transaction.
Where the Company repurchases its shares under the circumstances set out in items 1 and 2
above, a resolution shall be passed at the shareholders’ meeting of the Company. Where the
Company repurchases its shares under the circumstances set out in items 3, 5 and 6 above, a
resolution may be passed at a Board meeting attended by more than two-thirds of the directors
APPENDIX V SUMMARY OF THE ARTICLES OF ASSOCIATION
–V - 2–


--- page 718 ---
in accordance with the provisions of the Articles of Association or as authorised by the
shareholders’ meeting. Where the securities regulatory rules of the place where the shares of the
Company are listed provide otherwise, such provisions shall prevail, provided that such
provisions are not in violation of the Company Law, the Securities Law, the Administrative
Measures and the Guidelines for the Articles of Association of Listed Companies.
Where the Company repurchases its shares under the circumstances set out in item 1 above,
such shares shall be cancelled within 10 days from the date of repurchase; where the Company
repurchases its shares under the circumstances set out in items 2 and 4, such shares shall be
transferred or cancelled within 6 months; where the Company repurchases its shares under the
circumstances set out in items 3, 5 and 6, the total number of shares held by the Company shall
not exceed 10% of the total issued shares of the Company, and such shares shall be transferred
or cancelled within 3 years.
A holding subsidiary of the Company shall not acquire shares issued by the Company. If a
holding subsidiary of the Company holds shares of the Company due to a merger, exercise of a
pledge, or other reasons, it shall not exercise the voting rights corresponding to the shares held
and shall promptly dispose of the shares of the related company.
Transfer and Pledge of Shares
Shares of the Company held by the promoters shall not be transferred within one year from
the date of establishment of the Company. Shares issued by the Company prior to the public
offering of shares shall not be transferred within one year from the date on which the Company’s
shares are listed and traded on the Hong Kong Stock Exchange.
Directors, supervisors and senior management of the Company shall declare to the
Company their shareholdings in the Company and any changes thereof, and shall not transfer
more than 25% of the total number of shares of the Company held by them each year during
their terms of office; the shares of the Company held by them shall not be transferred within one
year from the date on which the shares of the Company are listed and traded. The above
personnel shall not transfer the shares of the Company held by them within half a year after they
leave the Company.
If the Company’s shareholders holding 5% (excluding the recognized clearing houses or
their agents as defined in the relevant ordinances in force under the laws of Hong Kong from
time to time) or above shares of the Company, Directors, Supervisors, senior management
officers sell shares or other securities with an equity nature within six months after buying the
same or buy shares or securities within six months after selling the same, the earnings arising
therefrom shall belong to the Company and the Board shall recover such earnings. However, the
restriction shall not be applicable to any sale of shares by a securities company holding 5% or
above of the Company’s shares as a result of its purchase and underwriting of the untaken shares
after offering and other circumstances stipulated by CSRC.
APPENDIX V SUMMARY OF THE ARTICLES OF ASSOCIATION
–V - 3–


--- page 719 ---
The shares or other securities with an equity nature held by Directors, Supervisors, senior
management officers and natural person shareholders referred to in the preceding paragraph
include the shares or other securities with an equity nature held by their spouses, parents,
children, and any of the above which is held by using others’ accounts.
If the Company’s Board does not comply with the provision of the first paragraph of this
Article, the shareholders can request the Board to do so within 30 days. If the Board does not
enforce such right within the aforesaid period, the shareholders are entitled to commence
litigations in the people’s court in their own names for the interests of the Company.
If the Company’s Board does not enforce the provision of the first paragraph of this
Article, the responsible Directors shall assume joint and severally liable in accordance with the
laws.
The Company does not accept its own shares as the collateral of pledge.
REGISTER OF MEMBERS
The Company shall establish a register of shareholders in accordance with the evidentiary
documents provided by the securities registration authority, and such register of members shall
be the sufficient evidence substantiating that the shareholders hold the shares of the Company.
Shareholders enjoy rights and undertake obligations according to the class and percentage of
shares they hold. Shareholders of the same class shall enjoy the same rights and bear the same
obligations.
The Company shall enter into a share custody agreement with the share registrar, regularly
enquire the information of substantial shareholders and the changes in shareholdings (including
pledge of equity interests) of substantial shareholders, and keep abreast of the shareholding
structure of the Company.
When the Company convenes a shareholders’ meeting, distributes dividends, conducts
liquidation or engages in other activities that require the confirmation of the identity of
shareholders, the Board or the convener of the shareholders’ meeting shall determine the record
date in accordance with the provisions of the securities regulatory rules of the place where the
Company’s shares are listed. Shareholders whose names appear on the register of shareholders
after the close of trading on the record date shall be the shareholders entitled to relevant
interests.
Rights and Obligations of Shareholders
Shareholders of the Company shall enjoy the following rights:
1. to have the right to speak and vote at shareholders’ meetings, unless required to
abstain from voting on specific matters pursuant to the regulations of the Hong Kong
Listing Rules;
APPENDIX V SUMMARY OF THE ARTICLES OF ASSOCIATION
–V - 4–


--- page 720 ---
2. to receive dividends and other distributions in proportion to the number of shares
held;
3. to request, summon, preside over, attend or appoint a proxy to attend shareholders’
meetings, and to exercise the corresponding voting rights;
4. to supervise the operation of the Company, making suggestions or enquiries;
5. to transfer, give or pledge the shares held by them in accordance with the laws,
administrative regulations and the Articles of Association;
6. to review and copy the Articles of Association, the register of members (the Company
may suspend the processing of shareholder registration procedures in accordance with
Section 632 of the Companies Ordinance (Chapter 622) of the Laws of Hong Kong),
minutes of the shareholders’ meetings, resolutions of the Board meetings, resolutions
of the Board of Supervisors meetings and financial and accounting reports;
7. in the event of the termination or liquidation of the Company, to participate in the
distribution of remaining assets of the Company in proportion to the number of shares
held;
8. to request the Company to buy back the shares of shareholders objecting to resolutions
of the shareholders’ meeting concerning merger or division of the Company;
9. other rights stipulated by laws, administrative regulations, departmental rules,
securities regulatory rules of the place where the Company’s shares are listed or the
Articles of Association.
Shareholders of the Company shall assume the following obligations:
1. to abide by laws, administrative regulations and the Articles of Association;
2. to pay subscription monies according to the number of shares subscribed and the
method of subscription;
3. not to make divestment unless in the circumstances stipulated by laws and regulations;
4. not to abuse the rights of shareholders to damage the interests of the Company or that
of other shareholders; not to abuse the independent status of the Company as a legal
person and the limited liability of shareholders to damage the interests of the creditors
of the Company;
5. other obligations imposed by laws, administrative regulations, securities regulatory
rules of the place where the Company’s shares are listed and the Articles of
Association.
APPENDIX V SUMMARY OF THE ARTICLES OF ASSOCIATION
–V - 5–


--- page 721 ---
Shareholders of the Company who abuse their shareholders’ rights and cause losses to the
Company or other shareholders shall be liable for compensation in accordance with the law.
Shareholders of the Company who abuse the independent status of the Company as a legal
person and the limited liability of shareholders to evade debts and seriously damage the interests
of the creditors of the Company shall bear joint and several liabilities for the debts of the
Company.
RESTRICTIONS ON RIGHTS OF THE CONTROLLING SHAREHOLDERS
The controlling shareholders and de facto controllers of the Company shall not use their
connected relations to damage the interests of the Company. If the violation causes losses to the
Company, it shall be liable for compensation.
The controlling shareholders and de facto controllers of the Company shall have fiduciary
duties towards the Company and its public shareholders. The controlling shareholder shall
exercise its rights as a capital contributor in strict compliance with the laws. The controlling
shareholder shall not damage the legitimate rights and interests of the Company and public
shareholders by means of profit distribution, asset restructuring, external investment, fund
appropriation, loan guarantee, etc., and shall not use its controlling status to damage the
interests of the Company and public shareholders.
SHAREHOLDERS AND SHAREHOLDERS’ MEETING
General Provisions of Shareholders’ Meetings
The shareholders’ meeting is the organ of authority of the Company and shall exercise the
following functions and powers:
1. to elect and replace directors and supervisors and to decide on matters relating to the
remuneration of directors and supervisors;
2. to consider and approve the reports of the Board;
3. to consider and approve the report of the Board of Supervisors;
4. to consider and approve the Company’s profit distribution plans and loss recovery
plans;
5. to resolve on the increase or reduction of the registered capital of the Company;
6. to resolve on the issue of corporate bonds;
7. to resolve on the merger, division, dissolution, liquidation or change of corporate form
of the Company;
APPENDIX V SUMMARY OF THE ARTICLES OF ASSOCIATION
–V - 6–


--- page 722 ---
8. amendments to the Articles of Association;
9. to resolve on the appointment and dismissal of the accounting firm of the Company;
10. to consider and approve the guarantee matters stipulated in Article 45 of the Articles
of Association;
11. to consider the purchase or disposal of material assets within one year with an amount
exceeding 30% of the latest audited total assets of the Company;
12. to consider and approve the change in use of proceeds;
13. to consider share incentive schemes and employee share ownership schemes;
14. to consider other matters required by laws, administrative regulations, departmental
rules, the securities regulatory rules of the place where the Company’s shares are
listed or the Articles of Association to be decided by the shareholders’ meeting.
Except as otherwise provided in the Articles of Association, the above-mentioned powers of
shareholders’ meeting shall not be exercised by the Board or other institutions or individuals by
way of authorization. In addition to the above matters, the shareholders’ meeting may authorise
or entrust the Board and/or its authorised persons to handle the matters authorised or entrusted
by it without violating the laws and regulations and the mandatory provisions of the relevant
laws, regulations and regulatory rules of the place where the Company’s shares are listed.
Shareholders’ meetings are divided into annual meetings and extraordinary meetings. The
annual meeting shall be convened once a year within six months after the end of the previous
accounting year.
The Company shall convene an extraordinary meeting within two months from the date of
occurrence of any of the following circumstances:
1. the number of directors is less than the number stipulated in the Company Law or less
than two-thirds of the number specified in the Articles of Association;
2. when the unrecovered losses of the Company amount to one-third of the total amount
of its share capital;
3. when shareholders individually or jointly holding 10% or more of the Company’s
shares so request;
4. when deemed necessary by the Board;
5. when proposed by the Board of Supervisors;
APPENDIX V SUMMARY OF THE ARTICLES OF ASSOCIATION
–V - 7–


--- page 723 ---
6. other circumstances stipulated by laws, administrative regulations, departmental rules,
securities regulatory rules of the place where the Company’s shares are listed or the
Articles of Association.
Summoning of Shareholders’ Meetings
Shareholders’ meetings shall be summoned by the Board. The publication of the notice of
the shareholders’ meeting shall comply with the relevant laws and regulations and the securities
regulatory rules of the place where the Company’s shares are listed.
The independent non-executive Directors are entitled to propose to the Board to convene an
extraordinary meeting. The Board shall, in accordance with the laws, administrative regulations,
the securities regulatory rules of the place where the Company’s shares are listed and the
Articles of Association, give a written reply on whether or not to convene the extraordinary
meeting within 10 days after receiving the proposal from the independent non-executive
Directors.
If the Board agrees to convene the extraordinary meeting, a notice of such meeting shall be
issued within five days after the resolution of the Board is passed. If the Board does not agree to
convene the extraordinary meeting, it shall explain the reasons and make an announcement.
The Board of Supervisors shall have the right to propose to the Board to convene an
extraordinary meeting in writing. The Board shall, in accordance with the laws, administrative
regulations, the securities regulatory rules of the place where the Company’s shares are listed
and the Articles of Association, give a written reply on whether to convene the extraordinary
meeting or not within 10 days after receipt of the proposal.
If the Board agrees to convene the extraordinary meeting, a notice of such meeting shall be
issued within 5 days after the resolution of the Board is passed. Any changes to the original
proposal made in the notice shall be approved by the Board of Supervisors.
If the Board does not agree to convene the extraordinary meeting or fails to give a reply
within 10 days after receiving the proposal, the Board shall be deemed to be unable or fail to
perform the duty of convening the shareholders’ meeting, and the Board of Supervisors may
summon and preside over the meeting on its own.
Shareholders individually or jointly holding 10% or more of the Company’s shares shall
have the right to request the Board of Directors in writing to convene an extraordinary meeting.
The Board shall, in accordance with the laws, administrative regulations, the securities
regulatory rules of the place where the shares of the Company are listed and the Articles of
Association, give a written reply on whether to convene the extraordinary meeting or not within
10 days after receipt of the proposal.
APPENDIX V SUMMARY OF THE ARTICLES OF ASSOCIATION
–V - 8–


--- page 724 ---
If the Board agrees to convene the extraordinary meeting, a notice of such meeting shall be
issued within five days after the resolution of the Board is passed. Any change to the original
request made in the notice shall be subject to the consent of the relevant shareholders.
If the Board does not agree to convene an extraordinary meeting or does not reply within
10 days upon receipt of the proposal, the shareholders individually or jointly holding more than
10% of the Company’s shares shall have the right to propose to the Board of Supervisors to
convene an extraordinary meeting, and such proposal shall be made in writing. The Board of
Supervisors shall, in accordance with the laws, administrative regulations, the securities
regulatory rules of the place where the shares of the Company are listed and the Articles of
Association, give a written reply on whether to convene the extraordinary meeting or not within
10 days after receipt of the proposal.
If the Board of Supervisors agrees to convene the extraordinary meeting, it shall issue a
notice of meeting within 5 days upon receipt of the request. Any changes to the original request
in the notice shall be approved by the relevant shareholders.
If the Board of Supervisors fails to issue the notice of the meeting within the prescribed
period, it shall be deemed that the Board of Supervisors will not convene and preside over the
shareholders’ meeting, and shareholders individually or jointly holding 10% or more of the
Company’s shares for more than 90 consecutive days may summon and preside over the meeting
by themselves.
Proposals at Shareholders’ Meetings
The content of the proposals shall fall within the scope of powers of the shareholders’
meeting, set out clear issues and specific matters on which resolutions are to be made, and meet
the relevant provisions of laws, administrative regulations and the Articles of Association.
When the Company convenes a shareholders’ meeting, the Board, the Board of Supervisors
and shareholders individually or jointly holding more than 1% of the Company’s shares shall
have the right to submit proposals to the Company.
Shareholders individually or jointly holding 1% or more of the Company’s shares may
submit ad hoc proposals in writing to the convener 10 days before a shareholders’ meeting is
convened. The convener shall issue a supplementary notice of the general meeting within two
days upon receipt of the proposal to announce the contents of the provisional proposal. If the
shareholders’ meeting is postponed due to the issuance of a supplementary notice of the
shareholders’ meeting pursuant to the securities regulatory rules of the place where the
Company’s shares are listed, the shareholders’ meeting shall be postponed pursuant to the
securities regulatory rules of the place where the Company’s shares are listed.
APPENDIX V SUMMARY OF THE ARTICLES OF ASSOCIATION
–V - 9–


--- page 725 ---
Except as provided in the preceding paragraph or the securities regulatory rules of the place
where the Company’s shares are listed, the convener shall not amend the proposals set out in the
notice of the shareholders’ meeting or add any new proposals after issuing the notice of the
shareholders’ meeting.
Notice of Shareholders’ Meeting
The convener shall notify all shareholders by way of announcement 21 days before the
annual meeting and shall notify all shareholders by way of announcement 15 days before the
extraordinary meeting.
The notice of the shareholders’ meeting shall be in writing and include the following
contents:
1. the time, venue, and duration of the meeting;
2. the matters and proposals to be discussed at the meeting;
3. a prominent statement stating that all Shareholders entitled to attend the shareholders’
meetings and appoint proxy by written to attend and vote on his/her behalf, and such
proxy need not be a shareholder of the Company;
4. the shareholding registration date of shareholders entitled to attend the shareholders’
meeting;
5. the name and phone number of the contact person in connection with the meeting;
6. the voting time and voting procedures through the internet or other means;
7. other matters required to be disclosed by laws, administrative regulations,
departmental rules, or the Hong Kong Listing Rules.
Notices or supplementary notices of shareholders’ meetings shall adequately and completely
disclose all the specific contents of all proposals. Where the opinions of an independent
non-executive director are required on the matters to be discussed, such opinions and reasons
thereof shall be disclosed when the notices or supplementary notices of shareholders’ meetings
are issued.
Convening of Shareholders’ Meetings
All shareholders registered on the record date or their proxies are entitled to attend the
shareholders’ meeting. They shall exercise their voting rights in accordance with the relevant
laws, regulations and the Articles of Association.
APPENDIX V SUMMARY OF THE ARTICLES OF ASSOCIATION
– V-10 –


--- page 726 ---
Individual shareholders who attend the meeting in person shall produce their identity cards
or other effective document or proof of identity and stock account cards. Proxies of individual
shareholders shall produce their valid identity cards and the power of attorney of the
shareholder.
Shareholder that is a legal person may be represented at the meeting by its legal
representative or a proxy appointed by it to exercise its rights. If a legal representative attends
the meeting, he/she should produce his/her identity card and valid proof that he/she is a legal
representative; if a proxy attends the meeting, the proxy should produce his/her identity card and
documents proving that he/she has been appointed by such legal person.
Shareholder that is organized by non-legal person, the person in charge of the organization
or a proxy authorized by the person in charge shall attend the meeting. Such person in charge of
the organization attending the meeting shall present their personal identity cards or valid
documents that can prove its identity as the person in charge. Proxies authorized to attend the
meeting shall present their personal identity cards or the authorization letter legally issued by
the person in charge of the organization.
The proxy form shall contain a statement that whether in the absence of instructions from
the shareholder the proxy may vote as he/she thinks fit.
If the proxy form is signed by a person authorised by the principal, the power of attorney
or other authorization documents shall be notarized. The instrument appointing a proxy, the
notarized power of attorney or other authorization documents shall be placed at the domicile of
the Company or at such other place as specified in the notice convening the meeting.
If the principal is a legal person, its legal representative or such person as is authorised by
resolution of its board of directors or other governing body to act as its representative may
attend the shareholders’ meeting of the Company and exercise the shareholder’s rights.
A shareholders’ meeting shall be chaired by the chairman of the Board of Directors. In the
event that the chairman of the Board of Directors is unable to or fails to perform his duties, the
vice chairman shall chair the meeting. In the event that the chairman and the vice chairman of
the Board of Directors is unable to perform his duties, a director jointly elected by more than
half of the directors shall chair the meeting.
A shareholders’ meeting convened by the Board of Supervisors on its own shall be chaired
by the chairman of the Board of Supervisors. In the event that the chairman of the Board of
Supervisors is unable to or fails to perform his duties, a supervisor jointly elected by more than
half of the supervisors of the Company shall chair the meeting.
The shareholders’ meeting convened by Shareholders on their own initiative shall be
presided over by the representative nominated by the convener.
APPENDIX V SUMMARY OF THE ARTICLES OF ASSOCIATION
–V - 1 1–


--- page 727 ---
If the host of the shareholders’ meeting breaches the procedural rules, which makes it
unable to proceed the shareholders’ meeting, subject to consents of over half of shareholders
with voting rights attending the shareholders’ meeting, the shareholders’ meeting may nominate
a person to act as the host of the meeting and such meeting may continue.
Resolutions of Shareholders’ Meetings
Resolutions of the shareholders’ meeting are divided into ordinary resolutions and special
resolutions.
Ordinary resolutions shall be passed by votes representing over half of the voting rights
represented by the shareholders (including proxies) present at the meeting.
A special resolution shall be passed by votes representing more than two-thirds of the
voting rights represented by the shareholders (including proxies) present at the meeting.
The following matters shall be approved by ordinary resolutions at a shareholders’ meeting:
1. work reports of the Board and the Board of Supervisors;
2. profit distribution plans and loss recovery plans formulated by the Board;
3. appointment and removal of members of the Board and the Board of Supervisors, their
remuneration and method of payment;
4. annual reports of the Company;
5. hiring, dismissal, or non-renewal of the engagement of an accounting firm and its
compensation;
6. matters other than those required by the laws, administrative regulations, the securities
regulatory rules of the place where the shares of the Company are listed or the
Articles of Association to be adopted by special resolution.
The following matters shall be approved by special resolutions at a shareholders’ meeting:
1. increase or reduction of the registered capital of the Company;
2. division, division, merger, dissolution and liquidation of the Company;
3. amendments to the Articles of Association;
4. purchase or disposal of material assets or provision of guarantee by the Company
within 1 year with an amount exceeding 30% of the latest audited total assets of the
Company;
APPENDIX V SUMMARY OF THE ARTICLES OF ASSOCIATION
– V-12 –


--- page 728 ---
5. share incentive scheme;
6. issue corporate bonds;
7. other matters stipulated by laws, administrative regulations, the securities regulatory
rules of the place where the Company’s shares are listed or the Articles of
Association, and other matters considered by the shareholders’ meeting, by way of
ordinary resolution, to have a material impact on the Company and need to be
approved by special resolution.
Shareholders (including proxies) shall exercise voting rights based on the number of shares
with voting rights held by them, and each share shall have one vote.
The separate votes should be counted for the votes of small and medium-sized investors,
when the shareholders’ meeting is reviewing the major matter that affects the interests of small
and medium-sized investors. The results of the separate vote counting should be promptly and
publicly disclosed. In addition, the Company must allow shareholders holding a minority interest
to convene a special general meeting of shareholders and to include resolutions on the meeting
agenda. Based on the principle of one vote per share, the minimum level of shareholders’
support required to convene a meeting shall not be higher than 10% of the voting rights attached
to the Company’s capital shares (excluding treasury shares).
No voting rights shall attach to the shares held by the Company, and such shares shall not
be counted among the total number of voting shares present at a shareholders’ meeting.
The connected/related shareholders shall not participate in voting, with its number of shares
with voting rights represented by them not to be counted in the total number of valid votes,
when the shareholders’ meeting is reviewing the relevant connected/related transaction; the
announcement of the resolution of the shareholders’ meeting shall fully disclose the votes of the
non-connected/non-related shareholders.
DIRECTORS AND BOARD OF DIRECTORS
Directors
Directors shall be elected or replaced by the shareholders’ meeting, and may be removed by
the shareholders’ meeting before the expiry of their terms of office. The term of office of the
Directors shall be 3 years, and they are subject to re-election upon expiry.
The term of office of the Directors shall commence from the date of their appointment until
the expiry of the term of the current session of the Board. If the term of office of a director
expires but re-election is not made responsively, the said director shall continue fulfilling the
duties as director pursuant to laws, administrative regulations, departmental rules and the
Articles of Association until a new director is elected.
APPENDIX V SUMMARY OF THE ARTICLES OF ASSOCIATION
– V-13 –


--- page 729 ---
The general manager or any other senior management members may hold the position of
director concurrently, provided that the total number of directors who hold the position of
general manager or any other senior management members concurrently and directors who are
employee representatives shall not exceed half of the total number of directors of the Company.
Directors have a series of loyal and diligent obligations towards the Company.
Board of Directors
The Company shall have a board of directors which shall be accountable to the general
meeting. The Board shall consist of 12 directors, including one chairman and one vice chairman.
The number of independent non-executive Directors shall not be less than three and shall
represent more than one-third of the total number of Directors. At least one independent
non-executive director must possess the appropriate professional qualifications or expertise in
accounting or related financial management. Independent non-executive directors should have
sufficient business or professional experience to effectively perform their duties and ensure that
the interests of all shareholders are fully represented. At least one independent non-executive
director must reside in Hong Kong.
The Board shall exercise the following powers:
1. to summon shareholders’ meetings and report its work to the meetings;
2. to implement the resolutions of the shareholders’ meeting;
3. to determine on the Company’s business plans and investment plans;
4. to formulate the Company’s profit distribution plans and loss recovery plans;
5. to formulate proposals for the increase or reduction of the Company’s registered
capital, the issue of bonds or other securities and listing plans;
6. to formulate plans for material acquisitions, purchase of shares of the Company or
merger, division, dissolution and change of corporate form of the Company;
7. to decide on the Company’s external investment, acquisition and disposal of assets,
pledge of assets, external guarantees, entrusted wealth management, connected
transactions, external donations and other matters within the scope authorised by the
shareholders’ meeting;
8. to decide on the establishment of the Company’s internal management structure;
APPENDIX V SUMMARY OF THE ARTICLES OF ASSOCIATION
– V-14 –


--- page 730 ---
9. to decide on the appointment or dismissal of the Company’s general manager,
secretary to the Board and other senior management, and decide on their
remuneration, rewards and punishments; to decide on the appointment or dismissal of
the Company’s deputy general manager, chief financial officer and other senior
management based on the nomination of the general manager, and decide on their
remuneration, rewards and punishments;
10. to formulate the basic management system of the Company;
11. to formulate proposals for any amendment to the Articles of Association;
12. to manage the information disclosure of the Company;
13. to propose to the shareholders’ meeting the appointment or replacement of the
accounting firm that audits the Company;
14. to listen to the work report of the general manager of the Company and inspect the
work of the general manager;
15. other functions and powers conferred by laws, administrative regulations, departmental
rules, securities regulatory rules of the place where the Company’s shares are listed or
the Articles of Association.
The Board of Directors of the Company shall establish special committees, including the
audit committee, the nomination committee, and the remuneration committee (collectively
referred to as the “ special committees ”), and other committees as necessary. The special
committees shall be accountable to the Board of Directors and perform their duties in
accordance with the Articles of Association and the authorization of the Board of Directors. The
proposals of the committees shall be submitted to the Board of Directors for approval. All
members of the special committees shall be directors, among which the majority of the members
of audit committee, nomination committee, and remuneration committee shall be independent
non-executive directors, and their conveners shall be an independent non-executive director. The
convener of the audit committee must be an accounting professional. The Board of Directors is
responsible for formulating the rules of the special committees to regulate their operation.
Matters beyond the scope of authorization of the shareholders’ meeting shall be submitted
to the meeting for consideration.
The Articles of Association do not specifically provide for the manner in which borrowing
powers may be exercised nor do they contain any specific provision in respect of the manner in
which such borrowing powers may be amended, other than provisions which (a) authorize the
Board to formulate proposals for the issue of bonds or other securities and listing plans; and (b)
require the issue of corporate bonds to be approved by the Shareholders in Shareholders’ general
meeting by way of a special resolution.
APPENDIX V SUMMARY OF THE ARTICLES OF ASSOCIATION
– V-15 –


--- page 731 ---
General Manager and Other Senior Management Personnel
The Company shall have one general manager and may have several deputy general
managers according to the actual situation to be appointed or dismissed by the Board of
Directors.
The Company’s general manager, deputy general manager, chief financial officer, and the
secretary to the Board of Directors shall be the Company’s senior management personnel.
The general manager shall be accountable to the Board and exercise the following powers:
1. to be in charge of the production, operation and management of the Company,
organise the implementation of the resolutions of the Board and report to the Board;
2. to organise the implementation of the Company’s annual business plan and investment
plan;
3. to draft plans for the establishment of the Company’s internal management structure;
4. to draft the basic management system of the Company;
5. to formulate the specific rules and regulations of the Company;
6. to propose to the Board to appoint or dismiss deputy general managers and financial
controller of the Company;
7. to appoint or dismiss management personnel other than those required to be appointed
or dismissed by the Board;
8. to exercise other powers conferred by the Articles of Association or the Board.
The general manager is to attend board meetings.
Secretary to the Board
The Company shall have a secretary to the Board, who shall be responsible for the
preparation of the shareholders’ meetings and Board meetings of the Company, keeping of
documents, management of shareholders’ information of the Company and handling matters such
as information disclosure.
The secretary to the Board shall comply with the relevant provisions of laws, administrative
regulations, departmental rules and the Articles of Association.
APPENDIX V SUMMARY OF THE ARTICLES OF ASSOCIATION
– V-16 –


--- page 732 ---
BOARD OF SUPERVISORS
The term of office of a supervisor shall be three years. A supervisor may serve consecutive
terms if re-elected.
Any directors, general managers and other senior management personnel shall not act
concurrently as supervisors.
The Company shall have a Board of Supervisors. The Board of Supervisors shall consist of
three Supervisors and shall have one chairman. The Board of Supervisors may have the vice
chairman. The chairman and the vice chairman of the Board of Supervisors shall be elected by
over half of all Supervisors.
The chairman of the Board of Supervisors shall convene and preside over the meetings of
Board of Supervisors; where the chairman of the Board of Supervisors cannot or does not fulfil
the duty thereof, the vice chairman of the Board of Supervisors shall convene and preside over
the meetings of Board of Supervisors; where the vice chairman of the Board of Supervisors
cannot or does not fulfil the duty thereof, over half of the Supervisors may jointly elect a
Supervisor to convene and preside over the meetings of Board of Supervisors.
The board of supervisors shall comprise shareholder representatives and an appropriate
proportion of the company’s staff representatives, of which the proportion of staff
representatives shall not be less than one-third. The employee representatives of the Board of
Supervisors shall be democratically elected by the Company’s employees at the employee
representative assembly, employee meeting or otherwise.
The Board of Supervisors exercises the following powers:
1. it shall review the regular reports of the Company prepared by the Board and to
provide written review opinions;
2. to examine the financial affairs of the Company;
3. to supervise the directors and senior management in their performance of their duties
and to propose the removal of directors and senior management who have violated
laws, administrative regulations, the Articles of Association or the resolutions of the
shareholders’ meetings;
4. to demand rectification from a Director or senior management when the acts of such
persons are detrimental to the interests of the Company;
5. to propose the convening of extraordinary meetings and to summon and preside over
shareholders’ meetings when the Board fails to perform the duty of summoning and
presiding over shareholders’ meetings under the Company Law;
APPENDIX V SUMMARY OF THE ARTICLES OF ASSOCIATION
– V-17 –


--- page 733 ---
6. to submit proposals to the shareholders’ meeting;
7. to initiate proceedings against directors and senior management in accordance with the
Company Law;
8. to investigate any irregularities identified in the operation of the Company; if
necessary, to engage professional institutions such as accounting firms and law firms
to assist its work at the expense of the Company;
9. other powers as stipulated by laws, administrative regulations, departmental rules, and
the Articles of Association.
Meetings of the Board of Supervisors shall be convened at least every six months.
Extraordinary meetings of the Board of Supervisors can be convened by the supervisors.
Resolutions of the Board of Supervisors shall be passed by over half of all the supervisors.
FINANCIAL ACCOUNTING SYSTEM, PROFIT DISTRIBUTION AND AUDIT
Financial Accounting System and Profit Distribution
The Company shall establish its financial and accounting system in accordance with the
laws, administrative regulations and the requirements of the relevant state authorities.
The Company shall publish its annual financial report within 4 months after the end of each
financial year, and shall publish the interim financial report within 2 months after the end of the
first six months of each financial year. The Company shall submit, disclose, and/or provide to
the shareholders the annual reports, interim reports, preliminary performance announcements,
and other documents in accordance with the securities regulatory rules of the place where the
Company’s Shares are listed. The aforesaid annual financial reports and interim financial reports
of the Company are prepared in accordance with the relevant laws, administrative regulations,
the requirements of the CSRC and the stock exchanges where the Company’s shares are listed.
When distributing the profit after tax for a year, the Company shall set aside 10% of its
profit after tax for the statutory reserve. The Company shall no longer be required to make
allocations to its statutory reserve once the aggregate amount of such reserve reaches at least
50% of its registered capital. If the Company’s statutory reserve is insufficient to make up losses
from previous years, the Company shall use its profits from the current year to make up such
losses before making the allocation to its statutory reserve in accordance with the preceding
paragraph.
After making the allocation from its after-tax profits to its statutory reserve fund, the
Company may also, subject to a resolution of the shareholders’ meeting, make an allocation from
its after-tax profits to the discretionary reserve fund.
APPENDIX V SUMMARY OF THE ARTICLES OF ASSOCIATION
– V-18 –


--- page 734 ---
After the Company has made up its losses and made allocations to its reserve fund, the
remaining profits after taxation shall be distributed in proportion to the number of shares held by
the shareholders, except for those which are not distributed in a proportionate manner as
provided by the Articles of Association. If the Company distributes profits to its shareholders in
violation of the Company Law and the provisions of the Articles of Association, the shareholders
shall return the profits distributed in violation of the provisions to the Company; if the Company
suffers losses as a result, the shareholders, directors, supervisors, and senior management
personnel responsible shall bear compensation liability.
The shares of the Company held by the Company is not entitled for profit distribution.
Audit
The Company shall implement internal audit system and employ full-time audit personnel
to carry out internal audit and supervision on the Company’s financial revenue and expenditure
and economic activities.
The Company shall appoint an independent accounting firm that complies with the
provisions of the Securities Law and the securities regulatory rules of the place where the
Company’s shares are listed to audit its accounting statements, verify its net assets and provide
other relevant advisory services, and the term of appointment of the accounting firm is 1 year
and can be renewed.
The appointment of the accounting firm of the Company shall be determined by the
shareholders’ meeting, and the Board shall not appoint an accounting firm before the decision of
the shareholders’ meeting. The audit fees of the accounting firm shall be determined by ordinary
resolutions at the shareholders’ meeting.
NOTICES
A notice of the Company shall be given in the following manner:
1. by hand;
2. by mail;
3. by way of announcement;
4. by way of fax or e-mail;
5. by publishing on the websites designated by the Company and the Hong Kong Stock
Exchange, subject to the laws, administrative regulations and the listing rules of the
stock exchange where the Company’s shares are listed;
APPENDIX V SUMMARY OF THE ARTICLES OF ASSOCIATION
– V-19 –


--- page 735 ---
6. other means stipulated by laws, administrative regulations, securities regulatory rules
of the place where the Company’s shares are listed or the Articles of Association.
Subject to the securities regulation rules of the place where the Company’s shares are
listed, where a notice of the Company is published by way of announcement, the said notice
shall be deemed as received by all relevant persons once it is published.
Dissolution and Liquidation of the Company
The Company shall be dissolved for the following reasons:
1. the term of its operations as is stipulated in the Articles of Association has expired or
events of dissolution specified in the Articles of Association have occurred;
2. the shareholders’ meeting resolves to dissolve the Company;
3. dissolution is necessary due to merger or division of the Company;
4. the Company’s business licence is revoked, the Company is ordered to close down or
be revoked in accordance with the law;
5. where the Company encounters serious difficulties in its operation and management
and its continuous existence will cause significant losses to the interests of
shareholders, and such difficulties cannot be resolved through other means,
shareholders holding more than 10% of the voting rights of all shareholders of the
Company may request the People’s Court to dissolve the Company.
Where the Company is dissolved pursuant to items 1, 2, 4 and 5 above, liquidation shall be
conducted. The directors of the Company are the obligors of the liquidation and shall establish
the liquidation committee within 15 days after the occurrence of the cause of dissolution, and
commence the liquidation. The liquidation committee shall be composed of directors, unless the
shareholders’ meeting resolves to appoint others. If the obligors of the liquidation fail to perform
their liquidation duties in a timely manner, causing losses to the company or its creditors, they
shall be liable for compensation. If the Company fails to establish a liquidation committee
within the time limit or fails to carry out liquidation after the establishment of the liquidation
committee as required by the preceding clause, the interested parties may apply to the people’s
court to designate relevant personnel to form a liquidation committee to carry out liquidation.
The liquidation committee shall notify creditors within 10 days from the date of its
establishment, and publish an announcement in a newspaper or on the National Enterprise Credit
Information Publicity System within 60 days. The creditors shall declare their rights to the
liquidation committee within 30 days after receipt of the notice or within 45 days after
announcement if the creditors haven’t received the notice.
APPENDIX V SUMMARY OF THE ARTICLES OF ASSOCIATION
– V-20 –


--- page 736 ---
During the period of the claim, the creditor shall explain all matters relevant to the
creditor’s rights he/she has claimed and provided relevant evidential documents. The liquidation
committee shall register the creditor’s rights.
In the creditor’s rights declaration period, the liquidation committee shall not make
repayment to the creditors.
Upon disposal of the Company’s property and preparation of the balance sheet and
inventory of properties, the liquidation committee shall draw up a liquidation plan and submit
this plan to a shareholders’ meeting or a People’s Court for endorsement.
The properties of the Company shall be used respectively for payment of liquidation
expenses, employees’ wages, social security expenditures, statutory compensations, tax in arrears
and the Company’s debts; the residual properties thereafter shall be distributed in accordance
with the shareholding percentages of the shareholders.
During the liquidation, the Company shall continue to exist, but may not engage in any
business activities unrelated to the liquidation.
The Company’s properties shall not be distributed to shareholders before making repayment
pursuant to the provisions of the preceding paragraphs.
If the liquidation committee discovers that the Company’s assets are insufficient to repay
its debts after cleaning up the Company’s assets and preparing a balance sheet and an inventory
of assets, it shall apply to the People’s Court for a declaration of insolvency in accordance with
the law.
After the People’s Court has ruled to declare the Company bankrupt, the liquidation
committee shall turn over the liquidation matters to the People’s Court.
Upon completion of the liquidation, the liquidation committee shall prepare a liquidation
report which shall be submitted to the shareholders’ meeting or the People’s Court for
confirmation, and shall submit the same to the company registration authority, apply for
cancellation of the company’s registration.
AMENDMENTS TO THE ARTICLES
The Company shall amend the Articles of Association in any of the following
circumstances:
1. after the amendments are made to the Company Law or relevant laws, administrative
regulations, departmental rules, the provisions of the Articles of Association are in
conflict with the amended laws, administrative regulations, departmental rules;
APPENDIX V SUMMARY OF THE ARTICLES OF ASSOCIATION
– V-21 –


--- page 737 ---
2. there is a change in the Company’s situation, which is inconsistent with the matters
recorded in the Articles of Association;
3. the shareholders’ meeting decides to amend the Articles of Association.
The amendments to the Articles of Association adopted by the shareholders’ meeting shall
be submitted to the competent authorities for approval if they are subject to approval by the
competent authorities. If there is any change relating to the registered particulars of the
Company, application shall be made for registration of the changes in accordance with the laws.
APPENDIX V SUMMARY OF THE ARTICLES OF ASSOCIATION
– V-22 –


--- page 738 ---
1. FURTHER INFORMATION ABOUT OUR COMPANY
A. Incorporation
Our Company was established in the PRC as a limited liability company on 19
October 2005 and was converted into a joint stock company with limited liability on 30
September 2007. Our registered office is located at Shao Bo Town Industrial Park Logistics
Park, Jiangdu District, Y angzhou City, Jiangsu Province, the PRC.
We have established a place of business in Hong Kong at Room 2109, 21st Floor, C C
Wu Building, 302–308 Hennessy Road, Wanchai, Hong Kong and has registered with the
Registrar of Companies in Hong Kong as a non-Hong Kong company under Part 16 of the
Companies Ordinance on 4 July 2023. JBL & Co. has been appointed as the authorised
representative of our Company for the acceptance of service of process and notices on
behalf of our Company in Hong Kong. The address for service of process on our Company
in Hong Kong is Room 2107–9, 21st Floor, C C Wu Building, 302–308 Hennessy Road,
Wanchai, Hong Kong.
As our Company was established in the PRC, we are subject to relevant laws and
regulations of the PRC. A summary of the relevant aspects of laws and regulations of the
PRC and our Articles of Association is set out in Appendices IV and V to this prospectus
respectively.
B. Changes in the Share Capital of Our Company
Save as disclosed in “History and Development”, there has been no alteration in the
share capital of our Company within two years immediately preceding the date of this
prospectus.
Upon completion of the Global Offering, but without taking into account any exercise
of the Over-allotment Option, our registered share capital will increase from
RMB160,684,910 to RMB214,246,910, comprising nil Domestic Unlisted Shares and
214,246,910 H Shares fully paid up, representing approximately nil and 100% of our total
issued share capital, respectively.
C. Shareholders’ Resolutions of our Company
Pursuant to the Shareholders’ meeting held on 10 May 2024, the following resolutions,
among others, were duly passed:
(a) the issue by our Company of H Shares of nominal value of RMB1.00 each and
such H Shares be listed on the Stock Exchange; and
APPENDIX VI STATUTORY AND GENERAL INFORMATION
– VI-1 –


--- page 739 ---
(b) authorisation of our Board and its authorised persons to handle all matters
relating to, among other things, the Global Offering, the issue and listing of the
H Shares.
Pursuant to the Shareholders’ meeting held on 13 June 2024, the following resolution,
among others, were duly passed: the number of H Shares to be issued before the exercise of
the Over-allotment Option shall not exceed 15% of the enlarged share capital of our
Company upon completion of the Global Offering and granting the Underwriters the
Over-allotment Option of no more than 15% of the above number of H Shares to be issued.
Pursuant to the Shareholders’ meeting held on 12 March 2025, the following
resolutions, among others, were duly passed subject to the completion of the Global
Offering, the conditional adoption of the revised Articles of Association, which shall
become effective on the Listing Date.
D. Changes in the Share Capital of Our Subsidiaries
Save as disclosed in this prospectus, there has been no alteration in the share capital
of any of our subsidiaries within the two years immediately preceding the date of this
prospectus.
E. Restriction on Share Repurchases
For details of the restrictions on share repurchases by our Company, see “Appendix V
– Summary of the Articles of Association”.
2. FURTHER INFORMATION ABOUT OUR BUSINESS
A. Summary of Our Material Contracts
We have entered into the following contracts (not being contracts entered into in the
ordinary course of business) within two years preceding the date of this prospectus, which
are or may be material:
(a) the supplemental agreement (ʮ̡ᄣ༟՘ᙄ ʘ
໾̂՘ᙄ ) dated 23 August 2023 and entered into among Y angzhou Jiangdu
District Major Projects Special Investment Fund Co., Ltd.* (ɽධ
ʮ̡ )( “ Jiangdu Fund ”), Gao Feng (ࢤand our
Company, pursuant to which the parties agreed that, among others, all special
rights granted to Jiangdu Fund were terminated on the date of the supplemental
agreement;
(b) the second supplemental agreement (ږ( Ϟ
Υྫ)΅Ⴉᒅʿᄣ༟՘ᙄʘ໾̂՘ᙄɚ) dated
18 September 2023 and entered into among Jiangsu Jiequan Supply and Marketing
APPENDIX VI STATUTORY AND GENERAL INFORMATION
– VI-2 –


--- page 740 ---
Cooperative Industrial Development Fund (Limited Partnership)* (ԶቖΥЪ
ږ(Υྫ)) (“ Jiequan Fund ”), our Company, Gao Feng (ࢤJiangsu
Ruichuanda Investment Co., Ltd.* (ʮ̡) and Y angzhou Xianda
Toyota Automobile Sales and Service Co., Ltd.* (ʮ̡),
pursuant to which the parties agreed that, among others, all special rights granted to
Jiequan Fund shall be terminated on the date of submission of a listing application by our
Company to the Stock Exchange, the SFC or the CSRC;
(c) the tobacco business cooperation agreement (ʮ
ΥЪ՘ᙄ ) dated 6 June 2024 and entered into between our
Company and Jiangsu Hongxinlong Supermarket Chain Co., Ltd.* (Ꮂஹ
ʮ̡ ) in relation to, among others, the transfer of tobacco product
inventory assets relating to the business of tobacco product sales of our Group at
a consideration of RMB21,366,628.67;
(d) the cornerstone investment agreement dated 20 March 2025 and entered into
among our Company, Top Legend SPC, Red Solar Capital Limited and CMBC
Securities Company Limited with respect to a subscription of the H Shares at the
Offer Price in the maximum gross amount of US$5 million;
(e) the Deed of Indemnity;
(f) the Deed of Non-competition; and
(g) the Hong Kong Underwriting Agreement.
APPENDIX VI STATUTORY AND GENERAL INFORMATION
– VI-3 –


--- page 741 ---
B. Our Material Intellectual Property Rights
Trademarks
As at the Latest Practicable Date, our Group has registered the following key
trademarks which are material to the business of our Group:
No. Trademark
Place of
registration
Registration
number Class(es) Expiry date
Name of
registered
proprietor
1.
Hong Kong 306280632 35 26 June 2033 Our Company
2.
 The PRC 17758205 35 13 October
2026
Our Company
3.
 The PRC 17757148 35 13 October
2026
Our Company
4.
 The PRC 8541948 16 13 August
2031
Our Company
5.
 The PRC 8538644 30 20 August
2031
Our Company
6.
 The PRC 6918105 35 6 August 2030 Our Company
7.
 The PRC 41871191 35 6 December
2032
Hongxin
Trading
8.
 The PRC 4883925 41 27 April 2029 Hongxin
Trading
9.
 The PRC 4883924 43 13 May 2029 Hongxin
Trading
10.
 The PRC 4883923 44 13 May 2029 Hongxin
Trading
APPENDIX VI STATUTORY AND GENERAL INFORMATION
– VI-4 –


--- page 742 ---
No. Trademark
Place of
registration
Registration
number Class(es) Expiry date
Name of
registered
proprietor
11.
The PRC 7034991 35 13 October
2030
Hongxin
Trading
12.
 The PRC 3799938 19 6 August 2026 Hongxin
Trading
13.
 The PRC 3799937 19 6 August 2026 Hongxin
Trading
Software copyrights
As at the Latest Practicable Date, our Group has registered the following
software copyrights which are material to the business of our Group:
No. Software name
Registration
number
Date of initial
publication
Term of
protection
Name of
registered
proprietor
1. Hongxinlong E-commerce Logistics
Management System Software
(Abbreviated: Hongxinlong
E-commerce Logistics Management
System) V1.0* (၍
ଣӻ୕ழ΁ (ݴي
၍ଣӻ୕ )V1.0)
2018SR787894 20 July 2017 20 July 2067 Our Company
2. Hongxinlong Cloud Kitchen Cloud
Store System Software (Abbreviated:
Hongxinlong Cloud Kitchen Cloud
Store System) V1.0* (Ꮂථᄼථ
ӻ୕ழ΁ (ֳ
ӻ୕)V1.0)
2018SR944525 15 October
2018
15 October
2068
Our Company
3. Hongxinlong Lifestyle Service
Software V1.0.01* (؂
ਕழ΁ V1.0.01)
2021SR1086520 6 January 2014 6 January 2064 Our Company
APPENDIX VI STATUTORY AND GENERAL INFORMATION
– VI-5 –


--- page 743 ---
Domain Names
As at the Latest Practicable Date, our Group has registered the following key
domain name which is material to the business of our Group:
Domain name Expiry date
Name of registered
proprietor
hxsupermarket.cn 21 May 2026 Our Company
3. FURTHER INFORMATION ABOUT OUR DIRECTORS AND SUPERVISORS
A. Particulars of Directors’ and Supervisors’ Contracts
We have entered into a service contract or a letter of appointment with each of our
Directors and Supervisors in respect of, among other things, (i) compliance of relevant laws
of regulations, (ii) observance of the Articles of Association, and (iii) provisions on
arbitration.
Save as disclosed above and as required by the Articles, none of our Directors or
Supervisors has or is proposed to have a contract with any member of our Group (other
than contracts expiring or determinable by the relevant employer within one year without
the payment of compensation other than statutory compensation).
B. Remuneration of Directors and Supervisors
Save as disclosed in the section headed “Directors, Supervisors and Senior
Management” and Note 8 to the Accountants’ Report, no Director or Supervisor received
other remuneration or benefits in kind from our Company in respect of FY2021, FY2022,
FY2023 and 9M2024.
APPENDIX VI STATUTORY AND GENERAL INFORMATION
– VI-6 –


--- page 744 ---
4. DISCLOSURE OF INTERESTS
A. Interests of our Directors, Supervisors and Chief Executives of our Company
Immediately following completion of the Global Offering (assuming the
Over-allotment Option is not exercised), the interests and/or short positions (as applicable)
of our Directors, Supervisors and chief executives of our Company in the Shares,
underlying Shares and debentures of our Company and any interests and/or short positions
(as applicable) in shares, underlying Shares or debentures of any of our Company’s
associated corporations (within the meaning of Part XV of the SFO) which (i) 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 interests and/or short positions (as applicable) which they are
taken or deemed to have under such provisions of the SFO), (ii) will be required, pursuant
to Section 352 of the SFO, to be entered in the register referred to therein or (iii) will be
required, pursuant to the Model Code for Securities Transactions by Directors of Listed
Issuers as set out in Appendix C3 to the Listing Rules, to be notified to our Company and
the Stock Exchange, in each case once the Shares are listed on the Stock Exchange, will be
as follows:
Interest in our Company
Immediately following
completion of the Global
Offering (without taking
into account any Shares
which may be issued
pursuant to the exercise of
the Over-allotment Option)
Name of Director,
Supervisor or chief
executive Nature of interest
(1)
Number of
Shares
Approximate
percentage
of
shareholding
interest (2)
(%)
Mr. Gao (3) Beneficial owner, interest
in controlled
corporation, interest of
concert parties
66,674,976 31.11
Mr. Y uan
(4) Beneficial owner, interest
of concert parties
66,674,976 31.11
Mr. Zhang (5) Beneficial owner, interest
of concert parties
66,674,976 31.11
APPENDIX VI STATUTORY AND GENERAL INFORMATION
– VI-7 –


--- page 745 ---
Immediately following
completion of the Global
Offering (without taking
into account any Shares
which may be issued
pursuant to the exercise of
the Over-allotment Option)
Name of Director,
Supervisor or chief
executive Nature of interest
(1)
Number of
Shares
Approximate
percentage
of
shareholding
interest (2)
(%)
Mr. Y ao Jun
(ᒺ΋͛ )(6)
Beneficial owner 500,000 0.23
Ms. Shen Zhigen
(ӏқЌɾɻ )(7)
Beneficial owner 600,000 0.28
Ms. Zhan Mingyu
(͗ɾɻ )(8)
Beneficial owner 2,700,000 1.26
Mr. Xia Zhonglin
(΋͛ )(9)
Beneficial owner 550,000 0.26
Ms. Zhu Aizhen
(ɾɻ )(10)
Beneficial owner 200,000 0.09
Notes:
1. All interests stated are long positions.
2. The calculation is based on the total number of 214,246,910 Shares in issue immediately following
the Global Offering and without taking into account any Shares which may be issued pursuant to the
exercise of the Over-allotment Option.
3. As at the Latest Practicable Date, Mr. Gao directly holds 26,292,302 Shares in our Company.
Ruichuanda Investment, a company directly wholly-owned by Mr. Gao, directly holds 21,410,776
Shares in our Company. Under the SFO, the deemed interest of Mr. Gao consists of (i) 47,703,078
Shares in our Company held directly and beneficially, and through Ruichuanda Investment, and (ii)
Shares held by other Concert Parties as they are parties acting in concert.
4. As at the Latest Practicable Date, Mr. Y uan directly holds 11,171,898 Shares in our Company. Under
the SFO, the deemed interest of Mr. Y uan consists of (i) 11,171,898 Shares in our Company held
directly and beneficially, and (ii) Shares held by other Concert Parties as they are parties acting in
concert.
APPENDIX VI STATUTORY AND GENERAL INFORMATION
– VI-8 –


--- page 746 ---
5. As at the Latest Practicable Date, Mr. Zhang directly holds 7,800,000 Shares in our Company. Under
the SFO, the deemed interest of Mr. Zhang consists of (i) 7,800,000 Shares in our Company held
directly and beneficially, and (ii) Shares held by other Concert Parties as they are parties acting in
concert.
6. Mr. Y ao Jun (ᒺ΋͛ ) is an executive Director and a deputy general manager of our Company.
7. Ms. Shen Zhigen ( ӏқЌɾɻ ) is an executive Director, a deputy general manager and financial
controller of our Company.
8. Ms. Zhan Mingyu (͗ɾɻ ) is the chairman of our Supervisory Committee, and a shareholder
Supervisor.
9. Mr. Xia Zhonglin (΋͛ ) is a shareholder Supervisor and the group purchase department
manager.
10. Ms. Zhu Aizhen (ɾɻ ) is an employee Supervisor, and the store manager of Jianying store.
B. Interests of Substantial Shareholders
For more details on the persons who will, immediately following the completion of
the Global Offering without taking into account any Shares which may be issued pursuant
to the exercise of the Over-allotment Option, have interests or short positions in our Shares
or underlying Shares which would be required to be disclosed to us and the Stock Exchange
under the provisions of Divisions 2 and 3 of Part XV of the SFO, or who will directly
and/or indirectly, be interested in 10% or more of the nominal value of any class of share
capital carrying the rights to vote in all circumstances at general meetings of our Company
or of any member of our Group, please refer to the section headed “Substantial
Shareholders” in this prospectus.
C. Disclaimers
Save as disclosed in this prospectus:
(a) none of our Directors, Supervisors or experts (as named under “5. Other
Information – G. Qualification of Experts” in this Appendix) has any direct or
indirect interest in the promotion of our Company, or in any assets which have
within the two years immediately preceding the date of this prospectus been
acquired or disposed of by or leased to any member of our Group, or are
proposed to be acquired or disposed of by or leased to any member of our Group;
(b) none of our Directors or Supervisors is materially interested in any contract or
arrangement subsisting at the date of this prospectus which is significant in
relation to the business of our Group taken as a whole; and
APPENDIX VI STATUTORY AND GENERAL INFORMATION
– VI-9 –


--- page 747 ---
(c) without taking into account any Shares which may be taken up under the Global
Offering, none of our Directors knows of any person (not being a Director or
chief executive of our Company) who will, immediately following completion of
the Global Offering, be interested in 10% or more of the nominal value of any
class of share capital carrying rights to vote in all circumstances at shareholders’
meetings of any member of our Group in the Shares or underlying Shares of our
Company.
5. OTHER INFORMATION
A. Tax and Other Indemnity
The Controlling Shareholders have entered into the Deed of Indemnity with and in
favour of our Company (for ourselves and as trustee for each of our present subsidiaries) to
provide indemnities on a joint and several basis, in respect of, among other matters, any
claims, payments, suits, damages, settlement payments, costs and expenses which would be
incurred or suffered by our Group as a result of any litigation, arbitration and/or legal
proceedings, whether criminal, administrative, contractual, tortuous or otherwise nature
against any member of our Group in relation to any act, non-performance, omission or
otherwise, taxation resulting from income, profits or gains earned, accrued or received as
well as any other claim to which any member of our Group may be subject and payable on
or before the date when the Global Offering becomes unconditional and all liabilities
incurred by it arising from any material non-compliance committed by any number of our
Group on or before the Listing Date.
The Controlling Shareholders are under no liability under the Deed of Indemnity in
respect of any taxation:
(a) to the extent that provision has been made for such taxation in the consolidated
audited accounts of our Company and its subsidiaries as set out in the
Accountants’ Report in Appendix I to this prospectus or in the audited accounts
of the relevant members of our Group for the Track Record Period (the
“Accounts ”);
(b) to the extent that such taxation or amount arises or is incurred as a result of any
change in the law having retrospective effect coming into force after the date on
which the Global Offering becomes unconditional or to the extent that such
taxation or amount arises or is incurred as a result of an increase in rates of
taxation after the date on which the Global Offering becomes unconditional with
retrospective effect (except the imposition of or an increase in the rate of Hong
Kong profits tax or any tax of anywhere else in the world on the profits of
companies for the current or any earlier financial period);
APPENDIX VI STATUTORY AND GENERAL INFORMATION
– VI-10 –


--- page 748 ---
(c) which would not have arisen but for any act or omission of, or transaction by any
member of our Group voluntarily effected (other than pursuant to a legally
binding commitment created on or before the date on which the Global Offering
becomes unconditional) without prior written consent or agreement of the
Controlling Shareholders; or
(d) to the extent that any provision or reserve made for such taxation or amount in
the Accounts is established to be an overprovision or an excessive reserve.
B. Estate Duty
Our Directors have been advised that no material liability for estate duty is likely to
fall on our Company or any of our subsidiaries.
C. Litigation
As at the Latest Practicable Date, no member of our Group was engaged in any
litigation or arbitration of material importance and, so far as our Directors are aware, no
litigation or claim of material importance is pending or threatened by or against any
member of our Group.
D. Sponsor
Red Solar Capital Limited satisfies the independence criteria applicable to sponsor set
out in Rule 3A.07 of the Listing Rules.
Pursuant to the engagement letters entered into between our Company and the Sole
Sponsor, we have agreed to pay the Sole Sponsor a total fee of HK$4.5 million to act as the
sponsor of our Company in connection with the proposed listing on the Stock Exchange.
E. Preliminary Expenses
We have not incurred any material preliminary expense.
F. Promoters
Information of our promoters as at the time of our Company’s conversion into a joint
stock company in September 2007 is set out in the paragraph headed “History and
Development – Our Corporate Development – Our Company – Conversion into a joint
stock company and capital increase in September 2007” in this prospectus.
Save as disclosed in this prospectus, within the two years immediately preceding the
date of this prospectus, no cash, securities or other benefit has been paid, allotted or given
nor is proposed to be paid, allotted or given to any promoters in connection with the Global
Offering and the related transactions described in this prospectus.
APPENDIX VI STATUTORY AND GENERAL INFORMATION
– VI-11 –


--- page 749 ---
G. Qualification of Experts
The qualifications of the experts, as defined under the Listing Rules, who have given
opinions in this prospectus, are as follows:
Name Qualification
Red Solar Capital Limited Licensed to carry on type 1 (dealing in securities)
and type 6 (advising on corporate finance) regulated
activities under the SFO
KPMG Certified Public Accountants, Public Interest Entity
Auditor registered in accordance with the
Accounting and Financial Reporting Council
Ordinance
Beijing DHH Law Firm PRC legal advisers to our Company as to PRC laws
Loeb & Loeb LLP U.S. legal advisers to our Company as to the U.S.
laws
HCR Co., Ltd. Independent industry consultant
SHINEWING Risk Services
Limited
Internal control consultant
Jiangsu Yilun Construction
Engineering Co., Ltd.* ( Ϫᘽ
ʮ̡ )
Fire safety consultant
Shanghai Y uanning Fire
Technology Co., Ltd.* ( ɪऎ
ʮ̡ )
Fire safety consultant
Shanghai Biaogu Construction
Engineering Testing
Technology Co., Ltd.* ( ɪऎ
ࠢ
ʮ̡)
Construction safety consultant
APPENDIX VI STATUTORY AND GENERAL INFORMATION
– VI-12 –


--- page 750 ---
H. Consents of Experts
Each of the experts named in the paragraph headed “5. Other Information – G.
Qualification of Experts” in this Appendix has given and has not withdrawn its written
consent to the issue of this prospectus with the inclusion of its report and/or letter and/or
opinion and/or the references to its name included herein in the form and context in which
it is respectively included.
As at the Latest Practicable Date, none of the experts named above has any
shareholding interests 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.
I. Taxation of H Shareholders
The sale, purchase and transfer of H Shares are subject to Hong Kong stamp duty if
such sale, purchase and transfer are effected on the H Share register of members of the
Company, including in circumstances where such transaction is effected on the Stock
Exchange. The current rate of Hong Kong stamp duty for such sale, purchase and transfer
is 0.1% of the consideration or, if higher, the fair value of the H Shares being sold or
transferred. For further information in relation to taxation, see “Appendix III – Taxation
and Foreign Exchange”.
J. Binding Effect
This prospectus shall have the effect, if an application is made in pursuant hereof, of
rendering all persons concerned bound by all 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.
K. Related Party Transactions
Our Group entered into the related party transactions within the two years immediately
preceding the date of this prospectus as mentioned in Note 29 to the Accountants’ Report.
L. Agency Fees or Commissions Received
Save as disclosed in the section headed “Underwriting” in this prospectus, no
commissions, discounts, brokerages, agency fee or other special terms have been granted or
agreed to be granted in connection with the issue or sale of any share of our Company or
any of our subsidiaries within the two years immediately preceding the date of this
prospectus.
APPENDIX VI STATUTORY AND GENERAL INFORMATION
– VI-13 –


--- page 751 ---
M. Miscellaneous
Save as disclosed in this prospectus:
(a) within the two years immediately preceding the date of this prospectus:
(i) no share or loan capital of our Company or any of our subsidiaries has been
issued or agreed to be issued, or is proposed to be fully or partly paid either
for cash or a consideration other than cash; and
(ii) no share or loan capital of our Company or any of our subsidiaries is under
option or is agreed conditionally or unconditionally to be put under option;
(b) there are no founder, management or deferred shares or any debentures in our
Company or any of our subsidiaries;
(c) there has not been any interruption in the business of our Group which may have
or has had a significant effect on the financial position of our Group in the 12
months preceding the date of this prospectus;
(d) our Company has no outstanding convertible debt securities or debentures;
(e) there is no arrangement under which future dividends are waived or agreed to be
waived;
(f) none of our equity and debt securities is listed or dealt with in any other stock
exchange nor is any listing or permission to deal being or proposed to be sought;
(g) our Company does not currently intend to apply for the status of a sino-foreign
investment joint stock limited liability company and does not expect to be
subject to the Law of the PRC on Sino-foreign Equity Joint V entures; and
(h) all necessary arrangements have been made to enable the H shares to be admitted
into CCASS for clearing and settlement.
N. No Material Adverse Change
Our Directors confirm that there has been no material adverse change in the financial
or trading position or prospects of our Company since 30 September 2024 and up to the
date of this prospectus.
APPENDIX VI STATUTORY AND GENERAL INFORMATION
– VI-14 –


--- page 752 ---
O. Bilingual Prospectus
The English language and Chinese language versions of this prospectus are being
published separately, in reliance upon the exemption provided by section 4 of the
Companies (Exemption of Companies and Prospectuses from Compliance with Provisions)
Notice (Chapter 32L of the Laws of Hong Kong).
APPENDIX VI STATUTORY AND GENERAL INFORMATION
– VI-15 –


--- page 753 ---
DOCUMENTS DELIVERED TO THE REGISTRAR OF COMPANIES
The documents attached to a copy of this prospectus and delivered to the Registrar of
Companies in Hong Kong for registration were, amongst other documents, a copy of each of the
written consents referred to in “Appendix VI – 5. Other Information – H. Consents of Experts”,
and a certified copy of each of the material contracts referred to in “Appendix VI – 2. Further
Information about our Business – A. Summary of our Material Contracts”.
DOCUMENTS ON DISPLAY
The following documents will be published on the websites of the Stock Exchange
(www.hkexnews.hk ) and our Company ( www.hxsupermarket.cn ) up to and including the date
which is 14 days from the date of this prospectus:
(a) the Articles of Association;
(b) the Accountants’ Report from KPMG, the texts of which are set out in Appendix I;
(c) the report from KPMG in relation to unaudited pro forma financial information, the
text of which is set out in Appendix IIA;
(d) the audited consolidated financial statements of our Group for FY2021, FY2022,
FY2023 and 9M2024;
(e) the legal opinion prepared by Beijing DHH Law Firm, our legal advisers as to PRC
laws, in respect of certain aspects of our Group and the property interests of our
Group in the PRC;
(f) the legal opinion prepared by Loeb & Loeb LLP , our legal advisers as to the U.S.
laws;
(g) the industry report prepared by HCR Co., Ltd.;
(h) the report prepared by SHINEWING Risk Services Limited, our internal control
consultant, in relation to the internal control measures of certain food safety issues;
(i) the report issued by Jiangsu Yilun Construction Engineering Co., Ltd.* (ண
ʮ̡ ), the Fire Safety Consultant, in respect of its findings on the fire
safety inspection on certain properties of our Group which had not obtained the
relevant Fire Safety Approvals;
APPENDIX VII DOCUMENTS DELIVERED TO THE REGISTRAR OF
COMPANIES IN HONG KONG AND A V AILABLE ON DISPLAY
– VII-1 –


--- page 754 ---
(j) the report issued by Shanghai Y uanning Fire Technology Co., Ltd.* ( ɪऎჃྐྵऊԣҦ
ʮ̡ ), the Second Fire Safety Consultant, in respect of its findings on the fire
safety inspection on certain properties of our Group which had not obtained the
relevant Fire Safety Approvals;
(k) the report issued by Shanghai Biaogu Construction Engineering Testing Technology
Co., Ltd.* (ʮ̡ ), the Construction Expert, in respect
of its findings on the construction safety on certain properties of our Group which had
not obtained the relevant Fire Safety Approvals;
(l) the material contracts referred to in the paragraph headed “Appendix VI – 2. Further
Information about our Business – A. Summary of our Material Contracts”;
(m) the written consents referred to in the paragraph headed “Appendix VI – 5. Other
Information – H. Consents of Experts”;
(n) the service contracts and letters of appointment referred to in the paragraph headed
“Appendix VI – 3. Further Information About Our Directors and Supervisors – A.
Particulars of Directors’ and Supervisors’ Contracts”; and
(o) the PRC Company Law and the Overseas Listing Trial Measures, together with their
unofficial English translations.
APPENDIX VII DOCUMENTS DELIVERED TO THE REGISTRAR OF
COMPANIES IN HONG KONG AND A V AILABLE ON DISPLAY
– VII-2 –


--- page 755 ---
